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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [ ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-12
LEDGER CAPITAL CORP.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[ANCHOR BANCORP WISCONSIN INC. LOGO][LEDGER CAPITAL CORP. LOGO]
COMBINED PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED
YOUR VOTE IS VERY IMPORTANT
Dear Ledger Shareholder:
The boards of directors of Anchor BanCorp Wisconsin Inc. and Ledger Capital
Corp. have approved an agreement to merge Ledger with and into Anchor. We cannot
complete the merger unless a majority of the shareholders of Ledger approve it.
Under applicable law, approval of Anchor shareholders is not required to
complete the merger. We are asking Ledger shareholders to vote on the merger at
Ledger's annual shareholders' meeting to be held on October 24, 2001. YOUR VOTE
IS VERY IMPORTANT.
If the merger is completed, Ledger shareholders will receive 1.10 shares of
Anchor common stock (together with an equal number of preferred share purchase
rights under Anchor's shareholders' rights plan) in exchange for each share of
Ledger common stock (including the associated preferred share purchase rights
under Ledger's shareholders' rights plan) they own, plus cash in lieu of any
fractional shares. Ledger shareholders also will have the ability to elect to
receive cash instead of Anchor stock, subject to certain limitations, with the
amount of cash being equal to 1.10 times Anchor's closing price on the date we
complete the merger. Anchor shareholders will continue to own Anchor common
stock. Based upon the number of outstanding shares for each company on September
10, 2001, current Ledger shareholders will own between approximately 8.7% and
10.6% of the outstanding Anchor stock if the merger is completed. On September
10, 2001, Anchor stock, which is listed on The Nasdaq Stock Market under the
trading symbol "ABCW," closed at $16.25 per share and Ledger stock, which is
listed on Nasdaq under the trading symbol "LEDG," closed at $17.55 per share. If
the merger is completed, Ledger stock will no longer be listed on Nasdaq.
This document gives you detailed information about the merger and includes
a copy of the merger agreement. It is being issued jointly by Anchor and Ledger.
It is a proxy statement that Ledger is using to solicit proxies for use at its
annual meeting. Ledger's board of directors is also soliciting proxies for the
election of directors and ratification of the appointment of auditors to serve
until the merger is completed or, if the merger is not completed, until Ledger's
2002 annual shareholders' meeting. It also is a prospectus relating to Anchor's
issuance of up to 2,915,945 shares of Anchor stock (and the associated preferred
share purchase rights) in connection with the merger. AFTER CAREFUL
CONSIDERATION, AND BASED IN PART UPON RECEIPT OF A FAIRNESS OPINION FROM
LEDGER'S FINANCIAL ADVISOR, WILLIAM BLAIR & COMPANY, L.L.C., LEDGER'S BOARD OF
DIRECTORS UNANIMOUSLY DETERMINED THE MERGER TO BE FAIR TO YOU FROM A FINANCIAL
POINT OF VIEW AND IN YOUR BEST INTERESTS AND DECLARED THE MERGER ADVISABLE.
LEDGER'S BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO ADOPT IT AND APPROVE THE MERGER.
PLEASE GIVE ALL OF THE INFORMATION CONTAINED IN THE PROXY
STATEMENT/PROSPECTUS YOUR CAREFUL ATTENTION. IN PARTICULAR, YOU SHOULD CAREFULLY
CONSIDER THE FACTORS DISCUSSED IN THE SECTION ENTITLED "CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING INFORMATION" ON PAGE 19.
We are very enthusiastic about the merger and the strength and capabilities
we expect from the combined company. We join all the members of Ledger's board
of directors in recommending that you vote in favor of the merger.
<Table>
[/s/ Douglas J. Timmerman] [/s/ James D. Smessaert]
Douglas J. Timmerman James D. Smessaert
Chairman, President and Chief Executive Officer President and Chief Executive Officer
Anchor BanCorp Wisconsin Inc. Ledger Capital Corp.
</Table>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED IF THIS COMBINED PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PLEASE DO NOT SEND IN CERTIFICATES FOR YOUR SHARES OF LEDGER STOCK WITH YOUR
PROXY CARD. IF THE MERGER IS APPROVED BY LEDGER SHAREHOLDERS, A LETTER OF
TRANSMITTAL INCLUDING DETAILED INSTRUCTIONS AND A FORM TO MAKE A CASH ELECTION
WILL BE MAILED TO YOU AFTER THE MERGER IS COMPLETED.
COMBINED PROXY STATEMENT/PROSPECTUS DATED SEPTEMBER 14, 2001
FIRST MAILED TO SHAREHOLDERS ON OR ABOUT SEPTEMBER 21, 2001
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LEDGER CAPITAL CORP.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 24, 2001
To the Shareholders of Ledger Capital Corp.:
We are hereby giving you notice that Ledger Capital Corp. will hold an
annual meeting of its shareholders on October 24, 2001, at 7:00 p.m., local
time, at the Pettit National Ice Center, Hall of Fame Room, 500 South 84th
Street, Milwaukee, Wisconsin, for the following purposes, all of which are more
fully described in the accompanying combined proxy statement/prospectus:
1. To consider and vote on a proposal to approve and adopt the agreement
and plan of merger, dated as of June 15, 2001, between Anchor BanCorp
Wisconsin Inc. and Ledger, and to approve the related merger of our two
companies on the terms set forth in the merger agreement, a copy of
which is included as Appendix A to the proxy statement/prospectus.
2. To elect three directors to serve until consummation of the merger or,
if the merger is not consummated, until the 2004 annual meeting of
shareholders or until their successors have been elected and qualified.
3. To ratify the appointment of KPMG LLP as independent auditors of Ledger
for the fiscal year ending June 30, 2002 if the merger is not
consummated, or for any such shorter period of time as may be called for
or deemed necessary by Ledger.
4. To consider such other matters as may properly come before the meeting
or any adjournments or postponements thereof, including proposals to
adjourn the meeting to permit further solicitation of proxies if we have
not received sufficient votes to approve the merger. However, if you
vote against the merger, your shares will not be voted in favor of an
adjournment to solicit further proxies.
Our board of directors has fixed the close of business on September 14,
2001, as the record date for determining which shareholders are entitled to
notice of and to vote at the annual meeting and any adjournment or postponement
thereof. Only shareholders of record on that date will be entitled to vote at
the annual meeting or any adjournments or postponements thereof. In the event
that there are not sufficient votes for a quorum or to approve or ratify any of
the foregoing proposals at the time of the annual meeting, the annual meeting
may be postponed or adjourned in order to permit further solicitation of proxies
by Ledger.
Shareholders entitled to vote on the merger do NOT have the right to
dissent from the vote on the merger and receive payment of the fair value of
their shares upon compliance with the applicable provisions of the Wisconsin
Business Corporation Law.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE APPROVAL OF THE MERGER,
"FOR" LEDGER'S NOMINEES FOR DIRECTOR AND "FOR" RATIFICATION OF THE APPOINTMENT
OF KPMG LLP AS LEDGER'S INDEPENDENT AUDITORS.
We cordially invite you to attend the annual meeting in person. However, to
assure that your shares are voted at the annual meeting, please complete, sign,
date and promptly mail the enclosed proxy card, whether or not you plan to
attend the meeting. Please return your completed proxy card in the enclosed,
pre-addressed envelope (no postage is required if mailed in the United States).
As an alternative to using the proxy card to vote, you may vote by telephone if
you choose. Please see "THE MEETING -- Telephonic Voting" on page 21 of the
proxy statement/prospectus for instructions on how to do this. You may revoke
your proxy before it is voted by submitting a valid later-dated vote by
telephone or proxy card, or you may revoke your proxy and vote in person if you
attend the annual meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
[/s/ Peter A. Gilbert]
Glendale, Wisconsin Peter A. Gilbert
September 21, 2001 Executive Vice President and Corporate Secretary
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FINDING IMPORTANT INFORMATION
This document contains important information about our companies and the
merger that you should read and consider carefully before you decide how to vote
your shares. The principal sections of this document are located on the pages
referenced in the Table of Contents on the next page. Some of the documents
related to the merger are included as appendices to this document. In addition,
we have incorporated important business and financial information about our
companies from documents filed with the SEC, some of which have not been
included in or delivered with this document.
FINDING INFORMATION
INCORPORATED BY REFERENCE
Ledger's 2001 Annual Report on Form 10-K is being incorporated herein by
reference and is being delivered to you along with this proxy
statement/prospectus. Other information that is incorporated by reference in
this document is available to you without charge upon your written or oral
request. You can obtain documents incorporated by reference in this document,
excluding exhibits, by requesting them in writing or by telephone from the
appropriate company at the following addresses:
Anchor BanCorp Wisconsin Inc. Ledger Capital Corp.
25 West Main Street 5555 North Port Washington Rd.
Madison, WI 53703 Glendale, WI 53217
Attention: Investor Relations Attention: Investor Relations
Telephone: (608) 252-1810 Telephone: (414) 290-7900
We will mail any incorporated documents you request to you by first class
mail, or another equally prompt means, within one business day after we receive
your request. IN ORDER TO INSURE TIMELY DELIVERY OF THESE DOCUMENTS TO YOU PRIOR
TO THE MEETING, WE MUST RECEIVE YOUR REQUEST BY OCTOBER 10, 2001.
See "WHERE YOU CAN FIND MORE INFORMATION" on page 92 for more information
about the documents incorporated by reference in this document.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
ABOUT THE MERGER OR OUR COMPANIES THAT DIFFERS FROM, OR ADDS TO, THE INFORMATION
IN THIS PROXY STATEMENT/PROSPECTUS OR IN DOCUMENTS THAT ARE PUBLICLY FILED WITH
THE SEC. THEREFORE, IF ANYONE DOES GIVE YOU DIFFERENT OR ADDITIONAL INFORMATION,
YOU SHOULD NOT RELY ON IT. THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS SPEAKS ONLY AS OF ITS DATE UNLESS THE INFORMATION
SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES. INFORMATION IN THIS PROXY
STATEMENT/PROSPECTUS ABOUT ANCHOR HAS BEEN SUPPLIED BY ANCHOR, AND INFORMATION
ABOUT LEDGER HAS BEEN SUPPLIED BY LEDGER. NEITHER ANCHOR NOR LEDGER MAKES ANY
REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF INFORMATION CONTAINED
HEREIN ABOUT THE OTHER COMPANY.
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TABLE OF CONTENTS
<Table>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 4
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION............................................... 19
THE MEETING................................................. 20
THE COMPANIES............................................... 22
MATTER 1. THE MERGER........................................ 24
THE MERGER AGREEMENT........................................ 36
THE STOCK OPTION AGREEMENT.................................. 42
EXCHANGE PROCEDURES......................................... 44
MANAGEMENT AND OPERATIONS AFTER THE MERGER.................. 47
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA....... 48
ANCHOR STOCK AND COMPARATIVE RIGHTS OF SHAREHOLDERS......... 55
REGULATION.................................................. 61
MATTER 2. ELECTION OF DIRECTORS............................. 74
MATTER 3. RATIFICATION OF APPOINTMENT OF AUDITORS........... 75
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES....... 76
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS............. 77
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS............ 79
COMPENSATION COMMITTEE REPORT............................... 85
AUDIT COMMITTEE REPORT...................................... 87
PERFORMANCE GRAPH........................................... 89
INDEBTEDNESS OF MANAGEMENT AND CERTAIN TRANSACTIONS......... 90
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE............... 90
SHAREHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING........... 90
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL
MEETING................................................... 91
LEGAL MATTERS............................................... 91
EXPERTS..................................................... 91
WHERE YOU CAN FIND MORE INFORMATION......................... 92
AGREEMENT AND PLAN OF MERGER................................ Appendix A
SUMMARY OF OPINION OF LEDGER'S FINANCIAL ADVISOR............ Appendix B
FAIRNESS OPINION OF WILLIAM BLAIR & COMPANY, L.L.C.......... Appendix C
</Table>
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY HAS LEDGER AGREED TO BE ACQUIRED BY ANCHOR?
A: Ledger's board of directors approved the merger based upon its assessment of
the financial condition and prospects of Ledger in particular and the
competitive and regulatory environment for financial institutions generally.
Ledger's financial advisor, William Blair & Company, L.L.C., has advised
Ledger's board that the merger consideration is fair, from a financial point
of view, to Ledger shareholders. The merger will enable Ledger shareholders
who elect to receive Anchor stock in the merger to hold stock in a larger
and more diversified company whose shares are more widely held and more
actively traded. Based upon these and other factors, Ledger's board believes
that merging with Anchor is in the best interests of Ledger and its
shareholders. To review the background and reasons for the merger, see the
discussions entitled "MATTER 1. THE MERGER -- Background of the Merger" on
page 25 and "MATTER 1. THE MERGER -- Reasons for the Merger; Ledger Board
Recommendation" on page 27.
Q: AS A LEDGER SHAREHOLDER, WHAT WILL I RECEIVE IN THE MERGER?
A: You may elect to receive 1.10 shares of Anchor stock for every Ledger share
you own or, subject to certain limitations, cash instead of Anchor stock for
all or a portion of the Ledger shares you own. These limitations are
discussed in the question below entitled "What are the limitations on my
option to elect to receive cash instead of Anchor stock?" You will also
receive cash instead of any fractional shares of Anchor stock. After the
meeting, assuming Ledger shareholders approve the merger, you will be sent a
document called a "Letter of Transmittal" with instructions on how to elect
to receive Anchor stock, cash or a combination in exchange for your shares
of Ledger stock.
Q: WHAT IS THE VALUE OF THE ANCHOR STOCK I WILL RECEIVE IN THE MERGER AND WILL
THE VALUE BE DIFFERENT IF I ELECT TO RECEIVE CASH, INSTEAD OF RECEIVING
ANCHOR STOCK, FOR MY LEDGER STOCK?
A: Because the exchange ratio is fixed and the market price of the Anchor stock
that Ledger shareholders will receive in the merger will fluctuate, Ledger
shareholders cannot be sure of the market value of the Anchor stock they
will receive in the merger. Using the exchange ratio and the closing price
of a share of Anchor stock on September 10, 2001, a share of Ledger stock
would have been exchanged for 1.10 shares of Anchor stock with a value of
$17.875 if the merger had occurred on that date. If you elect to receive
cash for your Ledger shares instead of Anchor stock, the amount of cash you
receive will be based on the closing price of Anchor stock on the day we
complete the merger, which we presently expect will happen within several
days after the meeting. If you elect to receive Anchor stock, its value may
fluctuate on a daily basis and could be worth more or less than the amount
you would receive if you make a cash election. You will be notified after
the merger of the per-share cash value to be distributed to Ledger
shareholders whose cash elections are honored.
Q: WHAT ARE THE LIMITATIONS ON MY OPTION TO ELECT TO RECEIVE CASH INSTEAD OF
ANCHOR STOCK?
A: There is a limit of 20% on the Ledger stock that can be converted to cash in
the merger. After the merger is completed, you will receive a Letter of
Transmittal that you will have to fill out and return along with your Ledger
stock certificate(s) in order to receive Anchor stock or cash. There are
several limitations on your ability to receive cash for your Ledger shares
instead of Anchor stock. First, your properly completed Letter of
Transmittal must be returned within 45 days after it is mailed to you.
Second, if you decide to "split" your election and want to receive cash for
part of your Ledger shares and Anchor stock for the rest, you can only do
this if you split it in such a way that you receive at least 100 shares of
Anchor stock. Finally, once we receive cash elections which exceed the 20%
limit described above, we will treat all subsequent elections as elections
to receive only Anchor stock. For more information on the procedure for
exchanging your Ledger stock if the merger is approved, and the procedure
for making a cash election,
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please see "EXCHANGE PROCEDURES" on page 44.
Q: WILL I HAVE TO PAY INCOME TAX ON THE ANCHOR STOCK OR CASH THAT I RECEIVE FOR
MY LEDGER STOCK?
A: You may, on the cash. Unless the number of shares of Ledger stock you own is
evenly divisible by 10, you will receive cash instead of any fractional
share of Anchor stock. The amount of cash you receive in lieu of this
fractional share will be taxable to you. Further, if you elect to and
actually receive cash instead of Anchor stock for all or part of your Ledger
shares, you will be subject to income tax on the lesser of the amount of
cash you receive or your gain on the transaction. In almost all cases, this
income will be taxed as capital gain. The tax consequences of the merger to
you will depend upon your personal situation. You should consult your tax
advisor for a full understanding of the tax consequences to you. For more
information, see the discussion under "MATTER 1. THE MERGER -- Federal
Income Tax Consequences" on page 33.
Q: WHAT WILL HAPPEN TO EXISTING ANCHOR SHAREHOLDERS AS A RESULT OF THE MERGER?
A: Anchor shareholders will retain the Anchor stock they currently own.
Q: WHAT SHOULD I DO NOW?
A: Carefully read this document and decide how you want to vote. To vote, you
should either indicate on the enclosed proxy card how you want to vote, sign
and mail the proxy card in the enclosed pre-paid return envelope as soon as
possible or vote by telephone. If you vote by mail, to insure that your
shares are represented and voted at the meeting, we recommend that you mail
your proxy card by October 15, 2001. Please see "THE MEETING -- Telephonic
Voting" on page 21 for instructions on how to vote by telephone. In order
for the merger to occur, a majority of the outstanding Ledger shares must
approve the merger agreement. If you do not vote your shares, the effect
will be the same as voting AGAINST the merger. LEDGER'S BOARD UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THE MERGER.
Q: WHY AM I BEING ASKED TO VOTE ON THE ELECTION OF LEDGER DIRECTORS AND THE
APPROVAL OF LEDGER'S AUDITORS?
A: The meeting is being held at approximately the time that Ledger is required
to hold its annual meeting. If the merger were not approved at the meeting,
there would not be sufficient time to solicit proxies on these matters in
order for Ledger to hold an annual meeting for these purposes within the
time limits under applicable law and Ledger's bylaws. Therefore, Ledger's
board is soliciting proxies for the election of directors and the approval
of auditors to be used at the meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will not vote your shares unless you follow the directions he or
she provides you regarding how to instruct your broker to vote. If you do
not provide voting instructions to your broker, your shares will not be
voted and this will have the same effect as if you voted AGAINST the merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD OR VOTED BY
TELEPHONE?
A: Yes. You can change your vote at any time before your proxy is voted at the
meeting. Just (1) vote again by telephone to override your previous
telephonic vote, (2) send in a later-dated, signed proxy card to Ledger's
Secretary before the meeting, or (3) attend the meeting and vote in person.
Q: SHOULD I SEND IN MY STOCK CERTIFICATE(S) AT THIS TIME?
A: No. If the merger is completed, we will send Ledger shareholders a Letter of
Transmittal with written instructions for exchanging their stock
certificate(s) and making elections to receive Anchor stock, cash, or a
combination of the two. We do recommend that you locate your Ledger stock
certificate(s) and keep them in a safe place so that you are prepared to
respond promptly to the Letter of Transmittal when it arrives. See "What if
I cannot find my stock certificate(s)?" on the next page.
Q: CAN I MAKE MY CASH ELECTION AT THIS TIME?
A: No. After the meeting, assuming the merger is approved by Ledger
shareholders, you will
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be sent a Letter of Transmittal containing detailed instructions as to how to
elect to receive either Anchor stock, cash or a combination of the two, in
exchange for your shares of Ledger stock. At that time, you will be notified of
the per share cash value to be distributed to those Ledger shareholders
whose cash elections are honored.
Q: WHAT IF I CANNOT FIND MY STOCK CERTIFICATE(S)?
A: If the merger is approved, there will be a procedure for you to receive your
Anchor stock (or cash), even if you have lost one or more of your
certificates for Ledger stock. However, this procedure can take some time to
complete. In order to insure that you are able to receive your Anchor stock
quickly after the merger is completed, or that you are able to comply with
the deadlines established for electing to receive cash instead of Anchor
stock, if you cannot locate your Ledger stock certificate(s) after looking
for them carefully, we urge you to contact Firstar Bank, N.A., and follow
the procedure for replacing your stock certificate(s). Firstar Bank can be
reached at (414) 276-3737 or (800) 637-7549, or you can write to Firstar at
the following address:
Firstar Bank, N.A.
P.O. Box 2077
Milwaukee, WI 53201-2077
Attn: Corporate Trust Services
Q: WHAT IF MY STOCK CERTIFICATE(S) STILL SAY "HALLMARK CAPITAL CORP."?
A: Ledger changed its corporate name from "Hallmark Capital Corp." to "Ledger
Capital Corp." last year. Many of our shareholders have certificates that
they owned before the name change that still say "Hallmark Capital Corp." If
this applies to you, you do not have to do anything. If the merger is
approved, you will be entitled to receive the merger consideration (Anchor
stock or, if you make an effective cash election, cash or a combination of
the two) if you surrender your stock certificate(s) with "Hallmark Capital
Corp." on them to the Exchange Agent and otherwise comply with the
requirements discussed under "EXCHANGE PROCEDURES" on page 44.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the merger as quickly as possible. We must
first obtain the necessary regulatory clearance and the approval of Ledger
shareholders at the meeting. We hope to complete the merger in the fourth
quarter of 2001; however, we cannot assure you as to when or if all
conditions to the merger will be satisfied or waived, and it is possible
that the merger will not be completed.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANIES?
A: Both Anchor and Ledger file periodic reports and other information with the
SEC. You may read and copy this information at the SEC's public reference
facilities. Please call the SEC at 1-800-SEC-0330 for information about
these facilities. This information is also available at the Internet site
maintained by the SEC at http://www.sec.gov. You can also request copies of
these documents from us. See "WHERE YOU CAN FIND MORE INFORMATION" on page
92.
Q: WHO CAN ANSWER MY QUESTIONS ABOUT THE MERGER?
A: For Ledger Shareholders. If you have more questions about the merger, you
should contact:
Ledger Capital Corp.
5555 North Port Washington Road
Glendale, WI 53217
Attention: Investor Relations
Telephone: (414) 290-7900
For Banks and Brokers. If you have questions about the merger, please
contact D.F. King & Co., Inc., who is serving as proxy solicitor for
Ledger, at the following address:
D.F. King & Co., Inc.
77 Water Street
20th Floor
New York, NY 10005
(212) 269-5550
3
9
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus. It does not contain all of the information that is
important to you. We urge you to carefully read this entire document and the
other documents it refers to in order to fully understand the merger. Most of
the headings in this summary are followed by a reference to other pages of this
document where you can read more about that particular topic. See "WHERE YOU CAN
FIND MORE INFORMATION" on page 92 to find out how you can obtain more
information about Anchor and Ledger.
Although the articles of incorporation of each company authorize the
issuance of preferred stock, and both Anchor and Ledger have authorized a series
of preferred stock in connection with their respective preferred share purchase
rights plans, neither company has any shares of preferred stock outstanding.
Since each company has only one class of stock outstanding (common stock), when
we use the term "Anchor stock" we are referring to Anchor common stock
(including the associated preferred share purchase rights), and when we use the
term "Ledger stock" we are referring to Ledger common stock (including the
associated preferred share purchase rights).
In this proxy statement/prospectus, we use "Anchor" to refer to Anchor
BanCorp Wisconsin Inc. and "Ledger" to refer to Ledger Capital Corp. When the
words "we" or "us" are used in this proxy statement/prospectus, they refer to
both Anchor and Ledger.
GENERAL [PAGE 24]
We are proposing a merger between Anchor and Ledger. The merger will (1)
create value for Ledger shareholders by combining Ledger with the largest thrift
institution headquartered in Wisconsin, having a broad market area and diverse
customer base, and (2) create opportunities for the combined company to realize
enhanced revenues and profitability through mortgage, commercial and consumer
loan growth.
In the merger, Ledger shareholders will receive 1.10 shares of Anchor stock
in exchange for each share of Ledger stock they own, and will have the limited
ability to elect to receive cash instead of Anchor stock. Both Anchor and Ledger
stock are listed on The Nasdaq Stock Market. For information regarding the
historical market prices of and dividends paid on Anchor stock and Ledger stock,
see "-- Market Prices and Dividends" on page 17. We urge you to obtain current
stock price quotations for Anchor and Ledger stock. If the merger is completed,
Ledger stock will no longer be listed on Nasdaq.
Throughout this proxy statement/prospectus, we use information (including
Anchor and Ledger closing stock prices) as of September 10, 2001 as the basis
for providing you with certain information about Anchor, Ledger and the merger.
September 10 was the most recent trading day for which it was practicable to
obtain market price data prior to the printing of this proxy statement/
prospectus, in part because the September 11, 2001 terrorist attacks on the
United States caused the major stock exchanges, including Nasdaq, to close. At
the time of printing this proxy statement/prospectus, we cannot predict what the
effect of the attacks or the closing of the stock exchanges will be on financial
markets in general or on Anchor's or Ledger's stock prices in particular.
Therefore, we cannot assure you that these prices will not be materially lower
or higher than shown, either immediately after the stock exchanges reopen or at
any time thereafter, including the time we complete the merger.
THE COMPANIES [PAGE 22]
ANCHOR. Headquartered in Madison, Wisconsin, Anchor is the parent holding
company for AnchorBank, fsb, a financial institution with $3.2 billion in
assets, 49 full-service offices and three lending-only facilities in 37
Wisconsin cities. AnchorBank is the largest thrift institution headquartered in
Wisconsin. Information about AnchorBank's products and services can be accessed
on the Internet at http://www.anchorbank.com.
LEDGER. Headquartered in Glendale, Wisconsin, Ledger is the parent holding
company for Ledger Bank, S.S.B., a financial institution with $507 million in
assets, four full-service offices and one limited-service office, all of which
are located in the Milwaukee-metropolitan area. Information about Ledger Bank's
products and
4
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services can be accessed on the Internet at http://www.ledgerbank.com.
THE MEETING [PAGE 20]
The merger will be submitted to Ledger shareholders for approval at its
annual meeting to be held on October 24, 2001, at 7:00 p.m., local time, at the
Pettit National Ice Center, Hall of Fame Room, 500 South 84(th) Street,
Milwaukee, Wisconsin.
RECORD DATE; VOTE REQUIRED [PAGE 20]
You can vote at the meeting if you owned Ledger stock at the close of
business on September 14, 2001. As of that date, there were 2,437,141 shares of
Ledger stock outstanding and entitled to vote at the meeting; directors and
executive officers of Ledger and their affiliates held 514,939 of these shares.
- The merger will be approved if a majority of the shares of Ledger stock
outstanding on the record date (at least 1,218,571 shares) are voted "FOR"
approval of the merger. If you do not vote your shares, the effect will be the
same as if you voted AGAINST the merger.
- On the proposal to elect directors, you are being asked to vote for, or
withhold authority to vote for, Ledger's board of directors' nominees. Ledger
directors are elected by a "plurality" of the votes cast at the meeting,
meaning that the three nominees receiving the most votes will be elected
provided there is a quorum (a majority of the shares represented in person or
by proxy) in attendance at the meeting. If you do not vote your shares, it
will have no effect on the election of directors provided there is a quorum in
attendance at the meeting.
- The affirmative vote of the holders of a majority of the quorum is necessary
to ratify the appointment of KPMG LLP as independent auditors of Ledger. If
you do not vote your shares, it will have no effect on the ratification of
KPMG LLP as Ledger's independent auditors provided there is a quorum in
attendance at the meeting.
RECOMMENDATION TO SHAREHOLDERS [PAGE 27]
Ledger's board of directors unanimously recommends that you vote "FOR" the
proposal to approve the merger. You should read the board's reasons for its
recommendation beginning on page 27. Ledger's board of directors also recommends
that you vote "FOR" Ledger's nominees for director and "FOR" ratification of the
appointment of KPMG LLP as Ledger's independent auditors.
NO DISSENTERS' RIGHTS
Under the Wisconsin Business Corporation Law ("WBCL"), Ledger shareholders
will NOT have any right to dissent from the merger and receive payment of the
"fair value" of their shares. Although the WBCL provides these rights generally
to shareholders of merging corporations, they are not available in connection
with the merger because both Anchor stock and Ledger stock are listed on Nasdaq.
EFFECTS OF THE MERGER [PAGE 14]
Among Ledger's board of directors' reasons for recommending approval of the
merger is its belief that, over the long-term, the merger will be beneficial to
Anchor's shareholders, including Ledger shareholders who will become Anchor
shareholders if the merger is completed. Anchor believes that one of the
potential benefits of the merger is that the cost savings it believes can be
realized by combining the two companies will enhance Anchor's earnings.
Anchor currently expects to reduce expenses by eliminating duplicative
external data processing costs and by combining the two companies' accounting,
data processing, retail and lending support and other functions after the
merger, which will enable Anchor to eventually eliminate duplicative positions.
Promptly following the completion of the merger, which is expected to occur
during the third quarter of Anchor's fiscal 2002 (the year ending March 31,
2002), Anchor plans to begin the process of eliminating redundant functions
(such as external data processing) and identifying and eliminating duplicative
positions.
Because Anchor believes that this process will take the remainder of fiscal
2002 to complete, it has not attempted to quantify what cost savings might be
achieved during fiscal 2002. The amount of any cost savings Anchor may realize
in fiscal 2002 will depend upon how quickly and efficiently Anchor is able to
implement the processes outlined above.
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Anchor believes that cost savings of approximately $2.5 million (pre-tax)
can be realized in Anchor's fiscal 2003 (the year ending March 31, 2003), which
represents approximately 25% of Ledger's operating expenses for fiscal 2001. The
$2.5 million (pre-tax) in cost savings is based on Anchor's assumption that it
will be able to (1) eliminate approximately $2.0 million (pre-tax) in
compensation and benefits costs, (2) reduce external data processing costs by
approximately $0.2 million (pre-tax), and (3) achieve additional cost savings of
approximately $0.3 million (pre-tax) through the reduction or elimination of
expenses such as audit, legal, supervisory exam, printing and office supplies,
directors fees, insurance and surety bond premiums, and organizational dues.
Anchor estimates that these savings will be partially offset by increased
marketing expenses which Anchor expects to incur because of its entry into
Ledger's geographic market area which has not been served by Anchor prior to the
merger. These estimates are based on Anchor's present assessment of where
savings could be realized based upon the present independent operations of the
two companies and the actual savings in some or all of these areas could be
higher or lower than Anchor currently anticipates.
The companies have prepared financial statements that show the combined
operations and financial condition of the two companies as if the merger had
occurred on April 1, 2000 (in the case of operations data) and March 31, 2001
(in the case of balance sheet data). These are known as "pro forma" financial
statements. Pursuant to SEC rules, the pro forma financial statements do not
reflect the following:
- the effect of any anticipated cost savings cannot be shown, because those
potential savings are based on Anchor management's estimates and Anchor cannot
assure you that it will achieve them; and
- the effect of opportunities for increasing Anchor's revenues through mortgage,
commercial and consumer loan growth cannot be shown, because Anchor has not
quantified the increase in revenues that it hopes to achieve and cannot
predict what effect it will have on post-merger results of operations if it
achieves such increase.
The pro forma financial statements show that the merger would have caused a
"dilution" (reduction) in Anchor's earnings per share. This dilution is
reflected in the pro forma financial statements and can be seen in the table
under "-- Comparative Per Share Data" on page 16 by comparing the section
labeled "Anchor Historical Data" with the section labeled "Anchor Unaudited Pro
Forma." If Anchor does achieve $2.5 million (pre-tax) in cost savings in fiscal
2003, partially offset by the increased marketing expenditures Anchor expects to
incur, Anchor expects that these net savings will offset the dilution and that
the merger will be 4 cents to 6 cents per share accretive to earnings in that
year.
There are numerous factors other than the merger that could cause Anchor's
results of operations (including, among other things, earnings per share) to
increase or decrease after the merger. Therefore, Anchor cannot assure you that
the anticipated benefits of the merger discussed in the previous paragraphs will
happen. You should read "CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION" on page 19 for a discussion of the factors that could affect the
combined company's future operations and financial condition.
The pro forma financial statements are shown under "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL DATA" on page 48 and are summarized on page 14
under "-- Selected Unaudited Pro Forma Condensed Combined Financial Data." You
should read these sections carefully.
SOLICITATION OF PROXIES [PAGE 22]
Ledger's board of directors is soliciting proxies from Ledger's
shareholders for use at the meeting. Ledger will also make arrangements with
brokerage firms, fiduciaries and other custodians who hold shares of record to
forward solicitation materials to the beneficial owners of those shares. D.F.
King & Co., Inc. will assist in the solicitation of proxies by Ledger for a fee
of $5,000, plus reimbursement of reasonable out-of-pocket expenses.
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OPINION OF LEDGER'S FINANCIAL ADVISOR [PAGE 29]
William Blair & Company, L.L.C. has delivered a written opinion to Ledger's
board of directors to the effect that, as of the mailing date of this proxy
statement/prospectus, the exchange ratio was fair to Ledger's shareholders from
a financial point of view. This opinion is not a recommendation to any Ledger
shareholder as to how to vote. We have attached a summary of the analysis Blair
undertook in rendering its opinion as Appendix B to this proxy
statement/prospectus and a copy of Blair's opinion is attached to this document
as Appendix C. You should read these documents completely.
The opinion of Ledger's financial advisor contains assumptions as to
various matters it considered in rendering its opinion, including hypothetical
assumptions as to the future business operations, financial performance, and
prospects of each company. These assumptions were made by the financial advisor
solely for purposes of rendering its opinion and do not represent assumptions
that are made by either Anchor or Ledger. Further, these assumptions are not
meant to predict what will happen in the future and you should not rely on them
for this purpose.
INTERESTS OF MEMBERS OF LEDGER'S BOARD OF DIRECTORS AND MANAGEMENT IN THE MERGER
[PAGE 31]
Some of Ledger's directors and executive officers have interests in the
merger that are different from, or in addition to, the interests of Ledger
shareholders. You should be aware of these interests, because they may conflict
with your interests.
REGULATORY APPROVALS REQUIRED FOR THE MERGER [PAGE 33]
Completion of the merger is subject to a number of state and federal
regulatory approvals. For more information, see "MATTER 1. THE
MERGER -- Regulatory Approvals" on page 33.
CONDITIONS TO COMPLETION OF THE MERGER [PAGE 39]
Completion of the merger depends on a number of conditions being satisfied
or waived. Some of these conditions include:
- approval of the merger by the holders of a majority of the outstanding shares
of common stock of Ledger;
- approval of the merger by regulatory authorities;
- the absence of any injunction or legal restraint blocking the merger; and
- material compliance by Anchor and Ledger with all agreements and covenants in
the merger agreement.
The merger will occur shortly after all of the conditions to completion of
the merger have been satisfied or waived. Although we expect to complete the
merger during the fourth calendar quarter of 2001, we cannot be certain when the
conditions to the merger will be satisfied or waived or that the merger will be
completed.
TERMINATION OF THE MERGER AGREEMENT [PAGE 39]
We may agree in writing to terminate the merger agreement at any time
without completing the merger, even after the shareholders of Ledger have
approved it, provided that such termination is approved by the boards of
directors of both companies.
In addition, either Anchor or Ledger may, without the consent of the other,
terminate the merger agreement under various circumstances, including the
following:
- if the merger is not completed by March 31, 2002;
- if Ledger's shareholders do not approve the merger;
- if an injunction is issued preventing the merger;
- if any regulatory body denies approval of the merger and neither company
appeals that denial; or
- if the other company has materially breached any of the representations,
warranties, covenants or agreements contained in the merger agreement unless
the breach, if curable, is cured within 30 days after notice.
7
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Ledger may terminate the merger agreement if as a result of a proposed
acquisition of Ledger by a third party, Ledger's directors determine that they
should terminate the merger agreement to fulfill their fiduciary obligations to
Ledger's shareholders. However, before Ledger may do so, it must first advise
Anchor of the identity of the third party and the terms of its proposal and give
Anchor an opportunity to negotiate adjustments in the terms of the merger
agreement. See "THE MERGER AGREEMENT -- Fiduciary Termination" on page 40. If
this happens, Anchor will be able to exercise the option to purchase up to 19.9%
of Ledger's stock. See "-- The Stock Option Agreement" below.
Ledger also may terminate the merger agreement if the average price of
Anchor stock, measured during a specified trading period prior to the date we
receive the last approval necessary to complete the merger, declines by more
than 15% relative to the SNL Midwest Thrift Stock Index. Anchor may terminate
the merger agreement if the Anchor stock price increases by more than 15%
relative to the same index during the same trading period. See "THE MERGER
AGREEMENT -- Price Condition" on page 41.
Anchor may terminate the merger agreement if (1) Ledger's board of
directors does not recommend or changes its recommendation of the merger for any
reason, (2) any person acquires more than 20% of Ledger's stock, (3) Ledger's
board recommends a takeover proposal to its shareholders, or (4) a tender or
exchange offer for 20% or more of Ledger's stock is made and Ledger's board
fails to recommend against it.
TERMINATION FEE ARRANGEMENTS [PAGE 40]
The merger agreement provides for a termination fee of $1 million if the
merger agreement is terminated under certain circumstances. If the merger
agreement is wrongfully terminated by Anchor, Ledger is entitled to receive a $1
million termination fee. Anchor also is entitled to the termination fee if
Ledger terminates the merger agreement under certain circumstances as discussed
more fully under "THE MERGER AGREEMENT -- Termination Fee" on page 40.
AMENDMENT AND WAIVER [PAGE 42]
The merger agreement may be amended prior to the completion of the merger,
and some of the terms and conditions of the merger agreement may be waived.
THE STOCK OPTION AGREEMENT [PAGE 42]
The companies have entered into a stock option agreement that could
discourage other companies from trying or proposing to combine with Ledger
before the merger is completed. The stock option agreement gives Anchor an
option to purchase up to 19.9% of Ledger's stock. The option will only become
exercisable in the event of an acquisition or contemplated acquisition of Ledger
by a party other than Anchor. As of the date of this proxy statement/prospectus,
we did not know of any such acquisition or contemplated acquisition. The stock
option agreement is an exhibit to Anchor's registration statement, of which this
proxy statement/prospectus is a part. See "WHERE YOU CAN FIND MORE INFORMATION"
on page 92 to learn how you can obtain a copy of the stock option agreement.
DIVIDENDS [PAGE 17]
Following completion of the merger, all Anchor shareholders (including
former Ledger shareholders) will be entitled to receive dividends, if any, if
and as declared by Anchor's board of directors. Anchor currently anticipates
continuing its practice of paying quarterly cash dividends following the
completion of the merger. The future payment of any dividends by Anchor will
depend upon several factors, including the profitability of the combined
company, capital requirements, financial condition, growth, business
opportunities, tax considerations, industry standards, economic conditions,
restrictions in any then-existing credit agreements and other factors that
Anchor's board may deem relevant.
COMPARISON OF RIGHTS OF LEDGER AND ANCHOR SHAREHOLDERS [PAGE 55]
The rights of Ledger and Anchor shareholders are governed by the WBCL and
each company's respective articles of incorporation and bylaws. Upon the
completion of the merger, Ledger shareholders will become shareholders of
Anchor, and will have different rights under Anchor's articles and bylaws than
they have now. In addition, Ledger shareholders who become Anchor shareholders
will have rights under Anchor's preferred share purchase rights plan that
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are different from the rights that they previously had under Ledger's preferred
share purchase rights plan.
ACCOUNTING TREATMENT [PAGE 33]
We will account for the merger using the purchase method of accounting for
business combinations.
FEDERAL INCOME TAX CONSEQUENCES [PAGE 33]
You will not recognize taxable gain or loss for federal income tax purposes
upon the exchange of Ledger stock for Anchor stock in the merger, except that
(1) you will be taxed on any cash you receive in lieu of fractional shares,
which will be nominal, and (2) if you elect to and actually receive cash instead
of all (or part) of the Anchor stock to which you are entitled because of the
merger, you will recognize taxable gain on the lesser of the amount of cash you
receive or your total gain in the transaction. You will not be able to recognize
a loss, if any, for tax purposes unless you elect to and actually receive all
cash and no Anchor stock. For this purpose, your total gain in the transaction
will be measured as the excess, if any, of the total value (as of the date of
the merger) of the cash and Anchor stock you receive over your total tax basis
in your Ledger stock.
The tax basis of the Anchor stock you will receive in the merger generally
will be the same as the tax basis of the Ledger stock you exchange, increased by
the amount of any taxable gain you recognized in the transaction (as described
above) and decreased by the amount of cash you receive. The holding period for
the Anchor stock you will receive, which determines how any gain or loss will be
treated for federal income tax purposes when that stock is sold, generally will
include the holding period for the Ledger stock you exchange in the merger.
The merger is conditioned on our receipt of legal opinions that the federal
income tax treatment will be as we have described in this document.
This tax treatment may not apply to some shareholders and may depend on
your specific situation and on variables not within our control. You should
consult your own tax advisor for a full understanding of the tax consequences to
you, including the application and effect of state and local income and other
tax laws.
Anchor shareholders will not recognize any taxable gain or loss or other
taxable event as a result of the merger.
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SELECTED FINANCIAL DATA
The tables on this and the following pages show summary historical
financial data for each of our companies, and similar information reflecting the
merger of our two companies, which we refer to as "pro forma" data.
ANCHOR SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA. The table below
and on the next page shows summary historical financial data about Anchor. When
you read this information, you should also read the historical financial
statements we are incorporating by reference in this document, including the
notes to those financial statements. See "WHERE YOU CAN FIND MORE INFORMATION"
on page 92 for instructions on how to obtain these financial statements and
other documents Anchor has filed with the SEC.
We derived the historical consolidated financial data in the table for
fiscal years 1997 through 2001 from Anchor's historical consolidated financial
statements audited by Ernst & Young LLP, independent public accountants. We
derived the historical consolidated financial data in the table at and for the
quarters ended June 30, 2000 and 2001 from Anchor's internally prepared
unaudited financial statements for such periods. In the opinion of Anchor
management, these unaudited historical consolidated financial statements reflect
all adjustments, consisting of only normal recurring items, that are necessary
for the fair presentation of financial position and results of operations for
those periods.
Anchor's financial statements as of March 31, 2000 and 2001 and for each of
the three years in the period ended March 31, 2001 and its unaudited financial
statements at and for the quarters ended June 30, 2000 and 2001 are incorporated
into this document by reference. Anchor's statements of income for fiscal years
1997 and 1998, and its balance sheets at March 31, 1997, 1998 and 1999, are not
incorporated into this document by reference.
<Table>
<Caption>
AT OR FOR THE
QUARTER ENDED
JUNE 30, AT OR FOR THE FISCAL YEAR ENDED MARCH 31,
------------------------- --------------------------------------------------------------
2001 2000 2001 2000 1999 1998 1997
----------- ----------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
SELECTED OPERATIONS DATA:
Interest income.............. $ 56,724 $ 54,421 $ 228,647 $ 202,594 $ 194,807 $ 187,392 $ 160,952
Interest expense............. 35,501 33,840 148,096 119,393 114,535 110,893 95,543
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income.......... 21,223 20,581 80,551 83,201 80,272 76,499 65,409
Provision for loan losses.... 210 185 945 1,306 1,017 1,250 850
Non-interest income.......... 5,019 3,370 13,503 14,390 22,019 15,882 14,968
Non-interest expense......... 13,696 12,695 51,450 61,187 52,426 49,279 53,942
Income taxes................. 4,425 4,086 14,682 15,596 18,607 15,507 9,197
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income................... $ 7,911 $ 6,985 $ 26,977 $ 19,502 $ 30,241 $ 26,345 $ 16,388
========== ========== ========== ========== ========== ========== ==========
SELECTED FINANCIAL CONDITION
DATA:
Total assets................. $3,180,228 $3,020,721 $3,127,474 $2,911,152 $2,663,718 $2,517,080 $2,156,168
Investment securities........ 109,183 94,148 56,129 86,206 87,722 80,460 52,511
Mortgage-related
Securities................. 332,135 288,666 379,159 300,519 258,489 254,389 263,295
Loans receivable held for
investment, net............ 2,430,195 2,408,939 2,414,976 2,302,721 2,111,566 1,962,023 1,682,919
Deposits..................... 2,202,577 1,922,008 2,119,320 1,897,369 1,835,416 1,710,980 1,465,608
Notes payable to FHLB........ 642,696 686,746 669,896 649,046 517,695 508,145 439,065
Other borrowings............. 39,943 27,416 70,702 107,813 55,264 55,765 57,374
Non-performing assets........ 5,973 5,096 5,712 5,577 6,400 14,201 14,599
Stockholders' equity......... 225,739 215,203 219,612 217,215 220,287 202,868 165,319
Shares outstanding........... 22,760,567 23,652,955 22,814,923 24,088,147 23,832,165 23,791,78 21,623,990
</Table>
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<Table>
<Caption>
AT OR FOR THE
QUARTER ENDED
JUNE 30, AT OR FOR THE FISCAL YEAR ENDED MARCH 31,
-------------------------- -----------------------------------------
2001 2000 2001 2000 1999 1998 1997
----------- ----------- ----- ----- ----- ----- -----
(UNAUDITED) (UNAUDITED)
SELECTED PER SHARE DATA:
Earnings:
Basic................................. $0.36 $0.30 $1.19 $0.80 $1.26 $1.06 $0.71
Diluted............................... 0.35 0.29 1.16 0.78 1.19 1.01 0.68
Book value per share at end of period... 9.92 9.10 9.63 9.02 9.24 8.53 7.65
Dividends paid.......................... 0.075 0.070 0.30 0.25 0.20 0.16 0.12
SELECTED RATIOS:
Dividend payout ratio................... 21.43% 24.14% 24.79% 31.25% 15.48% 15.09% 16.73%
Yield on earning assets................. 7.65* 7.77* 7.89 7.56 7.68 7.94 7.90
Cost of funds........................... 4.97* 5.05* 5.31 4.79 4.84 5.01 4.98
Interest rate spread.................... 2.68* 2.72* 2.58 2.77 2.84 2.93 2.92
Net interest margin..................... 2.86* 2.94* 2.78 3.10 3.15 3.23 3.20
Return on average assets................ 1.01* 0.95* 0.88 0.71 1.16 1.08 0.78
Return on average equity................ 14.19* 12.92* 12.48 8.92 14.44 13.24 9.90
Average equity to average assets........ 7.13 7.36 7.09 7.97 8.04 8.15 7.84
Non-performing assets to total assets... 0.19 0.17 0.18 0.19 0.24 0.56 0.68
Allowance for loan losses to total
loans................................. 0.93 0.96 0.94 1.00 1.08 1.23 1.36
</Table>
---------------
*Annualized.
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LEDGER SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA. The table below
and on the next page shows summary historical financial data about Ledger. When
you read this information, you should also read the historical financial
statements we are incorporating by reference in this document, including the
notes to those financial statements.
We derived the historical consolidated financial data in the table for
fiscal years 1997 through 2001 from Ledger's historical consolidated financial
statements audited by KPMG LLP, Ledger's independent public accountants. We
derived the historical consolidated financial data in the table at and for the
quarters ended June 30, 2000 and 2001 from Ledger's internally prepared
unaudited financial statements for such periods. In the opinion of Ledger
management, these unaudited historical consolidated financial statements reflect
all adjustments, consisting of only normal recurring items, that are necessary
for the fair presentation of financial position and results of operations for
those periods.
The financial information for the quarters ended June 30, 2001 and 2000 is
included in Ledger's audited historical financial information for the years
ended June 30, 2001 and 2000 but is separately stated herein to provide a basis
for comparison to Anchor's financial information for its fiscal quarters ended
June 30, 2001 and 2000 and for combining the two companies' financial results
for these periods in the pro forma financial statements (see "UNAUDITED PRO
FORMA CONDENSED COMBINED FINANCIAL DATA" on page 48).
Ledger's statements of income for fiscal years 1999 through 2001 and its
balance sheets at June 30, 2000 and 2001 are incorporated into this document by
reference. Ledger's statements of income for fiscal years 1997 and 1998 and its
balance sheets at June 30, 1997, 1998 and 1999 and its unaudited financial
statements at and for the quarters ended June 30, 2000 and 2001 are not
incorporated into this document by reference.
<Table>
<Caption>
AT OR FOR THE QUARTER
ENDED JUNE 30, AT OR FOR THE FISCAL YEAR ENDED JUNE 30,
------------------------- ----------------------------------------------------
2001 2000 2001 2000 1999 1998 1997
----------- ----------- -------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)
SELECTED OPERATIONS DATA:
Total interest income........... $ 9,409 $ 10,180 $ 39,260 $ 38,982 $ 34,298 $ 32,227 $ 29,823
Total interest expense.......... 6,386 6,955 27,674 26,023 22,814 21,586 20,210
-------- -------- -------- -------- -------- -------- --------
Net interest income............. 3,023 3,225 11,586 12,959 11,484 10,641 9,613
Provision for loan losses....... 100 244 430 871 480 800 650
Non-interest income............. 726 348 2,110 1,231 2,082 1,208 1,028
Non-interest expense............ 2,850 2,059 9,783 8,537 8,451 6,847 7,046
Income tax expense.............. 294 435 1,209 1,537 1,505 1,403 1,026
-------- -------- -------- -------- -------- -------- --------
Net income...................... $ 505 $ 835 $ 2,274 $ 3,245 $ 3,130 $ 2,799 $ 1,919
======== ======== ======== ======== ======== ======== ========
SELECTED FINANCIAL CONDITION
DATA:
Total assets.................... $506,920 $519,971 $506,920 $519,971 $469,659 $438,374 $409,820
Loans receivable, net........... 352,672 392,306 352,672 392,306 281,120 280,889 273,556
Securities available for sale... 92,979 74,259 92,979 74,259 100,468 66,445 29,518
Mortgage-backed and related
securities.................... 11,074 15,017 11,074 15,017 54,618 65,282 85,430
Cash and cash equivalents....... 22,926 16,559 22,926 16,559 8,599 8,184 8,755
Deposits........................ 319,812 345,318 319,812 345,318 288,714 271,619 281,512
FHLB advances and other
borrowings.................... 141,108 132,040 141,108 132,040 129,519 117,059 92,073
Non-performing assets........... 5,988 2,984 5,988 2,984 3,281 1,435 643
Shareholders' equity............ 36,208 33,596 36,208 33,596 34,496 33,453 29,672
</Table>
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<Table>
<Caption>
AT OR FOR THE QUARTER
ENDED JUNE 30, AT OR FOR THE FISCAL YEAR ENDED JUNE 30,
------------------------- ----------------------------------------------------
2001 2000 2001 2000 1999 1998 1997
----------- ----------- -------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)
SELECTED PER-SHARE DATA:
Earnings per share (basic)...... $ 0.21 $ 0.34 $ 0.95 $ 1.27 $ 1.13 $ 1.01 $ 0.71
Earnings per share (diluted).... 0.20 0.33 0.92 1.23 1.10 0.97 0.68
Cash dividends per share........ 0.05 0.05 0.20 0.15 0.00 0.00 0.00
Book value per share (basic).... 15.37 13.69 15.11 13.12 12.47 12.12 10.95
Book value per share
(diluted)..................... 14.86 13.33 14.65 12.75 12.10 11.61 10.55
SELECTED RATIOS:
Return on average assets........ 0.40% 0.57% 0.45% 0.63% 0.67% 0.67% 0.48%
Return on average equity........ 5.63 8.84 6.50 9.61 9.08 8.89 6.83
Net interest margin............. 2.49 2.42 2.35 2.60 2.52 2.63 2.48
Net interest spread............. 2.06 2.15 1.89 2.30 2.13 2.22 2.06
Shareholders' equity to total
assets........................ 7.14 6.46 7.14 6.46 7.34 7.63 7.24
Non-performing loans to gross
loans......................... 1.20 0.45 1.20 0.45 0.81 0.49 0.22
Non-performing assets to total
assets........................ 1.18 0.57 1.18 0.57 0.70 0.32 0.16
Allowance for loan losses to
non-performing loans.......... 76.70 171.26 76.70 171.26 109.19 163.14 282.71
</Table>
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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA. The table
on the next page shows summary unaudited pro forma financial information for the
combined company for fiscal 2001 (ended March 31, 2001) and for the quarter
ended June 30, 2001.
We derived the pro forma balance sheets at June 30, 2001 by combining
Anchor's unaudited balance sheet at June 30, 2001 with Ledger's audited balance
sheet at June 30, 2001.
We derived the pro forma statements of operations as follows:
-in the statement of operations for the most recent fiscal year, we combined
Anchor's audited results for its fiscal year ended March 31, 2001 with Ledger's
audited results for its fiscal year ended June 30, 2001; and
-in the statement of operations for the quarter ended June 30, 2001, we combined
Anchor's unaudited financial results for the quarter ended June 30, 2001 with
Ledger's unaudited results for the same period.
When you read this information, you should also read the information under
"UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA" on page 48.
The unaudited pro forma combined financial information and the related
notes reflect the application of the purchase method of accounting. Under this
method of accounting, the assets and liabilities of Ledger are adjusted to
reflect the fair value of the assets and liabilities as of the purchase date and
the resulting fair value adjustments become adjustments to their carrying value.
The amount of the purchase price which exceeds the fair value of the assets and
liabilities acquired and identifiable intangibles is recorded as goodwill and
will be reviewed for impairment in future years.
We are presenting two alternative sets of pro forma data, one of which
assumes that none of the former Ledger shareholders will elect to receive cash
instead of Anchor stock in exchange for their Ledger stock, and the other of
which assumes that effective cash elections will be received for 20% of the
outstanding Ledger shares.
We anticipate that the merger will provide the combined company with
financial benefits, including reduced operating expenses and opportunities to
earn more revenue. These anticipated cost savings and benefits are not reflected
in the pro forma information. See "-- Effects of the Merger" on page 5.
The pro forma information, while helpful in illustrating the financial
characteristics of the combined company, does not attempt to predict or suggest
future results. The pro forma information also does not attempt to show how the
combined company would actually have performed had the companies been combined
throughout these periods.
14
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<Table>
<Caption>
ASSUMES THAT NONE OF THE ASSUMES THAT 20.0% OF THE
LEDGER STOCK IS CONVERTED TO LEDGER STOCK IS CONVERTED TO
CASH IN THE MERGER CASH IN THE MERGER
---------------------------- ----------------------------
AT OR FOR AT OR FOR AT OR FOR AT OR FOR
THE QUARTER THE FISCAL THE QUARTER THE FISCAL
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, MARCH 31, JUNE 30, MARCH 31,
2001 2001 2001 2001
------------- ------------ ------------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)
SELECTED OPERATIONS DATA:
Interest income............................... $ 65,922 $ 267,064 $ 65,922 $ 267,064
Interest expense.............................. 41,817 175,489 41,817 175,489
---------- ---------- ---------- ----------
Net interest income........................... 24,105 91,575 24,105 91,575
Provision for loan losses..................... 310 1,375 310 1,375
Non-interest income........................... 5,745 15,613 5,745 15,613
Non-interest expense.......................... 16,653 61,661 16,653 61,661
Income taxes.................................. 4,632 15,544 4,632 15,544
---------- ---------- ---------- ----------
Net income.................................... $ 8,255 $ 28,608 $ 8,255 $ 28,608
========== ========== ========== ==========
SELECTED FINANCIAL CONDITION DATA:
Total assets.................................. $3,699,820 $3,647,066 $3,692,185 $3,639,431
Investment securities......................... 150,790 97,736 150,790 97,736
Mortgage-related Securities................... 393,815 440,839 393,815 440,839
Loans receivable held for investment, net..... 2,786,746 2,771,527 2,786,746 2,771,527
Deposits...................................... 2,524,778 2,441,521 2,524,778 2,441,521
Non-performing assets......................... 11,960 11,699 11,960 11,699
Stockholders' equity.......................... 266,525 260,398 258,890 252,763
Average shares outstanding
Basic....................................... 24,677,086 25,184,096 24,178,494 24,676,617
Diluted..................................... 25,303,065 25,828,259 24,786,967 25,304,173
SELECTED PER-SHARE DATA:
Earnings:
Basic....................................... $ 0.33 $ 1.14 $ 0.34 $ 1.16
Diluted..................................... 0.33 1.11 0.33 1.13
Book value at end of period................... 11.63 10.25 11.57 10.06
Dividends paid................................ 0.08 0.30 0.08 0.30
SELECTED RATIOS:
Dividend payout ratio......................... 24.24% 27.03% 24.24% 26.55%
Yield on earning assets....................... 7.67* 7.91 7.67* 7.91
Cost of funds................................. 5.07* 5.42 5.07* 5.42
Interest rate spread.......................... 2.60* 2.49 2.60* 2.49
Net interest margin........................... 2.81* 2.72 2.81* 2.72
Return on average assets...................... 1.01* 6.81 1.01* 6.81
Return on average equity...................... 14.19* 9.64 14.19* 9.82
Average equity to average assets.............. 7.13 7.06 7.13 6.93
Non-performing assets to total assets......... 0.32 0.32 0.32 0.32
Allowance for loan losses to total loans...... 0.98 0.98 0.98 0.98
</Table>
---------------
* Annualized.
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COMPARATIVE PER-SHARE DATA. The table below shows the earnings, book value
and dividends per share for Anchor and Ledger both on an historical and a pro
forma basis.
We derived the Anchor and Ledger historical data from the same sources as
the "Selected Financial Data" for the two companies appearing on pages 10 and
12, respectively.
We derived the Anchor pro forma data by combining historical consolidated
financial information of Anchor and Ledger for the above periods using the
purchase method of accounting for business combinations, all on the basis
described under "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA" on page
48.
We derived the Ledger equivalent pro forma data by multiplying the Anchor
pro forma data by the 1.10 exchange ratio.
We are presenting two alternative sets of Anchor pro forma data and Ledger
equivalent pro forma data, one of which assumes that none of the former Ledger
shareholders will elect to receive cash instead of Anchor stock in exchange for
their Ledger stock, and the other of which assumes that effective cash elections
will be received for 20% of the outstanding Ledger shares.
You should read the respective audited and unaudited historical
consolidated financial statements and related notes of Anchor and Ledger
incorporated by reference into this proxy statement/prospectus.
<Table>
<Caption>
ANCHOR LEDGER
------------------------------------- -------------------------------------
AT OR FOR THE AT OR FOR THE FISCAL AT OR FOR THE AT OR FOR THE FISCAL
QUARTER ENDED YEAR ENDED QUARTER ENDED YEAR ENDED
JUNE 30, 2001 MARCH 31, 2001 JUNE 30, 2001 JUNE 30, 2001
------------- -------------------- ------------- --------------------
(UNAUDITED) (UNAUDITED)
HISTORICAL DATA
Earnings per share:
Basic........................ $0.36 $1.19 $ 0.21 $ 0.95
Diluted...................... 0.35 1.16 0.20 0.92
Book value per share............ 9.92 9.63 15.37 15.11
Dividends per share............. 0.075 0.30 0.05 0.20
</Table>
<Table>
<Caption>
AT OR FOR THE QUARTER ENDED AT OR FOR THE FISCAL YEAR ENDED
JUNE 30, 2001 MARCH 31, 2001
-------------------------------------------- --------------------------------------------
ASSUMES THAT NONE ASSUMES THAT 20.0% ASSUMES THAT NONE ASSUMES THAT 20.0%
OF THE LEDGER STOCK OF THE LEDGER STOCK OF THE LEDGER STOCK OF THE LEDGER STOCK
IS CONVERTED TO CASH IS CONVERTED TO CASH IS CONVERTED TO CASH IS CONVERTED TO CASH
IN THE MERGER IN THE MERGER IN THE MERGER IN THE MERGER
-------------------- -------------------- -------------------- --------------------
ANCHOR UNAUDITED PRO FORMA
Earnings per share:
Basic................ $ 0.33 $ 0.34 $ 1.14 $ 1.16
Diluted.............. 0.33 0.33 1.11 1.13
Book value per share.... 11.63 11.57 10.25 10.16
LEDGER EQUIVALENT PRO
FORMA
Earnings per share:
Basic................ $ 0.36 $ 0.37 $ 1.25 $ 1.28
Diluted.............. 0.36 0.36 1.22 1.24
Book value per share.... 12.79 12.73 11.28 12.45
Dividends per share..... 0.0825 0.0825 0.33 0.33
</Table>
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MARKET PRICES AND DIVIDENDS
Anchor stock is listed on Nasdaq under the trading symbol "ABCW." Ledger
stock is listed on Nasdaq under the trading symbol "LEDG." The following table
sets forth, for the quarters indicated, the range of the high and low sale
prices of Anchor stock and Ledger stock, as reported on Nasdaq, and the
dividends paid per share.
<Table>
<Caption>
ANCHOR STOCK LEDGER STOCK
----------------------------- -----------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------ ------ --------- ------ ------ ---------
FISCAL 2000
First Quarter (ended 6/30/99).................. $19.81 $15.75 $0.0500 $12.13 $10.00 n/a
Second Quarter (ended 9/30/99)................. 20.00 15.75 0.0650 12.31 10.00 $0.0500
Third Quarter (ended 12/31/99)................. 16.63 15.00 0.0650 11.25 8.94 0.0500
Fourth Quarter (ended 3/31/00)................. 15.88 12.75 0.0700 10.50 8.50 0.0500
FISCAL 2001
First Quarter (ended 6/30/00).................. $16.50 $14.13 $0.0700 $11.25 $ 8.13 $0.0500
Second Quarter (ended 9/30/00)................. 16.75 14.81 0.0750 10.75 8.31 0.0500
Third Quarter (ended 12/31/00)................. 16.00 14.06 0.0750 11.06 9.75 0.0500
Fourth Quarter (ended 3/31/01)................. 16.75 12.88 0.0750 11.25 9.63 0.0500
FISCAL 2002
First Quarter (ended 6/30/01).................. $15.90 $13.12 $0.0750 $16.15 $10.00 $0.0500
Second Quarter (ended 9/30/01)(1).............. 18.41 15.00 0.0825 19.61 16.00 0.0500
</Table>
---------------
(1)Historical prices through September 10, 2001.
Anchor and Ledger have, from time to time, engaged in open-market
repurchases of their own stock pursuant to repurchase authorizations issued by
their respective boards of directors. The merger agreement authorizes Ledger to
repurchase up to 5% of its stock in the open market prior to completion of the
merger, or a greater percentage with Anchor's consent. Anchor informally
suspended its open-market repurchase program when merger negotiations resumed on
February 23, 2001 (see "MATTER 1. THE MERGER -- Background of the Merger" on
page 25), and this suspension continued in effect until June 21, 2001, which was
three business days after public announcement of the merger. Ledger did not have
an authorized share repurchase program in effect during this period. In
accordance with applicable law and regulation, both Anchor and Ledger suspended
their open-market repurchase programs as of September 10, 2001 and, assuming the
merger is completed, such suspension by Anchor will remain in effect until the
date that former Ledger shareholders can no longer elect to receive cash in lieu
of Anchor stock pursuant to the merger (either by reason of the 45-day
limitation or the 20% limitation, whichever is earlier, as discussed under
"EXCHANGE PROCEDURES" on page 44). During the period from June 21, 2001 to
September 10, 2001, Anchor repurchased 706,600 shares of Anchor stock in the
open market at an average price of $17.262, and Ledger did not repurchase any
shares of Ledger stock in the open market during that time period.
During this period, neither party purchased the other party's stock in the
open market. Anchor previously owned 89,100 shares of Ledger stock which it
purchased from time to time for investment purposes.
In the table below, we show the following prices for each of Anchor stock
and Ledger stock:
- the average closing price for the 20 trading days immediately prior to the
public announcement of the merger (after the markets closed on June 15, 2001);
- the closing price on June 15, 2001 (the date the merger agreement was
executed); and
- the closing price on September 10, 2001, the most recent trading day for which
it was practicable to obtain market price data prior to the printing of this
proxy statement/prospectus.
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Also set forth below for each of those prices is the equivalent pro forma
price of Ledger stock, which was determined by multiplying the applicable
closing price of Anchor stock by the exchange ratio (1.10). Because the exchange
ratio is fixed and because the market price of Anchor stock is subject to
fluctuation, the market value of the Anchor stock that Ledger shareholders will
receive in the merger may increase or decrease prior to and following the
completion of the merger (except for those Ledger shareholders who elect to
receive cash instead of Anchor stock). We urge you to obtain current market
quotations.
<Table>
<Caption>
LEDGER
ANCHOR LEDGER EQUIVALENT
STOCK STOCK PRO FORMA
------- ------- ----------
Average closing price for the 20 trading days prior to
public announcement of the merger*........................ $15.120 $10.322 $16.632
Closing price on June 15, 2001.............................. 14.780 10.250 16.258
Closing price on September 10, 2001......................... 16.250 17.550 17.875
</Table>
---------------
* Includes June 15, 2001.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
We make forward-looking statements in this document, including statements
about the financial condition, results of operations, plans, objectives, future
performance and business of each company, as well as information relating to the
merger. These statements generally include the following:
- statements relating to the cost savings and accretion to reported earnings
Anchor expects to result from the merger;
- statements relating to revenue increases Anchor expects will result from the
merger;
- statements relating to integration costs Anchor expects to incur in connection
with the merger; and
- statements preceded by, followed by or that include the words "believes,"
"expects," "anticipates," "estimates" or similar words or expressions.
These forward-looking statements are intended to qualify for the safe
harbors from liability provided by the Private Securities Litigation Reform Act
of 1995.
Whether these forward-looking statements will prove accurate in the future
will depend on many factors beyond our control. Some of the forward-looking
statements made in this document are accompanied by specific cautionary factors.
Other factors relate to the merger as well as to economic conditions in general
and conditions affecting the financial services industry in particular, and
factors pertaining to Anchor (and the combined companies after the merger) in
particular. These include, among other things, the following factors and
potential events:
FACTORS RELATING TO THE MERGER
- Anchor may not realize the expected cost savings from the merger in a timely
manner, or at all, or it may incur additional or unexpected costs.
- Anchor may encounter greater than expected costs or difficulties related to
the integration of our businesses or other businesses Anchor acquires.
- We may experience difficulties in obtaining regulatory approval of the merger.
- We may lose key personnel expected to manage the integration of the two
companies.
FACTORS RELATING TO GENERAL ECONOMIC CONDITIONS AND CONDITIONS AFFECTING THE
FINANCIAL SERVICES INDUSTRY
- There may be changes in general economic or political conditions following the
merger.
- Competitive pressures in the industry or markets in which Anchor operates may
increase following the merger.
- Interest rates may fluctuate, which could affect Anchor's cost of funds and/or
interest income and reduce Anchor's net interest margin following the merger.
- Changes may occur in the securities markets following the merger that affect
Anchor in adverse ways.
- Revenues following the merger may be lower than Anchor expects.
FACTORS PERTAINING TO ANCHOR
We refer you to Anchor's Form 10-K for its fiscal year ended March 31, 2001
which is incorporated herein by reference, and in particular to the cautionary
factors spelled out under "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" in that document and other
specific cautionary factors contained therein. See "WHERE YOU CAN FIND MORE
INFORMATION" on page 92 to learn how you can obtain a copy of that document.
Finally, Anchor's analyses of these risks and factors may be incorrect or
the strategies Anchor has developed to address them may be unsuccessful. Because
the future accuracy of these forward-looking statements depends on risks and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements. We caution you not to place undue
reliance on these statements, which speak only as of the date of this document
or, in the case of any document incorporated by reference, the date of that
document.
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All subsequent written and oral forward-looking statements attributable to
Anchor or Ledger, or any person acting on our behalf, are expressly qualified in
their entirety by the cautionary statements contained or referred to in this
section.
THE MEETING
PLACE, TIME AND DATE
The annual meeting of Ledger's shareholders will be held on October 24,
2001, at 7:00 p.m. local time, at the Pettit National Ice Center, Hall of Fame
Room, 500 South 84(th) Street, Milwaukee, Wisconsin. This proxy
statement/prospectus is being sent to Ledger shareholders and is accompanied by
an appointment form of proxy ("proxy") that is being solicited by the Ledger
board of directors for use at the meeting or any adjournments or postponements
thereof.
MATTERS TO BE CONSIDERED AT THE MEETING
The purpose of the meeting is: (1) to consider and vote upon the approval
and adoption of the merger described herein, providing for, among other things,
the merger of Ledger with and into Anchor, with Anchor surviving the merger, and
the conversion of Ledger stock into shares of Anchor stock; (2) to elect three
directors to serve until consummation of the merger or, if the merger is not
consummated, until the 2004 annual meeting of shareholders or until their
successors have been elected and qualified; (3) the ratification of the
appointment of KPMG LLP as independent auditors of Ledger for the fiscal year
ending June 30, 2002 if the merger is not consummated, or for any such shorter
period of time as may be called for or deemed necessary by Ledger; and (4) to
act upon such other matters, if any, as may properly come before the meeting or
any adjournments or postponements thereof, including proposals to adjourn the
meeting to permit further solicitation of proxies if we have not received
sufficient votes to approve the merger. However, if you vote "against" the
merger, your shares will not be voted in favor of an adjournment to solicit
further proxies for approval of the merger.
RECORD DATE
The record date for determining the Ledger shareholders entitled to vote at
the meeting is September 14, 2001. Only holders of record of Ledger stock at the
close of business on that date are entitled to receive notice of and vote at the
meeting or any adjournments or postponements thereof.
Ledger shareholders should not send stock certificates for Ledger stock
with their proxy cards. As described under "EXCHANGE PROCEDURES" on page 44,
each Ledger shareholder will be provided with a Letter of Transmittal form for
exchanging shares of Ledger stock, and should follow the instructions set forth
therein.
SHARES OUTSTANDING; QUORUM
As of September 14, 2001, there were 2,437,141 shares of Ledger stock
outstanding. A majority of the outstanding shares of Ledger stock entitled to
vote, whether present in person or represented by proxy, will constitute a
quorum for the transaction of business at the meeting. A list of Ledger
shareholders entitled to vote at the meeting is available for examination,
during normal business hours, at Ledger's offices, 5555 North Port Washington
Road, Glendale, Wisconsin, and will be available at the meeting.
VOTE REQUIRED
The affirmative vote of holders of a majority of the outstanding shares of
Ledger stock is required to approve the merger. A plurality of the votes cast at
the meeting by the holders of shares of Ledger stock entitled to vote is
required for the election of directors. A plurality vote means that the
individuals who receive the largest number of votes, up to the maximum number of
directors to be chosen at the meeting, will be elected as directors. Any shares
not voted will have no effect on the election of directors provided that a
quorum for the transaction of business is present at the meeting. The
affirmative vote of the holders of a majority of the shares of Ledger stock
present in person or by proxy at the meeting is necessary to ratify the
appointment of KPMG LLP as independent auditors of Ledger. Each share of Ledger
stock is entitled to one vote. As of the September 14, 2001 record date, Ledger
directors and executive officers and their affiliates held
20
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514,939 shares, or approximately 19.1%, of the Ledger stock entitled to vote at
the meeting. Each of the directors and executive officers of Ledger has
indicated that he intends to vote "FOR" approval of the merger.
HOW SHARES WILL BE VOTED
Shares represented by a proxy will be voted at the meeting as specified in
the proxy.
PROXIES WITHOUT VOTING INSTRUCTIONS. If no instructions are indicated on a
properly executed proxy, the shares represented thereby will be voted "FOR" the
proposal to approve the merger, "FOR" the slate of directors nominated for
election and "FOR" ratification of the appointment of KPMG LLP as independent
auditors of Ledger. If any other matters are properly presented at the meeting
for consideration, including, among other things, a motion to adjourn the
meeting to another time and/or place (including, without limitation, for the
purpose of soliciting additional proxies), the persons named in the proxy and
acting thereunder will have discretion to vote on such matters in accordance
with their best judgment. However, if you vote "against" the merger, your shares
will not be voted in favor of an adjournment to solicit further proxies for
approval of the merger.
All other matters to be considered at the meeting are considered
"discretionary proposals" for which brokers and third-party nominees may vote
proxies notwithstanding the fact that they have not received voting instructions
from the beneficial owners of shares. Consequently, shares held by brokers and
third-party nominees will be voted if and as voted by such brokers and third-
party nominees.
ABSTENTIONS. We will count a properly executed proxy marked "abstain" for
purposes of determining whether there is a quorum, but the shares represented by
that proxy will not be voted at the meeting. For the election of directors,
abstentions will have no effect on the outcome because Ledger's directors are
elected by a plurality of the votes cast. For all other matters to be voted on
at the meeting, including approval of the merger, abstentions will be included
in the number of shares voting on the matter. Consequently, if you mark your
proxy "abstain," it will have the same effect as if you voted AGAINST the
merger.
BROKER NON-VOTES. Your broker will vote your shares for you only if you
provide instructions to your broker on how to vote your shares. You should
follow the directions provided by your broker regarding how to instruct your
broker to vote your shares. In accordance with the rules of the New York Stock
Exchange, your broker cannot vote your shares of Ledger stock without specific
instructions from you. Because the affirmative vote of the holders of a majority
of the outstanding common stock of Ledger is required to approve of the merger,
if you do not instruct your broker how to vote, it will have the same effect as
if you voted AGAINST the merger. All other matters to be considered at the
meeting are considered "discretionary proposals" for which brokers and
third-party nominees may vote proxies notwithstanding the fact that they have
not received voting instructions from the beneficial owners of shares.
Consequently, shares held by brokers and third-party nominees will be voted if
and as voted by such brokers and third-party nominees.
OTHER MATTERS. Your proxy grants authority to the holders thereof to vote
in their discretion on any other matters that may properly come before the
meeting (or any adjournments or postponements thereof), including proposals to
adjourn the meeting to permit further solicitation of proxies if we have not
received sufficient votes to approve the merger. However, if you vote against
the merger, your shares will not be voted in favor of an adjournment to solicit
further proxies for approval of the merger. Ledger's management does not
presently know of any matters to be brought before the meeting other than those
matters described herein.
TELEPHONIC VOTING
Ledger shareholders are able to vote their shares by telephone. Voting via
the Internet is not available. The giving of a proxy via telephone will not
affect your right to vote in person should you decide to attend the meeting.
- SHARES REGISTERED IN THE NAME OF THE SHAREHOLDER. Shareholders with shares
registered directly with Firstar Bank, N.A. may vote their proxy
telephonically by calling (877) 215-9164. Votes submitted by telephone must be
received by 5:00 p.m., central time,
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October 23, 2001, including revised votes submitted by telephone.
- SHARES REGISTERED IN THE NAME OF A BROKERAGE FIRM OR BANK. A number of
brokerage firms and banks are participating in a program provided through ADP
Investor Communication Services that offers telephone voting alternatives.
This program is different from the program offered by Firstar for telephonic
voting of shares registered in the name of the shareholder. If your shares are
held in an account at a brokerage firm participating in the ADP program, you
may vote your shares telephonically by calling the telephone number referenced
on your voting form. Votes submitted telephonically through the ADP program
must be received by 5:00 p.m., central time, October 24, 2001.
HOW TO REVOKE A PROXY
Granting a proxy either by returning the enclosed proxy card or voting by
telephone will not prevent you from voting in person at the meeting or otherwise
revoking your proxy.
You may revoke a proxy (including a proxy given by telephone vote) at any
time prior to the meeting by voting again by telephone to override your previous
telephonic vote, or delivering a duly executed revocation or a proxy bearing a
later date to Peter A. Gilbert, Executive Vice President and Corporate
Secretary, 5555 North Port Washington Road, Glendale, Wisconsin 53217, or by
giving notice of revocation in person at the meeting.
In addition, your proxy will be considered revoked if you vote your shares
in person at the meeting.
SOLICITATION OF PROXIES
Ledger's board of directors is soliciting proxies from Ledger's
shareholders for use at the meeting and will bear the cost of the solicitation
of proxies from its shareholders. Anchor and Ledger will share equally the cost
of printing and mailing this document. In addition to solicitation by mail, our
directors, officers and employees may solicit proxies from shareholders by
telephone, in person or through other means. These persons will not receive
additional compensation, but they will be reimbursed for the reasonable
out-of-pocket expenses they incur in connection with this solicitation. We will
also make arrangements with brokerage firms, fiduciaries and other custodians
who hold shares of record to forward solicitation materials to the beneficial
owners of those shares. We will reimburse these brokerage firms, fiduciaries and
other custodians for their reasonable out-of-pocket expenses in connection with
this solicitation. D.F. King & Co., Inc. will assist in the solicitation of
proxies by Ledger for a fee of $5,000, plus reimbursement of reasonable
out-of-pocket expenses. Ledger will indemnify D.F. King & Co., Inc. against
liabilities and expenses under federal securities laws and against other
liabilities and expenses.
THE COMPANIES
ANCHOR
Anchor is a registered savings and loan holding company incorporated in
Wisconsin engaged in the savings and loan business through its wholly owned
banking subsidiary, AnchorBank, fsb. AnchorBank was organized in 1919 as a
Wisconsin-chartered savings institution. On July 15, 1992, AnchorBank converted
from a state-chartered mutual savings institution to a stock savings
institution. As part of the conversion, Anchor acquired all of the outstanding
common stock of AnchorBank.
Anchor also has a non-banking subsidiary, Investment Directions, Inc.,
which invests in limited partnerships. In March 1997, Investment Directions,
Inc. created a subsidiary, Nevada Investment Directions, Inc., which invests in
limited partnerships and real estate held for development.
AnchorBank has 49 full-service offices and three lending-only facilities in
37 Wisconsin cities, primarily serving markets in and around Madison, Wisconsin
and throughout southern, southwestern, and the Fox Valley region of northeastern
Wisconsin. AnchorBank blends an interest in the consumer and small business
markets with the willingness to expand its numerous checking, savings and
lending programs to meet customers'
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28
changing financial needs. AnchorBank offers checking, savings, money market
accounts, mortgages, home equity and other consumer loans, student loans, credit
cards, annuities and related consumer financial services. AnchorBank also offers
banking services to businesses, including checking accounts, lines of credit,
secured loans and commercial real estate loans.
AnchorBank has three wholly owned subsidiaries. Anchor Investment Services,
Inc. offers securities and annuities to AnchorBank's customers and other members
of the general public. ADPC Corporation holds and develops some of AnchorBank's
foreclosed properties. Anchor Investment Corporation was formed for the purpose
of managing a portion of AnchorBank's investment portfolio (primarily
mortgage-related securities). All of AnchorBank's subsidiaries, except Anchor
Investment Corporation, are Wisconsin corporations.
The executive offices of Anchor and AnchorBank are located at 25 West Main
Street, Madison, Wisconsin 53703, and its main telephone number is (608)
252-8700.
Additional information regarding Anchor and AnchorBank is included in
Anchor's 2001 Annual Report on Form 10-K and other reports that Anchor has filed
with the SEC which are incorporated by reference into this proxy statement/
prospectus. Please see "WHERE YOU CAN FIND MORE INFORMATION" on page 92 for
additional information on how to find these documents.
LEDGER
Ledger Capital Corp. is a holding company incorporated under the laws of
the State of Wisconsin and is engaged in the financial services business through
its wholly owned subsidiary, Ledger Bank, S.S.B., a Wisconsin state-chartered
stock savings bank headquartered in Milwaukee, Wisconsin. Ledger's initial
public offering was consummated in December 1993, and Ledger acquired all of the
outstanding common stock of Ledger Bank issued in the mutual-to-stock conversion
of Ledger Bank on December 30, 1993.
Ledger Bank has four full-service offices and one limited-service office,
all of which are located in the Milwaukee-metropolitan area. Ledger has
primarily focused on (1) the origination and purchase of mortgage loans
(principally loans secured by one-to-four family owner-occupied homes) within
and outside of Ledger's primary lending area, (2) the purchase of mortgage-
backed and related securities, and (3) the origination and purchase of
commercial real estate and business loans within and outside of Ledger's primary
lending area. Ledger Bank has two wholly owned subsidiaries. Ledger Investments,
Inc., a Wisconsin corporation, offers securities, mutual funds, annuities and
life insurance products by licensed investment brokers. Ledger Investment Corp.,
a Nevada corporation, was organized to manage a portion of Ledger Bank's
investment portfolio.
In addition to Ledger Bank, Ledger Financial, Inc., a Wisconsin
corporation, is a wholly owned subsidiary of Ledger that originates loans from
third-party commercial real estate brokers on a non-exclusive basis and acts as
the lender of record until the loan is sold without recourse.
The executive offices of Ledger and Ledger Bank are located at 5555 North
Port Washington Road, Glendale, Wisconsin 53217, and their main telephone number
is (414) 290-7900.
Additional information regarding Ledger and Ledger Bank is included in
Ledger's 2001 Annual Report on Form 10-K, which is being delivered herewith, and
other reports that Ledger has filed with the SEC which are incorporated by
reference into this proxy statement/prospectus. Please see "WHERE YOU CAN FIND
MORE INFORMATION" on page 92 for additional information on how to find these
documents.
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MATTER 1. THE MERGER
GENERAL INFORMATION ABOUT THE MERGER
The merger agreement provides for the merger of Ledger with and into
Anchor. Under the terms of the merger agreement, each share of Ledger stock
issued and outstanding immediately prior to the effectiveness of the merger will
(except as otherwise provided below) be canceled and converted into the right to
receive cash in lieu of any fractional shares plus, either 1.10 shares of Anchor
stock, or an amount of cash equal to 1.10 multiplied by the closing price of
Anchor stock on the date the merger becomes effective. However, the merger
agreement also provides that a maximum of 20% of the Ledger stock may be
exchanged for cash (the "cash election"). If, at the end of the day that the
total cash elections exceed 20%, the cash elections do not exceed more than
20.1%, then the full 20.1% will be honored. If at the end of such day, the total
cash elections exceed 20.1%, then the cash elections received on that day will
be reduced proportionately so that the total cash elections equal 20% of the
Ledger stock outstanding at the effective time. Additionally, the merger
agreement provides for a cash election termination date which is 45 days after
the date that the Letters of Transmittal containing instructions for exchanging
the shares of Ledger stock are sent to Ledger shareholders. Any cash elections
received after such date shall be disregarded and treated as an election to
receive shares of Anchor stock.
Based upon the exchange ratio and the average closing price of Anchor stock
for the 20 trading days immediately prior to the public announcement of the
merger agreement on June 15, 2001 ($15.12 per share), each share of Ledger stock
would have been converted into Anchor stock with a value of $16.632, which
represented a 61.1% premium over the average closing price of Ledger stock for
the 20 trading days immediately prior to the public announcement of the merger
agreement ($10.322). On June 15, 2001, based upon the exchange ratio and that
day's closing price of Anchor stock ($14.76 per share), each Ledger share would
have been converted into Anchor stock with a value of $16.26, which represented
a 58.6% premium over the closing price of Ledger stock on that date ($10.25). On
September 10, 2001, based upon the exchange ratio and that day's closing price
of Anchor stock ($16.25 per share), each Ledger share would have been converted
into Anchor stock with a value of $17.875. At the completion of the merger, the
Anchor stock received in exchange for Ledger stock may have a market value that
is greater or less than these amounts depending on the market price of Anchor
stock at that time.
Based upon the number of shares of Anchor stock and Ledger stock
outstanding on September 10, 2001, following the merger, former shareholders of
Ledger will hold between approximately 8.7% of the outstanding Anchor stock
(assuming 20% of the Ledger stock is converted to cash in the merger) and
approximately 10.6% of the outstanding Anchor stock (assuming no cash elections
are made). At that same date, following the merger, the pre-merger Anchor
shareholders will hold between approximately 91.3% of the outstanding Anchor
stock after the merger (assuming 20% of the Ledger stock is converted to cash in
the merger) and approximately 89.4% of the outstanding Anchor Stock (assuming no
cash elections are made).
Throughout this proxy statement/prospectus, we use information (including
Anchor and Ledger closing stock prices) as of September 10, 2001 as the basis
for providing you with certain information about Anchor, Ledger and the merger.
September 10 was the most recent trading day for which it was practicable to
obtain market price data prior to the printing of this proxy statement/
prospectus, in part because the September 11, 2001 terrorist attacks on the
United States caused the major stock exchanges, including Nasdaq, to close. At
the time of printing this proxy statement/prospectus, we cannot predict what the
effect of the attacks or the closing of the stock exchanges will be on financial
markets in general or on Anchor's or Ledger's stock prices in particular.
Therefore, we cannot assure you that these prices will not be materially lower
or higher than shown, either immediately after the stock exchanges reopen or at
any time thereafter, including the time we complete the merger.
The discussion in this document of the merger and the description of the
principal terms and conditions of the merger agreement and the merger are
subject to and qualified in their
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entirety by reference to the merger agreement. A copy of the merger agreement is
attached to this document as Appendix A and is incorporated herein by reference.
See "THE MERGER AGREEMENT" on page 36.
BACKGROUND OF THE MERGER
The past several years have been a period of substantial and rapid change
in the financial services industry characterized by increasing consolidation,
intensified competition and continued growth through acquisition by many of the
larger national and regional banking organizations. Since Ledger's conversion
from a mutual institution to a stock institution in December, 1993, Ledger's
board of directors has regularly reviewed available strategic alternatives and
taken steps to maintain and improve Ledger's long-term competitive position and
profitability in the face of changing regulatory and market conditions.
While the Ledger board has regularly reviewed its options and business
strategies to enhance Ledger Bank's position, there were growing concerns among
board members and management for the past two fiscal years as to (1) Ledger
Bank's ability to continue to compete with larger institutions within the
Milwaukee-metropolitan area, and (2) the perceived failure of Ledger stock to be
valued as fully as that of its peers by the marketplace. These concerns were
specifically discussed at a Ledger board meeting held on February 29, 2000, with
the Ledger board authorizing Mr. Smessaert to work with Ledger's regular
investment banker, William Blair & Company, L.L.C. ("Blair"), to explore
possible strategic options. The board also authorized Mr. Smessaert and Mr.
Zellmer, a Ledger board member, to approach Anchor regarding a possible
transaction, since previous analyses both internally and by Blair had indicated
that Anchor's size, lack of a Milwaukee, Wisconsin market presence and relative
stock performance made Anchor both a likely and attractive merger partner for
Ledger.
Subsequent to receipt of that authorization, Messrs. Smessaert and Zellmer
contacted Mr. Timmerman of Anchor in early March of 2000 to arrange an initial
meeting. That initial meeting with Mr. Timmerman was held on March 17, 2000,
with discussions focusing on the possible strategic and market benefits of a
merger and on what steps might be taken to pursue further discussions and to
address pricing issues. Mr. Smessaert and Mr. Timmerman met again on April 6,
2000 to discuss their respective organizations, at which time they had initial
preliminary discussions on possible pricing. Following the April 6, 2000 meeting
with Anchor, Ledger contacted Blair to discuss with them what might represent a
fair value for Ledger stock under current market conditions. On April 7, 2000,
Mr. Timmerman contacted Mr. Smessaert and suggested exploring a transaction
based on a share exchange ratio that would provide Ledger shareholders with
$14.50 of Anchor stock for each outstanding share of Ledger stock.
Subsequent to the April 7, 2000 discussion, and based on further internal
analysis and consultation with Blair, the Ledger board was initially concerned
that the pricing proposed by Anchor was too low and that the interests of Ledger
shareholders might be better served by remaining independent and by Ledger
seeking to add shareholder value through its own operations. Nonetheless, Ledger
agreed to allow Anchor to conduct limited due diligence at Ledger's offices,
beginning with discussions of operations issues at an April 15, 2000 meeting
between Messrs. Smessaert and Gilbert of Ledger and Mr. Timmerman and several
additional members of Anchor's management team. On April 20, 2000, Mr. Timmerman
spoke, at Mr. Smessaert's request, with Blair regarding pricing and, more
specifically, about Ledger's concerns as to the appropriateness of the proposed
price. While price remained an issue, Ledger entered into a Confidentiality
Agreement with Anchor on April 24, 2000 in order to facilitate additional due
diligence.
Mr. Smessaert reported regularly to the Ledger board on the status of
discussions with Anchor, reporting specifically at a May 23, 2000 meeting
regarding his ongoing concerns relative to the proposed pricing. The Ledger
board agreed with Mr. Smessaert's concerns and when Mr. Smessaert raised them
with Mr. Timmerman on June 6, 2000, it became apparent to the parties that they
would be unable to reach any agreement on price. The parties concluded their
discussion by agreeing they might resume discussions in the future if
circumstances were to change.
After the discontinuance of discussions, Ledger proceeded with its planned
name change for the company and the bank, with the opening
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of its Glendale retail facility, and with other steps its board and management
believed were necessary to implement a strategy of continued independence. There
were no further discussions from June 8, 2000 until February 23, 2001.
After a more than eight-month hiatus, and after discussing the matter with
selected members of Anchor's board, Mr. Timmerman contacted Mr. Smessaert on
February 21, 2001 to see if Ledger might have an interest in reopening
discussions. A telephone poll of Ledger directors conducted the next day
indicated that there was some continuing interest and Mr. Smessaert agreed to
meet with Mr. Timmerman on February 23, 2001. At the February 23, 2001 meeting,
the parties agreed that circumstances had changed since their earlier meetings,
because of changes in the interest rate environment, the institutions' relative
interest rate risk positions and the general market for thrift stocks. After a
discussion of the current status of the operations of the respective
institutions, the parties reopened discussions regarding the potential for a
merger transaction. The parties focused on pricing in their initial discussion,
with Mr. Smessaert indicating that, based upon Ledger's internal valuation
analysis, Ledger shareholders would need to receive consideration in the range
of $16.00 per share in order to consider a transaction. The parties agreed that
an exchange ratio of 1.07 shares of Anchor stock for each share of Ledger stock
would approximate the $16.00 per share value desired for Ledger shareholders and
a possible transaction should be explored on that basis to see if the exchange
ratio were one that appeared appropriate after due diligence and that the
parties' financial advisors could conclude was fair from a financial point of
view.
Following the February 23, 2001 meeting, Ledger formally retained Blair,
entering into an engagement letter with them on February 26, 2001. During its
evaluation process, Blair provided Ledger with ongoing verbal, conditional,
pricing advice, which continued until April 19, 2001, at which time Blair
provided its first formal written modeling results to Ledger indicating that a
1.07 exchange ratio appeared to represent a reasonable valuation under current
conditions. After reviewing and discussing the valuation parameters being
utilized by Blair, Ledger constructed its own internal valuation models, which
also supported a 1.07 exchange ratio as reasonable.
Mr. Smessaert and Mr. Timmerman had a number of further discussions
regarding the possible merger, with those discussions proving sufficiently
productive for the parties to arrange a meeting between the principals and their
respective attorneys and accountants to explore what terms might be included in
a merger agreement. On March 13, 2001, the parties and their advisors met and
reached agreement on many of the previously unresolved, non-price related
issues. Mr. Smessaert provided the Ledger board with a summary of the results of
the meeting at the board's regularly scheduled March 23, 2001 meeting.
Similarly, Mr. Timmerman summarized the results of that meeting for certain
members of Anchor's board at a March 22, 2001 AnchorBank board of directors
meeting.
Subsequent to the March 23, 2001 Ledger board meeting, Ledger discovered an
error in its financial statements for its fiscal year ending June 30, 2000 and
the first two quarters of its then current fiscal year. The error resulted from
an inadvertent erroneous set-up of certain loans in the bank's outsourced data
processing system, resulting in the underaccrual of interest income on such
loans. The effect of the restatement for the fiscal year ended June 30, 2000 was
an increase in interest income of $543,000, an increase in non-interest expense
of $146,000 and an increase in net income of $241,000 or $0.09 per share. The
effect of the restatement for the six months ended December 31, 2000 was an
increase in interest income of $314,000 and an increase in net income of
$190,000 or $0.07 per share. In light of the earnings restatement (which
resulted in an increase in Ledger's book value per share) and a decrease in the
market value of Anchor's shares during April 2001 to the $13.00 range, Mr.
Smessaert, Blair, and the Ledger board had become concerned that a 1.07 exchange
ratio could result in Ledger shareholders receiving less than fair value for
their shares. At an April 24, 2001 meeting of the Ledger board, Mr. Smessaert
reported specifically on these developments and on their possible effect on
Blair's fairness opinion.
The impact of the revised earnings on the proposed exchange ratio was
discussed in detail at the April 24, 2001 Ledger board meeting, at which time
the Ledger board also reviewed in detail the proposed quarterly earnings press
release incorporating the earnings restatement. That press release was issued on
April 25, 2001. As a result
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of the deliberations at the April 24, 2001 Ledger board meeting, Mr. Smessaert
approached Mr. Timmerman on April 25, 2001 and requested that they reopen
discussions on the exchange ratio. Mr. Timmerman reluctantly agreed and a series
of phone negotiations followed between Mr. Smessaert and Mr. Timmerman.
During these discussions, Mr. Smessaert maintained almost daily contact
with Blair, legal counsel, and with the Ledger directors, to be certain that
everyone was apprised as to the status of discussions and to obtain their input
into the process. Mr. Timmerman remained in contact with Anchor's advisors and
selected members of Anchor's board and Anchor management who, assisted by
Anchor's legal counsel, conducted additional due diligence of Ledger.
As a result of these intensive price discussions, which included
preparation by Blair of a number of comparisons showing the effect that various
changes in the proposed exchange ratio might have relative to the accretion or
dilution of Anchor's book value and earnings per share, the parties agreed on
May 3, 2001 (subject to approval by their respective boards of directors and to
the receipt of fairness opinions) to increase the exchange ratio from 1.07
shares of Anchor stock for each share of Ledger stock to an exchange ratio of
1.10.
On May 16, 2001, Messrs. Smessaert and Gilbert, together with legal counsel
and a representative from Blair, conducted due diligence at Anchor's offices in
Madison, Wisconsin, reviewing Anchor board minutes, loan files, and interviewing
members of Anchor's senior management. Following satisfactory completion of due
diligence, the principals and their respective counsel undertook to negotiate
the remaining non-pricing issues that needed to be resolved in order to prepare
a final draft of the definitive agreement. Legal counsel attended Ledger's
regularly scheduled April 24, 2001 board meeting, distributing copies of the
most recent draft of the agreement to the directors, commenting on various
provisions and highlighting those few remaining issues which still needed to be
resolved.
The Ledger board met on June 7, 2001 with Mr. Smessaert providing a full
report on the discussions with Anchor and with presentations being made by (1)
Blair, relative to the fairness of the proposed merger consideration from a
financial point of view, and (2) legal counsel, regarding changes made to the
draft agreement since the prior board meeting. Following extensive discussion,
the Ledger board approved the proposed merger with Anchor, subject to the
ability of management and counsel to negotiate a number of non-pricing issues
that still required clarification and to receipt of a written fairness opinion
from Blair.
Anchor's board met on June 13, 2001 and approved the merger agreement,
subject to satisfactory negotiation of some remaining issues, after receiving
presentations from Anchor management, legal counsel, and Anchor's financial
advisor. See "-- Reasons for the Merger; Determination of Anchor's Board of
Directors" on page 30.
The principals and their respective counsel continued to negotiate with
respect to the remaining issues by phone on June 12, 13 and 14, reaching final
agreement on June 14, 2001. Ledger and Anchor then executed the definitive
agreement on June 15, 2001. On June 15, 2001, following the close of the
markets, the parties issued a joint press release announcing the execution of
the merger agreement and Ledger announced the execution of the merger agreement
to Ledger employees.
REASONS FOR THE MERGER; LEDGER BOARD RECOMMENDATION
In reaching a determination at its June 7, 2001 meeting to recommend the
merger, the Ledger board of directors consulted with Michael Best & Friedrich
LLP, Ledger's outside legal counsel, with respect to the legal duties of the
Ledger board of directors, regulatory matters, tax matters, the merger agreement
and related issues. The Ledger directors also consulted with Blair, Ledger's
financial advisor, with respect to financial aspects of the transaction and the
fairness of the merger consideration from a financial point of view. In
addition, Ledger's board of directors consulted with senior management on all of
the foregoing issues as well as on more conceptual issues and advantages of the
proposed merger. Ledger's board of directors considered a number of factors,
without assigning any specific or rela-
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tive weight to the consideration of such factors. Material factors considered
included:
- information concerning the businesses, earnings, operations, financial
condition, prospects, capital levels and asset quality of Ledger and Anchor,
both individually and combined as a single entity. In particular, the Ledger
board focused on the strategic fit of the business lines, the operating
philosophies of the two institutions, and on the experience and depth of
Anchor's management, Anchor's asset quality and diversity, and its existing
interest rate gap and margins;
- the advantages of a combination with a Wisconsin-based institution, which
would, through a merger, obtain a Milwaukee-metropolitan market presence
without creating concerns as to undue market concentration, as well as the
opportunities for increased efficiencies and cost savings that a combination
within the Wisconsin market could be expected to provide (potentially
resulting in increased profitability of the combined entity over time as
opposed to a possible out-of-market business combination);
- the current and prospective economic and competitive environments facing
Ledger and other financial institutions of its size, characterized by
intensifying competition from both banks and nonbank financial services
organizations, particularly within the Milwaukee market, and the growing costs
associated with regulatory compliance in the banking industry;
- the high costs of technology and the cost of new facilities that might be
required to grow deposits in light of the fact that deposit growth for Ledger
and the banking industry in general has been difficult and given that certain
funding limitations would be likely to hamper Ledger's long-term asset growth;
- the belief that following the merger, Anchor would be well-positioned to grow
through possible future acquisitions or expansions, while at the same time not
being so large as to reduce its own attractiveness as a possible acquisition
candidate;
- the belief that the merger would result in shareholders of Ledger receiving
stock in a high-quality combined company, whose stock would offer considerably
greater liquidity than shares of Ledger, and that the shareholders should
further benefit from the enhanced operating efficiencies and better
penetration of consumer banking and commercial markets likely to be achieved
by a combined entity;
- the opinion by Blair that, as of the date of such opinion, the merger
consideration is fair from a financial point of view to the holders of Ledger
stock (see "-- Opinion of Ledger's Financial Advisor" on page 29);
- a comparison of the legal terms of the merger agreement and the other
documents relating to the merger to the terms customarily seen in similar
transactions;
- the ability of Ledger and Anchor to complete the merger, including the
likelihood of obtaining necessary regulatory approvals and the obligations of
both companies to attempt to obtain those approvals;
- the impact of the merger on Ledger's employees in terms of working environment
and career opportunities, as well as layoffs, that would likely result from a
transaction with Anchor; and
- the impact on Ledger's depositors and customers in terms of the wider range of
products and services that will be available from a strong and sound combined
institution, and the enhanced strength and accessibility available to such
customers and depositors through the combined Wisconsin franchise.
Ledger's board of directors also considered a variety of risks and other
potentially negative factors concerning the merger, including:
- the fact that the merger agreement does not provide for any adjustment to the
exchange ratio and that, as a result, the value of the Anchor stock that would
be received by Ledger shareholders in the merger could be less than such value
as computed on the date Ledger's board approved the merger agreement due to
fluctuations in the market price of Anchor stock. This risk was mitigated, in
the view of Ledger's board of directors, by the fact that the merger agreement
allows Ledger to terminate its obligation to complete the merger if Anchor's
stock price, relative to the average
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price of a select group of midwestern thrifts, drops below a specified level
prior to closing (see "THE MERGER AGREEMENT -- Price Condition" on page 41)
and by the fact that an increase in the market value of Anchor stock could
result in the value of Anchor stock received by Ledger shareholders being
greater than as computed on the date Ledger's board approved the merger
agreement;
- the fact that the merger brings Anchor into the Milwaukee-metropolitan market
with which it is relatively unfamiliar and in which it has not previously
competed. Ledger's board believed that this risk was outweighed by the
possibility that expansion in the Milwaukee marketplace could provide new
sources of business to Anchor and result in increased value to Ledger
shareholders being realized as a result of Anchor's expansion;
- that Anchor, through its wholly owned subsidiaries, had total investments of
approximately $48.6 million in real estate held for development in California,
Florida and Texas at March 31, 2001, and has recorded $0.4 million in losses
related to such investments in fiscal 2001. In considering Anchor's real
estate development activities, the Ledger board discussed whether Anchor may
eventually incur additional losses in connection with such activities.
Ledger's board reviewed and considered these risks and believed that the risks
were outweighed by the overall historical and prospective financial
performance of Anchor;
- that the interests of some Ledger officers and directors with respect to the
merger may in some degree differ from or conflict with the interests of the
shareholders of Ledger. The interests of these officers and directors are
described below under "-- Interests of Members of Ledger's Board of Directors
and Management in the Merger" on page 31; and
- that the stock option granted to Anchor by Ledger in certain situations
involving a competing offer may deter third parties from proposing an
alternative transaction that may be more advantageous to Ledger shareholders,
which Ledger's board felt was offset by Ledger's ability to terminate its
obligation to complete the merger if Blair was unable to issue an update to
its fairness opinion as of the time of mailing of these proxy materials.
The foregoing discussion of the information and factors considered by
Ledger's board of directors is not intended to be exhaustive but includes the
material factors considered by the Ledger board. Throughout its deliberations,
the Ledger board received the advice of its outside legal counsel. After
deliberating with respect to the merger and the other transactions contemplated
by the merger agreement, considering, among other things, the information and
factors described above (including reliance on the opinion of Blair), Ledger's
board concluded that the merger is fair to, and in the best interest of its
shareholders. In reaching this conclusion, Ledger's board did not assign
relative or specific weights to the above information and factors or determine
that any information or factor was of particular importance. A determination of
various weightings would, in the view of the Ledger board of directors, be
impractical. Rather, Ledger's board viewed its position and recommendations as
being based on the totality of the information and factors presented to and
considered by it. In addition, individual members of Ledger's board may have
given different weight to different information and factors.
FOR THE REASONS DESCRIBED ABOVE, LEDGER'S BOARD OF DIRECTORS HAS DETERMINED
THAT THE TERMS OF THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, LEDGER'S
SHAREHOLDERS. ACCORDINGLY, LEDGER'S BOARD UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS THAT THE SHAREHOLDERS OF LEDGER VOTE "FOR" APPROVAL OF
THE MERGER.
OPINION OF LEDGER'S FINANCIAL ADVISOR
Ledger selected Blair based on its experience, expertise, and familiarity
with Ledger and its business. Blair has been engaged in the investment-banking
business since 1935 and continually undertakes the valuation of investment
securities in connection with public offerings, private placements, business
combinations, estate and gift tax valuations, and similar transactions.
In connection with Blair's engagement, Ledger asked Blair to evaluate the
fairness of the merger consideration to Ledger's shareholders from a financial
point of view. At the June 7, 2001 meeting of the Ledger board to evaluate the
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merger, Blair orally informed the Ledger board that Blair was prepared to
deliver a written opinion as to the fairness of the merger consideration to
Ledger's shareholders from a financial point of view upon execution of the
merger agreement. On June 15, 2001, the date of the merger agreement, Blair
delivered its written opinion to the Ledger board that, as of June 15, 2001, and
based upon and subject to various matters set forth in its opinion, the merger
consideration was fair to Ledger's shareholders from a financial point of view.
Blair has also delivered an updated opinion to the Ledger board dated as of the
mailing date of this proxy statement/prospectus.
Ledger did not impose any limitations upon the scope of investigation or
procedures followed by Blair in connection with its opinion, nor did Ledger give
Blair any specific instructions in connection with its opinion. The merger
consideration was determined through arm's-length negotiations between Ledger
and Anchor. Ledger did not request Blair to, nor did Blair, participate in the
negotiation and structuring of the merger or seek alternative participants for
the proposed merger.
Appendix B, which we incorporate into this proxy statement/prospectus by
reference, summarizes additional background of Blair's fairness opinion, and we
urge you to read it carefully. We have attached Blair's updated opinion as
Appendix C to this proxy statement/prospectus and incorporate it herein by
reference. You should read Blair's opinion completely, along with the summary in
Appendix B, to understand the assumptions made, procedures followed, matters
considered, and limitations of the review undertaken by Blair in providing its
opinion.
Blair's opinion was provided for the use and benefit of Ledger's board of
directors and addresses only the fairness of the merger consideration to Ledger
shareholders from a financial point of view. Blair's opinion does not address
the merits of Ledger's underlying decision to engage in the merger nor does it
constitute a recommendation to any stockholder as to how such stockholder should
vote with respect to the proposed merger. The summary of Blair's opinion in
Appendix B to this proxy statement/prospectus is qualified in its entirety by
reference to the full text of the opinion.
Ledger retained Blair by engagement letter agreement dated February 26,
2001 to render certain limited investment-banking services in connection with a
possible business combination of Ledger with Anchor. In connection with this
engagement, Ledger paid Blair a cash fairness opinion fee of $75,000 following
delivery of its June 15, 2001 fairness opinion, and upon delivery of its updated
opinion as of the mailing date of this proxy statement/prospectus, will pay
Blair an additional cash fairness opinion fee equal to $25,000. Further, in the
engagement letter Ledger agreed to reimburse Blair for its out-of-pocket
expenses reasonably incurred in connection with its engagement and to indemnify
Blair against certain liabilities, including liabilities under securities laws.
REASONS FOR THE MERGER; DETERMINATION OF ANCHOR'S BOARD OF DIRECTORS
At a meeting on June 13, 2001, Anchor's board of directors unanimously
approved the merger. In reaching its determination, Anchor's board consulted
with Anchor management, as well as its financial and legal advisors, and
considered the following material factors, each of which supported the board's
recommendation:
- the long-term interests of Anchor and its shareholders, as well as the
interests of Anchor employees, customers, creditors, suppliers and the
communities in which Anchor operates;
- information concerning the business, earnings, operations, financial condition
and prospects of Anchor and Ledger, both individually and on a combined basis;
- that the merger provides Anchor with opportunities to enhance revenue and
profitability through mortgage, commercial and consumer loan growth in the
Milwaukee-metropolitan area markets currently served by Ledger, which have not
previously been directly served by Anchor, through the marketing of the
expanded menu of services and products Anchor currently offers to its
customers;
- a presentation made by Mr. Michael Iannaconne of Howe Barnes Investments as to
the fairness of the merger to Anchor;
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- the opportunity to leverage economies of scale and operating efficiencies and
realize a portion of the anticipated $2.5 million (pre-tax) in cost savings
through the consolidation of accounting, data processing, retail and lending
support and other functions, offset by the anticipated increase in marketing
expenses to take advantage of Ledger's presence in the Milwaukee-metropolitan
market, resulting in expected accretion to earnings in fiscal 2003 of
approximately 4 cents to 6 cents per share;
- the terms of the merger agreement, including that the merger will be a
tax-free reorganization for federal income tax purposes;
- the recent and historical trading prices of Ledger stock and Anchor stock
relative to those of other industry participants, and the potential for
appreciation in the value of Anchor stock following the merger;
- that current Anchor shareholders would continue to own approximately 90% of
the combined company immediately following the merger and that Anchor
shareholder approval would not be required to complete the merger;
- the ability to consummate the merger, including, in particular, the likelihood
of obtaining regulatory approvals and the terms of the merger agreement
regarding the obligations of both companies to pursue such regulatory
approvals; and
- the measures taken by the parties to provide reasonable assurance to each
other that the merger will occur, including the effects of the stock option
granted by Ledger which enable Anchor, under limited circumstances, to acquire
up to 19.9% of Ledger's stock if Ledger agrees to merge with or be acquired by
another party and the potential effect that the stock option agreement may
have on the ability of other parties to make competing business combination
proposals to Ledger.
Anchor's board of directors also considered a variety of inherent risks and
other potentially negative factors in considering the merger. In particular,
Anchor's board considered the risks associated with integrating Ledger's
operations with Anchor's existing operations (including the loss of key
personnel of Ledger); difficulty in integrating corporate, accounting, financial
reporting and management information systems; and strain on existing levels of
personnel to operate Ledger's business.
Anchor's board of directors did not receive a quantitative analysis of all
of the factors listed above. However, based on the foregoing, and the
recommendation of management, Anchor's board concluded that the anticipated
benefits of the merger outweighed the possible detriments. Based on these
factors, Anchor's board of directors approved the merger consideration of 1.10
shares of Anchor stock for each share of Ledger common stock issued and
outstanding.
The foregoing discussion is not intended to be exhaustive but includes the
material information and factors considered by Anchor's board of directors in
its consideration of the merger. In view of the wide variety of factors
considered, Anchor's board did not assign relative weights to the specific
factors considered in reaching its determination. The determination was made
after consideration of all of the factors as a whole. In addition, individual
members of Anchor's board may have given different weights to different factors.
INTERESTS OF MEMBERS OF LEDGER'S BOARD OF DIRECTORS AND MANAGEMENT IN THE MERGER
When considering the recommendations of Ledger's board of directors, you
should be aware that some executive officers of Ledger and members of the Ledger
board may have interests in the merger that are different from, or in addition
to, your interests. These interests may create potential conflicts of interests.
The Ledger board was aware of these interests when they approved the merger and
the merger agreement. Except as described below, to the knowledge of Ledger, the
executive officers and directors of Ledger do not have any material interest in
the merger, apart from their interests as Ledger shareholders.
BUYOUT OF EMPLOYMENT CONTRACTS. The following executive officers of Ledger
have rights to receive change-in-control payments under their employment
agreements with Ledger: Mr. James D. Smessaert, President and Chief Executive
Officer; Mr. Peter A. Gilbert, Executive Vice President, Chief Operating Officer
and Corporate Secretary; Mr. Arthur E. Thompson, Treasurer and Senior
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Vice President; Ms. Elizabeth S. Borst, Senior Vice President Sales & Marketing;
and Ms. Shelly Olejniczak, Vice President Human Resources. In connection with
the merger, Anchor has agreed to make the change-in-control payments to these
executive officers under their employment agreements consisting of cash
severance payments in the amount of approximately $2.2 million together with
additional cash payments (currently estimated to be approximately $1.2 million)
to reimburse them for certain federal and state taxes they will pay on the total
value of their change-in-control related benefits, pursuant to Sections 280G and
4999 of the Internal Revenue Code. Pursuant to such arrangements, Messrs.
Smessaert, Gilbert, Thompson, Ms. Borst and Ms. Olejniczak will receive cash
severance payments in the amounts of $754,223, $615,332, $347,417, $256,683 and
$237,325, respectively, and the estimated cash payments to be paid to Messrs.
Smessaert and Gilbert for tax reimbursements are $456,376 and $779,059,
respectively. Pursuant to the terms of their employment agreements, Mr.
Thompson, Ms. Borst and Ms. Olejniczak are not eligible to receive any tax
reimbursement payments. Anchor will make such payments even though Mr. Thompson,
Ms. Borst and Ms. Olejniczak will be offered employment and may continue as "at
will employees" of Anchor for some time after the merger.
ACCELERATED VESTING OF STOCK OPTIONS. Outstanding but unvested options
under Ledger's stock option plans (including options held by directors and
executive officers) will automatically vest according to their terms upon the
approval of the merger by Ledger's shareholders. Some of these options, although
granted at fair market value as of the date of grant, may have exercise prices
at below current market value. In the merger, each outstanding option to buy
Ledger stock under Ledger's stock option plans will become an option to buy 1.10
shares of Anchor stock at an exercise price per share equal to the exercise
price of the original option divided by 1.10. All other terms and conditions of
the options will remain the same as the terms and conditions of the original
options.
DEFERRED COMPENSATION AGREEMENTS. Messrs. Smessaert and Gilbert each have
contractual deferred compensation agreements with Ledger. Under the terms of
such agreements, benefits were to commence upon retirement from service with
Ledger at age 65 for Mr. Smessaert and age 64 for Mr. Gilbert. In the event
either Mr. Smessaert or Mr. Gilbert left employment with Ledger prior to their
attainment of ages 65 and 64, respectively, benefit payments were to be
postponed to a later date which was to be determined depending upon their date
of termination of service. The deferred compensation agreements contain a
provision which eliminates the requirement for continued service in order to be
eligible to receive benefits in the event of a change in control, although
benefits will not become payable for Mr. Smessaert until age 65 and for Mr.
Gilbert until age 64. Upon Messrs. Smessaert and Gilbert's attainment of ages 65
and 64, respectively, the deferred compensation agreements will provide them
with monthly benefits of $9,583 and $8,333, respectively, for life or a minimum
of 240 payments.
ANCHOR BOARD OF DIRECTORS. The merger agreement provides that, following
the merger, Anchor will take necessary actions, including expansion of the size
of its board of directors, if required, to cause Mr. James D. Smessaert to be
appointed to Anchor's board and then to nominate him for reelection to a full
three-year term upon expiration of such initial appointment. Each member of
Anchor's board of directors is currently paid a fee of $1,600 for each regular
quarterly board meeting attended, $400 for each regular committee meeting
attended and $800 for each special board meeting attended. In addition, Anchor
directors are entitled to participate in Anchor's deferred compensation and
stock option plans.
ESOP. The executive officers, along with all other eligible employees of
Ledger, participate in the Ledger ESOP. As a result of the merger, the
outstanding ESOP loan in the amount of $303,600 will be repaid, with the shares
previously held as security for that loan then being allocated to the accounts
of all ESOP participants, including Ledger management and other eligible Ledger
employees. As a result, allocations will be made to the ESOP accounts of the
following members of Ledger management: Mr. Smessaert -- 4,060 shares; Mr.
Gilbert -- 3,240 shares; Mr. Thompson -- 2,416 shares; and Ms. Borst -- 2,319
shares. The foregoing ESOP allocations are estimates based upon the estimated
salaries of the employee base estimated to be employed on the closing date of
the
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merger; the actual allocations will be based on the actual salaries of the
employee base on the closing date of the merger.
EMERITUS PLAN FOR LEDGER DIRECTORS. Additionally, Anchor will honor the
obligations set forth in Ledger's Emeritus Plan for Directors, as currently in
effect for three former directors, including providing ongoing healthcare
coverage and cash payments in the amount of 50% of current Ledger board retainer
fees for life.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. The merger agreement
provides that after the effective time, Anchor will indemnify and hold harmless,
to the fullest extent permitted by law, any person who has, prior to the
effective time, been a director, officer or employee of Ledger or its
subsidiaries (each such person is referred to herein as an "indemnified party")
against any losses, claims, damages, liabilities, costs, expenses, judgments,
fines and amounts paid in settlement in connection with any threatened or actual
claim, action, suit, proceeding or investigation, whether asserted or arising
before or after the effective time (collectively, the "actions"). In addition,
in the event of any such action, the indemnified parties may retain counsel
satisfactory to them provided that Anchor has not assumed the defense thereof,
and provided that certain other limitations are met. The merger agreement also
provides that Anchor will, subject to the conditions set forth in the merger
agreement, use its best efforts to cause directors and officers of Ledger to be
covered for a period of six years from the effective time by a directors' and
officers' liability insurance policy equivalent to that maintained by Ledger,
provided that Anchor will not be required to expend more than the current amount
expended by Ledger to procure such insurance.
For more information on these arrangements, see "MANAGEMENT AND OPERATIONS
AFTER THE MERGER" on page 47.
REGULATORY APPROVALS
For an explanation of the regulatory environment in which the companies
operate, see "REGULATION" on page 61.
We cannot complete the merger unless we obtain the approval of the federal
and state agencies that regulate our businesses. As of the date of this proxy
statement/prospectus, applications for regulatory approval had been submitted to
the applicable regulatory institutions; however, these regulatory approvals have
not been obtained. Although we expect to obtain regulatory approvals before the
date of the meeting, we cannot be certain when or whether we will receive them.
ACCOUNTING TREATMENT
We will account for the merger under the purchase method of accounting for
business combinations. Under this method of accounting, the assets and
liabilities of Ledger are adjusted to reflect the fair value of the assets and
liabilities as of the purchase date, and the resulting fair value adjustments
become adjustments to their carrying value. The amount of the purchase price
which exceeds the fair value of the assets and liabilities acquired and
identifiable intangible assets is recorded as goodwill and will be reviewed for
impairment in future years.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the important federal income tax
consequences of the merger to Ledger shareholders. It is not a complete
description of all of the tax consequences that may be important to you, and
does not address filing or reporting obligations generally applicable to all
taxpayers, rules applicable only to certain types of taxpayers, or rules that we
assume are generally known by Ledger shareholders. This summary is based upon
the Internal Revenue Code, IRS Regulations, and judicial interpretations in
effect as of the date of this proxy statement/prospectus, all of which could
change, possibly retroactively, which could change the conclusions set forth in
this summary.
We have obtained tax opinions from Whyte Hirschboeck Dudek S.C., tax
counsel to Anchor, and Michael Best & Friedrich LLP, tax counsel to Ledger,
which are included as Exhibits 8.1 and 8.2 to the registration statement of
which this proxy statement/prospectus is a part. This summary is based upon
assumptions regarding Anchor and Ledger contained in those opinions and the
assumption that the merger will be completed in accordance with the terms of the
merger agreement. This summary also assumes that Ledger shareholders hold their
shares of Ledger stock as capital assets and does not address the tax
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consequences that may be relevant to certain types of shareholders who are
subject to special treatment under federal income tax laws, such as dealers in
securities, banks, insurance companies, tax-exempt organizations, non-United
States persons and shareholders who acquired shares of Ledger stock pursuant to
the exercise of options or otherwise as compensation or through a tax-qualified
retirement plan. Finally, this summary does not discuss any state, local or
foreign tax consequences.
Based on these assumptions and upon representations and assumptions
contained in the tax opinions, our tax counsel are of the opinion that:
- the merger will qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code;
- neither Anchor or Ledger will recognize any gain or loss as a result of the
merger;
- no gain or loss will be recognized by Ledger shareholders who exchange their
Ledger stock solely for Anchor stock pursuant to the merger agreement (except
that a shareholder will be required to recognize gain with respect to any
fractional share for which cash is received, determined as though such
fractional share had been redeemed);
- those Ledger shareholders who elect to and actually receive only cash in
exchange for their Ledger shares will recognize gain or loss equal to the
difference between the amount of cash they receive and their aggregate tax
basis in their Ledger stock;
- those Ledger shareholders who elect to and actually receive a combination of
cash and Anchor stock in exchange for their Ledger stock will recognize gain
(but not loss) equal to the lesser of (1) the amount of cash they receive or
(2) the total gain they realize on the transaction. For this purpose, total
gain realized means the excess, if any, of the amount of cash received plus
the fair market value of any Anchor stock received (value as of the effective
date of the merger), over the shareholder's aggregate tax basis in his or her
Ledger stock;
- the tax basis of the Anchor stock received by a Ledger shareholder will be the
same as the tax basis the shareholder had in his or her Ledger stock
immediately prior to the merger, increased by the amount of any taxable gain
recognized by the Ledger shareholder in the merger and decreased by the amount
of cash received by the Ledger shareholder, and further adjusted for any
fractional shares deemed to have been redeemed as referred to above; and
- the holding period of the Anchor stock received will include the holding
period of shares of Ledger stock surrendered in exchange therefor.
The tax opinions cannot be relied upon if any of the factual assumptions or
representations on which they are based is, or later becomes, inaccurate. No
ruling from the Internal Revenue Service concerning the tax consequences of the
merger has been requested, and the tax opinions will not be binding upon the
Internal Revenue Service or the courts.
The following examples may be helpful in illustrating the tax consequences
of the merger to Ledger shareholders summarized above. Assume that you own 175
shares of Ledger stock that you purchased at a total cost of $1,750.00, or
$10.00 per share -- these amounts are referred to as your "basis" in the stock.
Also assume that the average closing price of Anchor stock for the 20 trading
days before the day we complete the merger (which is the price on which we will
base the payment of cash in lieu of fractional shares) is $15.00 per share and
that the closing price of Anchor stock on the day we complete the merger (which
is the price on which we will base the payment of cash pursuant to a cash
election) is $15.25 per share.
- If you elected to receive only Anchor stock, you would be entitled to receive
192.5 shares of Anchor stock (175 shares of Ledger stock times the 1.10
exchange ratio). Because Anchor will not issue fractional shares in the
merger, you would receive a certificate for 192 whole shares of Anchor stock
and a check for $7.50 (which is the result of multiplying 0.5 shares by the
$15.00 average closing price of Anchor stock for the 20 trading days before
the day we complete the merger). Your capital gain would be $2.95 (determined
by subtracting your basis in the 0.5 share, $4.55 ($1,750.00 divided by 192.5,
multiplied by 0.5) from $7.50). Your basis in the remaining 192 shares of
Anchor stock would be $1,745.45, or approximately $9.09 per share. This would
be the basis for the calculation of
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any gain or loss you realize when you later sell your Anchor stock.
- If you "split" your election and received Anchor stock for 100 of your Ledger
shares and cash for the other 75 Ledger shares you own, you would receive a
certificate for 110 whole shares of Anchor stock (100 times the 1.10 exchange
ratio) and a check for $1,258.13 (75 times the 1.10 exchange ratio times the
$15.25 per share closing price of Anchor stock on the day we complete the
merger). You would be subject to tax on $1,185.63 (the amount of your gain,
measured by the $15.25 Anchor price, which is less than the amount of cash you
received). Your basis in the remaining 110 shares of Anchor stock would be
$1,677.50 (your original basis of $1,750 minus the amount of cash you received
($1,258.13) plus the amount of gain you recognized in the transaction
($1,185.63)), or $15.25 per share. If, in this example, your basis in your
Ledger shares had been $1,000.00 instead of $1,750.00, you would be taxed on
only the amount of cash you received, or $1,258.13, even though your total
gain would be $1,935.63. In that case, your basis in your 110 Anchor shares
would be $1,000.00 (your original basis in your Ledger shares, plus the amount
of gain on which you were taxed ($1,258.13), minus the amount of cash you
received ($1,258.13)), or approximately $9.09 per share. In either case, any
gain you realize when you later sell your Anchor stock would be subject to tax
at the time you sell those shares.
- If you elect to receive cash instead of Anchor stock for all of your shares of
Ledger stock, you would receive a check for $2,935.63 (175 times the 1.10
exchange ratio times the $15.25 closing price of Anchor stock on the day we
complete the merger). Your taxable gain would be $1,185.63 (the amount you
received minus your original basis in your Ledger stock ($1,750.00)).
FEDERAL CAPITAL GAINS RATES. Although different tax rules may apply to you,
we believe that, with respect to any taxable gain recognized in the merger as
described above, most Ledger shareholders (other than corporations) will benefit
from the reduced federal income tax rates applicable to gains resulting from the
sale of a capital asset (the Ledger stock).
THE FOREGOING SUMMARY IS GENERAL IN SCOPE AND IS NOT INTENDED TO ADDRESS
ALL OF THE TAX CONSEQUENCES APPLICABLE TO EVERY LEDGER SHAREHOLDER, AND THE
FOREGOING EXAMPLES ARE FOR ILLUSTRATION PURPOSES ONLY AND DO NOT TAKE CERTAIN
ADDITIONAL FACTORS INTO ACCOUNT (SUCH AS ADJUSTMENTS TO BASIS WHICH MAY BE
PERMITTED UNDER APPLICABLE TAX LAWS). YOU SHOULD CONSULT YOUR OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE MERGER, INCLUDING TAX
RETURN REPORTING REQUIREMENTS, THE APPLICABILITY OF FEDERAL, STATE, LOCAL AND
FOREIGN TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
RESALE RESTRICTIONS
All Anchor stock received by Ledger shareholders in the merger will be
freely transferable, except those shares received by persons who are deemed to
be "affiliates," as that term is defined under the Securities Act of 1933, as
amended, of Ledger at the time of the Ledger meeting. Anchor stock received by
affiliates may be resold by them only in transactions permitted by the resale
provisions of Rule 144 or Rule 145 under the Securities Act, or as otherwise
permitted under the Securities Act. Persons who may be deemed to be affiliates
generally include individuals or entities that control, are controlled by, or
are under common control with, that party and may include the officers and
directors of that party as well as principal holders of stock of that party. The
merger agreement requires Ledger to use its reasonable efforts to cause each of
its affiliates to execute a written agreement to comply with the foregoing
requirements.
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THE MERGER AGREEMENT
This is a summary of the material provisions of the merger agreement, dated
June 15, 2001, a copy of which is attached as Appendix A to this proxy
statement/prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the merger agreement.
The exhibits to the merger agreement are filed with Anchor's Registration
Statement on Form S-4. See "WHERE YOU CAN FIND MORE INFORMATION" on page 92 to
find out how to locate these documents.
THE MERGER
The companies entered into the merger agreement providing for the merger of
Ledger with and into Anchor. Anchor will be the surviving corporation in the
merger and will continue to operate under the name Anchor BanCorp Wisconsin Inc.
The merger agreement has been approved by the boards of directors of both
companies and, subject to approval by Ledger shareholders as well as various
regulatory approvals, the merger is expected to be completed during the fourth
quarter of 2001. The merger agreement provides that the banking subsidiaries of
the two companies will merge and will thereafter operate under the name
AnchorBank, fsb.
MERGER CONSIDERATION
Each share of Ledger stock issued and outstanding immediately prior to the
effectiveness of the merger will (except as otherwise provided below) be
canceled and converted into the right to receive cash in lieu of any fractional
shares plus, at the option of the holder thereof, either (1) 1.10 shares of
Anchor stock, or (2) an amount of cash equal to 1.10 multiplied by the closing
price of Anchor stock on the date the merger becomes effective. However, the
merger agreement also provides that a maximum of 20% of the Ledger stock may be
exchanged for cash (the "20% ceiling"). If, at the end of the day that the total
cash elections exceed the 20% ceiling, the cash elections do not exceed more
than 20.1%, then the full 20.1% will be honored. If at the end of such day, the
total cash elections exceed 20.1%, then the cash elections received on that day
will be reduced proportionately so that the total cash elections equal 20% of
the Ledger stock outstanding at the effective time. Additionally, the merger
agreement provides for a cash election termination date which is 45 days after
the date that the letter containing instructions for exchanging the shares of
Ledger stock is sent to the Ledger shareholders. Any cash elections received
after such date shall be disregarded and treated as an election to receive
shares of Anchor stock.
If the merger is completed, the cancellation and conversion of Ledger stock
into shares of Anchor stock at the effective time will cause Ledger stock to
cease to be listed on Nasdaq and make Ledger stock eligible to terminate its
registration pursuant to the Securities Exchange Act of 1934, as amended.
EFFECTIVE TIME OF THE MERGER
The merger will become effective as soon as practicable following the
satisfaction or waiver of all conditions contained in the merger agreement. We
expect this to occur in the fourth quarter of 2001; however, we cannot assure
you when, or if, all the conditions to consummation of the merger will be
satisfied or waived. See "-- Conditions" on page 39.
EXCHANGE PROCEDURES
After the merger, Firstar Bank, N.A., the company we have appointed as the
"Exchange Agent," will mail to each person who held shares of Ledger stock at
the time of the completion of the merger a document called "Letter of
Transmittal" for their use in forwarding Ledger stock certificates. The Letter
of Transmittal will include detailed instructions for the exchange of Ledger
stock certificates for either Anchor stock certificates, or for cash. When you
surrender your Ledger stock certificate(s), together with a properly completed
Letter of Transmittal, you will be entitled to receive an Anchor stock
certificate (plus cash in lieu of any fractional shares) or, if you made an
effective cash election, cash. In either case, the surrendered Ledger stock
certificate(s) will be canceled. YOU SHOULD NOT SEND IN YOUR LEDGER STOCK
CERTIFICATE(S) UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL.
For more information about exchanging your Ledger shares, see "EXCHANGE
PROCEDURES" on page 44.
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REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties made by each
of us to the other, including representations and warranties relating to:
- due organization, power and standing of Ledger and Anchor and other corporate
matters;
- capital structure and securities;
- authorization, execution, delivery and enforceability of the merger agreement;
- subsidiaries of Ledger;
- absence of conflicts under charter documents, violations of any instruments or
law, and required consents and approvals;
- documents filed with the SEC and the accuracy of the information in those
documents;
- litigation and liabilities of Ledger;
- conduct of business in the ordinary course and the absence of certain types of
changes and material adverse effects;
- tax matters;
- retirement and other employee benefit plans of Ledger;
- regulatory matters and compliance;
- brokers' and finders' fees with respect to the merger;
- adequacy of loan loss reserves of Ledger;
- compliance with applicable laws;
- environmental matters relating to Ledger;
- contracts and commitments relating to Ledger; and
- vote required by Ledger shareholders to approve the merger.
COVENANTS
The merger agreement contains covenants of the parties pending the
consummation of the merger, which generally include, among others, the covenants
described below.
LEDGER. Ledger is required to continue to carry on its business in the
ordinary course consistent with its past practices, and use all reasonable
efforts to keep its business organization and workforce intact. Ledger is
prohibited from:
- changing its employee benefit plans or adopting any new plans, or increasing
the compensation and benefits of its employees, except for amendments to
Ledger's option plans to extend the exercise period, certain arrangements
approved by Anchor relating to bonuses and supplemental executive retirement
plans, and normal increases in the ordinary course of business consistent with
its past practices;
- declaring or paying dividends on its stock, except that Ledger may continue to
pay regular quarterly cash dividends of up to $0.05 per share;
- redeeming or repurchasing Ledger stock, except that Ledger may effect
repurchases pursuant to its currently authorized repurchase program;
- merging with any other company or acquiring the assets or stock of another
company;
- liquidating or selling its assets outside of the ordinary course of its
business;
- splitting or otherwise reclassifying its outstanding stock, or issuing
additional shares of Ledger stock or other equity securities, other than
pursuant to existing stock option plans and agreements;
- amending its articles of incorporation or bylaws;
- changing its methods of accounting, except as may be required by law or GAAP;
- changing its lending, investment and other material business policies; and
- taking any action that would preclude the merger from qualifying for tax-free
treatment under the Internal Revenue Code.
ANCHOR. Anchor is also required to continue to carry on its business in the
ordinary course consistent with its past practices. Anchor is prohibited from:
- declaring or paying extraordinary dividends on its stock, unless appropriate
adjustments are made to the exchange ratio;
- merging with any other company or participating in any similar transaction as
a result of which Anchor or the surviving company in that transaction would
not be required to complete
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the merger in accordance with the terms of the merger agreement;
- amending its articles of incorporation or bylaws; and
- taking any action that would preclude the merger from qualifying for tax-free
treatment under the Internal Revenue Code.
NO SOLICITATION OF TRANSACTIONS
The merger agreement prohibits Ledger and its officers, directors and
employees from soliciting, initiating, encouraging or making any "takeover
proposal" (as defined below), and from recommending, endorsing or agreeing to
any such takeover proposal, participating in discussions with third parties
relating to any takeover proposal, or providing third parties with any nonpublic
information relating to any takeover proposal. However, these restrictions do
not apply where Ledger receives an unsolicited takeover proposal if Ledger,
after consulting with and receiving the advice of its outside legal counsel,
determines in good faith that it is appropriate for Ledger's board to consider
such unsolicited takeover proposal in order to discharge its fiduciary duties to
Ledger's shareholders. For this purpose, a "takeover proposal" means any offer
or proposal, from a party or parties other than Anchor, for a merger with or an
acquisition of Ledger or its stock, assets or business. For more information,
see the discussion under "-- Fiduciary Termination" on page 40.
LEDGER'S BOARD'S COVENANT TO RECOMMEND
Ledger's board of directors agreed to recommend the approval and adoption
of the merger agreement to Ledger's shareholders, unless it determines in good
faith, based on advice of its outside legal counsel, that doing so could
reasonably be deemed to violate their directors' fiduciary duty to Ledger
shareholders.
BENEFIT PLANS
Except as otherwise described below, Anchor has agreed to assume and honor
all of Ledger's existing agreements relating to employee benefits.
Employees of Ledger who become employees of Anchor will be entitled to
participate in Anchor's benefit plans according to the terms of those plans. For
purposes of retirement plan vesting, benefit eligibility, vacation accrual, and
for all purposes under welfare benefit plans, Anchor will treat Ledger's
employees' past service with Ledger as service with Anchor.
With respect to the Ledger Employee Stock Ownership Plan ("ESOP") and
401(k) plan, the accounts of all Ledger employees who are participants in those
plans will be vested fully as of the effective time of the merger. Prior to the
effective time of the merger, Ledger will make a cash contribution to the ESOP
sufficient to repay all bank debt of the ESOP. Both of Ledger's ESOP and 401(k)
plan will be merged into retirement plans of Anchor.
Anchor will assume the obligations under certain unfunded nonqualified
deferred compensation arrangements that Ledger currently maintains for two of
its officers. Five of Ledger's executive officers currently have employment
agreements which provide for payment of certain benefits upon a change in
control of Ledger. Anchor will honor these agreements by providing each of such
officers with severance payments at the effective time of the merger.
Additionally, Anchor will honor the obligations set forth in Ledger's
Emeritus Plan for Directors, as currently in effect for three former directors,
including providing ongoing healthcare coverage and cash payments in the amount
of 50% of current Ledger board retainer fees for life.
Upon completion of the merger, the executive officers of Ledger who have
employment agreements and related contracts with Ledger will receive payments
from Anchor as consideration for the termination of those agreements. For more
information, see "MANAGEMENT AND OPERATIONS AFTER THE MERGER" on page 47.
LEDGER STOCK OPTIONS
In the merger, each outstanding option to buy Ledger stock under Ledger's
stock option plans will become an option to buy 1.10 shares of Anchor stock at
an exercise price per share equal to the exercise price of the original option
divided by 1.10. All other terms and conditions of the options will remain the
same as the terms and conditions of the original options. See "MATTER 1. THE
MERGER -- Interests of Members of Ledger's Board of Directors and Management
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in the Merger -- Accelerated Vesting of Stock Options" on page 32.
GOVERNANCE
The merger agreement provides that, following the merger, Anchor will take
necessary actions, including expansion of the size of its board of directors, if
required, to cause one existing director of Ledger, James D. Smessaert, to be
appointed to Anchor's board. Mr. Smessaert's initial term will expire on the
date of the next annual meeting of Anchor's shareholders. Anchor also will cause
Mr. Smessaert to be nominated as its uncontested candidate for election at such
next annual meeting of Anchor's shareholders for a full three-year term as a
director.
For more information, see "MANAGEMENT AND OPERATIONS AFTER THE MERGER" on
page 47.
INDEMNIFICATION AND INSURANCE
The merger agreement provides that after the merger becomes effective
Anchor will indemnify, to the greatest extent permitted by applicable law, all
current and former officers or directors of Ledger or any of its subsidiaries
against any liability they may incur or that may be asserted against them
pertaining to or as a result of their service as a director or officer of Ledger
or any of its subsidiaries (including the costs of defending any such claims).
The merger agreement also requires that Anchor carry directors' and officers'
liability insurance covering Ledger's officers and directors against such
liability for six years, provided that Anchor is not required to expend more
than the amount currently paid by Ledger for such insurance on an annual basis.
CONDITIONS
The merger is subject to customary closing conditions, including, without
limitation, the following:
- the receipt of required shareholder approval by Ledger;
- the continued accuracy of the representations and warranties contained in the
merger agreement;
- the satisfaction of the covenants contained in the merger agreement;
- there has not occurred, between the date of the merger agreement and the date
of closing, any change in the financial condition, results of operations or
business of either company that would have a material adverse effect (as
defined in the merger agreement) on such company and its subsidiaries, taken
as a whole;
- there is not any pending material action, proceeding or investigation
challenging or seeking material damages in connection with the merger or
seeking to limit or restrain Anchor's right to exercise ownership of Ledger
after the merger;
- the receipt of all requisite regulatory approvals to consummate the merger;
and
- the receipt of opinions of counsel that the merger will qualify as a tax-free
reorganization.
TERMINATION
The merger agreement may be terminated under the following circumstances:
- by mutual consent of the parties (by the majority votes of their respective
boards of directors);
- by either party if the merger is not completed by March 31, 2002;
- by either party if Ledger's shareholders vote against the merger;
- by either party if any permanent injunction is issued preventing the merger;
- by either party if any regulatory body has denied approval of the merger and
neither party has appealed that denial;
- by the non-breaching party if there exist material breaches of the
representations or warranties contained in the merger agreement, which
breaches, individually or in the aggregate, would result in a material adverse
effect on the breaching party and which (if curable) are not cured within 30
days after notice;
- by the non-breaching party if there occurs a material breach of any covenant
or agreement in the merger agreement which (if curable) is not cured within 30
days after notice;
- by Ledger if, under certain circumstances, as a result of a proposed
acquisition of Ledger by a third party, the Ledger directors determine that
termination is appropriate in the fulfillment of
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their fiduciary duties (based on advice of its counsel), but only after Anchor
has first been advised of the identity of the third party and the terms of its
proposal and been given an opportunity to negotiate adjustments in the terms of
the merger agreement (this is referred to as a "fiduciary termination" and is
discussed in greater detail below under "-- Fiduciary Termination" below);
- by Ledger if the average price of Anchor stock during a specified trading
period preceding the time the last approval necessary to complete the merger
has been received declines by more than 15% relative to the SNL Midwest Thrift
Stock Index, or by Anchor if the average price of Anchor's stock during a
specified trading period preceding the last approval necessary to complete the
merger has been received increases by more than 15% relative to the SNL
Midwest Thrift Stock Index, unless such 15% increase occurs due to a public
announcement by Anchor that it has entered into an agreement with respect to
an acquisition, merger or similar change in control of Anchor (the specifics
of this provision are discussed in greater detail below under "-- Price
Condition" on page 41);
- by either party if Ledger's board of directors does not recommend or changes
its recommendation of the merger to its shareholders because it did not
receive an updated fairness opinion from its financial advisor as of the date
it mailed this proxy statement/prospectus to its shareholders; or
- by Anchor if (1) Ledger's board of directors does not recommend or changes its
recommendation of the merger to its shareholders for any reason, (2) any other
person acquires 20% or more of Ledger's stock, (3) Ledger's board recommends a
takeover proposal to its shareholders, or (4) a tender or exchange offer for
20% or more of Ledger's stock is made and Ledger's board fails to recommend
against it.
FIDUCIARY TERMINATION
As discussed on page 38 under "-- No Solicitation of Transactions," the
merger agreement prohibits Ledger and its officers, directors and employees from
soliciting, initiating, encouraging or making any takeover proposal, and from
recommending, endorsing or agreeing to any such takeover proposal, participating
in discussions with third parties relating to any takeover proposal, or
providing third parties with any nonpublic information relating to any takeover
proposal, except under circumstances where Ledger, after consulting with and
receiving the advice of its outside legal counsel, determines in good faith that
it is appropriate for Ledger's board to consider such unsolicited takeover
proposal in order to discharge its fiduciary duties to Ledger's shareholders.
The merger agreement gives Ledger the right to terminate the merger
agreement and not complete the merger if, as a result of an unsolicited takeover
proposal by a party other than Anchor, the Ledger board of directors determines
in good faith, after consulting with and receiving the advice of its outside
legal counsel, that the board's failure to accept such takeover proposal could
reasonably be deemed to constitute a breach of its fiduciary obligations to
Ledger's shareholders. However, before Ledger may terminate the merger agreement
under these circumstances, it must first disclose to Anchor the identity of the
third party making the takeover proposal in question and the financial terms of
that proposal, and must provide Anchor with the opportunity to negotiate changes
in the terms of the merger agreement that would enable Ledger to proceed with
the merger.
If Ledger exercises its right to terminate the merger agreement under these
circumstances, Anchor would have the right to exercise its option to acquire up
to 19.9% of Ledger's stock. See "THE STOCK OPTION AGREEMENT" on page 42.
TERMINATION FEE
The merger agreement provides for a termination fee of $1 million if the
merger agreement is terminated under certain circumstances. If the merger
agreement is wrongfully terminated by Anchor, Ledger is entitled to receive a $1
million termination fee. A wrongful termination by Anchor would occur if Anchor
terminated the merger agreement other than in accordance with its rights to do
so under the merger agreement (see "-- Termination" on page 39). Anchor is
entitled to a $1 million termination fee if the merger agreement is terminated
under certain circumstances, including if:
- (1) Ledger's shareholders do not approve the merger, (2) a takeover proposal
existed between
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June 15, 2001 and the date of the meeting, and (3) a "third-party acquisition
event" (as defined below) occurs (or Ledger enters into a letter of intent or
similar agreement regarding a third-party acquisition event) at the time of or
within 12 months of such termination;
- (1) Ledger does not receive an updated fairness opinion as of the date of
mailing of this proxy statement/prospectus, (2) the Ledger board withdraws its
recommendation of (or determines not to recommend) the merger, (3) a takeover
proposal existed between June 15, 2001 and the date of the action by the
Ledger board, and (4) a third-party acquisition event occurs (or Ledger enters
into a letter of intent or similar agreement regarding a third-party
acquisition event) at the time of or within 12 months of such termination;
- Ledger terminates the merger agreement upon receipt of an unsolicited takeover
proposal, the rejection of which the Ledger board determines (in good faith
and after consultation with Ledger's financial advisor and outside counsel and
after allowing Anchor the opportunity to renegotiate the terms of the merger
agreement) could reasonably be deemed to constitute a breach of the board's
fiduciary duties; or
- the merger agreement is terminated by Anchor, where (1) the Ledger board does
not recommend, or withdraws its recommendation of, the merger (except where
Ledger does not receive an updated fairness opinion as of the date of mailing
this proxy statement/prospectus), (2) any person other than Anchor has become
an owner of 20% or more of the outstanding Ledger stock, and (3) the Ledger
board recommends a competing takeover proposal, or a tender offer (which the
Ledger board does not recommend against) has been commenced for 20% or more of
the Ledger stock.
For these purposes, a "third-party acquisition event" means (1) the
issuance, sale or disposition of securities representing more than 20% of the
equity securities or voting power of Ledger, (2) sale of or other disposition of
more than 20% of Ledger's assets, or (3) any transaction where control of
Ledger's board of directors changes.
PRICE CONDITION
Ledger has the right to terminate the merger agreement and abandon the
merger if the average price of Anchor stock during a specified trading period
declines by more than 15% relative to the SNL Midwest Thrift Stock Index. Anchor
has the right to terminate the merger agreement and abandon the merger if the
average price of Anchor stock for the same trading period increases by more than
15% relative to the SNL Midwest Thrift Stock Index unless such 15% increase
occurs due to a public announcement by Anchor that it has entered into an
agreement with respect to an acquisition, merger or similar change in control of
Anchor.
Whether a 15% decline or increase has occurred will be determined by
comparing:
- the ratio of the average closing prices of Anchor stock to the average of the
SNL Midwest Thrift Stock Index during the 20 trading days ending on the sixth
trading day prior to the execution of the merger agreement (the period from
May 10 to June 7, 2001) to
- the ratio of the average closing prices of Anchor stock to the average of the
SNL Midwest Thrift Stock Index during the 20 trading days ending on the sixth
trading day prior to the date that the last approval necessary to complete the
merger is received (if, for example, the last approval is received at the
meeting of Ledger shareholders on October 24, 2001, the sixth trading day
prior to that date would be October 16, 2001 and the trading period would span
the period from September 18 to October 16, 2001).
Information about the SNL Midwest Thrift Stock Index can be obtained by
contacting SNL at SNL Securities LC, 321 East Main Street, Charlottesville,
Virginia 22902, telephone (434) 977-1600.
The price condition was included in the merger agreement to provide both
Ledger and Anchor with some protection against a dramatic decline or increase in
the value of Anchor stock between the date of the merger agreement and the date
the merger is completed. The price condition takes into account the possibility
that a decline or increase in Anchor's stock price could be the result of a
general decline or increase in the price
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of stocks in the thrift industry, rather than any situation particular to
Anchor.
As of the date of this proxy statement/ prospectus, assuming that
shareholder approval is received from Ledger on October 24, 2001 and that is the
last approval necessary to complete the merger, the measurement period for the
price condition has not begun.
Therefore, at the present time, we have no way of telling whether the price
condition will be satisfied at the time of the meeting, although, if it is not,
we would expect to announce this fact to Ledger shareholders at or prior to the
meeting.
AMENDMENT AND WAIVER
The parties may amend the merger agreement prior to the completion of the
merger if the amendment is approved by both parties' boards of directors and is
in writing and signed by both parties. Such amendment could change the structure
of the merger; however, no such amendment may be made after the merger is
approved by Ledger's shareholders if its effect would be to reduce the exchange
ratio or otherwise change the amount or type of consideration Ledger
shareholders are entitled to receive in the merger. The conditions to each
party's obligation to consummate the merger may be waived by the other party in
whole or in part to the extent permitted by applicable law.
THE STOCK OPTION AGREEMENT
GENERAL
Ledger granted Anchor an option to purchase up to 484,991 shares of Ledger
stock (subject to adjustment to avoid dilution, but not to exceed 19.9% of the
shares of Ledger stock issued and outstanding at the time of exercise), at an
exercise price of $15.00 per share. Anchor can only exercise the option if any
of the triggering and exercise events, which generally relate to control of
Ledger, occur. None of these events has occurred as of the date of this proxy
statement/prospectus.
The closing price of Ledger stock on both June 14, 2001 (the last trading
date before the parties executed the merger agreement and stock option
agreement) and June 15, 2001 (the last trading date before the parties publicly
announced the execution of the merger agreement and stock option agreement) was
$10.25 per share.
ANTI-TAKEOVER EFFECT
The option is intended to increase the likelihood that the merger will be
completed in accordance with the terms of the merger agreement. Some aspects of
the stock option agreement may have the effect of discouraging persons who
might, prior to the time the merger is completed, be interested in acquiring
Ledger or a significant interest in Ledger from considering or proposing such an
acquisition, even if they were prepared to pay a higher price per share for
Ledger stock than the price per share implicit in the exchange ratio used in the
merger agreement. Attempts to acquire Ledger or an interest in Ledger could
cause the option to become exercisable and give Anchor the right to receive a
portion of any premium offered to Ledger shareholders. This right would
significantly increase the cost of a proposed transaction to a potential
acquiror when compared to the cost if the stock option agreement did not exist.
This increased cost might discourage a potential acquiror from considering or
proposing an acquisition or might result in a potential acquiror proposing to
pay a lower price per share to acquire Ledger than it might otherwise have been
willing to pay. In addition, the management of Ledger believes that exercise of
the option is likely to prohibit any reasonably foreseeable acquiror of Ledger
(other than Anchor) from accounting for any acquisition of Ledger using the
pooling of interests accounting method, thereby further diminishing Ledger's
attractiveness to such an acquiror. Finally, because Anchor would be a 19.9%
shareholder of Ledger after it exercises the option, exercise of the option
would increase the ability of Anchor to obtain the approval of Ledger's
shareholders to consummate the merger with Anchor and adversely affect the
ability of a third party to obtain Ledger shareholder approval for an
alternative transaction.
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SUMMARY OF THE STOCK OPTION AGREEMENT
The following is a summary of the material provisions of the stock option
agreement. This summary is necessarily selective and incomplete and is qualified
in its entirety by the full text of the stock option agreement, which has been
filed as an exhibit to Ledger's Form 8-K filed on June 18, 2001 and is
incorporated herein by reference. See "WHERE YOU CAN FIND MORE INFORMATION" on
page 92 to find out how to locate documents incorporated by reference. You
should read the stock option agreement carefully. In this summary, we will use
some capitalized terms which, unless we indicate otherwise, have the meanings
given to them in the stock option agreement.
WHEN ANCHOR MAY EXERCISE THE OPTION
Anchor may exercise all or any part of the option if all of the following
are true:
- (1) a "third party acquisition event" (see "THE MERGER AGREEMENT --
Termination Fee" on page 40) has occurred; (2) Ledger has entered into a
letter of intent acquisition agreement or similar agreement with respect to a
third-party acquisition event; (3) the merger agreement is terminated by
Ledger or Anchor because Ledger's shareholders do not approve the merger, and
a takeover proposal existed between June 15, 2001, and the date of the
meeting; (4) the merger agreement is terminated by Ledger or Anchor because
Ledger's board of directors does not recommend or changes its recommendation
of the merger to its shareholders because it did not receive an updated
fairness opinion from its financial advisor as of the date it mailed this
proxy statement/prospectus to its shareholders, and a takeover proposal
existed between June 15, 2001 and the date on which the merger agreement was
terminated; (5) the merger agreement is terminated by Ledger due to a
"fiduciary termination" (see "THE MERGER AGREEMENT -- Fiduciary Termination"
on page 40); or (6) the merger agreement is terminated by Anchor, where (a)
the Ledger board does not recommend, or withdraws its recommendation of, the
merger (except where Ledger does not receive an updated fairness opinion as of
the date of mailing this proxy statement/prospectus), (b) any person other
than Anchor has become an owner of 20% or more of the outstanding Ledger
stock, and (c) the Ledger board recommends a competing takeover proposal, or a
tender offer (which the Ledger board does not recommend against) has been
commenced for 20% or more of the Ledger stock;
- Anchor has not materially breached any of its obligations under the merger
agreement or the stock option agreement (which, in the case of the merger
agreement, would entitle Ledger to terminate the merger agreement);
- Ledger has not terminated the merger agreement: (1) due to a material breach
by Anchor; (2) due to Ledger shareholders' failure to approve the merger
(other than if a takeover proposal existed between June 15, 2001 and the date
of the meeting); or (3) pursuant to the provision of the merger agreement,
which allows Ledger to terminate the merger agreement following a decline in
the average price of Anchor stock measured over a specified period (see "THE
MERGER AGREEMENT -- Price Condition" on page 41); and
- no preliminary or permanent injunction or other order has been issued by a
court invalidating the option grant or prohibiting its exercise.
WHEN THE OPTION EXPIRES
The option expires upon the earlier of the effective time or the date that
the merger agreement is terminated in accordance with its terms; however, if the
merger agreement is terminated due to one of the reasons listed below, the
option would terminate one year after termination of the merger agreement:
- either party terminates the merger agreement due to the failure of Ledgers
shareholders to approve the merger if, prior to Ledger's shareholders'
meeting, it announced that a third party has made, or intends to make, a
takeover proposal;
- either party terminates the merger agreement due to Ledger's board of
directors not recommending or changing its recommendation of the merger to its
shareholders because it did not receive an updated fairness opinion from its
financial advisor as of the date it mailed this proxy statement/prospectus,
if, prior to the action by Ledger's board, Ledger announced
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that a third party has made, or intends to make, a takeover proposal; or
- Anchor terminates the merger agreement because (1) Ledger's board of directors
does not recommend or change its recommendation of the merger to its
shareholders for any reason, (2) any other person acquires 20% or more of
Ledger's stock, (3) Ledger's board recommends a takeover proposal to its
shareholders, or (4) tender or exchange offer for 20% or more of Ledger's
stock is made and Ledger's board fails to recommend against it.
Further, if Ledger terminates the merger agreement due to Ledger's board
determining that its failure to accept an unsolicited takeover proposal could be
deemed to constitute a breach of its fiduciary obligations under applicable law
(see "THE MERGER AGREEMENT -- Fiduciary Termination" on page 40); the option
will terminate upon the earlier of (1) the effective time of the merger, (2) the
first anniversary of the termination of the merger agreement, or (3) the date of
the consummation of the unsolicited takeover proposal.
REGISTRATION RIGHTS AND RIGHT OF FIRST REFUSAL FOR REGISTERED SALE
Anchor has the right, after exercise of the option, to require Ledger to
register any Option Shares under the Securities Act of 1933, as amended, so that
Anchor may publicly resell those Option Shares. This right is known as Anchor's
"Registration Right." If Anchor exercises its Registration Right:
- Anchor may require Ledger to prepare and file a registration statement under
the Securities Act for the Option Shares; or
- If Ledger is registering other shares of Ledger stock under the Securities
Act, Anchor may be able to require Ledger to include the Option Shares as part
of that registration.
In either case, Ledger must also use its reasonable efforts to qualify the
Option Shares under any applicable state securities laws, if necessary, for
Anchor to be able to sell them. At any time within 30 business days after Ledger
receives notice from Anchor that Anchor proposes to sell Option Shares pursuant
to the exercise of its Registration Right, Ledger has the right to repurchase
such Option Shares at a cash price equal to their "Fair Market Value." "Fair
Market Value" means the number of Option Shares to be repurchased times the
greater of (1) the highest price of Ledger stock paid within 12 months preceding
the date on which Anchor notifies Ledger that it is exercising its Registration
Right, for any shares owned by any person who has acquired 20% or more of the
outstanding Ledger stock after June 15, 2001, or (2) the average of the daily
closing sales price of a share of Ledger stock on Nasdaq during the five trading
days prior to the date on which Anchor notifies Ledger that it is exercising its
Registration Right.
EXTENSION OF PERIODS
The periods for exercising exercise, registration and repurchase rights
under the stock option agreement will be extended to the extent necessary to
allow the parties to obtain all regulatory approvals for the exercise of such
rights and the expiration of all applicable waiting periods.
EXCHANGE PROCEDURES
After the merger, Firstar Bank, N.A., the company we have appointed as the
"Exchange Agent," will mail to each person who held shares of Ledger stock at
the time of the completion of the merger a document called "Letter of
Transmittal" for their use in forwarding Ledger stock certificates. The Letter
of Transmittal will include detailed instructions for the exchange of Ledger
stock certificates for either Anchor stock certificates, or for cash to be
distributed to those shareholders whose cash elections were honored. When you
surrender your Ledger stock certificate(s), together with a properly completed
Letter of Transmittal, you will be entitled to receive an Anchor stock
certificate (plus cash in lieu of any fractional shares) or, if you made an
effective cash election, cash. In either case, the surrendered Ledger stock
certificate(s) will be canceled. YOU SHOULD NOT SEND IN YOUR LEDGER STOCK
CERTIFICATE(S) UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL.
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CASH ELECTION
Subject to the limitations discussed below, you are entitled to elect to
receive cash for your Ledger shares instead of receiving Anchor stock or you
may, subject to the limitations discussed below, "split" your election and
receive part cash and part Anchor stock. To make a cash election for all or part
of your Ledger shares, you must properly complete the Cash Election section of
your Letter of Transmittal and the Exchange Agent must receive your completed
Letter of Transmittal, plus your surrendered Ledger stock certificate(s), by
certain deadlines.
The limitations on your ability to elect to receive cash for all or any
part of your Ledger stock are as follows:
- 100-SHARE MINIMUM. Although you may "split" your election and receive part
cash and part Anchor stock, you may not split your election in such a way that
you would receive less than 100 shares of Anchor stock. For example, if you
own 150 shares of Ledger stock, you would be entitled to receive 165 shares of
Anchor stock in the merger (150 x 1.10). You could elect to receive (1) 165
shares of Anchor stock; (2) cash instead of any number from 1 to 65 shares of
Anchor stock and the remainder in the form of an Anchor stock certificate; or
(3) cash instead of all 165 shares of Anchor stock. You could not make a cash
election for 100 shares of your Ledger stock, because you would then end up
with only 55 shares of Anchor stock. As a result, if you own fewer than 91
shares of Ledger stock you may not "split" your election and you would have to
elect to receive either all cash or all Anchor stock. It is important that you
read the instructions in the Letter of Transmittal and that you complete your
Letter of Transmittal carefully, especially if you decide to "split" your
election. The Exchange Agent has been instructed to treat any "split" election
which does not comply with the 100-share minimum limit described above as if
it were an election to receive only Anchor stock (plus cash in lieu of any
fractional shares). Further, if you make a mistake, neither Anchor nor the
Exchange Agent will be required to contact you or to give you any opportunity
to correct it, although the Exchange Agent will try to do so.
- 45-DAY DEADLINE. If you decide to make a cash election for all or part of
your stock, it must be sent to the Exchange Agent by the deadline, which will
be 45 days from the date that Letters of Transmittal are mailed to Ledger
shareholders. Assuming the merger is approved by Ledger shareholders at the
meeting, we expect to complete the merger within approximately five business
days thereafter (by about October 31, 2001) and that it will take the Exchange
Agent five business days (until about November 7, 2001) to mail Letters of
Transmittal. If this happens, the 45-day deadline will occur on approximately
December 22, 2001. We will tell you the exact deadline in the instructions for
the Letter of Transmittal. In order to meet this deadline, you must do one of
the following with your properly completed Letter of Transmittal and your
surrendered Ledger stock certificate(s): (1) deliver these documents to the
Exchange Agent at the delivery address listed on the Letter of Transmittal;
(2) mail these documents by first-class mail with proper postage affixed to
the Exchange Agent at the mailing address listed on the Letter of Transmittal
(your mailing must be postmarked by the deadline); or (3) send these documents
to the Exchange Agent via overnight courier no later than the deadline. If you
do not meet this deadline, or if your Letter of Transmittal is received in
time but you have not properly completed it or have not surrendered all of
your Ledger stock certificate(s), the Exchange Agent has been instructed to
treat your election as if it were an election to receive only Anchor stock
(plus cash in lieu of any fractional shares). Again, neither Anchor nor the
Exchange Agent will be required to contact you or to give you any opportunity
to correct any mistakes you may have made, although the Exchange Agent will
try to do so. Finally, the 45-day period will begin at the time that the
Exchange Agent has substantially completed its mailing of Letters of
Transmittal to all former Ledger shareholders -- if the Letter of Transmittal
mailed to you is returned for any reason (for example, if the Secretary of
Ledger does not have your correct mailing address), the deadline will not be
extended.
- 20% LIMIT. Anchor is only required to issue cash instead of up to 20% of the
Anchor stock to be issued in the merger. If this 20%
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threshold is reached, then, on the day it is reached (on the day the Exchange
Agent receives cash elections which cause the 20% threshold to be exceeded),
the following will happen: If all cash elections received on that day are
counted and the amount of cash does not exceed 20.1% of the total merger
considerations, then all cash elections received on that day will be honored.
If the 20.1% limit is exceeded by all cash elections received on that day,
then the Exchange Agent will reduce each former Ledger shareholder's cash
election received on that day proportionately so that the 20% limit is not
exceeded, and will issue the remaining consideration to which each such
shareholder is entitled in the form of Anchor stock. If this proportionate
reduction causes any former Ledger shareholder to receive fewer than 100
shares of Anchor stock, the 100-share minimum described above will be
disregarded only for former Ledger shareholders whose cash election is
received on that day. This 20% limitation could be exceeded before the 45-day
deadline. Therefore, even if you submit a properly completed cash election
before the deadline, you may still not be able to receive cash.
BECAUSE OF THE FOREGOING LIMITATIONS, WE URGE YOU TO ACT PROMPTLY IF YOU WISH TO
MAKE A CASH ELECTION FOR ALL OR ANY PART OF YOUR LEDGER STOCK.
Under certain circumstances, you may experience a delay in surrendering
your Ledger stock certificates. If you wish to elect to receive cash instead of
Anchor stock for all or a part of your Ledger shares, this delay could cause you
to miss one of the deadlines mentioned above. Therefore, if either of the
following apply to you, please follow the instructions below:
- IF YOU CANNOT FIND ONE OR MORE OF YOUR LEDGER STOCK CERTIFICATES, you should
follow the instructions in the answer to the question entitled "WHAT IF I
CANNOT FIND MY STOCK CERTIFICATE(S)?" on page 3. You should do this NOW -- you
do not have to wait to see if the merger is approved to do this.
- IF YOU DO NOT HAVE LEDGER STOCK CERTIFICATES, BECAUSE YOUR LEDGER STOCK IS
HELD FOR YOU BY YOUR BANK OR BROKER, you should contact your bank or broker
NOW and ask them for instructions on how to surrender your Ledger stock,
especially if you plan to elect to receive cash instead of Anchor stock for
all or a part of your Ledger shares.
If you make an effective cash election, the dollar amount you will receive
will be based on the exchange ratio and the closing price of Anchor stock on the
day we complete the merger. For example, if Anchor stock closes at $16.00 on the
day we complete the merger, you would receive $17.60 ($16.00 times the 1.10
exchange ratio) for each share of Ledger stock that you elect to convert to
cash.
The amount of cash you will receive if you make a effective cash election
will be determined before the Letters of Transmittal are sent, but the price of
Anchor stock is likely to fluctuate after that time. It is possible that by the
time you receive your cash, the market value of the Anchor stock (based upon the
then-current market price) that you would have received if you had not made a
cash election will be more or less than the amount of cash you will receive
pursuant to your cash election.
CASH IN LIEU OF FRACTIONAL SHARES
Anchor is not required to issue any "fractional shares" in the merger. For
example, if you own 125 shares of Ledger stock, you would be entitled to receive
137.5 shares of Anchor stock (125 times the 1.10 exchange ratio). Cash will be
issued instead of the 0.5 share. Thus, you would receive a certificate for 137
whole shares of Anchor stock and a check from the Exchange Agent for 0.5 shares
based upon the average closing price of Anchor Stock for the 20 trading days
preceding the day we complete the merger.
DIVIDENDS
No dividends will be paid with respect to Anchor stock represented by a
Ledger stock certificate until that Ledger stock certificate is surrendered for
exchange. In addition to cash in lieu of any fractional shares and either a
certificate representing Anchor stock or cash, the holder of a surrendered
Ledger stock certificate will receive (1) the amount of any dividends or other
distributions payable with respect to the shares represented by the Anchor stock
certificate with a record date after the completion of the merger and not
already paid, and (2) at the appropriate
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payment date, the amount of any dividends or other distributions with a record
date after the completion of the merger but prior to surrender and a payment
date after surrender. In each case, taxes will be withheld if required.
OTHER
After the completion of the merger, no shares of Ledger stock that were
outstanding immediately prior to the completion of the merger will be
transferred on Ledger's transfer books.
Any Anchor stock certificates issued in the merger and any dividends or
distributions deposited by Anchor with the Exchange Agent that remain unclaimed
by the former Ledger shareholders two years after the completion of the merger
will be returned to Anchor. Any former Ledger shareholders who have not complied
with the exchange procedures within two years after completion of the merger may
look only to Anchor for payment of Anchor stock, cash, and any unpaid dividends
and distributions on Anchor stock. Ledger, Anchor, the Exchange Agent or any
other person will not be liable to any former holder of shares of Ledger stock
for any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
No interest will be paid or accrued on any cash or on unpaid dividends and
distributions, if any, which will be paid upon surrender of Ledger stock
certificates.
If your Ledger stock certificate has been lost, stolen or destroyed, you
will only be entitled to obtain the Anchor stock and any other amounts to which
you may be entitled by providing an affidavit and posting a bond in an amount
sufficient to protect Anchor against claims related to your lost Ledger stock
certificate. See the question entitled "WHAT IF I CANNOT FIND MY STOCK
CERTIFICATE(S)?" on page 3.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
DIRECTORS
ANCHOR BOARD. Anchor's board of directors currently has eight members,
including the chairman, Mr. Douglas J. Timmerman. The eight current directors
are expected to remain on the board following the completion of the merger. The
board is currently divided into three classes, with two directors serving terms
expiring in July 2002, three directors serving terms expiring in July 2003 and
three directors serving terms expiring in July 2004. For biographical
information regarding Anchor's current directors, see Anchor's 2001 Annual
Report on Form 10-K which is incorporated into this document by reference. See
"WHERE YOU CAN FIND MORE INFORMATION" on page 92 to find out how to locate
documents incorporated by reference.
The merger agreement provides that, following the merger, Anchor will take
necessary actions to cause James D. Smessaert, who currently serves on Ledger's
board of directors, to be appointed to serve on Anchor's board for a term which
ends at the time Anchor's annual shareholders' meeting to be held in July 2002,
and to nominate Mr. Smessaert for election at its 2002 annual shareholders'
meeting to a three-year term expiring in 2005. See "THE MERGER
AGREEMENT -- Governance" on page 39. If, prior to the completion of the merger,
either of these individuals declines or is unable to serve as a director, Anchor
will be required to designate another individual who currently serves on
Ledger's board to fill such vacancy.
For biographical information with respect to Mr. Smessaert, see "MATTER 2.
ELECTION OF DIRECTORS" on page 74.
OFFICERS
Following the completion of the merger, Douglas J. Timmerman will continue
as Chairman, President and Chief Executive Officer of Anchor and AnchorBank, and
the other executive officers of Anchor and AnchorBank are expected to remain in
their current positions. For biographical information and information regarding
the compensation of Anchor's current executive officers, see Anchor's 2001
Annual Report on Form 10-K which is incorporated into this document by
reference. See "WHERE YOU CAN FIND MORE INFORMATION" on page 92 for information
on how to find documents incorporated by reference.
47
53
OPERATIONS
Following the merger, Anchor's corporate headquarters will remain in its
current executive offices located at 25 West Main Street, Madison, Wisconsin
53703. Following the bank merger, Ledger Bank's main office and all of its
current branch offices will be operated as branch offices of AnchorBank.
Following the bank merger, AnchorBank will consolidate certain functions
including external and internal data processing, retail and lending support, and
other functions, and will operate under the name "AnchorBank, fsb."
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The unaudited pro forma condensed combined financial statements are based
on the historical consolidated financial statements of Anchor and Ledger and
give effect to the merger accounted for under the purchase method of accounting.
The unaudited pro forma combined financial information and the related
notes reflect the application of the purchase method of accounting. Under this
method of accounting, the assets and liabilities of Ledger are adjusted to
reflect the fair value of the assets and liabilities as of the purchase date and
the resulting fair value adjustments become adjustments to their carrying value.
The amount of the purchase price which exceeds the fair value of the assets and
liabilities acquired and identifiable intangibles is recorded as goodwill and
will be reviewed for impairment in future years.
We are presenting two alternative sets of pro forma data, one of which
assumes that none of the former Ledger shareholders will elect to receive cash
instead of Anchor stock in exchange for their Ledger stock, and the other of
which assumes that effective cash elections will be received for 20% of the
outstanding Ledger shares, which is approximately equal to the maximum number
(20.1%) possible under the merger agreement (see "EXCHANGE PROCEDURES" on page
44).
The pro forma information includes:
-pro forma balance sheets at June 30, 2001, which combine Anchor's unaudited
balance sheet at June 30, 2001 with Ledger's audited balance sheet at June 30,
2001; and
-pro forma income statements for the most recent fiscal year and for the quarter
ended June 30, 2001. The pro forma income statements for the most recent fiscal
year combine historical results of operations of Anchor for the fiscal year
ended March 31, 2001 with historical results of operations of Ledger for the
fiscal year ended June 30, 2001. The pro forma statements of operations for the
quarter ended June 30, 2001 combine Anchor's unaudited results of operations
for the quarter ended June 30, 2001 with Ledger's unaudited results of
operations for the quarter ended June 30, 2001 (Ledger's results of operations
for the quarter ended June 30, 2001 are also included in Ledger's audited
historical financial information for the year ended June 30, 2001).
The unaudited pro forma condensed combined balance sheet assumes that the
merger was completed on June 30, 2001. The unaudited pro forma condensed
combined statements of operations assume that the merger was completed on April
1, 2000. The unaudited pro forma adjustments described in the accompanying notes
are based upon preliminary estimates and assumptions that the managements of
Anchor and Ledger believe are reasonable. Actual adjustments may differ from
those reflected in the unaudited pro forma condensed combined financial
statements.
The unaudited pro forma financial statements are not necessarily indicative
of the actual or future financial position or results of operations that would
have or will occur upon consummation of the merger, and should be read in
conjunction with the audited and unaudited historical consolidated financial
statements, including the notes thereto, of Anchor and Ledger incorporated by
reference. See "WHERE YOU CAN FIND MORE INFORMATION" on page 92.
48
54
ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2001
(UNAUDITED)
ASSUMES THAT NONE OF THE LEDGER STOCK IS CONVERTED TO CASH
(AND ALL (100%) OF THE LEDGER STOCK IS CONVERTED TO ANCHOR STOCK) IN THE MERGER
<Table>
<Caption>
COMBINED
ANCHOR LEDGER PRO FORMA COMPANY
HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS PRO FORMA
------------- ------------- ----------- ----------
(DOLLARS IN THOUSANDS)
ASSETS:
Cash and cash equivalents.................... $ 118,069 $ 22,926 $ -- $ 140,995
Investment securities available for sale..... 55,074 42,007 (855) 96,226
Investment securities held to maturity....... 54,109 455 -- 54,564
Mortgage-related securities available for
sale...................................... 141,096 50,972 -- 192,068
Mortgage-related securities held to
maturity.................................. 191,039 10,619 89 201,747
Loans receivable, net:
Held for sale............................. 39,206 4,357 48 43,611
Held for investment....................... 2,430,195 352,672 3,879 2,786,746
Foreclosed properties and repossessed
assets.................................... 342 1,619 -- 1,961
Real estate held for development and sale.... 47,127 -- -- 47,127
Office properties and equipment.............. 25,563 5,920 -- 31,483
Core deposit intangible...................... -- -- 3,000 3,000
Goodwill..................................... -- -- 6,511 6,511
Other assets................................. 78,408 15,373 -- 93,781
---------- -------- -------- ----------
Total assets.............................. $3,180,228 $506,920 $ 12,672 $3,699,820
========== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits..................................... $2,202,577 $319,812 $ 2,389 $2,524,778
Borrowings................................... 698,966 141,108 (790) 839,284
Merger-related charges....................... -- -- 8,035 8,035
Advance payments by borrowers for taxes and
insurance................................. 13,215 3,938 -- 17,153
Other liabilities............................ 39,731 5,854 (1,540) 44,045
---------- -------- -------- ----------
Total liabilities......................... 2,954,489 470,712 8,094 3,433,295
---------- -------- -------- ----------
Common stock................................. 2,536 3,162 (3,162) 2,536
Additional paid-in capital................... 56,571 10,227 (7,784) 59,014
Retained earnings............................ 203,683 30,410 (30,410) 203,683
Less: Treasury stock......................... (39,233) (7,225) 45,568 (890)
Common stock purchased by benefit plans...... (340) (291) 291 (340)
Accumulated other comprehensive income
(loss), net of tax........................ 2,522 (75) 75 2,522
---------- -------- -------- ----------
Total stockholders' equity................... 225,739 36,208 4,578 266,525
---------- -------- -------- ----------
Total liabilities and stockholders'
equity.................................. $3,180,228 $506,920 $ 12,672 $3,699,820
========== ======== ======== ==========
</Table>
---------------
(1)At June 30, 2001 (unaudited).
(2)At June 30, 2001 (audited).
See "-- NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL DATA (UNAUDITED)" on
page 53.
49
55
ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2001
(UNAUDITED)
ASSUMES THAT 20.0% OF THE LEDGER STOCK IS CONVERTED TO CASH
(AND 80.0% OF THE LEDGER STOCK IS CONVERTED TO ANCHOR STOCK) IN THE MERGER
<Table>
<Caption>
COMBINED
ANCHOR LEDGER- PRO FORMA COMPANY
HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS PRO FORMA
------------- ------------- ----------- ----------
(DOLLARS IN THOUSANDS)
ASSETS:
Cash and cash equivalents................... $ 118,069 $ 22,926 $(7,635) $ 133,360
Investment securities available for sale.... 55,074 42,007 (855) 96,226
Investment securities held to maturity...... 54,109 455 -- 54,564
Mortgage-related securities available for
sale..................................... 141,096 50,972 -- 192,068
Mortgage-related securities held to
maturity................................. 191,039 10,619 89 201,747
Loans receivable, net:
Held for sale............................ 39,206 4,357 48 43,611
Held for investment...................... 2,430,195 352,672 3,879 2,786,746
Foreclosed properties and repossessed
assets................................... 342 1,619 -- 1,961
Real estate held for development and sale... 47,127 -- -- 47,127
Office properties and equipment............. 25,563 5,920 -- 31,483
Core deposit intangible..................... -- -- 3,000 3,000
Goodwill.................................... -- -- 6,511 6,511
Other assets................................ 78,408 15,373 -- 93,781
---------- -------- ------- ----------
Total assets............................. $3,180,228 $506,920 $ 5,037 $3,692,185
========== ======== ======= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits.................................... $2,202,577 $319,812 $ 2,389 $2,524,778
Borrowings.................................. 698,966 141,108 (790) 839,284
Merger-related charges...................... -- -- 8,035 8,035
Advance payments by borrowers for taxes and
insurance................................ 13,215 3,938 -- 17,153
Other liabilities........................... 39,731 5,854 (1,540) 44,045
---------- -------- ------- ----------
Total liabilities........................ 2,954,489 470,712 8,094 3,433,295
---------- -------- ------- ----------
Common stock................................ 2,536 3,162 (3,162) 2,536
Additional paid-in capital.................. 56,571 10,227 (8,162) 58,636
Retained earnings........................... 203,683 30,410 (30,410) 203,683
Less: Treasury stock........................ (39,233) (7,225) 38,311 (8,147)
Common stock purchased by benefit plans..... (340) (291) 291 (340)
Accumulated other comprehensive income
(loss), net of tax....................... 2,522 (75) 75 2,522
---------- -------- ------- ----------
Total stockholders' equity.................. 225,739 36,208 (3,057) 258,890
---------- -------- ------- ----------
Total liabilities and stockholders'
equity................................. $3,180,228 $506,920 $ 5,037 $3,692,185
========== ======== ======= ==========
</Table>
---------------
(1) At June 30, 2001 (unaudited).
(2)At June 30, 2001 (audited).
See "-- NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL DATA (UNAUDITED)" on
page 53.
50
56
ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2001
(UNAUDITED)
<Table>
<Caption>
COMBINED
ANCHOR LEDGER PRO FORMA COMPANY
HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS PRO FORMA
------------- -------------- ----------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER-SHARE DATA)
Interest income............................... $56,724 $9,409 $(211) $65,922
Interest expense.............................. 35,501 6,386 (70) 41,817
---------- --------- -------- ----------
Net interest income........................... 21,223 3,023 (141) 24,105
Provision for loan losses..................... 210 100 -- 310
---------- --------- -------- ----------
Net interest income after provision for loan
losses...................................... 21,013 2,923 -- 23,795
Non-interest income........................... 5,019 726 -- 5,745
Non-interest expenses......................... 13,696 2,850 107 16,653
---------- --------- -------- ----------
Income before income taxes.................... 12,336 799 (248) 12,887
Income taxes.................................. 4,425 294 (87) 4,632
---------- --------- -------- ----------
Net income.................................... $ 7,911 $ 505 $(161) $ 8,255
========== ========= ======== ==========
ASSUMES THAT NONE OF THE LEDGER STOCK IS CONVERTED TO CASH (AND ALL (100%) OF THE LEDGER STOCK IS CONVERTED TO
ANCHOR STOCK) IN THE MERGER
Earnings per share:
Basic....................................... $0.36 $0.21 $0.33
Diluted..................................... 0.35 0.20 0.33
Average shares outstanding:
Basic....................................... 22,184,124 2,355,429 137,533 24,677,086
Diluted..................................... 22,721,774 2,435,910 145,581 25,303,265
ASSUMES THAT 20.0% OF THE LEDGER STOCK IS CONVERTED TO CASH (AND 80.0% OF THE LEDGER STOCK IS CONVERTED TO
ANCHOR STOCK) IN THE MERGER
Earnings per share:
Basic....................................... $0.36 $0.21 $0.34
Diluted..................................... 0.35 0.20 0.33
Average shares outstanding:
Basic....................................... 22,184,124 2,355,429 (361,059) 24,178,494
Diluted..................................... 22,721,774 2,435,910 (370,717) 24,786,967
</Table>
See "-- NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL DATA (UNAUDITED)" on
page 53.
51
57
ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS FOR THE MOST RECENT FISCAL YEAR
(UNAUDITED)
<Table>
<Caption>
COMBINED
ANCHOR LEDGER PRO FORMA COMPANY
HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS PRO FORMA
------------- -------------- ----------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER-SHARE DATA)
Total interest income......................... $228,647 $39,260 $(843) $267,064
Total interest expense........................ 148,096 27,674 (281) 175,489
---------- --------- -------- ----------
Net interest income........................... 80,551 11,586 (562) 91,575
Provision for loan losses..................... 945 430 -- 1,375
---------- --------- -------- ----------
Net interest income after provision for loan
losses...................................... 79,606 11,156 (562) 90,200
Total non-interest income..................... 13,503 2,110 -- 15,613
Total non-interest expenses................... 51,450 9,783 428 61,661
---------- --------- -------- ----------
Income before income taxes.................... 41,659 3,483 (990) 44,152
Income taxes.................................. 14,682 1,209 (347) 15,544
---------- --------- -------- ----------
Net income.................................... $ 26,977 $ 2,274 $(643) $ 28,608
========== ========= ======== ==========
ASSUMES THAT NONE OF THE LEDGER STOCK IS CONVERTED TO CASH (AND ALL (100%) OF THE LEDGER STOCK IS CONVERTED TO
ANCHOR STOCK) IN THE MERGER
Earnings per share:
Basic....................................... $1.19 $0.95 $1.14
Diluted..................................... 1.16 0.92 1.11
Average shares outstanding:
Basic....................................... 22,646,701 2,395,823 141,572 25,184,096
Diluted..................................... 23,207,833 2,471,305 149,121 25,828,259
ASSUMES THAT 20.0% OF THE LEDGER STOCK IS CONVERTED TO CASH (AND 80.0% OF THE LEDGER STOCK IS CONVERTED TO
ANCHOR STOCK) IN THE MERGER
Earnings per share:
Basic....................................... $1.19 $0.95 $1.16
Diluted..................................... 1.16 0.92 1.13
Average shares outstanding:
Basic....................................... 22,646,701 2,395,823 (365,907) 24,676,617
Diluted..................................... 23,207,833 2,471,305 (374,965) 25,304,173
</Table>
---------------
(1)Fiscal year ended March 31, 2001.
(2)Fiscal year ended June 30, 2001.
See -- "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL DATA (UNAUDITED)" on
page 53.
52
58
ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The unaudited Pro Forma Condensed Combined Financial Data has been prepared
assuming the merger will be accounted for under the purchase method and is based
on the historical consolidated financial statements of Anchor and Ledger. Anchor
and Ledger are in the process of reviewing their respective accounting policies.
As a result of this review, it might be necessary to restate amounts in
financial statements of the combined company to conform to those accounting
policies that are most appropriate. Any such restatements are not expected to be
material.
NOTE 2 -- LEDGER MERGER-RELATED CHARGES
In connection with the merger, Ledger expects to incur pre-tax
merger-related charges of approximately $7,200,000. These charges are expected
to include $6,145,000 in change-of-control, severance and other employee-related
payments, $550,000 in investment banking, legal and accounting fees and $510,000
in direct merger-related data processing and other equipment charges. An accrual
for the merger-related charges and the related tax effect of $1,540,000 has been
reflected in the unaudited Pro Forma Condensed Combined Balance Sheet as of June
30, 2001. They are not expected to have a continuing impact on the operations of
the combined company and therefore are not included in the unaudited Pro Forma
Condensed Combined Statement of Operations.
NOTE 3 -- PRO FORMA CONDENSED COMBINED BALANCE SHEET ADJUSTMENTS
Under purchase accounting, Ledger's assets and liabilities and any
identifiable intangible assets are required to be adjusted to their estimated
fair values. The estimated fair value adjustments have been determined by Anchor
based upon available information. Anchor cannot be sure that such estimated
values represent the fair value that would ultimately be determined at the
acquisition date. The following are the pro forma adjustments made to reflect
Ledger's estimated fair values at June 30, 2001:
<Table>
<Caption>
ASSUMES THAT NONE ASSUMES THAT 20.0%
OF THE LEDGER STOCK OF THE LEDGER STOCK
IS CONVERTED TO CASH IS CONVERTED TO
IN THE MERGER CASH IN THE MERGER
-------------------- -------------------
PURCHASE PRICE OF LEDGER:
Market value of Anchor shares to be issued.............. $38,174 $30,539
Anchor stock options issued in exchange for Ledger stock
options.............................................. 2,612 2,612
Cash election........................................... -- 7,635
Costs of acquisition incurred by Anchor................. 835 835
89,100 shares of Ledger stock previously owned by
Anchor............................................... 855 855
------- -------
$42,476 $42,476
======= =======
Historical net assets of Ledger at June 30, 2001........ $36,208 $36,208
Accrual of Ledger merger related charges, net of tax
(Note 2)............................................. (5,660) (5,660)
Fair market value adjustments as of June 30, 2001:
Mortgage-related securities held to maturity......... 89 89
Loans receivable held for sale....................... 48 48
Loans receivable held for investment................. 3,879 3,879
Core deposit intangible.............................. 3,000 3,000
Deposits............................................. (2,389) (2,389)
Borrowings........................................... 790 790
Goodwill............................................. 6,511 6,511
------- -------
$42,476 $42,476
======= =======
</Table>
53
59
It is estimated that the amount of the fair market value adjustment for
premises and equipment will not be material.
NOTE 4 -- STOCKHOLDERS' EQUITY
In the merger, Ledger shareholders will receive 1.10 (common stock exchange
ratio) shares of Anchor stock for each outstanding share of Ledger stock. Cash
will be paid in lieu of fractional shares at the price per whole share in effect
on the day of closing. Based on share information as of June 30, 2001, Anchor
will issue approximately 2.6 million shares of Anchor stock, substantially out
of previously-acquired shares held by Anchor as "treasury stock," in exchange
for 2.4 million shares of outstanding Ledger common stock in the merger. This
includes the adjustment to cause Anchor stock to be equal to its $0.10 par
value. Pro forma retained earnings reflect an adjustment for estimated
merger-related charges as described in Note 2 above. Approximately 25.2 million
shares of Anchor stock will be outstanding for the combined company after the
merger.
NOTE 5 -- AVERAGE SHARES OUTSTANDING
The pro forma weighted average shares outstanding is based on the
historical Anchor weighted average shares outstanding plus the Ledger weighted
average shares outstanding less the 89,100 shares of Ledger previously owned by
Anchor multiplied by the common stock exchange ratio. This amount is adjusted
for shares expected to be converted to cash for the pro forma data that assumes
20.0% of Ledger stock is converted to cash in the merger.
NOTE 6 -- PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS
For purposes of determining the pro forma effect of the Ledger acquisition
on the statement of operations, the following pro forma adjustments have been
made as if the acquisition had occurred as of April 1, 2000:
<Table>
<Caption>
QUARTER ENDED FISCAL YEAR ENDED
JUNE 30, 2001 MARCH 31, 2001
------------- -----------------
Yield adjustment for interest income on mortgage-related
securities held to maturity............................... $ (5) $ (19)
Yield adjustment for interest income on loans receivable.... (206) (824)
Amortization of core deposit intangible..................... (107) (428)
Yield adjustment for interest expense on deposits........... 119 478
Yield adjustment for interest expense on borrowings......... (49) (197)
----- -----
(248) (990)
Tax benefits of pro forma adjustments....................... 87 347
----- -----
$(161) $(643)
===== =====
</Table>
In accordance with Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, goodwill will not be amortized but will be reviewed
annually, or more frequently if impairment indicators arise, for impairment.
54
60
ANCHOR STOCK AND COMPARATIVE RIGHTS OF SHAREHOLDERS
GENERAL
As a result of the merger, shareholders of Ledger will become shareholders
of Anchor and the rights of all former Ledger shareholders will be thereafter
governed by the Anchor articles of incorporation and bylaws and the WBCL. The
rights of Ledger shareholders are presently governed by the Ledger articles of
incorporation and bylaws and the WBCL.
ANCHOR STOCK
Anchor incorporates by reference the description of its capital stock
contained in the Prospectus included in its registration statement on Form S-1
filed with the SEC on March 19, 1992. See "WHERE YOU CAN FIND MORE INFORMATION"
on page 92 to find out how you can locate documents incorporated by reference in
this document.
COMPARISON OF RIGHTS
Upon the completion of the merger, Ledger shareholders will become
shareholders of Anchor. Both companies are Wisconsin corporations governed by
the WBCL, which provides various rights to shareholders. Anchor and Ledger
shareholders also are provided various rights pursuant to their respective
company's articles of incorporation and bylaws. Many of Anchor's and Ledger's
article and bylaw provisions are identical or substantially similar to each
other or to the WBCL. These include provisions relating to the following:
- the manner in which the size of the board of directors is determined and the
method of filling vacancies on the board of directors;
- the method of calling special shareholders' meetings;
- amendments to the articles of incorporation and bylaws;
- approval of transactions with interested shareholders;
- shareholder approval of mergers, acquisitions and various other transactions;
- the ability of shareholders to act by written consent; and
- the board of directors' ability to consider constituencies other than
shareholders (for example, employees and customers) when making decisions for
the company.
In some of these instances, the companies' articles or bylaws do not
contain any specific provisions, meaning that the WBCL applies to both companies
in the same manner.
Some rights of Ledger shareholders as holders of Anchor stock will be
different than they are as holders of Ledger stock. You are urged to read the
fuller comparison of your rights that is included below, which includes the
following important differences:
- although both Anchor and Ledger have shareholder rights plans (commonly known
as a "poison pill"), there are some differences between the two plans (see "--
Shareholder Rights Plan" below);
- the provisions for removing directors vary between the corporations; and
- Anchor does not require that directors be shareholders of Anchor or residents
of the State of Wisconsin. For more detailed information, see the table
beginning on page 58.
SHAREHOLDER RIGHTS PLAN
In 1997, Anchor adopted a shareholders' rights plan providing for stock
purchase rights to current and future owners of Anchor stock. Each share of
outstanding Anchor stock has one right attached to it, and each share of Anchor
stock issued in the merger will have one right attached to it. You will not
receive a separate certificate evidencing the attached rights you receive along
with your Anchor stock because, unless and until the rights become exercisable,
each Anchor stock certificate will also evidence an equal number of rights. A
share of Anchor stock and the attached right may not be traded separately unless
and until the rights become exercisable. The rights will expire on July 22,
2007, unless they are redeemed by Anchor before then.
In 1997, Ledger adopted a shareholders' rights plan providing for stock
purchase rights to current and future owners of Ledger stock. Each
55
61
share of outstanding Ledger stock has one right attached to it. Rights are
redeemable by Ledger at any time until they are exercisable at the exchange rate
of $.01 per right. The rights expire February 21, 2007 unless they are redeemed
by Ledger before then.
The rights plans were adopted to protect Anchor and Ledger shareholders by
providing a potential acquiror with a disincentive to engage in manipulative or
coercive tactics in attempting to acquire the companies and an incentive to
negotiate with their respective boards in good faith and offer the companies'
shareholders fair value for their interests. However, the rights plans have
antitakeover effects. The rights may cause substantial dilution to a person or
group that attempts to acquire the companies on terms not approved by their
boards of directors. Nevertheless, the rights should not interfere with any
merger or other business combination approved by the boards of directors,
because the rights may be redeemed by the companies at a nominal cost.
The Anchor rights plan, which is evidenced by a rights agreement between
Anchor and Firstar Bank, N.A., as rights agent, is lengthy and complex.
Similarly, the Ledger rights plan, which is evidenced by a rights agreement
between Ledger and Firstar Bank, N.A., as rights agent, is lengthy and complex.
We have summarized its important provisions (and commented on the differences
between Anchor's rights plan and Ledger's rights plan) below in question and
answer format. However, this summary is qualified in its entirety by reference
to the Anchor rights agreement, a copy of which is filed as an exhibit to
Anchor's registration statement for the rights on Form 8-A and the Ledger rights
agreement, a copy of which is filed as an exhibit to Ledger's registration
statement for the rights on Form 8-A. See "WHERE YOU CAN FIND MORE INFORMATION"
on page 92 for more information about the documents incorporated by reference in
this document. We have noted in this summary the important differences between
Anchor's and Ledger's shareholders' rights plans.
Q. WHAT DO THE RIGHTS ENTITLE ME TO?
A. Each right, when it becomes exercisable, entitles the holder to purchase
from Anchor 1/100th of a share of preferred stock at a price of $200.00,
subject to adjustment in the case of stock splits or dividends. However,
after the rights become exercisable, the rights may become rights to acquire
Anchor common (as opposed to preferred) stock (commonly known as a "flip-in"
provision) or the common stock of another company that acquires Anchor
(commonly known as a "flip-over" provision), as discussed in the next three
questions. Until a right is exercised, the right itself will not entitle the
holder thereof to any rights as a shareholder of Anchor, including, among
other things, the right to vote or to receive dividends.
LEDGER'S SHAREHOLDERS' RIGHTS PLAN IS IDENTICAL IN THIS RESPECT, EXCEPT THE
PRICE FOR 1/100TH OF A SHARE IS $100.00, SUBJECT TO SIMILAR ADJUSTMENTS.
Q. WHEN DO THE RIGHTS BECOME EXERCISABLE?
A. The rights will become exercisable if anyone acquires, or proposes to
acquire, 20% or more of the outstanding Anchor stock. Specifically, the
rights will become exercisable at the earlier of:
- ten business days after a public announcement that a person or group of
affiliated persons has acquired, or has obtained the right to acquire,
beneficial ownership of 20% or more of Anchor's outstanding stock; or
- 15 business days after the commencement of a tender offer or exchange
offer for 20% or more of Anchor's outstanding stock.
LEDGER'S SHAREHOLDERS' RIGHTS PLAN IS SIMILAR TO THE ABOVE, EXCEPT THE
LEDGER PLAN ALSO REQUIRES THAT THE BOARD OF DIRECTORS DETERMINE THAT THE
PERSON BUYING IS ADVERSE BEFORE THE RIGHTS BECOME EXERCISABLE.
Q. WHEN DO THE RIGHTS "FLIP IN" AND BECOME RIGHTS TO PURCHASE ANCHOR COMMON
STOCK?
A. After the rights become exercisable, the rights will be converted into
rights to purchase Anchor common (as opposed to preferred) stock if any of
the following occur:
- Anchor is the surviving corporation in a merger and its common stock is
not changed or exchanged;
- a person (other than Anchor or its affiliates) becomes the beneficial
owner of 25%
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or more of the then outstanding common stock;
- an acquiring person engages in one or more "self-dealing" transactions as
defined in the rights agreement; or
- an event occurs that results in an acquiring person's ownership interest
being increased by more than 1% (e.g., a reverse stock split).
When this happens, each holder of a right will be entitled to receive,
upon exercise, Anchor common stock (or, under some circumstances, cash,
property or other securities) having a value equal to two times the
exercise price of the right. Assuming the exercise price is not adjusted,
this would mean that each Anchor shareholder would, for each share of
Anchor stock he or she owns, have the right to pay Anchor $200 and
receive additional Anchor common stock with a market value of $400. If
Anchor stock were trading at $50 per share at the time, and a shareholder
owned 100 shares of Anchor stock, the shareholder would be able to pay
Anchor $20,000 ($200 X 100 rights) and receive 800 additional shares
($40,000 worth) of Anchor stock.
THE "FLIP-IN" PROVISION OF LEDGER'S SHAREHOLDERS' RIGHTS PLAN IS VERY
SIMILAR TO ANCHOR'S, EXCEPT LEDGER REQUIRES THAT THE BENEFICIAL OWNER
ACQUIRE AT LEAST 15% OF THE OUTSTANDING COMMON STOCK IN ORDER TO CONVERT THE
RIGHT INTO A RIGHT TO PURCHASE STOCK.
Q. WHEN DO THE RIGHTS "FLIP OVER" AND BECOME RIGHTS TO PURCHASE ANOTHER
COMPANY'S COMMON STOCK?
A. After the rights become exercisable, the rights may be converted into rights
to purchase the common stock of another company if any of the following
occur:
- Anchor engages in a merger or other business combination transaction with
the other company in which Anchor is not the surviving corporation;
- Anchor engages in a merger or other business combination transaction with
the other company in which Anchor is the surviving corporation, but in
which its common stock is changed or exchanged; or
- 50% or more of Anchor's assets or earning power is sold or transferred to
the other company.
When this happens, each holder of a right will be entitled to receive,
upon exercise, the other company's common stock having a value equal to
two times the exercise price of the right. Assuming the exercise price is
not adjusted, this would mean that each Anchor shareholder would, for
each share of Anchor stock he or she owns, have the right to pay the
other company $200 and receive common stock of the other company with a
market value of $400.
LEDGER'S SHAREHOLDERS' RIGHTS PLAN IS ALMOST IDENTICAL TO ANCHOR'S IN THIS
RESPECT, EXCEPT LEDGER'S PLAN INCLUDES A SALE OR TRANSFER TO AN INTERESTED
PERSON TO ACTIVATE THE "FLIP-OVER" PROVISIONS OF THE PLAN.
Q. WILL THE OTHER COMPANY WHO ACQUIRES ANCHOR STOCK ALSO BE ENTITLED TO
EXERCISE ITS RIGHTS?
A. No. If any of the circumstances cause the rights to become rights to acquire
Anchor (or another company's) common stock (that is, if a "flip-in" or
"flip-over" event occurs), then all rights owned by the other company will
become null and void.
LEDGER'S SHAREHOLDERS' RIGHTS PLAN IS IDENTICAL TO ANCHOR'S IN THIS RESPECT.
Q. WOULD THE EXISTENCE OF THE RIGHTS HAVE ANY EFFECT IF THE ANCHOR BOARD
DETERMINES THAT THE ACQUISITION OF ANCHOR IS IN THE BEST INTERESTS OF ANCHOR
AND ITS SHAREHOLDERS?
A. No, because Anchor's board of directors may, within ten business days
following the public announcement of the transaction that causes the rights
to become exercisable, redeem the rights in whole, but not in part, at a
price of $0.01 per right, subject to adjustment to prevent dilution. After
that ten-day period, Anchor's board's ability to redeem the rights becomes
much more limited, although it would be reinstated if the person whose
actions caused the rights to become exercisable reduces its beneficial
ownership to 10% or
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less of the outstanding Anchor common stock.
LEDGER'S SHAREHOLDERS' RIGHTS PLAN IS VERY SIMILAR, BUT DOES NOT LIMIT THE
BOARD'S ABILITY TO REDEEM THE RIGHTS FOLLOWING THE TEN-DAY PERIOD.
Q. WHAT OTHER POWERS DOES THE BOARD HAVE WITH RESPECT TO THE RIGHTS?
A. Anchor's board may, at its option, at any time after the right to redeem the
rights has expired or terminated (with limited exceptions), exchange all or
part of the then outstanding and exercisable rights (other than those held
by the acquiring person) for common stock at a ratio of one share of common
stock per right, as adjusted; provided, however, that Anchor's board cannot
do so once a person becomes the owner of 50% or more of the outstanding
Anchor common stock. If the board authorizes an exchange, the rights will
immediately cease to be exercisable.
The board also has the right to amend the rights plan, subject to the
conditions set forth in the rights agreement.
LEDGER'S SHAREHOLDERS' RIGHTS PLAN IS IDENTICAL TO ANCHOR'S WITH REGARD TO
"OTHER" POWERS OF THE BOARD OF DIRECTORS.
SUMMARY OF APPLICABLE LAW AND THE PROVISIONS OF ANCHOR'S AND LEDGER'S RESPECTIVE
ARTICLES OF INCORPORATION AND BYLAWS
The following summary is not a complete statement of all differences
between rights of the holders of Anchor stock and Ledger stock. It sets forth
some important aspects of the WBCL and discusses differences between Anchor's
articles and bylaws and Ledger's articles and bylaws. The summary is qualified
in its entirety by reference to the full text of each document and the WBCL. For
information as to how those documents may be obtained, see "WHERE YOU CAN FIND
MORE INFORMATION" on page 92. Where the summary below indicates that there is
"no provision" of Anchor's or Ledger's articles or bylaws, the applicable
provision of the WBCL controls.
<Table>
<Caption>
SUBJECT WBCL: LEDGER: ANCHOR:
------- ----- ------- -------
CONTROL SHARE Unless otherwise Ledger elects the WBCL Anchor does not elect
VOTING RESTRICTIONS provided in the articles provision during the WBCL provision
of incorporation of a mergers. during mergers.
resident domestic
corporation, the voting
power of shares of a
resident domestic
corporation held by any
person, including shares
issuable upon conversion
of convertible
securities or upon
exercise of options or
warrants, in excess of
20% of the voting power
in the election of
directors shall be
limited to 10% of the
full voting power of
those shares.
</Table>
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<Table>
<Caption>
SUBJECT WBCL: LEDGER: ANCHOR:
------- ----- ------- -------
REMOVAL OF Shareholders may remove one Shareholders may remove any Shareholders may remove any
DIRECTORS or more directors with or director or the entire director from office only
without cause unless the board from office only for for cause and by an
articles of incorporation cause and by an affirmative affirmative vote of
or the bylaws provide that vote of 80% of the voting two-thirds of the voting
directors may be removed power of the holders of power of the holders of
only for cause. Ledger common stock and Anchor common stock
Class A Preferred Stock entitled to elect
entitled to elect directors.
directors, or by a majority
vote of the total number of
directors.
ADVANCE NOTICE No provision. Ledger's bylaws contain an Anchor's bylaws contain an
PROVISIONS FOR "advance notice" provision advance notice provision
SHAREHOLDER that states that, for a that states that for a
NOMINATIONS AND shareholder of record to shareholder to properly
SHAREHOLDER properly introduce business bring business before an
PROPOSALS to be transacted at the annual meeting Anchor's
annual meeting or a meeting secretary must have
of shareholders or to received by mail or
nominate persons for delivery a notice from the
election to the Ledger shareholder no later than
board, the shareholder must 60 days prior to the
give notice to Ledger's anniversary date of the
secretary within ten days mailing of proxy materials
following the date on which by Anchor for the
the notice of annual immediately preceding
meeting is mailed to annual meeting of the
shareholders. The bylaws shareholders. The bylaws
specify what information specify what information
such a notice must contain, such a notice must contain.
how it is to be presented
to Ledger, and what
additional information the
shareholder must provide in
particular circumstances.
QUALIFICATION OF The articles of No person shall be eligible Directors need not be
DIRECTORS incorporation or bylaws may for election, re-election, shareholders or residents
prescribe qualifications appointment or of the State of Wisconsin.
for directors. A director reappointment as a director
need not be a resident of who owns less than 100
this state or a shareholder shares of common stock in
of the corporation unless Ledger, has been convicted
the articles of of a felony, is not
incorporation or bylaws so eligible to serve on the
prescribe. board (for whatever
reason), or is legally
declared incapacitated by
reason of mental weakness.
</Table>
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<Table>
<Caption>
SUBJECT WBCL: LEDGER: ANCHOR:
------- ----- ------- -------
LIABILITY OF Unless a corporation's A director shall not be A director or officer shall
DIRECTORS articles of incorporation personally liable for not be personally liable
limit the immunity of a monetary damages for any for monetary damages for
director, a director may action taken, or any any action taken, or any
not be held liable for a failure to take any action, failure to take any action,
breach of, or failure to as a director except if the as a director or officer
perform, any duty resulting action or failure to except to the extent that a
solely from his or her perform was a willful director's or officer's
status as a director, failure to deal fairly with liability for monetary
unless the director's Ledger in a matter in which damages may not be limited
breach or failure to the director has a material by law.
perform constitutes: (a) a conflict of interest, or
willful failure to deal violates criminal law
fairly with the corporation (unless the director
or its shareholders in believed his or her conduct
connection with a matter in was lawful), or was a
which the director has a transaction in which the
material conflict of director received an
interest; (b) a violation improper personal benefit,
of criminal law, unless the or was willful misconduct.
director had reasonable
cause to believe that his
or her conduct was lawful;
(c) a transaction from
which the director derived
an improper personal
profit; or (d) willful
misconduct.
INDEMNIFICATION OF A corporation is required To the fullest extent To the fullest extent
DIRECTORS to indemnify a director or permitted or required by authorized by the WBCL,
officer in the defense of a the WBCL, Ledger will Anchor will indemnify and
proceeding for all indemnify a director or hold harmless a director or
reasonable expenses officer against all officer against all
incurred in the proceeding liabilities incurred by or liabilities and expenses
if the director or officer on behalf of such director incurred in connection with
was a party because he or or officer in connection a proceeding to which the
she is a director or with a proceeding in which director or officer has
officer of the corporation, the director or officer is become subject because he
unless the director or a party because he or she or she is a director or
officer was found to have is director or officer, officer of Anchor, unless
breached a duty to the unless the officer or the director or officer
corporation and to have director breached or failed breached or failed to
been guilty of actions a duty to Ledger. Ledger perform a duty he or she
which constitute (a) a will not indemnify a owes to Anchor which
willful failure to deal director or officer in constitutes one of the four
fairly with the corporation connection with a actions outlined above and
or its shareholders in proceeding which was specified in the WBCL.
connection with a matter in initiated by the such Anchor will not indemnify a
which the director has a director or officer unless director or officer in
material conflict of the proceeding was connection with a
interest; (b) a violation authorized by the board of proceeding which was
of criminal law, unless the directors. initiated by such director
director had reasonable or officer unless the
cause to believe that his proceeding was authorized
or her conduct was lawful; by the board of directors.
(c) a transaction from
which the director derived
an improper personal
profit; or (d) willful
misconduct. A corporation
is permitted to pay for or
reimburse the reasonable
expenses incurred by a
director or officer in
connection with a
proceeding to which he or
she is a party, as those
expenses are incurred.
</Table>
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REGULATION
Banking and financial services businesses such as Anchor and Ledger are
highly regulated. Anchor and Ledger and their banking subsidiaries are subject
to federal and state laws and regulations relating to all aspects of their
business, including, among others, capital requirements, lending practices,
disclosure requirements, limitations on dividends, liquidity requirements and
insurance of deposits requirements. In addition, Ledger is subject to the
examination and supervision of both state and federal regulatory authorities.
Anchor is primarily subject to review by federal regulatory authorities.
Below is a brief description of certain laws and regulations that apply to
Anchor and Ledger and their banking subsidiaries, AnchorBank and Ledger Bank.
The description of these laws and regulations, as well as the descriptions of
laws and regulations contained in other sections of this document, may not be
complete. You should refer to the actual laws and regulations for additional
information.
OVERVIEW
FEDERAL REGULATION. Anchor is a unitary savings and loan holding company
regulated at the federal level by the Office of Thrift Supervision (the "OTS").
Its banking subsidiary, AnchorBank, is a federally chartered savings institution
and subject to broad federal regulation and oversight extending to all aspects
of its operations. AnchorBank's primary federal regulators are the OTS and the
Federal Deposit Insurance Corporation ("FDIC").
Ledger is a unitary bank holding company regulated at the federal level by
the Board of Governors of the Federal Reserve System (the "FRB"). Ledger is also
a registered bank holding company under the Bank Holding Company Act of 1956, as
amended (the "BHC Act"). As such, Ledger is subject to examination, regulation
and periodic reporting under the BHC Act, as administered by the FRB.
Ledger's banking subsidiary, Ledger Bank, is a Wisconsin-chartered savings
bank that is also subject to broad federal regulation. Ledger Bank's primary
federal regulator is the FDIC.
The deposits of both AnchorBank and Ledger Bank are federally insured (up
to applicable limits) by the FDIC and they are members of the FDIC's Savings
Association Insurance Fund. AnchorBank and Ledger Bank are also subject to
limited regulation by the Federal Reserve Board and other federal regulatory
agencies. Anchor and Ledger are also subject to the Securities Exchange Act of
1934, as administered by the Securities and Exchange Commission.
STATE REGULATION. Because Ledger is an in-state savings bank holding
company and Ledger Bank is a Wisconsin-chartered institution, Ledger and Ledger
Bank are also regulated at the state level by the Wisconsin Department of
Financial Institutions-Division of Savings Institutions ("DFI-Savings"). Ledger
is also considered to be an in-state bank holding company for purposes of the
merger between Anchor and Ledger. Because AnchorBank is a federally chartered
savings institution, neither Anchor nor AnchorBank are currently regulated by
DFI-Savings. Since Ledger Bank will merge with and into AnchorBank as part of
the bank merger, Ledger's business will become subject to federal regulations
rather than DFI-Savings' regulation.
SIMILARITIES AND DIFFERENCES. The principal differences between the way in
which Ledger, Anchor and their banking subsidiaries are currently regulated
result from the fact that Anchor and AnchorBank are regulated at the federal
level while Ledger (and thereby Ledger Bank) is regulated, to certain degrees,
at both the federal and state levels. Also, as a bank holding company, Ledger
and Ledger Bank are subject to laws and regulations imposing restrictions on
activities, minimum capital requirements, lending and deposit restrictions and
numerous other requirements that are, in certain instances, different from those
that apply to Anchor and AnchorBank. Those differences are not material with
regard to the manner in which Ledger and Ledger Bank have conducted their
operations. Following the merger, these regulatory differences and distinctions
will disappear because Ledger Bank will merge with and into AnchorBank, which
will continue to be regulated at the federal level in the same manner as it is
now.
In this summary, where regulations apply in the same manner to both Anchor
and Ledger, we refer to them together as the "Holding Companies," and where
regulations apply in the same
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manner to both AnchorBank and Ledger Bank, we refer to them together as the
"Banks." In each case, where a regulatory requirement applies to both Banks, we
indicate whether the Banks individually met these requirements at June 30, 2001,
and whether AnchorBank would have met these requirements on a pro forma basis
giving effect to the bank merger as if it had occurred on March 31, 2001.
REGULATION OF THE HOLDING COMPANIES
FEDERAL. Anchor, as a "unitary savings and loan holding company" (meaning
that Anchor only owns one savings institution), is subject to regulatory
oversight by the OTS. Anchor must register and file reports with, and is subject
to regulation and examination by, the OTS. In addition, the OTS has enforcement
authority over Anchor and its non-savings institution subsidiaries, which
permits the OTS to restrict or prohibit activities that it determines are a
serious risk to a subsidiary savings institutions. The OTS regulations primarily
relate to the safety and soundness of the institutions under jurisdiction of the
OTS rather than the protection of such institutions' shareholders. Unitary
savings and loan holding companies generally are not subject to activity
restrictions.
Anchor will continue to be a unitary savings and loan holding company
following the merger; it will not become a "multiple savings and loan holding
company" (which holds more than one savings institution subsidiary) as a result
of the merger because it will cause Ledger Bank to merge into AnchorBank
immediately following the merger, and Anchor will continue to own only one
savings institution subsidiary. Although Anchor has no present plans or
intention to do so, it could become a multiple savings and loan holding company
in the future.
If Anchor were to become a multiple savings and loan holding company, it
would be subject to certain activity restrictions, unless its savings
institution subsidiaries comply with the qualified thrift lender test (the "QTL
Test"), which is described in the section on page 65 entitled
"-- Compliance -- Qualified Thrift Lender Requirement." If a savings institution
subsidiary of a multiple savings and loan holding company fails the QTL test,
the holding company may not continue any business activity without the approval
of the OTS, except for activities approved for multiple savings and loan holding
companies or their subsidiaries. In addition, within one year of such failure,
the holding company would become subject to bank holding company regulations
which are more restrictive than the savings and loan holding company
regulations.
Ledger is a unitary bank holding company (meaning that Ledger only owns one
savings institution), subject to regulatory oversight by the FRB, as well as
DFI-Savings and the SEC. As a registered bank holding company under the BHC Act,
Ledger is subject to examination, regulation and periodic reporting under the
BHC Act, as administered by the FRB. The FRB has adopted Capital Adequacy
Guidelines for bank holding companies (on a consolidated basis) that are
substantially similar to those established by the FDIC for Ledger Bank. Failure
to meet those Capital Adequacy Requirements can result in supervisory or
enforcement action brought by the FRB.
Anchor must obtain approval from the OTS before acquiring control of more
than 5% of the voting shares of any other SAIF-insured institution or savings
and loan holding company. The OTS prohibits such acquisitions if they result in
a multiple savings and loan holding company controlling savings associations in
more than one state. However, the OTS permits interstate acquisitions based on
specific state statutory authorization in the state of the target institution or
in a supervisory acquisition of a failing savings institution.
With respect to the merger between Anchor and Ledger and their respective
subsidiary savings institutions, OTS will be the primary banking agency
overseeing the transaction and the filing of the necessary federal regulatory
application. Although the regulations under the BHC Act also govern the
acquisition of registered bank holding companies, such as Ledger, and their
subsidiary financial institutions, a waiver of certain approvals and regulatory
filings will be requested from the FRB in this instance, as Anchor does not
intend to operate as a registered bank holding company or for Ledger Bank to
continue as a separate subsidiary of Anchor following the consummation of the
transactions.
STATE. In addition to the FRB bank holding company regulations, a bank
holding company
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that owns or controls, directly or indirectly, more than 25% of the voting
securities of a state-chartered savings bank also is subject to regulation as a
savings bank holding company by DFI-Savings. DFI-Savings has not yet issued
proposed regulations governing savings bank holding companies. DFI-Savings has
the authority to issue an order prohibiting those activities of a savings bank
holding company of a state-chartered banking subsidiary, such as Ledger, which
are fraudulent or illegal, or which endanger the safety of the savings bank or
are contrary to applicable state law. DFI-Savings also may direct the operations
of the savings bank and its holding company until a corrective order is complied
with, and it may prohibit the savings bank from declaring dividends to its
holding company during such period.
Anchor will need to seek the approval of DFI-Savings and the Wisconsin
Department of Financial Institutions-Division of Banking ("DFI-Banking") with
respect to its merger with Ledger and the merger of Ledger Bank into AnchorBank.
Following consummation of the transactions, DFI-Savings and DFI-Banking will not
have any authority over Anchor or AnchorBank.
REGULATION OF THE BANKS
GENERAL
Primary Regulatory Authorities. The OTS has extensive authority over the
operations of all insured savings associations, including AnchorBank. AnchorBank
is required to file periodic reports with the OTS. Because Ledger Bank is a
Wisconsin-chartered stock savings bank, DFI-Savings regulates and supervises
Ledger Bank at the state level. Ledger Bank must file periodic reports with
DFI-Savings. Both AnchorBank and Ledger Bank have their deposit accounts insured
up to applicable limits by the FDIC.
Examinations. The OTS and the FDIC periodically conduct examinations of
AnchorBank. The FDIC and DFI-Savings periodically conduct examinations of Ledger
Bank. During these examinations, the various federal and state examiners may
require the Banks to provide for higher general or specific loan loss allowances
or to write down the value of certain assets. The OTS conducted its last regular
examination of AnchorBank on August 28, 2000. The FDIC conducted its last
regular examination of AnchorBank in November 1992, and of Ledger Bank in April
2001. DFI-Savings last examined Ledger Bank in April 2001.
Enforcement Authority. The OTS, FRB and DFI-Savings also have extensive
enforcement authority over savings institutions like AnchorBank and Ledger Bank
and their respective holding companies and affiliated parties such as directors,
officers, employees, agents and certain other persons providing services to the
banks or the companies. This enforcement authority includes, among other things,
the ability to assess civil money penalties, to issue cease-and-desist or
removal orders and to initiate injunctive actions. The regulations may initiate
these enforcement actions if the Banks or the Holding Companies violate laws or
regulations or engage in unsafe or unsound practices, or if the Banks or the
Holding Companies file misleading or untimely reports with the regulators.
Except under certain circumstances, the OTS requires public disclosure of final
enforcement actions. DFI-Savings has similar enforcement authority over Ledger
Bank.
Conflicts of Interest. The OTS has adopted a conflicts of interest
regulation based upon common law principles of "duty of care" and "duty of
loyalty." The regulation provides that directors, officers, employees, persons
having the power to control the management or policies of savings associations,
and other persons who owe fiduciary duties to savings associations, cannot
advance their own personal or business interests, or those of others, at the
expense of the associations. The OTS also clarified that "persons having the
power to control the management or policies of savings associations" include
holding companies such as Anchor. The OTS corporate opportunity regulations
impose a standard similar to common law standards governing usurpation of
corporate opportunity.
Standards for Safety and Soundness. Federal bank regulators adopted
Interagency Guidelines establishing standards for safety and soundness (the
"Guidelines"). All insured depository institutions are required to prepare
safety and soundness compliance plans and operational and managerial standards
relating to internal controls, information systems and audit systems; loan
documentation; credit underwriting; interest rate risk exposure; asset growth;
and compensation fees and benefits. The compensation standards prohibit
employment contracts, compensation or benefit
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arrangements, stock option plans, fee arrangements or other compensatory
arrangements that would provide excessive compensation, fees or benefits or
could lead to material financial loss. The agencies may request a compliance
plan from any institution which fails to meet one or more of the standards.
Similar laws and regulations have been enacted at the state level with respect
to the operations of Ledger Bank. The Banks are currently in compliance with the
Guidelines applicable to each of them and Anchor believes that AnchorBank will
be in compliance with these Guidelines following the merger.
COMPLIANCE
CAPITAL AND NET WORTH REQUIREMENTS. Federally insured savings
institutions, such as AnchorBank and Ledger Bank, must maintain certain minimum
levels of regulatory capital. For AnchorBank, the OTS has established three
different capital standards:
- a 1.5% "tangible capital" requirement;
- a 3% "core capital" requirement; and
- an 8% "risk-based capital" requirement.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") mandated that these capital requirements generally must be as
stringent as the comparable capital requirements for national banks. Federal
regulatory authorities may impose capital requirements on individual
institutions on a case-by-case basis in excess of the established standards.
Savings associations, such as AnchorBank, must meet all of the standards in
order to comply with the capital requirements.
TANGIBLE CAPITAL. An institution's "tangible capital" must comprise at
least 1.5% of adjusted total assets (as defined by regulation). Tangible capital
generally includes common stockholders' equity and retained earnings, and
certain noncumulative perpetual preferred stock and related surplus and minority
interest in the equity accounts of fully consolidated subsidiaries less equity
and debt investments in subsidiaries which are not "includable" subsidiaries as
defined in the regulation. In addition, all intangible assets, other than a
limited amount of servicing rights, must be deducted from tangible capital.
CORE CAPITAL. An institution's "core capital" must equal at least 3% of
adjusted total assets. Core capital generally consists of tangible capital plus
up to 25% of certain other intangibles (subject to certain separate salability
and market valuation limitations). In addition, the OTS requires an institution
to maintain a minimum ratio of core capital to total risk-weighted assets of 4%.
An institution calculates its risk-weighted assets by multiplying all assets
(including certain off-balance sheet items) times a risk weight determined by
the OTS based on the risks the OTS believes are inherent in the assets.
RISK-BASED CAPITAL. An institution's "risk-based capital" must equal at
least 8% of risk-weighted assets. Risk-based capital equals the sum of core
capital plus supplementary capital (which includes, among other items, certain
permanent and maturing capital instruments that do not qualify as core capital
and general loan and lease loss allowances up to 1.25% of risk-weighted assets)
less certain deductions. The amount of supplementary capital that may be used to
satisfy the risk-based requirement is limited to the extent of core capital.
OTS regulations incorporate an interest rate risk ("IRR") component into
the "risk-based capital" requirement. Under the regulations, an institution with
a greater than normal level of IRR must deduct its IRR component from total
capital for purposes of calculating its risk-based capital. As a result, the
institution must maintain additional capital in order to comply with the risk-
based capital requirement. An institution with a "greater than normal IRR" is an
institution that would suffer a loss of net portfolio value exceeding 2% of the
estimated market value of its assets in the event of a 200 basis point increase
or decrease (with certain minor exceptions) in interest rates. The IRR component
is calculated, on a quarterly basis, as one-half of the difference between an
institution's measured IRR and 2%, multiplied by the market value of its assets.
FDIC-insured institutions, such as Ledger Bank, are required to follow
certain Capital Adequacy Guidelines that prescribe minimum levels of capital and
require that the institutions meet certain risk-based capital requirements.
Ledger Bank is required to meet the following
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capital standards to remain adequately capitalized and not be subject to
corrective action:
- "Tier 1 Capital" in an amount not less than 3% of total assets;
- "Tier 1 Capital" in an amount not less than 4% of risk-weighted assets; and
- "Total Capital" in an amount not less than 8% of risk-weighted assets.
FDIC-insured institutions in the strongest financial and managerial
condition (with a composite rating of "1" under the Uniform Financial
Institutions Rating System established by the Federal Financial Institutions
Examination Counsel) are also required to maintain "Tier 1 Capital" equal to at
least 3% of total assets (the "Leverage Capital" requirement). "Tier 1 Capital"
is defined to include the sum of common shareholders' equity, noncumulative
perpetual preferred stock (including any related surplus), and minority
interests in consolidated subsidiaries, minus all intangible assets (with
certain exceptions), identified losses, and qualifying investments in securities
subsidiaries. An institution that fails to meet the minimum leverage limit
requirement must file a capital restoration plan with the appropriate FDIC
regional director. At June 30, 2001, Ledger Bank's ratio of Tier 1 Capital to
total average assets was 7.39%, or 4.39 percentage points in excess of the
minimum Leverage Capital requirement. Ledger Bank's Tier 1 capital to
risk-weighted assets was 10.62%, or 6.62 percentage points in excess of the FDIC
requirement, and its total capital to risk-weighted assets was 11.58% or 3.58
percentage points in excess of the FDIC requirement.
OTS limits the amount of net deferred tax assets that may be included in
regulatory capital. (Net deferred tax assets represent deferred tax assets, less
any valuation allowances, in excess of deferred tax liabilities.) Whether or not
the limit applies depends upon the institution's sources of taxable income
available to realize deferred tax assets. An institution's deferred taxes are
not limited if the institution realizes deferred tax assets from taxes paid in
prior carryback years and future reversals of existing taxable temporary
differences. If an institution realizes deferred tax assets based on an
institution's future taxable income (exclusive of reversing temporary
differences and carryforwards) or its tax-planning strategies, such deferred tax
assets are limited for regulatory capital purposes to the lesser of (1) the
amount that can be realized within one year of the quarter-end report date or
(2) 10% of core capital. As of June 30, 2001, the foregoing considerations did
not affect the calculation of AnchorBank's or Ledger Bank's regulatory capital.
Under current OTS policy, savings associations must value securities
available for sale at amortized cost for regulatory purposes. This means that in
computing regulatory capital, savings associations must add back any unrealized
losses and deduct any unrealized gains, net of income taxes, on securities
reported as a separate component to stockholders' equity under Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities."
Wisconsin-chartered savings banks, such as Ledger Bank, must maintain a net
worth ratio of at least 6%. "Net worth ratio" means the association's assets
minus liabilities, plus unallocated general loan loss allowances, divided by the
institution's assets. If DFI-Savings determines that the nature of an
institution's operations creates a greater risk, then it may require the
institution to maintain a higher level of net worth to insure stability. If a
savings bank fails to comply with the net worth requirement, DFI-Savings may
impose operating restrictions, including a prohibition on the declaration of
dividends, to restore the institution's net worth to the required level. As of
June 30, 2001, Ledger Bank had a net worth ratio of 7.89% which was 1.89% in
excess of the required amount.
As of June 30, 2001, the Banks (and AnchorBank, on a pro forma basis) met
all regulatory capital and net worth requirements applicable to them.
QUALIFIED THRIFT LENDER REQUIREMENT. All savings institutions, including
the Banks, must meet a certain lending requirement known as the qualified thrift
lender ("QTL") test to avoid certain restrictions on their operations. To comply
with the QTL test, a savings institution must maintain at least 65% of its
portfolio assets in qualified thrift investments on a monthly average basis in
nine out of every 12 months. Qualified thrift investments generally consist of
housing-related loans and investments and certain groups of assets, such as
consumer loans, to a limited extent, subject to certain restrictions. The term
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"portfolio assets" means the savings institution's total assets minus goodwill
and other intangible assets, the value of property used by the savings
institution to conduct its business, and liquid assets held by the savings
institution in an amount up to 20% of its total assets. As of June 30, 2001, the
Banks individually, and AnchorBank on a pro forma basis, were in compliance with
the QTL test.
If a savings institution fails to meet the QTL test, the institution must
either convert to a commercial bank charter (other than a savings bank charter)
or limit its future investments and activities (including branching and payments
of dividends) to those permitted for both savings associations and national
banks. Any such savings institution that does not convert to a bank charter will
be ineligible to receive further FHLB advances. In addition, beginning three
years after the loss of QTL status, the institution must repay all outstanding
FHLB advances and dispose of or discontinue any pre-existing investment or
activities not permitted for both savings institutions and national banks.
Further, within one year of the loss of QTL status, the holding company of a
savings institution that does not convert to a commercial bank charter must
register as a bank holding company and will be subject to all statutes
applicable to bank holding companies.
LIQUIDITY. In December 2000, legislation was enacted that removed the
provision that authorized the Director of the OTS to establish a liquidity
requirement of any amount within the range of 4% to 10% of a savings
association's average daily balance of net withdrawable deposits plus short-term
borrowings depending upon economic conditions and the deposit flows of member
institutions. In revising the OTS regulations to conform with the recent
legislation, the OTS removed the specific liquidity requirement, but adopted a
rule that requires each savings association and service corporation to maintain
sufficient liquidity to insure its safe and sound operation. At March 31, 2001,
AnchorBank believes that it was in compliance with these liquidity requirements.
AnchorBank's liquidity ratio was 3.37% at June 30, 2001.
Savings banks are required to maintain an average daily balance of liquid
assets of not less than 8% of its average daily balance of net withdrawable
accounts plus its short-term borrowings. Also required is a "primary liquid
assets" ratio of at least 4% of average daily withdrawable accounts and
short-term borrowings. Primary liquid assets are defined as primarily short-term
liquid assets and U.S. Government Agency Securities. At June 30, 2001, Ledger
Bank's daily liquidity ratio was 15.52%.
LIMITATIONS ON ACTIVITIES
LOANS-TO-ONE-BORROWER LIMITS. The Banks are subject to federal laws that
set maximum limits on loans to any one borrower. In general, the Banks may make
loans to one borrower up to the greater of $500,000 or 15% of unimpaired capital
and unimpaired surplus. The Banks may loan an additional 10% of unimpaired
capital and unimpaired surplus for loans fully secured by certain readily
marketable collateral.
There are exceptions to the above limitations. Under certain circumstances,
and subject to regulatory approval, the Banks may make loans to one borrower up
to the lesser of $30 million or 30% of unimpaired capital and unimpaired surplus
for loans to develop domestic residential housing units. In addition, the Banks
may provide purchase money financing for the sale of real estate acquired in
satisfaction of debts previously contracted for without regard to the
loans-to-one-borrower limitation if no new funds are advanced and the Banks are
not placed in a more detrimental position than if they had held the real
property.
Wisconsin law contains loans-to-one-borrower limitations that are
applicable to Ledger Bank. Under Wisconsin law, the aggregate amount of loans
that an association may make to any one borrower may not, as a general rule,
exceed 15% of the savings bank's capital. Loans to a borrower may exceed the 15%
limit but may not exceed 25% of the savings bank's capital if all loans or
extensions of credit that exceed the 15% limit are at least 100% secured by
readily marketable collateral having a market value that may be determined by
reliable and continuously available price quotations. Other exceptions apply
that are similar to the federal limits on loans to one borrower as well as other
restrictions set forth under Wisconsin law.
As of June 30, 2001, neither AnchorBank nor Ledger Bank had loans to one
borrower that exceeded the federal limitation or the Wisconsin
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limitation, as the case may be. On a pro forma basis, following the bank merger,
AnchorBank will be in compliance with federal loans-to-one-borrower limitations.
BROKERED DEPOSITS; INTEREST RATE LIMITATIONS. FDIC regulations govern the
acceptance of brokered deposits by insured depository institutions. The capital
position of an institution determines whether and with what limitations an
institution may accept brokered deposits. A "well capitalized" institution (one
that significantly exceeds specified capital ratios) may accept brokered
deposits without restriction. "Adequately capitalized" institutions (those that
are not "well capitalized" or "undercapitalized") may only accept such deposits
with the consent of the FDIC. "Undercapitalized" institutions (those that fail
to meet minimum regulatory capital requirements) may not accept brokered
deposits. Both Banks meet the definition of a "well capitalized" institution and
therefore may accept brokered deposits without restriction. As of June 30, 2001,
AnchorBank had $143.4 million in brokered deposits and Ledger Bank had $166.9
million in brokered deposits.
OTS regulations impose various restrictions or requirements on savings
associations with respect to their ability to pay dividends or make other
distributions of capital. OTS regulations prohibit an association from declaring
or paying any dividends or from repurchasing any of its stock if, as a result,
the regulatory (or total) capital of the association would be reduced below the
amount required to be maintained for the liquidation account established in
connection with its mutual to stock conversion.
Under OTS regulations effective April 1, 1999, a savings institution must
file an application for OTS approval of the capital distribution if either (1)
the total capital distributions for the applicable calendar year exceed the sum
of the institution's net income for that year to date plus the institution's
retained net income for the preceding two years, (2) the institution would not
be at least adequately capitalized following the distribution, (3) the
distribution would violate any applicable statute, regulation, agreement or OTS-
imposed condition, or (4) the institution is not eligible for expedited
treatment of its filings. If an application is not required to be filed, savings
institutions, such as AnchorBank, that are a subsidiary of a holding company (as
well as certain other institutions) must still file a notice with the OTS at
least 30 days before the payment of a dividend or a capital distribution.
Savings banks, such as Ledger Bank, which meet regulatory capital
requirements may declare dividends on capital stock based upon net profits,
provided that its paid-in surplus equals its capital stock. If the paid-in
surplus of the savings bank does not equal its capital stock, the board of
directors may not declare a dividend unless at least 10% of the net profits of
the preceding half year in the case of quarterly or semi-annual dividends, or
10% of the net profits of the preceding year in case of annual dividends, has
been transferred to paid-in surplus. In addition, prior approval of DFI-Savings
is required before dividends exceeding 50% of profits for any calendar year may
be declared and before a dividend may be declared out of retained earnings.
Under applicable state regulations, a savings bank which has converted from
mutual stock form also would be prohibited from paying a dividend on its capital
stock if the effect thereof would cause the regulatory capital of the savings
bank to be reduced below the amount required for its liquidation account.
TRANSACTIONS WITH INSIDERS AND AFFILIATES. The Banks are subject to FRB
regulations limiting the total amount such institutions may lend to their
executive officers, directors, principal shareholders and their related
interests. Generally, an affiliated person may borrow an aggregate amount not
exceeding 15% of the institution's unimpaired capital and unimpaired surplus on
an unsecured basis and an additional 10% on a secured basis. The regulations
limit, with certain exceptions, is the aggregate amount a depository institution
may lend to affiliated persons as a class to an amount not exceeding the
institution's unimpaired capital and unimpaired surplus.
In addition, FRB regulations provide certain restrictions and limits on
loans and other transactions with the institutions affiliated persons to insure
that such loans and transactions are (1) on terms which would be available to
members of the general public for similar credit extensions, or (2) only under
the terms of a benefit or compensation plan which is generally available to
employees of the institution and its affiliates and does not
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give preference to or otherwise distinguish between such employees.
AnchorBank and Ledger Bank are also required to comply with Sections 23A
and 23B of the Federal Reserve Act ("Sections 23A and 23B") relative to
transactions with affiliates. Generally, Section 23A limits the extent to which
the insured institution or its subsidiaries may engage in certain covered
transactions with an affiliate to an amount equal to 10% of such institution's
capital and surplus and places an aggregate limit on all such transactions with
affiliates to an amount equal to 20% of such capital and surplus. Section 23B
requires that all such covered transactions and certain additional transactions
be on terms substantially the same, or at least as favorable to the institution
or subsidiary, as those provided to a non-affiliate. The term "covered
transaction" includes the making of loans, purchase of assets, issuance of a
guaranty and similar other types of transactions. Exemptions from Sections 23A
or 23B may be granted only by the FRB. Affiliates of the Banks include Anchor
and Ledger, respectively, and any company that is under common control of the
Banks. The Holding Companies and Banks have not been significantly affected by
such restrictions or transactions with affiliates.
BUSINESS ACTIVITIES. The business activities of savings associations such
as AnchorBank are governed by the Home Owner's Loan Act of 1933, as amended (the
"HOLA") and, in certain respects (as is Ledger Bank), the Federal Deposit
Insurance Act. HOLA and the Federal Deposit Insurance Act were amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA")
and the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), which contain provisions that affect numerous aspects of the
operations and regulation of federally insured savings associations. These acts
also empower the OTS and the FDIC, among other agencies, to promulgate
regulations implementing the provisions of the acts.
The federal banking statutes as amended by FIRREA and FDICIA:
- restrict the solicitation of brokered deposits by troubled savings
associations that are not well-capitalized;
- prohibit the acquisition of any corporate debt security that is not rated in
one of the four highest rating categories;
- restrict the aggregate amount of loans secured by non-residential real
property to 400% of capital;
- permit savings and loan holding companies to acquire up to 5% of the voting
shares of non-subsidiary savings associations or savings and loan holding
companies without prior approval;
- permit bank holding companies to acquire healthy savings associations; and
- require the federal banking agencies to establish, by regulation, standards
for extension of credit secured by real estate lending.
Under HOLA, a savings association may make non-conforming loans (loans in
excess of the specific limitations of HOLA) that do not exceed 5.0% of its total
assets, and construction loans without security for the purpose of financing
what is expected to be residential property that do not exceed the greater of
total capital or 5.0% of its total assets. To assure repayment of such loans,
the association relies substantially on the borrower's general credit standing,
personal guarantees and projected future income on the properties. No loans have
been made by AnchorBank pursuant to this authority.
For Ledger Bank, FDIC regulations governing equity investments prohibit
certain equity investments and generally limit equity investments to those
permissible for federally chartered banks and their subsidiaries. Banks holding
impermissible equity investments that do not receive FDIC approval must submit
to the FDIC a plan for divesting such investments. Ledger Bank does not hold any
impermissible equity investments.
Under FDIC regulations, Ledger Bank must obtain prior FDIC approval before
directly, or indirectly through a majority-owned subsidiary, engaging "as
principal" in any activity that is not permissible for a national bank unless
certain exceptions apply. The activity regulations provide that state banks
which meet applicable minimum capital requirements would be permitted to engage
in certain activities that are not permissible for national banks, including
guaranteeing obligations of others, activities which the FRB has found to be
closely related to banking and certain securities
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activities conducted through subsidiaries. The FDIC will not approve an activity
that it determines presents a significant risk to the FDIC insurance funds. As a
SAIF-insured (see "-- Insurance of Accounts, Premiums and Other
Assessments -- FDIC Insurance" on page 71), state-chartered savings bank which
was formerly a state-chartered savings association, Ledger Bank continues to be
subject to certain restrictions which are imposed by federal law on state-
chartered savings associations. The activities of Ledger Bank and its subsidiary
are permissible under applicable federal regulations.
Ledger is required to obtain the prior approval of the FRB to acquire all,
or substantially all, of the assets of any bank or bank holding company. Prior
FRB approval is also required for Ledger to acquire direct or indirect ownership
or control of any voting securities of any bank or bank holding company if,
after giving effect to such acquisition, it would, directly or indirectly, own
or control more than 5% of any class of voting shares of such bank or bank
holding company. The BHC Act also prohibits the acquisition by Ledger of more
than 5% of the voting shares of a bank located outside the State of Wisconsin or
of substantially all of the assets of such a bank, unless such an acquisition is
specifically authorized by the laws of the state in which such bank is located.
FRB regulations govern a variety of bank holding company matters, including
redemption of outstanding equity securities and a bank holding company engaging
in non-banking activities. Pursuant to FRB policy, dividends should be paid only
out of current earnings and only if the prospective rate of earnings retention
by the bank holding company appears consistent with its capital needs, asset
quality and overall financial condition. The FRB policy also requires that a
bank holding company serve as a source of financial strength to its subsidiary
banks by standing ready to use available resources to provide adequate capital
funds to those banks during periods of financial stress or adversity.
UNIFORM LENDING STANDARDS. Under FDICIA, federal bank regulators must
adopt uniform regulations prescribing standards for extensions of credit that
are secured by liens on interests in real estate or made for the purpose of
financing the construction of a building or other improvements to real estate.
Under current regulations, savings institutions must adopt and maintain written
policies that establish appropriate limits and standards for extensions of
credit that are secured by liens on or interests in real estate or are made for
the purpose of financing permanent improvements to real estate. These policies
must establish loan portfolio diversification standards, prudent underwriting
standards (including loan-to-value limits) that are clear and measurable, loan
administration procedures and documentation, approval and reporting
requirements. The real estate lending policies must reflect consideration of the
Interagency Guidelines for Real Estate Lending Policies that have been adopted
by federal bank regulators. Both AnchorBank and Ledger Bank have adopted such
policies.
COMMUNITY REINVESTMENT ACT. Under the Community Reinvestment Act of 1977,
as amended ("CRA"), as implemented by OTS and FDIC regulations, a savings
institution has an obligation to help meet the credit needs of its entire
community, including low and moderate income neighborhoods. The CRA does not
establish specific lending requirements or programs for financial institutions
nor does it limit an institution's discretion to develop the types of products
and services that it believes are best suited to its particular community,
consistent with the CRA. The CRA requires the OTS, in connection with its
examination of AnchorBank and the FDIC, in connection with its examination of
Ledger Bank, to assess each institution's record of meeting the credit needs of
its community and to take such record into account in its evaluation of certain
applications by such institution. An institution is assigned one of four overall
ratings: "outstanding," "satisfactory," "needs improvement," or "substantial
noncompliance." The CRA also requires all institutions to make their CRA ratings
available to the public. The Banks each received a "satisfactory" CRA rating in
their last review conducted in 1999.
In 1995, the federal financial supervisory agencies issued a final revised
regulation to implement the CRA. The revised regulation, which became fully
effective on July 1, 1997, eliminates the twelve assessment factors under the
prior regulation used to assess CRA performance and substitutes a
performance-based evaluation system. The revised CRA regulations have not had a
material impact on the operations of the Banks.
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Annually, the federal banking regulators must prepare and make available to
the public individual CRA Disclosure Statements for each reporting savings
association. Each institution must place its CRA Disclosure Statement in its
public file within three days of receipt of the statement from the OTS. Each
institution must maintain one copy of its public file in each state in which it
has its main office or a branch.
BRANCHING
FEDERAL. OTS rules permit nationwide branching by federally chartered
savings associations, such as AnchorBank, to the extent permitted by federal
statute, subject to OTS supervisory clearance. This permits associations with
interstate networks to diversify their loan portfolios and lines of business.
OTS authority preempts any state law purporting to regulate branching by federal
savings associations. However, subject to certain exceptions, federal law
continues to prohibit branching that would result in formation of a multiple
savings and loan holding company controlling savings associations in more than
one state, unless the statutory law of the additional state specifically
authorizes acquisition of its state-chartered associations by state-chartered
associations or their holding companies in the state where the acquiring
institution or holding company is located.
STATE. With the approval of DFI-Savings, a Wisconsin-chartered savings
bank may establish and maintain a branch office generally within the normal
lending area of the home office (100 miles), anywhere in Wisconsin or in any one
of the regional states of Illinois, Indiana, Iowa, Kentucky, Michigan,
Minnesota, Missouri, and Ohio. Whenever a savings bank is absorbed through a
merger, the acquiring savings association may maintain and operate a branch
office at the location of the absorbed savings association if the Director of
DFI-Savings finds that the continued operation of a branch office at the
location of the absorbed savings association would be in the public interest.
PROMPT CORRECTIVE ACTION REQUIREMENTS
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, federal bank
regulators must take certain supervisory actions with respect to
undercapitalized institutions, which depend upon the institution's degree of
capitalization. FDICIA establishes the following five capital categories: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized." Generally, subject to
narrow exceptions, FDICIA requires federal bank regulators to appoint a receiver
or conservator for an institution that is critically undercapitalized and
prohibits such institution from making any payment of principal or interest on
its subordinated debt. FDICIA authorizes federal bank regulators to specify the
ratio of tangible capital to assets at which an institution becomes critically
undercapitalized and requires that ratio to be no less than 2% of total assets.
An institution is "undercapitalized" if it has a total risk-based capital
ratio of less than 8%, a core risk-based capital ratio of less than 4%, or a
leverage ratio (core capital to adjusted total assets) of less than 4% (3% if
the institution has a CAMELS rating of "1"). An institution that has a total
risk-based capital ratio of less than 6%, a core risk-based capital ratio of
less than 3%, or a leverage ratio of less than 3% is "significantly
undercapitalized." An institution that has a ratio of tangible equity (as
defined in the regulations) to total assets that is equal to or less than 2% is
"critically undercapitalized." In addition, the OTS may downgrade an institution
to a lower degree of capitalization if the OTS has any safety or soundness
concerns (i.e. if the institution has received a less-than-satisfactory
examination rating for asset quality, management, earnings or liquidity under
the OTS's "CAMELS" rating system for savings associations).
Subject to limited exceptions, savings associations may not declare
dividends, make any other capital distribution or pay management fees to
controlling persons if afterwards the institution would be undercapitalized.
Undercapitalized institutions are also subject to certain mandatory supervisory
actions, including increased monitoring, required capital restoration planning
and restricted growth, and acquisition and branching restrictions. Significantly
and critically undercapitalized institutions face even more severe restrictions.
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As of June 30, 2001, the Banks individually, and AnchorBank, on a pro forma
basis, were "well capitalized" as defined under the OTS regulations.
INSURANCE OF ACCOUNTS, PREMIUMS AND OTHER ASSESSMENTS
FDIC INSURANCE. The FDIC administers two insurance funds, the Savings
Association Insurance Fund ("SAIF") and the Bank Insurance Fund ("BIF"). The
Banks are members of the SAIF insurance fund of the FDIC which insures the
Banks' savings deposits up to $100,000 per insured member (as defined by law and
regulation). Such insurance is backed by the full faith and credit of the United
States government. As an insurer, the FDIC charges deposit insurance premiums to
the Banks and conducts examinations of the Banks. The Banks periodically must
file reports with the FDIC. The FDIC may prohibit any FDIC-insured institution
from engaging in any activity that the FDIC determines, by regulation or order,
to pose a serious risk to the FDIC. The FDIC also may initiate enforcement
actions against savings associations, after giving an institution's primary
federal regulator an opportunity to take such action. The FDIC may terminate an
institution's deposit insurance if the FDIC determines that the institution has
engaged, or is engaging in, unsafe or unsound practices, or is in an unsafe or
unsound condition.
FDIC PREMIUM ASSESSMENTS. The Banks pay assessments to the FDIC for their
SAIF deposit insurance based on a percent of their insured deposits. Under the
Federal Deposit Insurance Act, the FDIC must set semi-annual assessments for
SAIF-insured institutions in order to maintain a reserve ratio of the SAIF at
1.25% of estimated deposits. The FDIC may set a higher percentage for a
particular year if it determines that circumstances pose a significant risk of
substantial future losses to the SAIF.
The FDIC has developed a risk-based deposit insurance system. Under this
system, the FDIC classifies all insured depository institutions into assessment
risk classifications based upon the institution's level of capital and
supervisory evaluation. The FDIC assigns all institutions to one of three
capital categories: (1) well capitalized, (2) adequately capitalized, or (3)
undercapitalized. Within each capital category, the FDIC assigns an institution
to one of three supervisory evaluation subgroups based on a supervisory
evaluation by the institution's primary supervisory authority and other
information that the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance fund. An
institution's assessment rate depends upon its assessment risk classification.
Under the FDIC's assessment schedule for SAIF deposit insurance, the
assessment rate for well-capitalized institutions with the highest supervisory
ratings has been reduced to zero effective in 1997. The assessment rate for
institutions in the lowest risk assessment classification is 0.27%. From 1997
through 1999, SAIF members paid 6.4 basis points to fund the Financing
Corporation ("FICO"), while BIF member institutions paid approximately 1.3 basis
points. Thereafter, BIF and SAIF members are assessed at the same rate by FICO.
The FICO assessment rate for the first quarter for 2001 was 1.96 basis points
for AnchorBank and 1.96 basis points for Ledger Bank.
OTS ASSESSMENTS. The OTS assesses all savings associations in order to
fund the operations of the OTS. As of January 1, 1999, OTS revised the method by
which it assesses fees on all savings associations to fund the operations of
OTS. According to the OTS, the new assessment structure more equitably imposes
assessments on savings associations. The general assessment formula, paid on a
semi-annual basis, is based on three components: the size of the savings
association; its condition; and the complexity of its operations. The OTS has
established a chart based on asset size, as reported on thrift financial
reports, to calculate the size component. For the complexity component, the OTS
charges a higher assessment to savings associations that engage in complex
activities, such as those involving certain off-balance sheet assets and that
have more than $1 billion of recourse obligations or direct credit substitutes.
For the condition component, savings associations that are "troubled" (i.e. have
a supervisory rating of "4" or "5," or are subject to a conservatorship) must
pay an additional 50% premium over the asset-based assessment. Savings
associations with a rating of "3" will pay a 25% premium.
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AnchorBank's general assessment to the OTS for the six-month period ending
June 30, 2001 was $240,000. Ledger Bank is required to file periodic reports
with and is subject to periodic examination by DFI-Savings. Wisconsin-chartered
savings banks are required to pay examinations fees and annual assessments to
fund the supervisory operations of DFI-Savings. Based on the assessment rates
published by DFI-Savings and Ledger Bank's total assets of approximately $507.4
million at June 30, 2001, Ledger Bank paid $14,870 in assessments in the fiscal
year ended June 30, 2001.
FEDERAL HOME LOAN BANK SYSTEM. The Banks are members of the Federal Home
Loan Bank ("FHLB") of Chicago, which is one of twelve regional FHLBs that
administer the home financing credit function of savings institutions. Each FHLB
serves as a reserve or central bank for its members within its assigned region.
The FHLBs are funded primarily from proceeds derived from the sale of
consolidated obligations of the FHLB System. Each FHLB makes loans (or advances)
to members in accordance with policies and procedures established by the board
of directors of the FHLB. The Federal Housing Finance Board regulates and
oversees these policies and procedures. All advances from the FHLB must be fully
secured by sufficient collateral as determined by the FHLB. In addition, all
long-term advances may be made only for the purpose of providing funds for
residential home financing.
As members, the Banks are required to own shares of capital stock in the
FHLB-Chicago. As of March 31, 2001, AnchorBank owned $38.0 million FHLB stock
and Ledger Bank owned $8.4 million FHLB stock as of June 30, 2001, which
complied with this requirement. The Banks have received substantial dividends on
their FHLB stock. For fiscal 2001, AnchorBank's dividend was $2.7 million and
Ledger Bank's dividend was $0.6 million.
Under federal law, the FHLBs must provide funds for resolving troubled
savings associations and contribute to low- and moderate-priced housing programs
through direct loans or interest subsidies on advances targeted for community
investment and low- and moderate-income housing projects. As a result of these
contributions, the FHLBs have paid fewer dividends to their members and could
continue to do so in the future. In addition, the FHLBs may impose a higher rate
of interest on advances to their members. These contributions could adversely
affect the value of FHLB stock in the future which may reduce the Banks'
shareholders' equity.
FEDERAL RESERVE SYSTEM. The FRB, under its Regulation D, requires all
depository institutions to maintain non-interest-bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts) and non-personal-time deposits. As of June 30, 2001, the
Banks individually, and AnchorBank, on a pro forma basis, were in compliance
with these requirements. These reserves may be used to satisfy the liquidity
requirements imposed by the OTS. See the "-- Compliance -- Liquidity" section on
page 66. Because required reserves must be maintained in the form of cash or a
non-interest-bearing account at a Federal Reserve Bank, the effect of this
reserve requirement is to reduce the amount of the Banks' interest-earning
assets.
FHLB member institutions may borrow from the Federal Reserve Bank "discount
window." FRB regulations, however, require savings associations to exhaust all
FHLB sources before borrowing from the Federal Reserve Bank.
RECENT LEGISLATIVE DEVELOPMENTS
On November 12, 1999, the Financial Services Modernization Act ("Act"),
which could have a far-reaching impact on the financial services industry, was
signed into law. The intent of the law is to increase competition in the
financial services area and includes repealing sections of the 1933
Glass-Steagal Act. The Act authorizes affiliations between banking, securities
and insurance firms and authorizes bank holding companies and national banks to
engage in a variety of new financial activities. Under the Act, a bank holding
company that qualifies as and elects to become a financial holding company may
engage in any activity stipulated by the Act under the regulation of the Federal
Reserve. The Act restricts the chartering and transferring of unitary thrift
holding companies, although it does not restrict the operations of unitary
holding companies in existence prior to May 4, 1999 that continue to meet the
QTL test and control only a single savings
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institution. Anchor and AnchorBank presently meet these requirements. The Act
also imposes a number of consumer protections that generally greatly limit
disclosure of customer information to non-affiliated third parties. Disclosure
of ATM usage charges is also required by the Act. Many of the Act's provisions
require the issuance of regulations to implement the statutory provisions. As
such, it is too early to assess the eventual impact of the Act on either the
financial services industry in general or the specific operations of the Holding
Companies and the Banks currently or on Anchor or AnchorBank following the
merger.
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MATTER 2. ELECTION OF DIRECTORS
Pursuant to Ledger's articles of incorporation, directors of Ledger are
divided into three classes with staggered terms of three years each. At the
meeting, Ledger shareholders will elect three directors to hold office until the
merger is consummated or, if the merger is not consummated, for a term of three
years expiring at the 2004 Annual Meeting. Directors of the remaining two
classes will continue to hold office until the merger is consummated or, if the
merger is not consummated, until the expiration of their respective terms and
until their successors are elected and qualified. There are no family
relationships among the directors and/or executive officers of Ledger. No person
being nominated as a director is being proposed for election pursuant to any
agreement or understanding between any person and Ledger.
Unless otherwise directed, each proxy executed and returned by a
shareholder will be voted "FOR" the election of the nominees for director listed
below. If the persons named as nominees should be unable or unwilling to stand
for election at the time of the meeting, the proxies will nominate and vote for
any replacement nominee or nominees recommended by Ledger's board of directors.
At this time, Ledger's board knows of no reason why the nominees listed below
may not be able to serve as directors if elected.
The following tables present information concerning the nominees for
director and continuing directors. The proposed nominees currently serve as
directors of Ledger Bank. Peter A. Gilbert and Reginald M. Hislop, III have
served as directors of Ledger since August 1995. Charles E. Rickheim has served
as a director of Ledger since Ledger's formation in June 1993. Martin Hedrich,
Jr. has served as a director of Ledger since September 1998. Donald A. Zellmer
has served as a director of Ledger since October 1996. James D. Smessaert has
served as a director of Ledger since Ledger's formation in June 1993.
<Table>
<Caption>
DIRECTOR OF
POSITION WITH LEDGER AND PRINCIPAL OCCUPATION LEDGER BANK
NAME AGE DURING THE PAST FIVE YEARS SINCE
---- --- --------------------------------------------- -----------
NOMINEES FOR DIRECTOR FOR TERM EXPIRING UPON CONSUMMATION OF THE MERGER
OR, IF THE MERGER IS NOT CONSUMMATED, UNTIL 2004
Peter A. Gilbert......... 53 Director of Ledger and Ledger Bank; Executive 1995
Vice President, Chief Operating Officer and
Corporate Secretary of Ledger Bank and Executive
Vice President and Corporate Secretary of Ledger.
Prior to joining Ledger Bank in December 1995,
Mr. Gilbert was President and CEO of Valley Real
Estate Services Corp., a mortgage banking
subsidiary of Valley Bancorporation located in
Sheboygan, Wisconsin, from 1992 to 1994.
Reginald M. Hislop, 41 Director of Ledger and Ledger Bank; President and 1995
III.................... Chief Executive Officer of The Village at Manor
Park, Inc., a diversified organization that
provides long-term care and specialized health
care services to senior adults, located in West
Allis, Wisconsin.
Charles E. Rickheim...... 60 Director of Ledger and Ledger Bank; Owner and 1980
manager of residential real estate located in the
State of Wisconsin.
</Table>
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INFORMATION WITH RESPECT TO CONTINUING DIRECTORS
<Table>
<Caption>
DIRECTOR OF
POSITION WITH LEDGER AND PRINCIPAL OCCUPATION LEDGER BANK
NAME AGE DURING THE PAST FIVE YEARS SINCE
---- --- --------------------------------------------- -----------
DIRECTORS WHOSE TERMS EXPIRE IN 2002
Martin Hedrich, Jr....... 59 Director of Ledger and the Bank; President and 1998
owner of Monopanel Technologies, Inc., a
manufacturer of switches used in appliance,
instrument, computer and medical markets, located
in West Allis, Wisconsin.
Donald A. Zellmer........ 68 Director of Ledger and the Bank; Chairman and 1996
Chief Executive Officer of Fortress Bancshares,
Inc., a multi-bank holding company located in
Westby, Wisconsin; President and owner of
Ridgeview Farms, Inc.; Retired Partner of Ernst &
Young LLP, Milwaukee Office.
DIRECTOR WHOSE TERM EXPIRES IN 2003
James D. Smessaert....... 63 President, Chief Executive Officer and Chairman 1984
of the Board for Ledger and Ledger Bank.
</Table>
THE AFFIRMATIVE VOTE OF A PLURALITY OF THE VOTES CAST IS REQUIRED FOR THE
ELECTION OF DIRECTORS. UNLESS MARKED TO THE CONTRARY, THE SHARES OF LEDGER STOCK
REPRESENTED BY THE SUBMITTED PROXIES WILL BE VOTED "FOR" THE ELECTION OF THE
ABOVE-DESCRIBED NOMINEES. LEDGER'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"FOR" ELECTION OF THE NOMINEES FOR DIRECTOR.
MATTER 3. RATIFICATION OF APPOINTMENT OF AUDITORS
Ledger's independent auditors for the fiscal year ended June 30, 2001 was
KPMG LLP. Ledger's board of directors has reappointed KPMG LLP to perform the
audit of Ledger's financial statements for the fiscal year ending June 30, 2002
if the merger is not consummated, or for any such shorter period as may be
called for and deemed necessary by Ledger. Ledger's board has directed that the
selection of auditors on such terms be submitted for ratification by Ledger
shareholders at the meeting. Representatives of KPMG LLP will be present at the
meeting and 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 Ledger's
shareholders.
KPMG LLP FEES BILLED TO LEDGER IN FISCAL 2001
The following is a summary of the fees billed to Ledger by KPMG LLP for
certain audit and non-audit services during fiscal 2001.
AUDIT FEES. The aggregate fees billed by KPMG LLP for professional
services rendered for the audit of Ledger's annual financial statements for
fiscal 2001 and for the reviews of the financial statements included in Ledger's
Quarterly Reports on Form 10-Q for that fiscal year were $39,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. The
aggregate fees billed by KPMG LLP for professional services rendered for the
information technology services relating to financial information systems design
and implementation for fiscal 2001 were $0.
ALL OTHER FEES. The aggregate fees billed by KPMG LLP for services
rendered to Ledger, other than the services described above under "Audit Fees"
and "Financial Information Systems Design and Implementation Fees," for fiscal
2001 were $48,000.
Ledger has been advised by KPMG LLP that neither that firm nor any of its
associates has any relationship with Ledger or its subsidiaries other than the
usual relationship that exists between independent certified public accountants
and clients.
UNLESS MARKED TO THE CONTRARY, THE SHARES OF LEDGER STOCK REPRESENTED BY
THE SUBMITTED PROXIES WILL BE VOTED "FOR" RATIFICATION OF THE APPOINTMENT OF
KPMG LLP AS LEDGER'S INDEPENDENT AUDITORS. LEDGER'S BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS LEDGER'S
INDEPENDENT AUDITORS.
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MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
Regular meetings of Ledger's board of directors generally are held on a
quarterly basis. During the fiscal year ended June 30, 2001, Ledger's board held
four regular meetings. No incumbent director attended fewer than 75% of the
aggregate total number of meetings of Ledger's board held and the total number
of committee meetings on which such director served during the fiscal year ended
June 30, 2001.
Ledger's board of directors has a standing Audit Committee and Compensation
Committee. The Audit Committee consists of Messrs. Zellmer (Chairman), Rickheim
and Hislop. The Audit Committee reviews the scope and timing of the audit of
Ledger's financial statements by Ledger's independent auditors and will review
with the independent auditors Ledger's management policies and procedures with
respect to auditing and accounting controls. The Audit Committee also will
review and evaluate the independence of Ledger's auditors, and recommend to
Ledger's board the engagement, continuation or discharge of Ledger's independent
auditors. In addition, the Audit Committee will direct the activities of Ledger
Bank's internal audit. Ledger's Audit Committee met three times during the
fiscal year ended June 30, 2001.
Ledger Bank's board of directors has established a Compensation Committee
consisting of three directors, Messrs. Rickheim (Chairman), Hislop and Hedrich,
who are neither officers nor employees of Ledger or Ledger Bank ("Outside
Directors"). During the fiscal year ended June 30, 2001, Ledger did not pay
separate compensation to its executive officers. The Compensation Committee of
Ledger Bank met three times during the fiscal year ended June 30, 2001 to review
and approve the compensation decisions made by the Compensation Committee of
Ledger Bank and to issue the Joint Compensation Committee Report which appears
in this proxy statement/prospectus. For a further discussion of the compensation
policies of Ledger Bank, see "COMPENSATION COMMITTEE REPORT" on page 85.
Ledger's entire board of directors, acting as a Nominating Committee, met
on July 24, 2001 to consider and select the nominees for director to stand for
election at the Meeting. Ledger's bylaws allow for shareholder nominations of
directors and require such nominations be made pursuant to timely notice in
writing to the Secretary of Ledger. See "SHAREHOLDER PROPOSALS FOR THE 2002
ANNUAL MEETING" on page 90.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of shares of Ledger
stock as of September 11, 2001 (except as noted otherwise below) by (1) each
shareholder known to Ledger to beneficially own more than 5% of the shares of
Ledger stock outstanding, as disclosed in certain reports regarding such
ownership filed with Ledger and with the Securities and Exchange Commission (the
"SEC") in accordance with Sections 13(d) or 13(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), (2) each director of Ledger, (3) each
director nominee of Ledger, (4) the executive officers of Ledger appearing in
the Summary Compensation Table below, and (5) all directors and executive
officers as a group. Members of the board of directors of Ledger also serve as
directors of Ledger Bank.
<Table>
<Caption>
NUMBER OF SHARES
NAME BENEFICIALLY OWNED(1) PERCENT OF CLASS
---- --------------------- ----------------
Anchor BanCorp Wisconsin Inc.(2)............................ 574,091 23.6%
Financial Institution Partners, L.P./Hovde Capital,
Inc.(3)................................................... 240,300 9.9
West Allis Savings Bank Employee Stock Ownership Trust(4)... 59,890 2.5
James D. Smessaert(5),(6),(7)............................... 245,204 9.6
Peter A. Gilbert(5),(6),(7)................................. 107,062 4.3
Martin Hedrich, Jr.(5)...................................... 3,800 *
Reginald M. Hislop, III(5).................................. 5,600 *
Charles E. Rickheim(5),(6).................................. 66,415 2.7
Donald A. Zellmer(5)........................................ 9,800 *
Arthur E. Thompson(5),(6),(7)............................... 59,365 2.4
Elizabeth S. Borst(5),(7)................................... 17,693 *
All directors and executive officers as a group (8
persons)(5),(6),(7)....................................... 514,939 19.1%
</Table>
---------------
* Amount represents less than 1.0% of the total shares of Ledger stock
outstanding.
(1) Unless otherwise indicated, includes shares of Ledger stock held directly by
the individuals as well as by members of such individuals' immediate family
who share the same household, shares held in trust and other indirect forms
of ownership over which shares the individuals exercise sole or shared
voting power and/or investment power. Fractional shares of Ledger stock held
by certain executive officers under the West Allis Savings Bank Employee
Stock Ownership Plan (the "ESOP") have been rounded to the nearest whole
share.
(2) Based upon a Schedule 13D, dated June 25, 2001, filed with the SEC pursuant
to the Exchange Act by Anchor, reporting the beneficial ownership of Ledger
stock where it has sole voting and dispositive power. The principal business
office of Anchor is located at 25 West Main Street, Madison, WI 53707. The
574,091 shares reflected as "beneficially owned" by Anchor in Anchor's
Schedule 13D include 484,991 shares subject to the stock option granted to
Anchor by Ledger pursuant to the merger agreement (see "THE STOCK OPTION
AGREEMENT" on page 42), and 89,100 shares previously owned by Anchor. Anchor
has informed Ledger that it disclaims beneficial ownership of the 484,991
shares subject to the stock option, because none of the events that would
trigger Anchor's right to exercise the stock option have occurred.
(3) Based upon Amendment No. 2, dated June 21, 2001, to a Schedule 13D, dated
November 7, 1996, filed with the SEC pursuant to the Exchange Act by Hovde
Capital, Inc., Financial Institution Partners, L. P., Hovde Capital, Ltd.,
Financial Institution Partners III, L.P., Eric D. Hovde and Steven D. Hovde,
reporting the beneficial ownership of Ledger stock where they have shared
voting and dispositive power. Financial Institution Partners, L.P. and its
general partner, Hovde Capital, Inc., reported that they have neither sole
nor shared voting or dispositive power over any shares of Ledger stock.
Financial Institution Partners III, L.P. and its general partner, Hovde
Capital, Ltd., as well as Hovde Capital, Ltd.'s officers and managing
members, Eric D. Hovde and Steven D. Hovde (both of whom are also officers
and directors of Hovde Capital, Inc.), reported that they each have shared
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83
voting and dispositive power over 240,300 shares of Ledger stock. The principal
business office of Hovde Capital, Inc., Financial Institution Partners, L.P.,
Hovde Capital, Ltd., and Financial Institution Partners III, L.P. is located at
1824 Jefferson Place, N.W., Washington, DC 20036. The principal business
office of Eric D. Hovde is located at 1824 Jefferson Place, N.W.,
Washington, DC 20036. The principal business office of Steven D. Hovde is
located at 1629 Colonial Parkway, Inverness, IL 60067.
(4) U.S. Bancorp (the "Trustee") is the trustee for the ESOP. The Trustee's
address is 601 2nd Avenue South, Minneapolis, MN 55402-4302.
(5) Includes shares of Ledger stock that the named individuals and certain
executive officers have the right to acquire within 60 days of the voting
record date pursuant to the exercise of stock options ("Vested Options"):
Mr. Smessaert -- 127,886 shares; Mr. Gilbert -- 42,800 shares; Mr.
Hedrich -- 1,800 shares; Mr. Hislop -- 5,000 shares; Mr. Rickheim -- 27,870
shares; Mr. Zellmer -- 3,800 shares; Mr. Thompson -- 38,024 shares; and Ms.
Borst -- 3,800 shares.
Does not include shares of Ledger stock that the named individuals and
certain executive officers will have the right to acquire within 60 days of
the voting record date if, and only if, the merger is consummated within 60
days of the record date (due to immediate vesting of all previously unvested
options upon a change in control of Ledger) pursuant to the exercise of
stock options ("Unvested Options"): Mr. Smessaert -- 25,800 shares; Mr.
Gilbert -- 17,700 shares; Mr. Hedrich -- 3,900 shares; Mr. Hislop -- 4,700
shares; Mr. Rickheim -- 1,500 shares; Mr. Zellmer -- 3,900 shares; Mr.
Thompson -- 3,600 shares; and Ms. Borst -- 3,600 shares. In the event that
the merger is consummated within 60 days of the voting record date and the
Unvested Options vest, the beneficial ownership of the named individuals and
certain executive officers would be as follows (with footnotes in the table
below having the same meaning as the footnotes in the table on page 77,
except that the Number of Shares Beneficially Owned in the table below
includes both Vested Options and Unvested Options):
<Table>
<Caption>
NUMBER OF SHARES
NAME BENEFICIALLY OWNED(1) PERCENT OF CLASS
---- --------------------- ----------------
James D. Smessaert(5),(6),(7).............................. 271,004 10.5%
Peter A. Gilbert(5),(6),(7)................................ 124,762 5.0
Martin Hedrich, Jr.(5)..................................... 7,700 *
Reginald M. Hislop, Jr.(5)................................. 10,300 *
Charles E. Rickheim(5),(6)................................. 67,915 2.8
Donald A. Zellmer(5)....................................... 13,700 *
Arthur E. Thompson(6),(7).................................. 62,965 2.5
Elizabeth S. Borst(5),(7).................................. 21,293 *
All directors and executive officers as a group (8
persons)(5),(6),(7)...................................... 579,639 21.0%
</Table>
(6) Includes shares of Ledger stock awarded to certain executive officers and
directors under the West Allis Savings Bank Management Recognition and
Retention Plan (the "MRP"). Recipients of awards under the MRP may direct
voting prior to vesting.
(7) Includes shares of Ledger stock allocated under the ESOP, for which such
individuals possess shared voting power, of which, approximately 48,567
shares have been allocated to the accounts of the named executive officers
in the Summary Compensation Table as follows: Mr. Smessaert -- 17,359
shares; Mr. Gilbert -- 10,758 shares; Mr. Thompson -- 12,207 shares; and Ms.
Borst -- 8,243 shares.
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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION
During the fiscal year ended June 30, 2001, Ledger did not pay separate
compensation to its executive officers. Separate compensation will not be paid
to officers of Ledger until such time as the officers of Ledger devote
significant time to separate management of Ledger's affairs, which is not
expected to occur unless Ledger becomes actively involved in additional business
beyond Ledger Bank.
The following table summarizes the total compensation paid by Ledger Bank
to its Chief Executive Officer and the next highest paid executive officer of
Ledger Bank whose compensation (salary and bonus) exceeded $100,000 during
Ledger's fiscal years ended June 30, 2001, 2000 and 1999:
<Table>
<Caption>
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION
-------------------- ----------------
NUMBER OF SHARES
SUBJECT TO ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS(3) COMPENSATION(4)
--------------------------- ---- -------- -------- ---------------- ---------------
James D. Smessaert................... 2001 $177,137 $ -- 15,000 $26,564
President & Chief Executive Officer 2000 171,147 62,754 -- 15,818
and Director of Ledger and Ledger 1999 164,564 66,774 6,000 24,378
Bank
Peter A. Gilbert..................... 2001 $141,347 $ -- 10,500 $26,564
Executive Vice President and 2000 136,567 43,815 -- 15,818
Corporate Secretary of Ledger, 1999 131,263 46,622 4,000 24,378
Executive Vice President/Chief
Operating Officer and Corporate
Secretary of Ledger and Ledger Bank
Arthur E. Thompson................... 2001 $ 91,831 $11,500 2,000 $14,137
Vice President & Treasurer of 2000 88,583 20,300 -- 10,733
Ledger, Senior Vice President of 1999 85,176 21,600 2,000 21,727
Finance of Ledger Bank
Elizabeth S. Borst................... 2001 $ 88,171 $11,000 2,000 $13,569
Senior Vice President of Sales and 2000 85,053 19,941 -- 10,191
Marketing of Ledger Bank 1999 75,348 19,109 2,000 15,322
</Table>
---------------
(1) Perquisites provided to Messrs. Smessaert, Gilbert, Thompson and Ms. Borst
by Ledger did not exceed the lesser of $50,000 or 10% of total annual salary
and bonus during the fiscal years indicated and accordingly, are not
included.
(2) Bonuses paid to Messrs. Smessaert, Gilbert, Thompson and Ms. Borst in fiscal
2000 and 1999 were based upon the terms set forth under the West Allis
Savings Bank Annual Incentive Plan (the "Incentive Plan"). See "-- Annual
Incentive Plan" on page 81. Bonuses paid for fiscal 2000 performance, which
were previously not reported, were paid in fiscal 2001 due to a restatement
of earnings for fiscal 2000. Bonuses paid for fiscal 2000 performance were
accrued and expensed in fiscal 2000.
(3) Amounts shown in this column represent the total number of shares of Ledger
stock subject to options granted (both vested and unvested) under the
Hallmark Capital Corp. 1993 Incentive Stock Option Plan, as amended (the
"Incentive Stock Option Plan"). The options awarded in fiscal 1999 are
subject to a vesting schedule over a five-year period from the date of
grant. The options awarded in fiscal 2001 to Messrs. Smessaert and Gilbert
are subject to performance-based vesting (as noted herein) and the options
awarded to Mr. Thompson and Ms. Borst in fiscal 2001 are subject to a
vesting schedule over a five-year period from the date of grant.
(4) Amounts shown in this column represent the Bank's contributions on behalf of
Messrs. Smessaert and Gilbert, Thompson and Ms. Borst under the ESOP for the
fiscal years ended June 30, 2001, 2000 and 1999.
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EMPLOYMENT AGREEMENTS
In connection with the conversion of Ledger Bank from a state-chartered
mutual savings bank to a state-chartered stock savings bank (the "Conversion"),
Ledger Bank entered into three-year employment agreements with Mr. Smessaert,
President and Chief Executive Officer of Ledger Bank, and Mr. Thompson, Senior
Vice President of Finance of Ledger Bank. On December 31, 1994, Ledger Bank
entered into a three-year employment agreement with Mr. Gilbert, Executive Vice
President and Chief Operating Officer and Corporate Secretary of Ledger Bank. On
July 24, 1997, Ledger Bank entered into a three-year employment agreement with
Ms. Borst, Senior Vice President of Sales and Marketing of Ledger Bank. The
terms of each of their employment agreements may be renewed upon expiration for
three years by action of Ledger Bank's board of directors, subject to the board
of directors' annual performance evaluation. The employment agreements are
intended to insure that the Bank maintains stable and competent management.
Under the employment agreements, the current base salaries for Messrs.
Smessaert, Gilbert, Thompson and Ms. Borst are $177,137, $141,347, $91,831 and
$88,171, respectively. The base salaries may be increased by Ledger Bank's board
of directors, but may not be reduced except as part of a general pro rata
reduction in compensation for all executive officers. In addition to base
salary, the employment agreements provide for payments from other Ledger Bank
incentive compensation plans, and provide for other benefits, including
participation in any group health, life, disability, or similar insurance
program and in any pension, profit-sharing, employee stock ownership plan,
deferred compensation, 401(k) or other retirement plans maintained by Ledger
Bank. The employment agreements also provide for participation in any
stock-based incentive programs made available to executive officers of Ledger
Bank. The employment agreements may be terminated by Ledger Bank upon death,
disability, retirement, or for cause at any time, or in certain events specified
by the regulations of the Wisconsin Department of Financial
Institutions-Division of Savings and Loan. If Ledger Bank terminates the
employment agreements for any reasons other than due to death, disability,
retirement or for cause, the executive officers are entitled to a severance
payment equal to one year's base salary (based on the highest base salary within
the three years preceding the date of termination) together with other
compensation and benefits in which they were vested at the termination date.
The employment agreements provide for severance payments if the executive
officers employment terminates following a change in control. Under the
employment agreements and as used in this subsection, a "Change in Control" is
generally defined to include any change in control required to be reported under
the federal securities laws as well as (1) the acquisition by any person of 25%
or more of Ledger's outstanding voting securities, or (2) a change in a majority
of the directors of Ledger during any two-year period without approval of at
least two-thirds of the persons who were directors at the beginning of such
period. Within the greater of twelve months or the remaining employment term at
the effective date of any Change in Control, the executive officers have the
option of receiving as severance: (1) the amount payable if Ledger Bank
terminated employment for reasons other than death, disability, retirement or
for cause; or (2) an amount equal to the salary payments for the then-remaining
employment term (which at the executive's election may be payable in one lump
sum). In either case, the executive officers are entitled to all qualified
retirement and other benefits in which they were vested. If the severance
benefits payable following a Change in Control would constitute "parachute
payments" within the meaning of Section 280G(b)(2) of the Internal Revenue Code,
and the present value of such "parachute payments" equals or exceeds three times
their average annualized includable income for the five calendar years preceding
the year in which a Change in Control occurred, the severance benefits will be
reduced to an amount equal to the present value of 2.99 times the average annual
compensation paid to the executive officers during the five years immediately
preceding such Change in Control.
In fiscal 2000, Ledger and Ledger Bank entered into employment agreements
with Messrs. Smessaert, Gilbert, Thompson and Ms. Borst that are intended to
supplement certain provisions contained in their employment agreements with
Ledger Bank. Neither of the employment agreements are intended to provide
duplicate payments or benefits that are provided under the agreements previously
executed. The employment
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agreements with Ledger Bank provide that Ledger may reimburse Ledger Bank for
any compensation paid to each of Messrs. Smessaert, Gilbert, Thompson and Ms.
Borst pursuant to such agreements as jointly determined by the boards of
directors of Ledger and Ledger Bank to reflect appropriately the allocation of
the executive's time between Ledger and Ledger Bank affairs. The employment
agreements with Ledger provide that Ledger shall pay the executive the entire
amount of any unpaid severance that is not paid to the executive as a result of
the Change in Control restrictions under their employment agreements with Ledger
Bank. In addition, as noted above, under applicable law, a 20% excise tax would
be triggered by change-in-control related payments that equal or exceed three
times the executives' annual compensation over the five years preceding the
Change in Control. The employment agreements with Ledger provide that to the
extent payments related to a Change in Control are subject to the excise tax,
Ledger will provide the executives with an additional amount sufficient to
enable the executives to retain the full value of the change in control benefits
as if the excise tax had not applied.
EXECUTIVE EMPLOYEE SUPPLEMENTAL COMPENSATION AGREEMENT
In December 1998, Ledger Bank entered into a Supplemental Compensation
Agreement (the "SERP") with Mr. Smessaert and Mr. Gilbert. The SERP supercedes
the Executive Salary Continuation Agreement of August 1992 between Ledger Bank
and Mr. Smessaert. Pursuant to the SERP, Ledger Bank agreed to pay Mr. Smessaert
and Mr. Gilbert an annual benefit of $115,000 and $100,000, respectively, upon
their retirement at age 65 or upon their attainment of age 65 following an
involuntary termination or a termination subsequent to a Change in Control.
"Change in Control" as used in this subsection means any change in control
required to be reported under the federal securities laws, as well as the
acquisition by any person of 25% or more of Ledger's or Ledger Bank's
outstanding voting securities. In an effort to provide "golden handcuffs," the
SERP provides that in the event of a voluntary termination of employment prior
to age 65, the benefit commencement date will extend significantly beyond 65.
The SERP provides benefits to Mr. Smessaert and Mr. Gilbert for life once the
payments commence. In the event of death while employed at Ledger Bank, Ledger
Bank will pay their designated beneficiaries approximately $2.3 million and $2.0
million, respectively, payable in equal monthly installments over a 20-year
period. In the event of death within 20 years after retirement, Ledger Bank will
pay their designated beneficiaries the remaining monthly payments.
The SERP agreements contain restrictive covenants which provide that Mr.
Smessaert or Mr. Gilbert would forfeit any further benefits under the SERP if
they commence employment with another competitive financial institution for a
period of 18 months following any voluntary termination of employment (excluding
termination caused by a Change in Control). Ledger Bank has purchased two
single-premium annuity policies on the life of Mr. Smessaert designating Ledger
Bank as beneficiary to fund Ledger Bank's anticipated obligations under the
SERP. In addition, in September 1998, Ledger Bank purchased split-dollar life
insurance policies on the lives of Mr. Smessaert and Mr. Gilbert to provide
their beneficiaries a death benefit of $1.0 million each and to additionally
fund Ledger Bank's anticipated obligations under the SERP.
ANNUAL INCENTIVE PLAN
In August 1995, Ledger Bank's board of directors adopted the West Allis
Savings Bank Annual Incentive Plan (the "Incentive Plan") which was effective
for the fiscal year ending June 30, 2001. The Incentive Plan is designed to
provide annual incentive opportunity targets that are consistent with Ledger
Bank's executive compensation philosophy and current competitive median market
compensation practices. Under the Incentive Plan, the Chief Executive Officer,
Executive Vice President/Chief Operating Officer and Senior Vice Presidents of
Ledger Bank earn incentive compensation if Ledger achieves targets set by the
Compensation Committee on an annual basis for net income of Ledger. The amount
of incentive compensation earned will be a percentage of each officer's base
salary and will be dependent upon whether Ledger achieves threshold, target and
maximum levels of net income. The threshold, target and maximum net income
levels and the corresponding percentages of base salary applicable to
computation of incentive compensation will be established at the beginning of
each fiscal year by the Compensation
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Committee of Ledger Bank. If the financial performance of Ledger is such that
the threshold net income level is not achieved, no incentive compensation will
be earned. For fiscal year 2001, if the threshold level set for net income was
achieved, the Incentive Plan provides for incentive payments as follows: (1)
20.0% of the Chief Executive Officer's base salary; (2) 17.5% of the Executive
Vice President/Chief Operating Officer's base salary; and (3) 12.5% of the
Senior Vice Presidents' base salaries. If the target level set for net income is
achieved, the Incentive Plan provides for incentive payments as follows: (1)
40.0% of the Chief Executive Officer's base salary; (2) 35.0% of the Executive
Vice President/Chief Operating Officer's base salary; and (3) 25.0% of the
Senior Vice Presidents' base salaries. If the maximum level set for net income
is achieved, the Incentive Plan provides for incentive payments as follows: (1)
60.0% of the Chief Executive Officer's base salary; (2) 52.5% of the Executive
Vice President/Chief Operating Officer's base salary; and (3) 37.5% of the
Senior Vice Presidents' base salaries. Incentive payments for achievement of net
income at levels within the range set by the threshold, target and maximum
levels will be based upon interpolated percentages. Incentive compensation will
not exceed the percentages of base salary set for the maximum net income level
if Ledger's net income exceeds the maximum net income level. The Incentive Plan
is administered by the Compensation Committee of Ledger Bank's board of
directors. Prior to the payment of incentive compensation, the Compensation
Committee will certify that the net income levels were achieved.
INCENTIVE STOCK OPTION PLAN
In connection with the Conversion, Ledger's board of directors adopted the
Incentive Stock Option Plan. All officers and employees of Ledger and its
subsidiaries are eligible to participate in the Incentive Stock Option Plan.
At June 30, 2001, Ledger and its subsidiaries had 78 eligible officers and
employees. The Incentive Stock Option Plan authorizes the grant of (1) options
to purchase shares of Common Stock intended to qualify as incentive stock
options under Section 422A of the Internal Revenue Code ("Incentive Stock
Options"), (2) options that do not so qualify ("Non-Statutory Options"), and (3)
options which are exercisable only upon a change in control of Ledger or Ledger
Bank ("Limited Rights"). Options for a total of 369,920 shares of Ledger stock
were made available for granting to eligible participants under the Incentive
Stock Option Plan, and options to purchase 31,862 shares of Ledger stock
remained available for future grant at June 30, 2001.
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The following tables set forth certain information concerning individual
grants of stock options to each of the executive officers named in the Summary
Compensation Table during the fiscal year ended June 30, 2001.
OPTION GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
INDIVIDUAL GRANTS
-------------------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO PER-SHARE
OPTIONS EMPLOYEES IN EXERCISE PRICE GRANT DATE
NAME GRANTED FISCAL YEAR(1) ($/SH) EXPIRATION DATE PRESENT VALUE(2)
---- ---------- ---------------- -------------- --------------- ----------------
James D. Smessaert(3)....... 15,000 32.75% $10.69 9/28/10 $41,700
Peter A. Gilbert(3)......... 10,500 22.93 10.69 9/28/10 29,190
Arthur E. Thompson(4)....... 2,000 4.37 9.75 8/22/10 5,560
Elizabeth S. Borst(4)....... 2,000 4.37 9.75 8/22/10 5,560
</Table>
---------------
(1) Options to purchase 45,800 shares of common stock were granted to eligible
participants under the Incentive Stock Option Plan during the fiscal year
ended June 30, 2001.
(2) Based on a binomial option pricing model, adopted for use in valuing stock
options, based upon the following variable assumptions: (i) a ten year
option term; (ii) a volatility statistic of 12.0%; (iii) a dividend yield of
2.0% for Ledger; and (iv) the actual value, if any, an executive may realize
will depend upon the excess of the stock price over the exercise price on
the date the option is exercised. There is no assurance the value realized
will be at or near the value estimated by the binomial pricing model.
(3) The options granted are subject to a vesting schedule under the Incentive
Stock Option Plan and are subject to Ledger obtaining minimum levels of net
income for fiscal 2001, 2002 and 2003. The options are exercisable as
follows:
<Table>
<Caption>
MINIMUM LEVEL OF
FISCAL YEAR MR. SMESSAERT MR. GILBERT NET INCOME
----------- ------------- ----------- ----------------
2001........................................ 4,000 3,000 $2.7 million
2002........................................ 5,000 3,500 $3.1 million
2003........................................ 6,000 4,500 $3.9 million
</Table>
(4) The options are subject to a vesting schedule under the Incentive Stock
Option Plan and are exercisable as follows: (i) Mr. Thompson:
400 -- 8/22/02; 400 -- 8/22/03; 400 -- 8/22/04; 400 -- 8/22/05 and
400 -- 8/22/06; and (ii) Ms. Borst: 400 -- 8/22/01; 400 -- 8/22/02;
400 -- 8/22/03; 400 -- 8/22/04; and 400 -- 8/22/05.
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The following table sets forth certain information concerning the exercise
of stock options granted under the Incentive Stock Option Plan by the named
executive officers during the fiscal year ended June 30, 2001, and the value of
their unexercised stock options at June 30, 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<Table>
<Caption>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR END FISCAL YEAR END(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
EXERCISE REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
James D. Smessaert....... 2,000 $11,500 125,486 28,200 $1,430,441 $156,520
Peter A. Gilbert......... -- -- 41,200 19,300 398,724 103,440
Arthur E. Thompson....... -- -- 37,244 4,400 420,959 23,160
Elizabeth S. Borst....... -- -- 5,600 4,400 36,600 12,760
</Table>
---------------
(1) The Value of Unexercised In-the-Money Options is based upon the difference
between the fair market value of the securities underlying the options
($16.13) and the exercise price of the options at June 30, 2001.
(2) The value realized was calculated based upon the difference between the fair
market value of the shares of Ledger stock subject to the exercised options
on the exercise date and the exercise price of the options.
DIRECTORS' COMPENSATION
BOARD FEES
The Ledger board of directors meets at least quarterly and received $250
for each regular or special board meeting attended during the fiscal year ended
June 30, 2001. For the fiscal year ended June 30, 2001, each member of Ledger
Bank's board of directors received a $1,350 monthly meeting fee.
DIRECTORS' EMERITUS PROGRAM
On July 20, 1994, Ledger Bank adopted a Directors' Emeritus Program (the
"Emeritus Program") that provides for an annual payment equal to 50% of the
annual retainer fee paid to eligible directors. Under the Emeritus Program, an
eligible director is defined as a director whose service as a director
terminates on or after the director has attained age 70. The mandatory
retirement age for directors of Ledger Bank is 70. For eligible directors who
attained age 70 on or prior to July 1, 1996, the annual payments shall continue
until the eligible director's death. For eligible directors who did not attain
age 70 on or prior to July 1, 1996, the annual payments shall continue until the
earlier of: (1) the eligible director's death; or (2) five years from the date
the eligible director's board service shall have terminated.
In addition, each eligible director who attained age 70 on or prior to July
1, 1996 receives health insurance (single and family coverage) under the health
plan maintained by Ledger Bank until the eligible director's death. Eligible
directors who did not attain age 70 on or prior to July 1, 1996 are not entitled
to health insurance benefits under the Emeritus Program.
In the event of a Change in Control (as defined in the Emeritus Program) of
Ledger Bank, or a merger or other business combination involving Ledger Bank in
which Ledger Bank is not the resulting entity, the rights and obligations of
Ledger Bank under the Emeritus Program shall become the rights and obligations
of the successor or acquiring entity.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
In connection with the Conversion, Ledger's board of directors adopted the
Hallmark Capital Corp. 1993 Stock Option Plan for Outside Directors of Ledger
and Ledger Bank (the "Directors' Plan"). Options to purchase 153,980 shares of
Ledger stock were made available for granting to Outside Directors under the
Directors' Plan, and options to purchase 18,500 shares of Ledger stock remained
available for future grant at June 30, 2001. All options granted under the
Directors' Plan expire upon the earlier of ten years following the date the
option was granted or one year following the date the optionee ceases to be a
director.
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COMPENSATION COMMITTEE REPORT
The Report of the Compensation Committee on Executive Compensation shall
not be deemed incorporated by reference by any general statement into any filing
under the Securities Act or 1933, as amended (the "Securities Act") or the
Exchange Act, except to the extent Ledger specifically incorporates such
information by reference, and shall not otherwise be deemed filed under the
Securities Act or Exchange Act.
COMPENSATION COMMITTEE
I. ROLE OF THE COMPENSATION COMMITTEE
The Compensation Committee of the board of directors of Ledger and Ledger
Bank consists of the outside directors, Messrs. Rickheim (Chairman), Hislop and
Hedrich. During the fiscal year ended June 30, 2001, Ledger did not pay separate
compensation to its executive officers. During fiscal 2001, the Compensation
Committee met to review and ratify the compensation policies set, and the
decisions made, by Ledger Bank's board of directors. All executive officer
compensation was paid by Ledger Bank and compensation policies were determined
by the Compensation Committee of Ledger Bank. The term "Compensation Committee"
in this report refers to the Compensation Committee of Ledger and Ledger Bank.
II. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed entirely of independent outside
directors that are not former officers or employees of Ledger or any of its
subsidiaries. There are no interlocks, as defined under the rules and
regulations of the SEC, between the Compensation Committee and corporate
affiliates of members of the Compensation Committee.
III. COMPENSATION COMMITTEE REPORT
Under rules established by the SEC, Ledger is required to provide certain
data and information regarding the compensation and benefits provided to
Ledger's Chief Executive Officer and certain other executive officers of Ledger.
The rules require compensation disclosure in the form of tables and a report of
the Compensation Committee that explains the rationale and considerations that
led to fundamental compensation decisions affecting such individuals. The
Compensation Committee has prepared the following report, at the direction and
approval of Ledger's board of directors, for inclusion in this proxy
statement/prospectus.
EXECUTIVE COMPENSATION PHILOSOPHY
The primary objective of Ledger's executive compensation policy is to
attract and retain highly skilled and motivated executive officers that will
manage Ledger and Ledger Bank in a manner to promote growth and profitability.
In recommending and establishing levels of executive compensation, it is the
policy of the Compensation Committee to consider the following factors: (1) the
individual performance of the executive; (2) the executive's contribution to
achievement of the strategic business plan of Ledger and Ledger Bank; (3) the
executive's experience and responsibility level during the present period and
anticipated responsibilities during the following fiscal year; and (4)
compensation levels for executives of comparable financial institutions. The
executive compensation program consists of three elements: (1) base salary and
incentive compensation; (2) long-term incentive compensation; and (3) retirement
and other benefits.
BASE SALARY AND INCENTIVE COMPENSATION
Base salary levels are designed to be competitive with cash compensation
levels paid to similar executives at financial institutions of similar size,
giving due consideration to the competitive market in which Ledger and Ledger
Bank operate. Base salaries are subject to review and adjustment by the
Compensation Committee each year. In fiscal 2001, the average increase in base
salary for executive officers was 4.0%.
In August 1995, Ledger Bank's board of directors adopted the West Allis
Savings Bank Annual Incentive Plan ("Incentive Plan"), which was effective for
the fiscal year ending June 30, 2001. The Incentive Plan is intended to
accomplish the following objections: (1) reward key individuals for achieving
pre-established financial and non-financial goals that support Ledger's and
Ledger Bank's annual business objectives;
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(2) encourage and reinforce effective teamwork and individual contributions
toward Ledger and Ledger Bank goals; and (3) provide an incentive opportunity
that will enable Ledger and Ledger Bank to attract, motivate and retain
outstanding executives.
For fiscal 2001, Ledger did not achieve a net income level that exceeded
the target level of net income established by Ledger Bank's board of directors
under the Incentive Plan for Messrs. Smessaert and Gilbert. Therefore, no
incentive compensation was paid to Messrs. Smessaert or Gilbert for fiscal 2001.
However, Ledger did achieve a net income level that exceeded the target level of
net income established by Ledger Bank's board of directors under the Incentive
Plan for Mr. Thompson and Ms. Borst. As such, Mr. Thompson and Ms. Borst were
each paid a cash bonus for fiscal 2001 in the amounts of $11,500 and $11,000,
respectively. For a further discussion of the Incentive Plan, see "COMPENSATION
OF EXECUTIVE OFFICERS AND DIRECTORS -- Annual Incentive Plan" on page 81.
In May 2001, Ledger restated its previously reported results of operations
for the fiscal year ended June 30, 2000, as a result of a mathematical error in
the way in which interest income was being accrued on certain purchased
commercial real estate mortgage and multi-family residential loans. The error
resulted from an inadvertent erroneous set-up of the loans in Ledger's
outsourced data processing system. The effect of the restatement for fiscal 2000
was an increase in interest income of $543,000, an increase in non-interest
expense of $146,000, for additional compensation required to be accrued under
the Incentive Plan, and an increase in net income of $241,000. At the close of
fiscal 2000 and prior to the restatement, Ledger had not achieved a net income
level that exceeded the target level of net income established by Ledger Bank's
board of directors under the Incentive Plan for executive officers. Therefore,
no incentive compensation was paid to executive officers for fiscal 2000.
However, as a result of the restatement, Ledger did achieve a net income level
that exceeded the target level of net income established by Ledger Bank's board
under the Incentive Plan for executive officers for fiscal 2000. Consequently,
in fiscal 2001, Messrs. Smessaert, Gilbert, Thompson and Ms. Borst were each
paid a cash bonus for fiscal 2000 equal to $62,654, $43,815, $20,300 and
$19,941, respectively. These cash bonuses were accrued and expensed in fiscal
2000 as part of the restatement of results for fiscal 2000. For a further
discussion of the Incentive Plan, see "COMPENSATION OF EXECUTIVE OFFICERS AND
DIRECTORS -- Annual Incentive Plan" on page 81.
LONG-TERM INCENTIVE COMPENSATION
Ledger Bank established the Incentive Stock Option Plan in fiscal 1994 as a
method of providing officers and employees of Ledger Bank with a proprietary
interest in Ledger and to encourage such persons to remain with Ledger Bank. All
officers and employees of Ledger are eligible to participate in the Incentive
Stock Option Plan. The option awards are designed to align the financial
interests of Ledger's executive officers more closely with Ledger's
shareholders. During fiscal 2001, non-qualifying stock options to purchase
29,500 shares of Ledger stock were awarded to senior executive officers of
Ledger and Ledger Bank.
RETIREMENT AND OTHER BENEFITS
In December 1998, Ledger Bank and Messrs. Smessaert and Gilbert entered
into Supplemental Compensation Agreements ("SERP") to ensure that such
executives continue to provide services to Ledger Bank and to provide an
incentive for such executives to refrain from providing services to a competitor
of Ledger Bank. Pursuant to the SERP, Ledger Bank will pay Messrs. Smessaert and
Gilbert annually $115,000 and $100,000, respectively, upon the attainment of
certain events. The benefits under the SERP are forfeited in the event such
executive commences employment for a competitor of Ledger Bank. For a further
description of the SERPs, see "COMPENSATION OF EXECUTIVE OFFICERS AND
DIRECTORS -- Executive Employee Supplemental Compensation Agreement" on page 81.
Additional retirement and other benefits provided to executive officers are the
same as those benefits provided to all employees of Ledger Bank, including
participating in the ESOP, the West Allis Savings Bank 401(k) Plan (in which Mr.
Smessaert does not participate) and comprehensive health insurance, life
insurance and short-term and long-term disability insurance.
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Under the ESOP, benefits may be payable upon death, retirement, early
retirement, disability or separation from service. Benefits may be paid either
in shares of Ledger stock or in cash. On March 15, 2001, Ledger Bank contributed
$139,181 to the ESOP and allocations of shares of Ledger stock were based upon
compensation paid to participants for the year ended December 31, 2000.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation paid to the President and Chief Executive Officer of
Ledger and Ledger Bank, James D. Smessaert, during fiscal 2001 was consistent
with Ledger's overall executive compensation philosophy. Based upon the
compensation philosophy of Ledger Bank, Mr. Smessaert's competitively determined
base salary under his employment agreement was increased 3.5% from fiscal 2000
to $177,137 effective January 1, 2001. Mr. Smessaert receives no additional
payment for serving as a member of the board of directors of Ledger or Ledger
Bank.
There was no cash bonus paid to Mr. Smessaert for fiscal 2001 pursuant to
the Incentive Plan. The cash bonus reflected Ledger's financial performance
relative to net income levels of Ledger established by the Compensation
Committee. During fiscal 2001, Ledger did not achieve a net income level that
exceeded the target level of net income established by Ledger's board of
directors under the Incentive Plan. For a further description of the Incentive
Plan, see "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS -- Annual Incentive
Plan" on page 81. Mr. Smessaert was granted options to purchase 15,000 shares of
Ledger stock under the Incentive Stock Option Plan during fiscal 2001. The
options vest according to the following performance-based schedule: 4,000
options vest on June 30, 2001 if net income of $2.7 million is achieved for
fiscal 2001; 5,000 options vest on June 30, 2002 if net income of $3.1 million
is achieved for fiscal 2002; and 6,000 options vest on June 30, 2003 if net
income of $3.9 million is achieved for fiscal 2003. All of the aforementioned
15,000 options granted in fiscal 2001 to Mr. Smessaert would vest immediately
upon a change in control of Ledger.
COMPENSATION COMMITTEE
Charles E. Rickheim
Reginald M. Hislop, III
Martin Hedrich, Jr.
AUDIT COMMITTEE REPORT
The Report of the Audit Committee shall not be deemed incorporated by
reference by any general statement into any filing under the Securities Act or
the Exchange Act, except to the extent Ledger specifically incorporates such
information by reference, and shall not otherwise be deemed filed under the
Securities Act or the Exchange Act.
I. AUDIT COMMITTEE COMPOSITION AND FUNCTION
The members of the Audit Committee are appointed by the Chairman of the
Board of Ledger and are approved by Ledger's board of directors. At June 30,
2001, the Audit Committee was composed of three independent directors of Ledger,
Messrs. Zellmer (Chairman), Hislop and Rickheim. Each of the current members of
the Audit Committee is "independent" as defined by The Nasdaq Stock Market, Inc.
("Nasdaq") listing standards. These listing standards include qualitative and
quantitative requirements regarding the independence and qualifications of Audit
Committee members and the size of the Audit Committee.
The Audit Committee acts pursuant to a written charter adopted and approved
by Ledger's board of directors on June 27, 2000 (the "Charter"). The Audit
Committee is responsible for assisting Ledger's board in its oversight
responsibilities regarding Ledger's auditing, accounting and financial reporting
process. Consistent with this function, the Audit Committee encourages
continuous improvement of, and adherence to, Ledger's policies, procedures and
practices at all levels related to the financial control and reporting process.
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Ledger's independent auditors, KPMG LLP ("KPMG"), are responsible for
auditing Ledger's financial statements and expressing an opinion as to their
conformity with generally accepted accounting principles. The members of the
Audit Committee are not professionally engaged in the practice of auditing or
accounting and are not experts in the fields of accounting or auditing,
including the area of auditor independence. Members of the Audit Committee rely
without independent verification on the information provided to them and on the
representations made by management and KPMG. Accordingly, the Audit Committee's
oversight does not provide an independent basis to determine that management has
maintained appropriate accounting and financial reporting principles or
appropriate internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations.
II. AUDIT COMMITTEE ACTIONS IN FISCAL 2001
In fiscal 2001, in connection with its oversight function, the Audit
Committee met with KPMG. Pursuant to Statement on Auditing Standards ("SAS") No.
90 (Audit Committee Communications), KPMG discussed various matters relating to
Ledger's financial results for fiscal 2001 and discussed matters required to be
discussed by SAS No. 61 (Communication with Audit Committees). KPMG also
provided the Audit Committee with the written disclosures required by
Independence Standards Board Standard ("ISBS") No. 1 (Independence Discussions
with Audit Committees), disclosing any relationships between KPMG and Ledger and
stating that in its professional judgment KPMG believes that it is "independent"
with respect to Ledger within the meaning of the Securities Act and the Exchange
Act.
The Audit Committee also has reviewed written confirmations from management
with respect to information technology consulting services relating to financial
information systems design and implementation and internal audit services
provided by the auditors ("non-audit services"). The Audit Committee has
considered whether the provision of such non-audit services by KPMG to Ledger is
compatible with maintaining KPMG's independence and has discussed with them
their independence.
Each year the Audit Committee is responsible for providing Ledger's board
of directors with a recommendation as to whether Ledger's annual financial
statements should be included in Ledger's Annual Report on Form 10-K filed with
the SEC. Based on the Audit Committee's discussions with Ledger's management and
KPMG concerning the fiscal year 2001 audit, the financial statements and related
review process and other matters deemed relevant and appropriate by the Audit
Committee, and subject to the limitations on the role and responsibilities of
the Audit Committee referred to above and in the Charter, the Audit Committee
met in August 2001 to issue this Audit Committee Report and recommended to
Ledger's board that Ledger's fiscal 2001 financial statements be included in the
2001 Annual Report on Form 10-K filed with the SEC.
August 27, 2001
AUDIT COMMITTEE
Reginald M. Hislop, III
Charles E. Rickheim
Donald A. Zellmer
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PERFORMANCE GRAPH
The following graph shows semi-annual comparisons of Ledger's cumulative
shareholder return on Ledger stock with (1) the cumulative total return on
stocks included in The Nasdaq Stock Market Index (for United States companies)
and (2) the cumulative total return on stocks included in the SNL Thrift Index,
published by SNL Securities, Charlottesville, Virginia, commencing on June 30,
1996 through June 30, 2001. The cumulative returns set forth below for each
index assume the reinvestment of dividends into additional shares of the same
class of equity securities at the frequency with which dividends were paid on
such securities during the applicable comparison period.
COMPARISON OF ANNUAL CUMULATIVE TOTAL RETURN
AMONG LEDGER, NASDAQ STOCK MARKET (U.S.) INDEX
AND SNL THRIFT INDEX(1)
[PERFORMANCE GRAPH]
<Table>
<Caption>
PERIOD ENDING
--------------------------------------------------------------------
INDEX 06/30/96 06/30/97 06/30/98 06/30/99 06/30/00 06/30/01
----- -------- -------- -------- -------- -------- --------
Ledger Capital Corp. ................. $100.00 $142.51 $186.67 $155.00 $123.59 $222.90
Nasdaq Total US....................... 100.00 121.60 160.06 230.22 340.37 184.51
SNL Thrift Index...................... 100.00 161.86 219.18 185.92 156.36 270.69
</Table>
---------------
(1) Assumes $100.00 invested on June 30, 1996, and all dividends reinvested
through the end of Ledger's fiscal year on June 30, 2001. Ledger did not pay
dividends during the period from June 30, 1996 to June 30, 2001. The
performance chart is based upon closing prices on the trading day specified
(as adjusted to reflect Ledger's 2-for-1 stock split in November 1997).
The Performance Graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement/prospectus
with any filing under the Securities Act or the Exchange Act, except to the
extent Ledger specifically incorporates this information by reference, and shall
not otherwise be deemed filed under the Securities Act or the Exchange Act.
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INDEBTEDNESS OF MANAGEMENT AND CERTAIN TRANSACTIONS
Current federal law requires that loans or extensions of credit to
executive officers and directors must be made only (1) on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with the general public and must not involve more
than the normal risk of repayment or present other unfavorable features, or (2)
pursuant to benefit or compensation programs that are widely available to
employees of Ledger Bank and that do not give such executive officers and
directors preference over other Ledger Bank employees. In addition, loans made
to a director or executive officer in excess of the greater of $25,000 or 5% of
Ledger Bank's capital and surplus (up to a maximum of $500,000) must be approved
in advance by a majority of the disinterested members of Ledger Bank's board of
directors.
Ledger Bank's policy provides that loans or extensions of credit to
executive officers and directors will be made only in the ordinary course of
business (i.e., on substantially the same terms, including interest rates and
collateral, 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), or in accordance with the terms of
nonpreferential benefit or compensation plans generally available to Ledger Bank
employees. All loans since the enactment of current laws were made by Ledger
Bank in the ordinary course of business or pursuant to non-preferential benefit
or compensation plans generally available to Ledger Bank employees.
Ledger and Ledger Bank intend that all transactions in the future between
Ledger and Ledger Bank and executive officers, directors, holders of 10% or more
of the shares of any class of Ledger stock and affiliates thereof, will be made
only in the ordinary course of business or pursuant to nonpreferential benefit
or compensation programs generally available to Ledger Bank employees.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Exchange Act requires Ledger's officers and directors,
and persons who own more than ten percent of the shares of Ledger stock
outstanding, to file reports of ownership and changes in ownership with the SEC
and the National Association of Securities Dealers, Inc. Officers, directors and
greater than ten percent shareholders are required by regulation to furnish
Ledger with copies of all Section 16(a) forms they file. Based upon review of
the information provided to Ledger, Ledger believes that during the fiscal year
ended June 30, 2001, officers, directors and greater than ten percent
shareholders complied with all Section 16(a) filing requirements.
SHAREHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS FOR INCLUSION IN 2002 PROXY
MATERIALS
Any proposal that a shareholder wishes to have included in the proxy
materials of Ledger relating to the 2002 annual meeting of the shareholders of
Ledger, which is scheduled to be held in October 2002 in the event that the
merger is not consummated, must be received at the principal executive offices
of Ledger, 5555 North Port Washington Road, Glendale, WI 53217, Attention: Peter
A. Gilbert, Corporate Secretary, no later than May 24, 2002. If such proposal is
in compliance with all of the requirements of Rule 14a-8 under the Exchange Act,
it will be included in the proxy statement and set forth on the form of proxy
issued for such annual meeting of shareholders. It is urged that any such
proposals be sent certified mail, return receipt requested.
Nothing in this section shall be deemed to require Ledger to include in its
proxy statement and proxy relating to the 2002 annual meeting any shareholder
proposal which does not meet all of the requirements for inclusion established
by the SEC in effect at the time such proposal is received.
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ADVANCE NOTICE REQUIREMENT FOR ANY PROPOSAL OR NOMINATION TO BE RAISED BY A
SHAREHOLDER
Shareholder proposals that are not submitted for inclusion in Ledger's
proxy materials pursuant to Rule 14a-8 under the Exchange Act may be brought
before an annual meeting pursuant to Article VII of Ledger's articles of
incorporation. For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of Ledger. To be timely, a shareholder's notice must be delivered
to or mailed by first class United States mail, postage prepaid, to the
principal executive offices of Ledger not later than the close of business on
the tenth day following the day on which notice of such annual meeting is first
given to shareholders. A shareholder's notice must set forth certain information
in accordance with Article VII of Ledger's articles of incorporation. The
advance notice must include the shareholder's name and address, as they appear
on Ledger's record of shareholders, the class and number of shares of Ledger
stock beneficially owned by such shareholder, a brief description of the
proposed business, the reason for considering such business at the annual
meeting and any material interest of the shareholder in the proposed business.
In the case of nominations for elections to the board of directors, certain
information regarding the nominee must be provided.
DISCRETIONARY VOTING OF 2002 PROXIES
Pursuant to Rule 14a-4(c) under the Exchange Act and Article VII of
Ledger's articles of incorporation, if a shareholder who intends to present a
proposal at the 2002 annual meeting timely and properly notifies Ledger of such
proposal at least ten days after mailing of the 2002 proxy statement, as
described above, management proxies may not use their discretionary voting power
for such proposal unless Ledger sends to shareholders information on the matter
to be presented at the meeting and how the management proxies intend to exercise
their discretionary vote of such matter.
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING
Ledger's board of directors knows of no business that will be presented for
consideration at the meeting other than as stated in the Notice of Annual
Meeting of Shareholders. If, however, other matters are properly brought before
the meeting or any adjournments or postponements thereof, 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 judgment.
LEGAL MATTERS
The validity of the issuance of Anchor common stock being offered hereby
will be passed upon for Anchor by Whyte Hirschboeck Dudek S.C., Milwaukee,
Wisconsin.
Certain legal matters will be passed upon for Ledger by Michael Best &
Friedrich LLP, Milwaukee, Wisconsin.
EXPERTS
The consolidated financial statements of Anchor at March 31, 2001 and 2000,
and for each of the three years in the period ended March 31, 2001, included in
Anchor's 2001 Annual Report on Form 10-K which is incorporated by reference in
this proxy statement/prospectus have been audited by Ernst & Young LLP,
independent auditors, to the extent indicated in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements have been incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
The consolidated statements of income, shareholders' equity, and cash flows
of FCB Financial Corp. for the year ended March 31, 1999, included in Anchor's
2001 Annual Report on Form 10-K/A, which is incorporated by reference in this
proxy statement/prospectus had been audited by Wipfli Ullrich Bertelson LLP,
independent auditors, to the extent indicated in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements have been incorporated herein by reference in reliance upon such
report given on
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the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Ledger at June 30, 2001 and 2000
and for each of the years in the three-year period ended June 30, 2001, have
been incorporated by reference in this proxy statement/prospectus in reliance
upon the report of KPMG LLP, independent certified public accountants, and are
incorporated by reference herein, and upon the authority of KPMG LLP as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Anchor has filed a registration statement with the SEC under the Securities
Act that registers the distribution to Ledger shareholders of Anchor common
stock to be issued in the merger. The registration statement, including the
attached exhibits and schedules, contains additional relevant information about
Anchor and Ledger. The rules and regulations of the SEC allow us to omit such
information from this document.
In addition, we file reports, proxy statements and other information with
the SEC under the Exchange Act. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. You may read and copy this
information at the following locations of the SEC:
<Table>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, DC 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</Table>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, DC
20549, at prescribed rates. The SEC also maintains an Internet world wide web
site that contains reports, proxy statements and other information about
issuers, including Anchor and Ledger, who file electronically with the SEC. The
address of that site is http://www.sec.gov.
The SEC allows us to "incorporate by reference" information into this
document. This means that the companies can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be a part of this
document, except for any information that is superseded by information that is
included directly in this document.
This document incorporates by reference the documents listed below that we
have previously filed with the SEC. They contain important information about our
companies and their financial condition. Some of these filings have been amended
by later filings, which are also listed.
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<Table>
<Caption>
ANCHOR SEC FILINGS (FILE NO. 0-20006)
REPORT DESCRIPTION OR PERIOD/AS OF DATE
------ ---------------------------------------------
Annual Report on Form 10-K................... Year ended March 31, 2001.
Registration Statement on Form S-1 filed with
the Commission on March 19, 1992
(Commission File No. 33-46536)............. Description of Anchor stock contained in the
Prospectus included in the Registration
Statement under the caption "Description of
Capital Stock."
Registration Statement on Form 8-A........... Dated July 28, 1997, relating to Series A
Preferred Share Purchase Rights.
Current Report on Form 8-K................... Filed on June 25, 2001, relating to the
execution of the merger agreement and the
stock option agreement.
Current Report on Form 8-K................... Filed on August 8, 2001, relating to the
issuance of a press release announcing
financial results for the quarter ended June
30, 2001.
</Table>
<Table>
<Caption>
LEDGER SEC FILINGS (000-22224)
REPORT DESCRIPTION OR PERIOD/AS OF DATE
------ ---------------------------------------------
Annual Report on Form 10-K................... Year ended June 30, 2001.
Quarterly Reports on Form 10-Q............... Quarters ended September 30, 2000, December
31, 2000 and March 31, 2001.
Registration Statement on Form 8-A........... Dated February 21, 1997 relating to Series A
Preferred Share Purchase Rights.
Current Report on Form 8-K................... Filed on June 18, 2001, relating to the
execution of the merger agreement and stock
option agreement.
Current Report on Form 8-K................... Filed on July 27, 2001, relating to the
issuance of a press release announcing
financial results for the fiscal year and
quarter ended June 30, 2001.
</Table>
We incorporate by reference additional documents that either company may
file with the SEC between the date of this document and the date of the Anchor
meeting and the Ledger meeting. These documents include periodic reports, such
as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements.
You can obtain any of the documents incorporated by reference in this
document from the SEC through the SEC's web site at the address provided above.
Documents incorporated by reference are available from the companies without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this proxy
statement/prospectus. You can obtain documents incorporated by reference in this
proxy statement/prospectus by requesting them in writing or by telephone from
the appropriate company at the following addresses:
Anchor BanCorp Wisconsin Inc.
25 West Main Street
Madison, WI 53707
Attention: Investor Relations
Telephone: (608) 252-1810
Ledger Capital Corp.
5555 North Port Washington Rd.
Glendale, WI 53217
Attention: Investor Relations
Telephone: (414) 290-7900
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, YOU MUST DO SO BY OCTOBER 10, 2001
TO RECEIVE THEM BEFORE THE MEETING. If you request any incorporated documents
from us, we will mail them to you by first class mail, or another equally prompt
93
99
means, within one business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that differs from, or adds to,
the information in this document or in our documents that are publicly filed
with the SEC. Therefore, if anyone does give you different or additional
information, you should not rely on it.
If you are in a jurisdiction where it is unlawful to offer to exchange or
sell, or to ask for offers to exchange or buy, the securities offered by this
proxy statement/prospectus or to ask for proxies, or if you are a person to whom
it is unlawful to direct such activities, then the offer presented by this
document does not extend to you.
The information contained in this proxy statement/prospectus speaks only as
of its date unless the information specifically indicates that another date
applies. Information in this document about Anchor has been supplied by Anchor,
and information about Ledger (including all of the information under the
captions "MATTER 2. ELECTION OF DIRECTORS," "MATTER 3. RATIFICATION OF
APPOINTMENT OF AUDITORS," "MEETINGS OF THE BOARD OF DIRECTORS AND ITS
COMMITTEES," "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS," "COMPENSATION OF
EXECUTIVE OFFICERS AND DIRECTORS," "COMPENSATION COMMITTEE REPORT," "AUDIT
COMMITTEE REPORT," "PERFORMANCE GRAPH," "INDEBTEDNESS OF MANAGEMENT AND CERTAIN
TRANSACTIONS," and "SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE") has been
supplied by Ledger. Neither Anchor or Ledger makes any representations as to the
accuracy or completeness of information contained herein about the other
company.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
101
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
LEDGER CAPITAL CORP.
AND
ANCHOR BANCORP WISCONSIN INC.
JUNE 15, 2001
102
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
AGREEMENT AND PLAN OF MERGER.................................................. A-1
ARTICLE I -- THE MERGER....................................................... A-1
Section 1.1 The Merger.................................................. A-1
Section 1.2 Effective Time.............................................. A-1
Section 1.3 Effect of the Merger........................................ A-1
Section 1.4 Articles of Incorporation; By-Laws.......................... A-1
Board of Directors and Officers of the Surviving
Section 1.5 Corporation................................................. A-2
Section 1.6 Conversion of Securities.................................... A-2
Section 1.7 Adjustments for Dilution and Other Matters.................. A-3
Section 1.8 Exchange of Certificates.................................... A-3
Section 1.9 Stock Transfer Books........................................ A-6
Section 1.10 The Bank Merger............................................. A-6
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... A-7
Section 2.1 Organization and Qualification; Subsidiaries................ A-7
Section 2.2 Articles of Incorporation and By-Laws....................... A-8
Section 2.3 Capitalization.............................................. A-8
Section 2.4 Authority................................................... A-9
Section 2.5 No Conflict; Required Filings and Consents.................. A-9
Section 2.6 Compliance; Permits......................................... A-9
Section 2.7 Environmental Matters....................................... A-10
Section 2.8 Material Contracts.......................................... A-11
Section 2.9 Agreements with Regulatory Agencies......................... A-11
Section 2.10 Loan Loss Reserves.......................................... A-11
Section 2.11 Securities and Banking Reports; Financial Statements........ A-12
Section 2.12 Absence of Certain Changes or Events........................ A-12
Section 2.13 Absence of Litigation....................................... A-13
Section 2.14 Employee Benefit Plans...................................... A-13
Section 2.15 Registration Statement; Proxy Statement/Prospectus.......... A-15
Section 2.16 Taxes....................................................... A-15
Section 2.17 Brokers..................................................... A-16
Section 2.18 Tax Matters................................................. A-16
Section 2.19 Vote Required............................................... A-16
Section 2.20 Disclosure Schedule, Materiality............................ A-16
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR................ A-17
Section 3.1 Organization and Qualification.............................. A-17
Section 3.2 Articles of Incorporation and By-Laws....................... A-17
Section 3.3 Capitalization.............................................. A-17
Section 3.4 Authority................................................... A-18
Section 3.5 No Conflict; Required Filings and Consents.................. A-18
Section 3.6 Compliance; Permits......................................... A-18
Section 3.7 Securities and Banking Reports; Financial Statements........ A-19
Section 3.8 Registration Statement; Proxy Statement/Prospectus.......... A-19
Section 3.9 Brokers..................................................... A-19
Section 3.10 Agreements with Regulatory Agencies......................... A-19
Section 3.11 Vote Required............................................... A-20
Section 3.12 Absence of Certain Changes or Events........................ A-20
Section 3.13 Tax Matters................................................. A-20
Section 3.14 Disclosure Schedule, Materiality............................ A-20
</Table>
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<Table>
<Caption>
PAGE
----
ARTICLE IV -- COVENANTS OF THE COMPANY........................................ A-20
Section 4.1 Affirmative Covenants....................................... A-20
Section 4.2 Negative Covenants.......................................... A-21
Section 4.3 Letter of the Company's Accountants......................... A-22
Section 4.4 Access and Information...................................... A-23
Section 4.5 Update Disclosure; Breaches................................. A-23
Section 4.6 Affiliates.................................................. A-23
Section 4.7 Tax Treatment............................................... A-24
ARTICLE V -- COVENANTS OF THE ACQUIROR........................................ A-24
Section 5.1 Affirmative Covenants....................................... A-24
Section 5.2 Negative Covenants.......................................... A-24
Section 5.3 Notice Regarding Breaches................................... A-24
Section 5.4 Stock Exchange Listing...................................... A-24
Section 5.5 Tax Treatment............................................... A-24
Section 5.6 Access and Information...................................... A-25
Section 5.7 Update Disclosure, Breaches................................. A-25
Section 5.8 Stock Options............................................... A-25
Section 5.9 MRRP Shares................................................. A-26
Section 5.10 SEC Filings................................................. A-26
Section 5.11 SERP Amendments............................................. A-26
ARTICLE VI -- ADDITIONAL AGREEMENTS........................................... A-26
Section 6.1 Proxy Statement/Prospectus; Registration Statement.......... A-26
Section 6.2 Meetings of Shareholders.................................... A-26
Section 6.3 Appropriate Action; Consents; Filings....................... A-26
Section 6.4 Benefit Plans............................................... A-27
Section 6.5 Contracts Honored, Severance Plan, Consulting Contracts..... A-28
Section 6.6 Directors' and Officers' Indemnification and Insurance...... A-28
Section 6.7 Notification of Certain Matters............................. A-29
Section 6.8 Public Announcements........................................ A-29
Section 6.9 Dividends................................................... A-30
Section 6.10 Expenses.................................................... A-30
Section 6.11 Company Repurchase Program.................................. A-30
ARTICLE VII -- CONDITIONS OF MERGER........................................... A-30
Conditions to Obligation of Each Party to Effect the
Section 7.1 Merger...................................................... A-30
Section 7.2 Additional Conditions to Obligations of the Acquiror........ A-31
Section 7.3 Additional Conditions to Obligations of the Company......... A-32
ARTICLE VIII -- TERMINATION, AMENDMENT AND WAIVER............................. A-33
Section 8.1 Termination................................................. A-33
Section 8.2 Effect of Termination....................................... A-34
Section 8.3 Termination by Acquiror in Breach........................... A-35
Section 8.4 Amendment................................................... A-35
Section 8.5 Waiver...................................................... A-35
</Table>
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<Table>
<Caption>
PAGE
----
ARTICLE IX -- GENERAL PROVISIONS.............................................. A-36
Non-Survival of Representations, Warranties and
Section 9.1 Agreements.................................................. A-36
Section 9.2 Enforcement of Agreement.................................... A-36
Section 9.3 Notices..................................................... A-36
Section 9.4 Certain Definitions......................................... A-37
Section 9.5 Headings.................................................... A-37
Section 9.6 Severability................................................ A-38
Section 9.7 Entire Agreement............................................ A-38
Section 9.8 Assignment.................................................. A-38
Section 9.9 Parties in Interest......................................... A-38
Section 9.10 Governing Law............................................... A-38
Section 9.11 Counterparts................................................ A-38
</Table>
COMPANY DISCLOSURE SCHEDULES
<Table>
Section 2.1(c)............................... Organization and Qualification; Subsidiaries.
Section 2.3.................................. Capitalization.
Section 2.5.................................. No Conflict; Required Filings and Consents.
Section 2.7.................................. Environmental Matters.
Section 2.8.................................. Material Contracts.
Section 2.9.................................. Agreements with Regulatory Agencies.
Section 2.11................................. Securities and Banking Reports; Financial
Statements.
Section 2.12................................. Absence of Certain Changes or Events.
Section 2.13................................. Absence of Litigation.
Section 2.14(a).............................. Plans of the Company.
Section 2.14(b).............................. Absence of Certain Types of Plans.
Section 2.14(c).............................. Compliance with Applicable Law.
Section 2.14(d).............................. Qualification of Certain Plans.
Section 2.14(e).............................. Absence of Certain Liabilities and Events.
Section 2.14(g).............................. Stock Options.
Section 2.14(h).............................. Employment Contracts.
Section 2.16................................. Taxes.
Section 2.17................................. Brokers.
</Table>
ACQUIROR DISCLOSURE SCHEDULES
<Table>
Section 3.3............................................. Capitalization.
Section 3.10............................................ Agreements with Regulatory Agencies.
Section 3.12............................................ Absence of Certain Changes or Events.
</Table>
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105
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 15, 2001 (the "Agreement"),
between Ledger Capital Corp. a Wisconsin corporation (the "Company"), and Anchor
BanCorp Wisconsin Inc., a Wisconsin corporation (the "Acquiror").
WHEREAS, the Boards of Directors of the Acquiror and the Company have each
determined that it is fair to and in the best interests of their respective
shareholders for the Company to merge with and into the Acquiror (the "Merger")
upon the terms and subject to the conditions set forth herein and in accordance
with the Wisconsin Business Corporation Law (the "WBCL"); and
WHEREAS, the respective Boards of Directors of the Acquiror and the Company
have each approved the Merger of the Company with and into the Acquiror, upon
the terms and subject to the conditions set forth herein; and
WHEREAS, as a condition to and immediately after the execution of this
Agreement, the Company and the Acquiror will enter into a Stock Option Agreement
(the "Stock Option Agreement") in the form attached hereto as Exhibit A; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, immediately following the Merger, the parties intend to consummate
a merger of the Company's bank subsidiary ("Company Bank") with and into the
Acquiror's bank subsidiary ("Acquiror Bank") the ("Bank Merger"); and
WHEREAS, the Acquiror and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the parties hereto hereby agree as
follows:
ARTICLE I -- THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the WBCL, at the Effective Time
(as defined in Section 1.2) the Company shall be merged with and into the
Acquiror. As a result of the Merger, the separate corporate existence of the
Company shall cease and the Acquiror shall continue as the surviving corporation
of the Merger (the "Surviving Corporation").
SECTION 1.2 EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, the parties hereto shall cause the Merger to be consummated by filing
articles of merger (the "Articles of Merger") with the Department of Financial
Institutions of the State of Wisconsin (the "DFI") in such form as required by,
and executed in accordance with the relevant provisions of, the WBCL (the date
and time of such filing is referred to herein as the "Effective Time").
SECTION 1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the WBCL. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, except as otherwise provided herein, all the property,
rights, privileges, powers and franchises of the Acquiror and the Company shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Acquiror and the Company shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.4 ARTICLES OF INCORPORATION; BY-LAWS. At the Effective Time, the
Articles of Incorporation, as amended, of the Acquiror (the "Acquiror Articles")
and the By-Laws, as amended, of the Acquiror
106
("Acquiror By-Laws"), as in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation and the By-Laws of the Surviving
Corporation.
SECTION 1.5 BOARD OF DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
(a) From and after the Effective Time, the Board of Directors of the
Surviving Corporation shall include the directors of the Acquiror immediately
prior to the Effective Time. In addition, on or after the Effective Time (but in
no event later than the first meeting of said Board of Directors following the
Effective Time), the Surviving Corporation and its Board of Directors shall take
such action as may be necessary to cause James D. Smessaert (the "Company
Director") to be appointed as a director of the Surviving Corporation effective
as of the day of appointment (the "Appointment Date"). Such action shall
include, if necessary, expansion of the size of the Board of Directors of the
Surviving Corporation to the extent necessary to create a vacancy for the
Company Director to be appointed as of the Appointment Date. The initial term of
the Company Director shall expire on the date of the annual meeting of the
Surviving Corporation's shareholders following appointment of the Company
Director (the "Initial Annual Meeting"). At the Initial Annual Meeting, the
Surviving Corporation shall nominate the Company Director as its uncontested
candidate for election to a full three-year term.
(b) At the Effective Time, the officers of the Acquiror immediately prior
to the Effective Time shall be the officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed.
(c) The parties hereto agree to take such action as may be necessary to
cause the agreements set forth in this Section 1.5 to be satisfied.
SECTION 1.6 CONVERSION OF SECURITIES. Subject to Section 1.8(f) regarding
fractional shares, at the Effective Time, by virtue of the Merger and without
any action on the part of the Acquiror, the Company or the holder of the
following securities, the shares of Acquiror and the Company shall be converted
as follows:
(a) Each share of common stock, $0.10 per share par value, of Acquiror
("Acquiror Common Stock"), issued and outstanding immediately prior to the
Effective Time shall remain outstanding and shall be unchanged after the Merger.
(b) Each share of the common stock, par value $1.00 per share of the
Company ("Company Common Stock"), issued and outstanding immediately prior to
the Effective Time (all such shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time being referred to herein as
the "Shares"), other than Shares held by the Acquiror for its own account or any
Acquiror Subsidiary (as defined in Section 3.1(a), below) for its own account,
shall cease to be outstanding and shall be converted into and become the right
to receive either: (x) 1.10 shares, subject to adjustment as provided pursuant
to Section 1.7 (as adjusted, the "Exchange Ratio"), of common stock, $0.10 per
share par value, of Acquiror Common Stock, which term shall be deemed to include
the rights to purchase shares of Acquiror preferred stock, $.10 par value, under
the terms of the Rights Agreement, dated July 22, 1997, by and between Acquiror
and U.S. Bank (as successor to Firstar Trust Company)), or (y) at the option of
the holder of such Share, and subject to and in accordance with the terms of
Sections 1.8(b) and (c), an amount in cash (payable by check) equal to the
Exchange Ratio multiplied by the closing price of the Acquiror Common Stock as
quoted on the NASDAQ Stock Market, as of the date of the Effective Time (a "Cash
Distribution"); provided, however, that except as provided in Section 1.8(c)
below, under no circumstances may the total number of Shares converted to a Cash
Distribution exceed twenty percent (20%) of the total number of Shares (the
"Twenty Percent Ceiling"). All such Shares shall no longer be outstanding and
shall immediately be canceled and retired and shall cease to exist, and each
certificate previously representing any such Shares shall thereafter represent
the right to receive a certificate representing shares of Acquiror Common Stock
or a Cash Distribution or both into which such Company Common Stock shall have
been converted. Certificates representing shares of Company Common Stock shall
be exchanged for certificates representing whole shares of Acquiror
A-2
107
Common Stock or a Cash Distribution or both issued in consideration therefor
upon the surrender of such certificates in accordance with the provisions of
Section 1.8 hereof, without interest.
(c) Each share of Company Common Stock held as treasury stock shall be
canceled and extinguished without conversion thereof into Acquiror Common Stock
or payment therefor.
(d) Each share of Company Common Stock held by the Acquiror for its own
account or any Acquiror Subsidiary for its own account shall be canceled and
extinguished without conversion thereof into Acquiror Common Stock or payment
therefor.
(e) If the Average Price Ratio (as defined in Section 1.6(f)), (as of the
date that the last approval necessary to consummate the Merger is received) is
less than 85% of the Average Price Ratio (as of the date of this Agreement),
then the Company shall have the right to terminate this Agreement immediately
with the effect as set forth in Section 8.2 hereof. If the Average Price Ratio
(as of the date that the last approval necessary to consummate the Merger is
received) is greater than 115% of the Average Price Ratio (as of the date of
this Agreement), then the Acquiror shall have the right to terminate this
Agreement immediately with the effect as set forth in Section 8.2 hereof;
provided, however, that the Acquiror shall have no such right to terminate under
this sentence if the Average Price Ratio exceeds such 115% measure due, in
material part, to the Acquiror's having made a public announcement of its having
entered into a letter of intent, agreement in principle, acquisition agreement
or other similar agreement with respect to an acquisition, merger or similar
change in control of the Acquiror, or having publicly announced its intent to
enter into any such transaction. The Average Price Ratio (as of the date of this
Agreement) is set forth on Exhibit B attached hereto.
(f) For purposes of this Agreement, "Average Price Ratio" means, as of any
date of determination, the ratio of (x), the Acquiror Average Price as of the
date of determination, over (y), the average of the SNL Midwest Thrift Stock
Index for the twenty (20) consecutive trading days immediately preceding the
fifth business day prior to the applicable determination date.
(g) For purposes of this Agreement, the "Acquiror Average Price" shall be,
as of any date of determination, the average of the closing prices of Acquiror
Common Stock as reported on The NASDAQ Stock Market for the twenty (20)
consecutive trading days immediately preceding the fifth business day prior to
the applicable determination date.
SECTION 1.7 ADJUSTMENTS FOR DILUTION AND OTHER MATTERS. If prior to the
Effective Time, (a) the Company shall declare a stock dividend or distribution
upon or subdivide, split up, reclassify or combine the Company Common Stock, or
declare a dividend or make a distribution on Company Common Stock in any
security convertible into Company Common Stock, or (b) the Acquiror shall
declare a stock dividend or distribution upon or subdivide, split up, reclassify
or combine Acquiror Common Stock or declare a dividend or make a distribution on
Acquiror Common Stock in any security convertible into Acquiror Common Stock,
appropriate adjustment or adjustments will be made to the Exchange Ratio.
SECTION 1.8 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. As of the Effective Time, the Acquiror shall deposit,
or shall cause to be deposited with an exchange agent chosen by the Acquiror and
which is reasonably acceptable to the Company (the "Exchange Agent"), for the
benefit of the holders of Shares for exchange in accordance with this Article I,
through the Exchange Agent, certificates representing the shares of Acquiror
Common Stock, cash in an amount equal to the maximum aggregate total of all Cash
Distributions, and cash in lieu of fractional shares (such certificates for
shares of Acquiror Common Stock, together with the amount of Cash Distributions
and cash payable in lieu of fractional shares and any dividends or distributions
with respect to such Acquiror Common Stock are referred to herein as the
"Exchange Fund") payable and issuable pursuant to Section 1.6 in exchange for
outstanding Shares; provided, however, that the Acquiror need not deposit the
Cash Distributions or the cash for fractional shares into the Exchange Fund
until such time as such funds are to be distributed by the Exchange Agent.
A-3
108
(b) Exchange Procedures. No later than five (5) business days after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares which were converted pursuant to Section 1.6 (a
"Certificate" or "Certificates"), (i) a letter of transmittal and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Acquiror Common Stock or a Cash
Distribution or both. The foregoing letter of transmittal and instructions shall
be subject to prior approval of the Company. Subject to the terms of this
Section 1.8, the letter of transmittal will entitle each holder of Shares to
designate which of the holder's Shares are to be converted to Acquiror Common
Stock pursuant to clause (x) of Section 1.6(b) (a "Stock Election") and which
are to be converted to a Cash Distribution pursuant to clause (y) of Section
1.6(b) (a "Cash Election"); provided, that except as provided in Section 1.8(c)
below, under no circumstances may the total number of Shares as to which a Cash
Election is made exceed the Twenty Percent Ceiling. Subject to the terms of this
Section 1.8, a holder may make a Stock Election as to some of the holder's
Shares and a Cash Election as to other of its Shares; provided further that no
holder of Shares may make a Stock Election with respect to fewer than one
hundred percent (100%) of its Shares if as a result such holder would receive
fewer than one hundred (100) shares of Acquiror Common Stock. Upon surrender of
a Certificate for cancellation to the Exchange Agent together with such letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor, and the Exchange Agent will as soon as
practicable thereafter (and in no event later than ten (10) business days
thereafter) distribute to such holder, a certificate representing that number of
whole shares of Acquiror Common Stock or a Cash Distribution or both which such
holder has the right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article I (after taking into account all
Shares then held by such holder), and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares which
is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Acquiror Common Stock or a Cash
Distribution or both may be issued to a transferee if the Certificate
representing such Shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Certificate to be lost, stolen or
destroyed and the posting by such person of a bond in such amount as the
Acquiror may reasonably direct as indemnity against any claim that may be made
against it or the Exchange Agent with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate a
certificate representing the proper number of shares of Acquiror Common Stock.
Until surrendered as contemplated by this Section 1.8, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of Acquiror
Common Stock, a Cash Distribution, dividends, cash in lieu of any fractional
shares of Acquiror Common Stock as contemplated by Section 1.8(f) and other
distributions as contemplated by Section 1.8(c).
(c) Cash Distributions. Except as provided below, under no circumstances
may the total number of Shares as to which a Cash Election is made by all
Company shareholders combined exceed the Twenty Percent Ceiling. If the number
of Shares as to which a Cash Election is properly requested (taking into account
the limitations of Section 1.8(b) above) exceeds the Twenty Percent Ceiling,
then the Exchange Agent shall honor the Cash Elections in the chronological
order in which they are received by the Exchange Agent, and any Cash Elections
that are received after the day on which the total Cash Elections exceed the
Twenty Percent Ceiling (the "20% Day") will be disregarded and treated as Stock
Elections; provided, that if the total number of Shares as to which Cash
Elections are received through the end of the 20% Day is not more than 20.1% of
the total number of Shares, then all Cash Elections received on the 20% Day will
be honored as Cash Elections. If the total number of Shares as to which Cash
Elections are received through the end of the 20% Day is more than 20.1% of the
total number of Shares, then the Exchange Agent will reduce each Cash Election
received on the 20% Day proportionately as necessary so that the total number of
Shares as to which Cash Elections are received through that day is equal to the
Twenty Percent Ceiling. In addition to the foregoing limitation, there is hereby
established a "Cash Election Termination Date," which date shall be the
forty-fifth (45th) day after the Exchange Agent has
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substantially completed the initial mailing of letters of transmittal in
accordance with the provisions of the first sentence of subsection (b), above.
Unless the 20% Day shall have occurred before the Cash Election Termination
Date, any Cash Election that is received by the Exchange Agent after the Cash
Election Termination Date shall be disregarded and treated as a Stock Election,
unless such Cash Election (i) if sent via United States mail was sent postage
prepaid and was postmarked on or prior to the Cash Election Termination Date; or
(ii) if sent by overnight or commercial courier, is accompanied by evidence that
it was sent on or prior to the Cash Election Termination Date.
(d) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to Acquiror
Common Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of Acquiror
Common Stock represented thereby, and no Cash Distribution or cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to Section
1.8(f), until the holder of such Certificate shall surrender such Certificate.
Subject to the effect of applicable Laws, following surrender of any such
Certificate exchanged for Acquiror Common Stock, there shall be paid to the
holder of the certificates representing whole shares of Acquiror Common Stock
issued in exchange therefor, without interest, (i) promptly, the amount of any
cash payable with respect to a fractional share of Acquiror Common Stock to
which such holder is entitled pursuant to Section 1.8(f) and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Acquiror Common Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Acquiror Common Stock.
(e) No Further Rights in the Shares. All shares of Acquiror Common Stock
issued and cash paid upon conversion of the Shares in accordance with the terms
hereof (including any Cash Distribution or cash paid pursuant to Section 1.8(f))
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Shares.
(f) No Fractional Shares. No certificates or scrip representing fractional
shares of Acquiror Common Stock shall be issued upon the surrender for exchange
of Certificates, and such fractional share interest will not entitle the owner
thereof to vote or to any rights of a shareholder of the Acquiror. Each holder
of a fractional share interest shall be paid an amount in cash equal to the
product obtained by multiplying such fractional share interest to which such
holder (after taking into account all fractional share interests then held by
such holder) would otherwise be entitled by the Acquiror Average Price as of the
Effective Time. As soon as reasonably practicable after the determination of the
amount of cash, if any, to be paid to holders of fractional share interests, the
Acquiror shall make available such amounts (without interest) to such holders of
such fractional share interests.
(g) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former shareholders of the Company for two (2)
years after the Effective Time shall be delivered to the Acquiror, upon demand,
and any former shareholders of the Company who have not theretofore complied
with this Article I shall thereafter look only to the Acquiror to claim their
shares of Acquiror Common Stock, their Cash Distribution, any cash in lieu of
fractional shares of Acquiror Common Stock and any dividends or distributions
with respect to Acquiror Common Stock, in each case without interest thereon,
and subject to Section 1.8(h).
(h) No Liability. Neither the Acquiror nor the Company shall be liable to
any former holder of Shares for any such Shares (or dividends or distributions
with respect thereto) or cash or other payment delivered to a public official
pursuant to any abandoned property, escheat or similar laws.
(i) Withholding Rights. The Acquiror shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any former holder of Shares such amounts as the Acquiror is required to deduct
and withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by the Acquiror, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid
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to the former holder of the Shares in respect of which such deduction and
withholding were made by the Acquiror.
SECTION 1.9 STOCK TRANSFER BOOKS. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of shares of the Company Common Stock thereafter on the records of
the Company. From and after the Effective Time, the holders of Certificates
shall cease to have any rights with respect to such Shares except as otherwise
provided herein or by law. On or after the Effective Time, any Certificates
presented to the Exchange Agent or the Acquiror for any reason shall be
converted into shares of Acquiror Common Stock and cash in lieu of fractional
shares in accordance with this Article I.
SECTION 1.10 THE BANK MERGER.
(a) Merger. Following the Effective Time, Ledger Bank ("Company Bank")
shall be merged and consolidated with and into AnchorBank ("Acquiror Bank")
under the Charter and By-Laws of Acquiror Bank (the "Bank Merger"), pursuant to
the provisions of, and with the effect provided in, applicable Law, and Acquiror
Bank shall be the surviving bank and the separate existence of Company Bank
shall thereupon cease (the term "Surviving Bank" shall refer to Acquiror Bank
following the Bank Merger). Subject to terms and upon satisfaction of all
requirements of law and the conditions specified herein, the Bank Merger shall
become effective on such date as shall be designated by the Acquiror following
the Effective Time and subsequent to the receipt of approvals from all
applicable governmental authorities authorizing the consolidation (the "Bank
Merger Effective Date").
(b) Surviving Bank.
(i) The Surviving Bank shall continue the banking business of Company
Bank in the current locations of Company Bank as branch offices of the
Surviving Bank.
(ii) The principal office of the Surviving Bank shall be the principal
office of Acquiror Bank.
(iii) At and as of the Bank Merger Effective Date, the Charter and
By-Laws of Acquiror Bank, as in effect immediately prior to the Bank Merger
Effective Date, shall be the Charter and By-Laws of the Surviving Bank
until thereafter amended as provided by law.
(iv) On the Bank Merger Effective Date, the Surviving Bank shall have
capital surplus equal to that of Company Bank and Acquiror Bank combined,
immediately prior to the Bank Merger and undivided profits, including
capital reserves, which, when combined with the capital and surplus, will
be equal to the capital structure of Company Bank and Acquiror Bank as of
the date hereof, adjusted, however, for normal earnings, expenses and any
Merger-related expenses and charges (including any charges and expenses
incurred pursuant to any Company repurchase program under Section 6.11)
between the date hereof and the Bank Merger Effective Date.
(v) As of the Bank Merger Effective Date, the Board of Directors of
Acquiror Bank in effect immediately prior to the Bank Merger shall continue
to serve as the Board of Directors of the Surviving Bank until such time as
their successors have been elected and have qualified.
(c) Corporate Existence; Assets and Liabilities of Surviving Bank. Upon the
Bank Merger Effective Date:
(i) All rights, franchises and interests of Company Bank in and to
every type of property (real, personal and mixed) and choses in action
shall be transferred to and vested in the Surviving Bank by virtue of the
Bank Merger without any deed or other transfer, and the Surviving Bank,
without any order or other action on the part of any court or otherwise,
shall hold and enjoy all rights of property, franchises and interests,
including appointments, designations, nominations, and all other rights and
interest as trustee, executor, administrator, registrar of stocks and
bonds, guardians of estates, assignee, and receiver of estates of
incompetents, and in every other fiduciary capacity, in the same manner and
to the same extent as such rights, franchises and interests were held or
enjoyed by Company Bank immediately prior to the Bank Merger.
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(ii) The Surviving Bank shall be liable for all of the liabilities of
Company Bank and all deposits, debts, liabilities, obligations and
contracts of Company Bank, matured or unmatured, whether insured, obsolete,
contingent or otherwise, and whether or not reflected or reserved against
on balance sheets, books of account, or records of Company Bank shall be
those of the Surviving Bank and shall not be relieved or canceled by the
Bank Merger and all rights of creditors and obligees, and all liens on
property of Company Bank shall be preserved and unimpaired. All assets of
Company Bank, as they exist at and as of the Bank Merger Effective Date,
shall pass to and vest in the Surviving Bank, without any conveyance or
other transfer; and the Surviving Bank shall be responsible for all
liabilities of Company Bank of every kind and description existing as of
the Bank Merger Effective Date.
(iii) At any time after the Bank Merger Effective Date, the officers
of the Surviving Bank may, in the name of Company Bank, execute and deliver
all such deeds, assignments and other instruments and take or cause to be
taken all such further or other action as the Surviving Bank may deem
necessary or desirable in order to vest, perfect or confirm in the
Surviving Bank title to and possession of all of Company Bank's property,
rights, privileges, immunities, powers, purposes and otherwise to carry out
the purposes hereof.
(iv) The liquidation account established by Company Bank pursuant to
the plan of conversion adopted in connection with its conversion from
mutual to stock form shall continue to be maintained by the Surviving Bank
after the Bank Merger Effective Date for the benefit of those persons and
entities who were savings account holders of Company Bank on Company Bank's
eligibility record date and who continue from time to time to have rights
therein.
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the Company to
Acquiror prior to execution of this Agreement (the "Company Disclosure
Schedule"), the Company hereby represents and warrants to the Acquiror that:
SECTION 2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company is a corporation duly organized and validly existing under
the laws of the State of Wisconsin, and is registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). Each
subsidiary of the Company ("Company Subsidiary" or, collectively, "Company
Subsidiaries") is a state-chartered savings bank or a corporation duly organized
and validly existing under the laws of the state of its organization or
incorporation. Each of the Company and the Company Subsidiaries has the
requisite corporate power and authority and is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
approvals and orders ("Company Approvals") necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted,
including, without limitation, appropriate authorizations from Federal Reserve
Board ("FRB"), the Federal Deposit Insurance Corporation (the "FDIC") and the
Wisconsin Department of Financial Institutions ("DFI"), and neither the Company
nor any Company Subsidiary has received any notice of proceedings relating to
the revocation or modification of any Company Approvals, except in each case
where the failure to be so existing or to have such power, authority, Company
Approvals and revocations or modifications would not, individually or in the
aggregate, have a Material Adverse Effect (as defined in Section 9.4(d)) on the
Company and the Company Subsidiaries, taken as a whole.
(b) The Company and each Company Subsidiary is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except where such failures to be so duly qualified or licensed and in
good standing would not, either individually or in the aggregate, have a
Material Adverse Effect on the Company and the Company Subsidiaries taken as a
whole.
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(c) A true and complete list of all of the Company Subsidiaries, together
with (i) the Company's percentage ownership of each Company Subsidiary and (ii)
laws under which such Company Subsidiary is incorporated, is set forth on
Section 2.1(c) of the Company Disclosure Schedule delivered by the Company to
the Acquiror prior to the execution of this Agreement. Except as set forth on
Section 2.1(c) of the Company Disclosure Schedule, the Company and/or one or
more of the Company Subsidiaries owns beneficially and of record all of the
outstanding shares of capital stock of each of the Company Subsidiaries. Except
as set forth on Section 2.1(c) of the Company Disclosure Schedule, the Company
does not directly or indirectly own any equity or similar interests in, or any
interests convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity other than in the ordinary course of business,
and in no event in excess of 5% of the outstanding equity securities of such
entity.
SECTION 2.2 ARTICLES OF INCORPORATION AND BY-LAWS. The Company has
heretofore furnished to the Acquiror a complete and correct copy of the Articles
of Incorporation and the By-Laws, as amended or restated, of the Company
("Company Articles" or "Company By-Laws") and each Company Subsidiary. Such
Articles of Incorporation and By-Laws of the Company and each Company Subsidiary
are in full force and effect. Neither the Company nor any Company Subsidiary is
in violation of any of the provisions of its Articles of Incorporation or
By-Laws.
SECTION 2.3 CAPITALIZATION. The authorized capital stock of the Company
consists of eight million (8,000,000) shares of Company Common Stock. As of the
date of this Agreement, (a) 3,162,500 shares of Company Common Stock are issued,
with 2,437,141 outstanding, all of which are duly authorized, validly issued,
fully paid and non-assessable, except as provided by Section 180.0622(2)(b) of
the WBCL (such section, including judicial interpretations thereof and of
Section 180.40(6), its predecessor statute, are referred to herein as "Section
180.0622(2)(b) of the WBCL"), and were not issued in violation of any preemptive
right of any Company shareholder, (b) 725,359 shares of Company Common Stock are
held in the treasury of the Company, (c) 18,462 shares of Company Common Stock
are issued but not granted (and will not be granted or otherwise awarded) under
the Company's Management Recognition and Retention Plan ("MRRP"), (d) 321,280
shares of Company Common Stock are reserved for issuance (but will not be
issued) pursuant to outstanding employee stock options issued pursuant to the
Company's equity incentive plans, and (e) 484,991 shares of Company Common Stock
are reserved for future issuance under the Stock Option Agreement. Except as set
forth in clauses (d) and (e) above, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character pursuant to
which the Company or any Company Subsidiary is a party, including without
limitation voting agreements or arrangements, relating to the issued or unissued
capital stock of the Company or any Company Subsidiary or obligating the Company
or any Company Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Company Subsidiary, other than
pursuant to a Shareholder Rights Agreement, entered into as of February 21,
1997, between the Company and Firstar Trust Company and as disclosed in Section
2.3 of the Company Disclosure Schedule. All shares of Company Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, shall be duly
authorized, validly issued, fully paid and non-assessable, except as otherwise
provided by Section 180.0622(2)(b) of the WBCL. There are no obligations,
contingent or otherwise, of the Company or any Company Subsidiary to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or the capital
stock of any Company Subsidiary or to provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any Company
Subsidiary or any other entity, except for loan commitments and other funding
obligations entered into in the ordinary course of business and except as
required under the Stock Option Agreement and under currently existing stock
option agreements. Each of the outstanding shares of capital stock of each
Company Subsidiary is duly authorized, validly issued, fully paid and
non-assessable, except as provided by Section 180.0622(2)(b) of the WBCL and in
the case of Wisconsin state savings banks, Section 214.775 of the Wisconsin
Statutes, and was not issued in violation of any preemptive rights of any
Company Subsidiary shareholder, and except as set forth on Section 2.3 of the
Company Disclosure Schedule, all such shares owned by the Company or another
Company Subsidiary
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are owned free and clear of all security interests, liens, claims, pledges,
agreements, limitations of the Company's voting rights, charges or other
encumbrances of any nature whatsoever.
SECTION 2.4 AUTHORITY. The Company has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby (other than,
with respect to the Merger, the approval and adoption of this Agreement by the
Company's shareholders in accordance with the WBCL and the Company Articles and
Company By-Laws and the receipt of requisite regulatory approvals). The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated hereby (other than, with respect to
the Merger, the approval and adoption of this Agreement by the Company's
shareholders in accordance with the WBCL and the Company Articles and Company
By-Laws). This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of the Company and, assuming due
authorization, execution and delivery by the Acquiror, is enforceable against
the Company in accordance with its terms, except as enforcement may be limited
by laws affecting insured depository institutions, general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
SECTION 2.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in Section 2.5 of the Company Disclosure Schedule,
the execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement and the transactions contemplated hereby by the
Company shall not, (i) conflict with or violate the Company Articles or Company
By-Laws or the Articles of Incorporation or By-Laws of any Company Subsidiary,
(ii) conflict with or violate any domestic (federal, state or local) or foreign
law, statute, ordinance, rule, regulation, order, judgment or decree
(collectively, "Laws") applicable to the Company or any Company Subsidiary or by
which its or any of their respective properties is bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, require the giving of
notice to, or the consent of, any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which the Company or any Company Subsidiary or its or any of their
respective properties is bound or affected, except in the case of clause (iii)
for any such conflicts, violations, breaches, defaults or other occurrences that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company and the Company Subsidiaries, taken as a whole.
(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Securities Act of 1933, as amended
(the "Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), state securities or blue sky laws ("Blue Sky Laws"), the BHC
Act, the Wisconsin Department of Financial Institutions ("WDFI") and the filing
of appropriate merger or other documents as required by the WBCL and (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay consummation of
the Merger or the Bank Merger or otherwise prevent the Company from performing
its obligations under this Agreement and would not have a Material Adverse
Effect on the Company and the Company Subsidiaries, taken as a whole.
SECTION 2.6 COMPLIANCE; PERMITS. Except for any conflicts, defaults or
violations which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or the Company Subsidiaries taken as a whole,
neither the Company nor any Company Subsidiary is in conflict with, or in
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default or violation of, (a) any Law applicable to the Company or any Company
Subsidiary or by which its or any of their respective properties is bound or
affected, or (b) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any Company Subsidiary is a party or by which the Company or any
Company Subsidiary or its or any of their respective properties is bound or
affected.
SECTION 2.7 ENVIRONMENTAL MATTERS.
(a) Except as set forth in Section 2.7 of the Company Disclosure Schedule,
(i) neither the Company nor any Company Subsidiary has caused there to be, nor
are there, any Hazardous Substances (as hereinafter defined in this Section 2.7)
in, on or under any of the Company Real Property (as hereinafter defined in this
Section 2.7); (ii) none of such Company Real Property has been designated,
restricted or investigated by any governmental authority or third party as a
result of the actual or suspected presence, spillage, leakage, discharge or
other emission of Hazardous Substances; (iii) no Hazardous Substances have been
generated, used, stored, treated, manufactured, refined, handled, produced or
disposed of in, on or under, and no Hazardous Substances have been transported,
released or disposed of at, from or to, any of such Company Real Property by the
Company or any Company Subsidiary or by any persons or agents operating under
the control, direction and supervision of the Company or any Company Subsidiary,
including, without limitation, all employees, agents and contractors of the
Company and any Company Subsidiary; and (iv) neither the Company nor any Company
Subsidiary has received, nor has any of the Company Real Property been the
subject of, any written or oral governmental notice, order, inquiry,
investigation, environmental audit or assessment or any lien, encumbrance,
decree, easement, covenant, restriction, servitude or proceeding (including,
without limitation, the recording or filing of any deed notice, deed restriction
or lien) concerning, or arising by reason of, the actual or suspected presence,
spillage, leakage, discharge, disposal or other emission of any Hazardous
Substance in, on, under, around, about or in the vicinity of, or the
transportation of any Hazardous Substance at, from or to, any of such Company
Real Property.
(b) Except as disclosed in Section 2.7 of the Disclosure Schedule: (i)
Neither the Company or any Company Subsidiary nor any Company Real Property
(including storage tanks or other impoundment vessels, whether above or below
ground) are in violation of, or subject to any liabilities as a result of any
past or current violations of or noncompliance with, any existing federal, state
or local law (including common law), statute, ordinance, rule or regulation of
any federal, state or local governmental authority relating to pollution or
protection of the environment, including, without limitation, statutes, laws,
ordinances, rules and regulations relating to the emission, generation,
discharge, spillage, leakage, storage, off-site dumping, release or threatened
release of Hazardous Substances into ambient air, surface water, ground water or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances
(collectively, "Environmental Laws"), in any case except for violations or
liabilities which would not, either individually or in the aggregate, have a
Material Adverse Effect on the Company and the Company Subsidiaries taken as a
whole; and (ii) no material expenditures are required in connection with the
operation of the Company's business as presently conducted in order to comply
with any Environmental Laws or with any enacted but prospectively effective
Environmental Laws. Except as disclosed in Section 2.7 of the Company Disclosure
Schedule, the Company, all Company Subsidiaries and the Company Real Property
have passed all inspections conducted by applicable governmental authorities and
regulatory bodies in connection with the matters described in the preceding
sentence. The Company and all Company Subsidiaries have all approvals,
authorizations, consents, licenses, orders and permits of all governmental and
regulatory authorities required under any Environmental Laws (collectively,
"Environmental Permits"), except where noncompliance would not, either
individually or in the aggregate, have a Material Adverse Effect on the Company
or on the Company Subsidiaries taken as a whole. Each of the Environmental
Permits is in full force and effect. The Company and all Company Subsidiaries
have complied with all of the terms, conditions and requirements imposed by each
of the Environmental Permits. All cleanup, removal and other remediation
activities carried out by the Company or any Company Subsidiary or by agents of
the Company or any Company Subsidiary at the Company Real Property have been
conducted in material compliance with all
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applicable Environmental Laws, and there is no basis for liability on the part
of the Company or any Company Subsidiary as a result of such activities.
(c) For purposes of this Agreement, the term "Hazardous Substance" shall
mean any product, substance, chemical, contaminant, pollutant, effluent,
emission, waste or other material which, or the presence, nature, quantity
and/or concentration or toxicity or existence, use, manufacture, disposal,
transportation, emission, discharge, spill, release or effect of which, either
by itself or in combination with other materials located on or associated with
any of the Company Real Property, is defined or listed in, regulated or
monitored by, or otherwise classified pursuant to, any statute, law, ordinance,
rule or regulation applicable to the Company Real Property as "solid waste,"
"hazardous substances," "hazardous materials," "hazardous wastes," "infectious
wastes" or "toxic substances." Hazardous Substances shall include, but not be
limited to, (i)(A) any "hazardous substance" as defined in the Comprehensive
Environmental Response, Compensation and Liability Act, (B) any "regulated
substance" as defined in the Solid Waste Disposal Act, (C) any substance subject
to regulation pursuant to the Toxic Substances Control Act, and (D) any
hazardous substance as defined in Section 292.01(5) Wis. Stats., in each case as
such laws are now in effect or may be amended through the Closing Date and any
rule, regulation or administrative or judicial policy statement, guideline,
order or decision under such laws, (ii) petroleum and refined petroleum
products, (iii) asbestos and asbestos-containing products, (iv) flammable
explosives, (v) radioactive materials, and (vi) radon.
(d) For purposes of this Agreement, the term "Company Real Property" means
all real property (whether owned or leased) at which the operations of the
Company or any Company Subsidiary are or at any time during the ten (10) years
preceding the date of this Agreement were conducted and real property which is
otherwise held as of the Effective Time as "real estate owned" (REO) as a result
of default by the borrower and subsequent foreclosure by the Company or any
Company Subsidiary.
SECTION 2.8 MATERIAL CONTRACTS. Except as disclosed in Section 2.8 of the
Company Disclosure Schedule, and except as included as exhibits in the Company
SEC Reports (as defined in Section 2.11), neither the Company nor any Company
Subsidiary is a party to or obligated under any contract, agreement or other
instrument or understanding which is not terminable by the Company or Company
Subsidiary without additional payment or penalty within ninety (90) days and
obligates the Company or any Company Subsidiary for payments or other
consideration with a value in excess of $50,000, or would require disclosure by
Company pursuant to Item 601(b)(10) of Regulation S-K under the Exchange Act.
Further, each contract which is material to the business of the Company and the
Company Subsidiaries is in full force and effect; neither the Company nor any
Company Subsidiary, nor, to the knowledge of the Company, any other party, is in
default under any such contract, and no event has occurred which constitutes, or
with the lapse of time or the giving of notice or both would constitute, a
default by the Company or any Company Subsidiary or, to the knowledge of the
Company, by any other party, under any such contract; and there are no material
disputes or disagreements between the Company or any Company Subsidiary and any
other party with respect to any such contract.
SECTION 2.9 AGREEMENTS WITH REGULATORY AGENCIES. Except as set forth on
Section 2.9 of the Company Disclosure Schedule, neither the Company nor any
Company Subsidiary is subject to any cease-and-desist or other order issued by,
or is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been a
recipient of any supervisory letter from, or has adopted any board resolutions
at the request of the FRB, the FDIC, DFI or any other applicable federal or
state regulatory agency having jurisdiction over the Company or any Company
Subsidiary or its business ("Regulatory Agency"), that currently restricts the
conduct of its business or that relates to its capital adequacy, compliance with
laws, its credit policies, its management or its business (each a "Regulatory
Agreement"), nor has the Company or any Company Subsidiary been advised by any
Regulatory Agency that it is considering issuing or requesting any such
Regulatory Agreement.
SECTION 2.10 LOAN LOSS RESERVES. The reserves for possible loan losses
shown on the May 31, 2001 call reports filed with a Regulatory Agency for the
Company's Subsidiaries are adequate in all material
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respects to provide for possible losses, net of recoveries relating to loans
previously charged off, on loans outstanding (including accrued interest
receivable) as of May 31, 2001.
SECTION 2.11 SECURITIES AND BANKING REPORTS; FINANCIAL STATEMENTS.
(a) The Company and each Company Subsidiary have filed all forms, reports
and documents required to be filed with:
(i) the Securities and Exchange Commission (the "SEC") since June 30,
1998, and as of the date of this Agreement the Company has delivered to the
Acquiror (A) its Annual Reports on Form 10-K for the fiscal years ended
June 30, 1998, 1999 and 2000, respectively, (B) its Quarterly Reports on
Form 10-Q for the periods ended September 30, 2000 and December 31, 2000,
(C) all proxy statements relating to the Company's meetings of shareholders
(whether annual or special) held since June 30, 1998, (D) all Current
Reports on Form 8-K filed by the Company with the SEC since June 30, 1998,
(E) all other reports or registration statements (other than Quarterly
Reports on Form 10-Q not referred to in clause (B) above) filed by the
Company with the SEC since June 30, 1998 and (F) all amendments and
supplements to all such reports and registration statements filed by the
Company with the SEC since June 30, 1998 (collectively, the "Company SEC
Reports"); and
(ii) the FRB, DFI, the FDIC and any other applicable federal or state
securities or banking authorities (all such reports and statements are
collectively referred to with the Company SEC Reports as the "Company
Reports"). The Company Reports, including all Company Reports filed after
the date of this Agreement, (x) were or will be prepared in all material
respects in accordance with the requirements of applicable Law and (y) did
not at the time they were filed, or will not at the time they are filed,
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports, including any
Company SEC Reports filed since the date of this Agreement and prior to or on
the Effective Time, has been prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto) and each fairly presents the consolidated financial position
of the Company and the Company Subsidiaries as of the respective dates thereof
and the consolidated results of its operations and changes in financial position
for the periods indicated, except that any unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments and
footnotes.
(c) Except for (i) those liabilities that are fully reflected or reserved
against in the financial statements that are contained in the Company SEC
Reports, (ii) liabilities disclosed in Section 2.11 of the Company Disclosure
Schedule, (iii) liabilities incurred in the ordinary course of business
consistent with past practice since December 31, 2000, and (iv) any liabilities
that may be incurred in connection with the Merger (including charges related to
the repayment of the outstanding ESOP loan, charges incurred in connection with
funding of contractual benefit obligations to employees, any share repurchase
pursuant to Section 6.11 and any charges the Company may be requested to take by
Acquiror), neither the Company nor any Company Subsidiary has incurred any
liability of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether due or to become due) that, either alone or when combined
with all similar liabilities, has had, or could reasonably be expected to have,
a Material Adverse Effect on the Company and the Company Subsidiaries taken as a
whole.
SECTION 2.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Company SEC Reports filed prior to the date of this Agreement or set forth
in Section 2.12 of the Company Disclosure Schedule and except for the
transactions contemplated by this Agreement, since December 31, 2000, to the
date of this Agreement, the Company and the Company Subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since December 31, 2000, there has not been (a) any change in
the financial condition, results of operations or business of the Company and
any of the Company Subsidiaries having a Material Adverse Effect on the Company
and
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the Company Subsidiaries taken as a whole, (b) any damage, destruction or loss
(whether or not covered by insurance) with respect to any assets of the Company
or any of the Company Subsidiaries having a Material Adverse Effect on Company
and the Company Subsidiaries taken as a whole, (c) any change by the Company in
its accounting methods, principles or practices, (d) any revaluation by the
Company of any of its assets in any material respect, (e) to the date of this
Agreement, any entry by the Company or any of the Company Subsidiaries into any
commitment or transactions material to the Company and the Company Subsidiaries
taken as a whole, except in connection with the Merger, or (f) except for
regular quarterly cash dividends on Company Common Stock with usual record and
payment dates, to the date of this Agreement, any declaration, setting aside or
payment of any dividends or distributions in respect of shares of Company Common
Stock or any redemption, purchase or other acquisition of any of its securities
or any of the securities of any Company Subsidiary.
SECTION 2.13 ABSENCE OF LITIGATION.
(a) Except as set forth in Section 2.13 of the Company Disclosure Schedule,
neither the Company nor any of the Company Subsidiaries is a party to any, and
there are no pending or threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of any
nature against the Company or any of the Company Subsidiaries or challenging the
validity or propriety of the transactions contemplated by this Agreement which,
if adversely determined, would, individually or in the aggregate, have a
Material Adverse Effect on the Company and the Company Subsidiaries taken as a
whole.
(b) There is no injunction, order, judgment, decree or regulatory
restriction imposed upon the Company, any of the Company Subsidiaries or the
assets of the Company or any of the Company Subsidiaries which has had a
Material Adverse Effect on the Company and the Company Subsidiaries taken as a
whole.
SECTION 2.14 EMPLOYEE BENEFIT PLANS.
(a) Plans of the Company. Section 2.14(a) of the Company Disclosure
Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and all
bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all material
employment, termination, severance or other employment contracts or employment
agreements, with respect to which the Company or any Company Subsidiary has any
obligation (collectively, the "Company Plans").
The Company has furnished or made available to the Acquiror a complete and
accurate copy of each Company Plan (or a description of the Company Plans, if
the Company Plans are not in writing) and a complete and accurate copy where
applicable, of (i) each trust or other funding arrangement, (ii) each summary
plan description and summary of material modifications, (iii) the most recently
filed IRS Forms 5500 and related schedules, and (iv) the most recently issued
IRS determination letter for each such Plan. With respect to the Company's
existing supplemental executive retirement plans, captioned the "Supplemental
Compensation Agreement By and Among West Allis Savings Bank, Hallmark Capital
Corporation and James D. Smessaert" and "Supplemental Compensation Agreement By
and Among West Allis Savings Bank, Hallmark Capital Corporation and Peter A.
Gilbert" (the "SERPs"): (a) The Company has provided to the Acquiror true,
correct and complete copies of all agreements, instruments and documents
pursuant to which the SERPs are constituted or under which the Company has any
liability or obligations relating to the SERPs, and of the most recently
available copies of those materials provided by the insurers or their agents
which relate to any insurance policy or program or other funding vehicle
designed to provide a source of funds from which to pay the benefits due under
the SERPs (the "Insurance"), and to the extent not readily available from the
Company's records, the Company will use its best efforts to acquire such
policies and information from applicable insurance companies and their agents
prior to Closing; (b) the total premiums remaining to be paid from and after the
date of this Agreement under the Insurance (a) are not greater than three
payments of $527,000 each, due on July 1, 2001, July 1, 2002, and the last of
such premiums due on July 1, 2003; (c) the Present Value of Benefits
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(defined below) is equal to the liability therefor as recorded in the financial
records of the Company, prior to any accelerated liability accrual required to
reflect the change in control contemplated by this Agreement; (d) the Present
Value of Funding (defined below) is equal to the asset as recorded in the
financial records of the Company; (e) forecasted increases in cash surrender
values of the policies constituting the Insurance as indicated in schedules
provided to the Acquiror represent current best estimates based on information
provided to the Company by applicable insurance companies and their agents; and
(f) none of the Insurance is a "Modified Endowment Contract" as defined in
Section 7702A of the Code. As used herein, Present Value of Benefits means the
sum of the present value of each of the cash payments to be made to the
beneficiaries under the SERPs, using a payment period of the greater of 20 years
or for the expected life of the beneficiary from time to time as indicated in
the "1983 Group Annuity Tables for Males" after discounting each payment to its
present value of the date of this Agreement at a discount rate of five and
one-half percent (5.5%) per annum (compounded annually); and Present Value of
Funding means the sum of the combined cash surrender value from time to time of
all policies constituting the Insurance (taking into account any amounts
required to be retained in any of the insurance policies constituting the
Insurance to satisfy obligations under the split dollar insurance agreements
under which such policies are or may be held, including any portion of the death
benefit that is payable to the beneficiaries), and assuming that all premiums on
the Insurance are paid when and as due, assuming a projected rate of growth of
the cash surrender value of the Insurance at its guaranteed minimum rate, and
further assuming that the beneficiaries achieve life expectancy equal to that
indicated in the policies constituting the Insurance.
(b) Absence of Certain Types of Plans. No member of the Company's
"controlled group," within the meaning of Section 4001(a)(14) of ERISA,
maintains or contributes to, or within the five years preceding the date of this
Agreement has maintained or contributed to, an employee pension benefit plan
subject to Title IV of ERISA. Except as disclosed in Section 2.14(b) of the
Company Disclosure Schedule, none of the Company Plans obligates the Company or
any of the Company Subsidiaries to pay material separation, severance,
termination or similar-type benefits (or provides for enhanced or accelerated
benefits) solely as a result of any transaction contemplated by this Agreement
or as a result of a "change in control," within the meaning of such term under
Section 280G of the Code. Except as disclosed in Section 2.14(b) of the Company
Disclosure Schedule, or as required by group health continuation rights under
Section 4980B of the Code or similar state law ("COBRA" rights), none of the
Company Plans provides for or promises retiree medical, disability or life
insurance benefits to any current or former employee, officer or director or
life insurance benefits to any current or former employee, officer or director
of the Company or any of the Company Subsidiaries. Each of the Company Plans is
subject only to the laws of the United States or a political subdivision
thereof.
(c) Compliance with Applicable Laws. Except as disclosed in Section 2.14(c)
of the Company Disclosure Schedule, each Company Plan has been operated in all
respects in accordance with the requirements of all applicable Law and all
persons who participate in the operation of such Company Plans and all Company
Plan "fiduciaries" (within the meaning of Section 3(21) of ERISA) have acted in
accordance with the provisions of all applicable Law, except where such
violations of applicable Law would not, individually or in the aggregate, have a
Material Adverse Effect on the Company and the Company Subsidiaries taken as a
whole. The Company and the Company Subsidiaries have performed all obligations
required to be performed by any of them under, are not in any respect in default
under or in violation of, and the Company and the Company Subsidiaries have no
knowledge of any default or violation by any party to, any Plan, except where
such failures, defaults or violations would not, individually or in the
aggregate, have a Material Adverse Effect on the Company and the Company
Subsidiaries taken as a whole.
(d) Qualification of Certain Plans. Except as disclosed in Section 2.14(d)
of the Company Disclosure Schedule, each Company Plan that is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code
(including each trust established in connection with such a Plan that is
intended to be exempt from Federal income taxation under Section 501(a) of the
Code) has received a favorable determination letter from the IRS (as defined
herein) that it is so qualified, and, except as
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disclosed in Section 2.14(d) of the Company Disclosure Schedule, no event has
occurred since the date of such determination letter that would affect adversely
the qualified status of any such Plan. Except as disclosed in Section 2.14(d) of
the Company Disclosure Schedule, no trust maintained or contributed to by the
Company or any of the Company Subsidiaries is intended to be qualified as a
voluntary employees' beneficiary association or is intended to be exempt from
Federal income taxation under Section 501(c)(9) of the Code.
(e) Absence of Certain Liabilities and Events. Except for matters disclosed
in Section 2.14(e) of the Company Disclosure Schedule, there has been no
non-exempt prohibited transaction (within the meaning of Section 406 of ERISA or
Section 4975 of the Code) with respect to any Plan. The Company and each of the
Company Subsidiaries has not incurred any liability for any excise tax arising
under Section 4972 or 4980B of the Code that would individually or in the
aggregate have a Material Adverse Effect on the Company and the Company
Subsidiaries taken as a whole.
(f) Plan Contributions. All contributions, premiums or payments required to
be made prior to the Effective Time with respect to any Company Plan will have
been made on or before the Effective Time.
(g) Stock Options. Section 2.14(g) of the Company Disclosure Schedule sets
forth a true and complete list of each current or former employee, officer or
director of the Company or any Company Subsidiary who holds any option to
purchase Company Common Stock as of the date of this Agreement, together with
the number of shares of Company Common Stock subject to such option, the date of
grant of such option, the plan under which the options were granted, the option
price of such option, whether such option is intended to qualify as an incentive
stock option within the meaning of Section 422(b) of the Code, and the
expiration date of such option. The vesting of all such options will be
accelerated as a result of, and shall occur as of the Effective Time of, the
Merger.
(h) Employment Contracts. Except as disclosed in Section 2.14(h) of the
Company Disclosure Schedule, neither the Company nor any Company Subsidiary is a
party to any employment, severance, consulting or other similar contracts with
any employees, consultants, officers or directors of the Company or any of the
Company Subsidiaries. Section 2.14(h) of the Company Disclosure Schedule also
sets forth the terms of the agreements presently in effect between the Company
and those individuals who are emeritus members of the Company's Board of
Directors. Neither the Company nor any Company Subsidiary is a party to any
collective bargaining agreements.
SECTION 2.15 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information supplied by the Company for inclusion in the Registration Statement
(referred to in Section 6.1) shall not at the time such Registration Statement
is declared effective contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The information supplied by the Company for inclusion
in the proxy statement/prospectus to be sent to the shareholders of the Company
in connection with the meeting of the Company's shareholders to consider the
Merger (the "Company Shareholders' Meeting") (such proxy statement/prospectus as
amended or supplemented is referred to herein as the "Proxy
Statement/Prospectus") shall not at the date the Proxy Statement/ Prospectus (or
any amendment thereof or supplement thereto) is first mailed to shareholders, at
the time of the Company Shareholders' Meeting and at the Effective Time, be
false or misleading with respect to any material fact required to be stated
therein, or omit to state any material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they are made, not misleading. If at any time prior to the Effective
Time any event relating to the Company or any of its affiliates, officers or
directors should be discovered by the Company which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement/
Prospectus, the Company shall promptly inform the Acquiror. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information about, or supplied or omitted by, the Acquiror which is contained in
any of the foregoing documents.
SECTION 2.16 TAXES. The Company and the Company Subsidiaries have timely
filed all material Tax Returns (as defined below) required to be filed by them,
and the Company and the Company Subsidiaries
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have timely paid and discharged all material Taxes (as defined below) due in
connection with or with respect to the filing of such Tax Returns, except such
as are being contested in good faith by appropriate proceedings and with respect
to which the Company is maintaining reserves adequate for their payment. The
liability for Taxes set forth on each such Tax Return adequately reflects the
Taxes required to be reflected on such Tax Return. For purposes of this
Agreement, "Tax" or "Taxes" shall mean taxes, charges, fees, levies, and other
governmental assessments and impositions of any kind, payable to any federal,
state, local or foreign governmental entity or taxing authority or agency,
including, without limitation, (i) income, franchise, profits, gross receipts,
estimated, ad valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding, disability, employment,
social security, workers compensation, unemployment compensation, utility,
severance, production, excise, stamp, occupation, premiums, windfall profits,
transfer and gains taxes, (ii) customs duties, imposts, charges, levies or other
similar assessments of any kind, and (iii) interest, penalties and additions to
tax imposed with respect thereto; and "Tax Returns" shall mean returns, reports,
and information statements with respect to Taxes required to be filed with the
United States Internal Revenue Service (the "IRS") or any other governmental
entity or taxing authority or agency, domestic or foreign, including, without
limitation, consolidated, combined and unitary tax returns. Except as otherwise
disclosed in Section 2.16 of the Company's Disclosure Schedule, neither the IRS
nor any other governmental entity or taxing authority or agency is now
asserting, either through audits, administrative proceedings or court
proceedings, any deficiency or claim for additional Taxes. Except as otherwise
disclosed in Section 2.16 of the Company's Disclosure Schedule, neither the
Company nor any of the Company Subsidiaries has granted any waiver of any
statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax. Except as otherwise disclosed in Section 2.16 of the
Company's Disclosure Schedule and except for statutory liens for current taxes
not yet due, there are no material tax liens on any assets of the Company or any
of the Company Subsidiaries. Except as otherwise disclosed in Section 2.16 of
the Company's Disclosure Schedule neither the Company nor any of the Company
Subsidiaries has received a ruling or entered into an agreement with the IRS or
any other taxing authority that would have a Material Adverse Effect on the
Company or the Company Subsidiaries, taken as a whole, after the Effective Time.
Except as otherwise disclosed in Section 2.16 of the Company's Disclosure
Schedule, no agreements relating to allocating or sharing of Taxes exist among
the Company and the Company Subsidiaries. Neither the Company nor any of the
Company Subsidiaries has made an election under Section 341(f) of the Code.
SECTION 2.17 BROKERS. Except as disclosed in Section 2.17 of the Company
Disclosure Schedule, no broker, finder or investment banker (other than William
Blair & Company, L.L.C. ("Blair")) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Company. Prior to the
date of this Agreement, the Company has furnished to Acquiror a complete and
correct copy of all agreements between Blair and the Company pursuant to which
such firm would be entitled to any payment relating to the transactions
contemplated hereunder.
SECTION 2.18 TAX MATTERS. Neither the Company nor any of its affiliates has
through the date of this Agreement taken or agreed to take or omitted to take
any action which action or omission would prevent the Merger from qualifying as
a reorganization under Section 368 of the Code.
SECTION 2.19 VOTE REQUIRED. The affirmative vote of a majority of the votes
that holders of the outstanding shares of Company Common Stock are entitled to
cast is the only vote of the holders of any class or series of the Company
capital stock necessary to approve the Merger.
SECTION 2.20 DISCLOSURE SCHEDULE, MATERIALITY.
The inclusion of any matters or items on the Company Disclosure Schedule
shall not constitute an acknowledgement by the Company (or evidence) as to the
materiality or Material Adverse Effect of any matter or item so disclosed.
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ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
Except as set forth in the Disclosure Schedule delivered by the Acquiror to
the Company prior to execution of this Agreement (the "Acquiror Disclosure
Schedule"), the Acquiror hereby represents and warrants to the Company that:
SECTION 3.1 ORGANIZATION AND QUALIFICATION.
(a) The Acquiror is a corporation duly organized and validly existing under
the laws of the State of Wisconsin, and is registered as a savings and loan
holding company under the Home Owners Loan Act, as amended ("HOLA"). The
Acquiror is current in all filings necessary to maintain its corporate existence
under Wisconsin law. Each subsidiary of the Acquiror (an "Acquiror Subsidiary"
and collectively the "Acquiror Subsidiaries") is a federally-chartered savings
association or a corporation duly organized and validly existing under the laws
of the state of its organization or incorporation. The Acquiror has the
requisite corporate power and authority and is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
approvals and orders ("Acquiror Approvals") necessary to own, lease and operate
its respective properties and to carry on its respective business as now being
conducted, including, without limitation, appropriate authorizations from the
FDIC and the Office of Thrift Supervision ("OTS"), and neither the Acquiror nor
any Acquiror Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Acquiror Approvals, except in each case where
the failure to be so existing or to have such power, authority, Acquiror
Approvals and revocations or modifications would not, individually or in the
aggregate, have a Material Adverse Effect (as defined in Section 9.4(d)) on the
Acquiror and the Acquiror Subsidiaries, taken as a whole.
SECTION 3.2 ARTICLES OF INCORPORATION AND BY-LAWS. The Acquiror has
previously furnished to the Company a complete and correct copy of the Articles
of Incorporation and the By-Laws, as amended or restated, of the Acquiror
("Acquiror Articles" or "Acquiror By-Laws") and each Acquiror Subsidiary. Such
Articles of Incorporation and By-Laws of the Acquiror and each Acquiror
Subsidiary are in full force and effect. Neither the Acquiror nor any Acquiror
Subsidiary is in violation of any of the provisions of its Articles of
Incorporation or By-Laws.
SECTION 3.3 CAPITALIZATION.
(a) The authorized capital stock of the Acquiror consists of 100,000,000
shares of Acquiror Common Stock and 5,000,000 shares of preferred stock, $0.10
par value of Acquiror ("Acquiror Preferred Stock"). As of the date of this
Agreement, (i) 25,363,339 shares of Acquiror Common Stock are issued, with
22,760,567 outstanding, all of which are duly authorized, validly issued, fully
paid and non-assessable, except as provided by Section 180.0622(2)(b) of the
WBCL, and were not issued in violation of any preemptive right of any Acquiror
shareholder, (ii) 2,602,772 shares of Acquiror Common Stock are held in the
treasury of the Acquiror, and (iii) 940,925 shares of Acquiror Common Stock are
reserved for future issuance pursuant to outstanding employee stock options
issued pursuant to the Acquiror's stock option plans. As of the date of this
Agreement, no shares of Acquiror Preferred Stock are issued and outstanding.
Except as set forth in clause (iii), above, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character,
including without limitation voting agreements or arrangements, relating to the
issued or unissued capital stock of the Acquiror or obligating the Acquiror to
issue or sell any shares of capital stock of, or other equity interests in, the
Acquiror, other than pursuant to the Rights Agreement, dated July 22, 1997, by
and between the Acquiror and U.S. Bank (as successor to Firstar Trust Company)
and as disclosed in Section 3.3 of the Acquiror Disclosure Schedule. All shares
of Acquiror Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, shall be duly authorized, validly issued, fully paid and
non-assessable, except as otherwise provided by Section 180.0622(2)(b) of the
WBCL. There are no obligations, contingent or otherwise, of the Acquiror to
repurchase, redeem or otherwise acquire any shares of Acquiror Common Stock or
to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) or any other entity, except for loan commitments and
other funding obligations entered into in the ordinary course of business.
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(b) The shares of Acquiror Common Stock to be issued pursuant to the Merger
will, upon issuance in accordance with the provisions of this Agreement, be duly
authorized, validly issued, fully paid and non-assessable, except as otherwise
provided by Section 180.0622(2)(b) of the WBCL.
SECTION 3.4 AUTHORITY. The Acquiror has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby (other than the
receipt of requisite regulatory approvals). The execution and delivery of this
Agreement by the Acquiror and the consummation by the Acquiror of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Acquiror are necessary to authorize this Agreement or to consummate the
transactions so contemplated hereby. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of the Acquiror
and, assuming due authorization, execution and delivery by the Company, is
enforceable against the Acquiror in accordance with its terms, except as
enforcement may be limited by laws affecting insured depository institutions,
general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
SECTION 3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Acquiror does not,
and the performance of this Agreement and the transactions contemplated hereby
by the Acquiror shall not, (i) conflict with or violate the Acquiror Articles or
Acquiror By-Laws, (ii) conflict with or violate any Laws applicable to the
Acquiror or by which its or any of their respective properties is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, require
the giving of notice to, or the consent of, any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the properties or
assets of the Acquiror pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Acquiror is a party or by which the Acquiror or its
properties is bound or affected, except in the case of clause (iii) for any such
conflicts, violations, breaches, defaults or other occurrences that would not,
individually or in the aggregate, have a Material Adverse Effect on the Acquiror
and the Acquiror Subsidiaries taken as a whole.
(b) The execution and delivery of this Agreement by the Acquiror does not,
and the performance of this Agreement by the Acquiror shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Securities Act, the Exchange Act,
Blue Sky Laws, the HOLA, the BHC Act [the HSR Act], the banking laws of the
State of Wisconsin (the "WBL") and the filing of appropriate merger or other
documents as required by the WBCL and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger or
otherwise prevent the Acquiror from performing its obligations under this
Agreement, and would not have a Material Adverse Effect on the Acquiror and the
Acquiror Subsidiaries taken as a whole.
SECTION 3.6 COMPLIANCE; PERMITS. Except for any such conflicts, defaults or
violations which would not, individually or in the aggregate, have a Material
Adverse Effect on the Acquiror and the Acquiror Subsidiaries, taken as a whole,
neither the Acquiror nor any Acquiror Subsidiary is in conflict with, or in
default or violation of, (a) any Law applicable to the Acquiror or any Acquiror
Subsidiary or by which it or its properties are bound or affected, or (b) any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Acquiror or any
Acquiror Subsidiary is a party or by which the it or its properties is bound or
affected.
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SECTION 3.7 SECURITIES AND BANKING REPORTS; FINANCIAL STATEMENTS.
(a) The Acquiror and each Acquiror Subsidiary have filed all forms, reports
and documents required to be filed with:
(i) the SEC since March 31, 1998, and as of the date of this Agreement
the Acquiror has delivered to the Company (A) its Annual Reports on Form
10-K for the fiscal years ended March 31, 2000, 1999 and 1998,
respectively, (B) its Quarterly Reports on Form 10-Q for the periods ended
June 30 and September 30, 2000 (C) all proxy statements relating to the
Acquiror's meetings of shareholders (whether annual or special) held since
March 31, 1998, (D) all Current Reports on Form 8-K filed by the Acquiror
with the SEC since March 31, 1998, (E) all other reports or registration
statements (other than Quarterly Reports on Form 10-Q not referred to in
clause (B) above) filed by the Acquiror with the SEC since March 31, 1998
and (F) all amendments and supplements to all such reports and registration
statements filed by the Acquiror with the SEC since March 31, 1998
(collectively, the "Acquiror SEC Reports"); and
(ii) the OTS and the FDIC and any other applicable federal or state
securities or banking authorities (all such reports and statements are
collectively referred to with the Acquiror SEC Reports as the "Acquiror
Reports"). The Acquiror Reports, including all Acquiror Reports filed after
the date of this Agreement, were or will be prepared in all material
respects in accordance with the requirements of applicable Law and did not
at the time they were filed, or will not at the time they are filed,
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Acquiror SEC Reports, including any
Acquiror SEC Reports filed since the date of this Agreement and prior to or on
the Effective Time, has been prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto) and each fairly presents the consolidated financial position
of the Acquiror and the Acquiror Subsidiaries as of the respective dates thereof
and the consolidated results of its operations and changes in financial position
for the periods indicated, except that any unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments.
SECTION 3.8 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information supplied by the Acquiror for inclusion in the Registration Statement
of the Acquiror (the "Registration Statement") pursuant to which the shares of
Acquiror Common Stock to be issued in the Merger will be registered with the SEC
shall not, at the time the Registration Statement is declared effective by the
SEC, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. If at any time prior to the Effective Time any event
relating to the Acquiror or any of its affiliates, officers or directors should
be discovered by the Acquiror which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement/Prospectus, the
Acquiror shall promptly inform the Company. Notwithstanding the foregoing, the
Acquiror makes no representation or warranty with respect to any information
about, or supplied or omitted by, the Acquiror which is contained in any of the
foregoing documents.
SECTION 3.9 BROKERS. No broker, finder or investment banker (other than
Howe Barnes Investments) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Acquiror.
SECTION 3.10 AGREEMENTS WITH REGULATORY AGENCIES. Except as set forth on
Section 3.10 of the Acquiror Disclosure Schedule neither the Acquiror nor any
Acquiror Subsidiary is subject to any cease and desist or other order issued by,
or is a party to any writing agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or is subject to any
order or directive by, or has been a recipient of any notice from, or has
adopted any board resolutions at the
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request of the FRB, the FDIC, the DFI or any other applicable federal or state
regulatory agency having jurisdiction over the Acquiror or any Acquiror
Subsidiary or its business ("Regulatory Agency") that currently restricts the
conduct of its business or that relates to its capital adequacy, compliance with
laws, its credit policies, its management or its business (each a "Regulatory
Agreement") nor has the Acquiror or any Acquiror Subsidiary been advised by any
Regulatory Agency that it is considering issuing or requesting any such
Regulatory Agreement.
SECTION 3.11 VOTE REQUIRED. No vote of the holders of outstanding shares of
Acquiror Common Stock is required for approval of the Merger or of any of the
actions contemplated to be taken by Acquiror to consummate the same.
SECTION 3.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Acquiror SEC Reports filed prior to the date of this Agreement or set forth
in Section 3.12 of the Acquiror Disclosure Schedule and except for the
transactions contemplated by this Agreement, since December 31, 2000 to the date
of this Agreement, the Acquiror and the Acquiror Subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since December 31, 2000, there has not been (a) any change in
the financial condition, results of operations or business of the Acquiror and
any of the Acquiror Subsidiaries having a Material Adverse Effect on the
Acquiror and the Acquiror Subsidiaries taken as a whole, (b) any damage,
destruction or loss (whether or not covered by insurance) with respect to any
assets of the Acquiror or any of the Acquiror Subsidiaries having a Material
Adverse Effect on Acquiror and the Acquiror Subsidiaries taken as a whole, (c)
any change by the Acquiror in its accounting methods, principles or practices,
(d) any revaluation by the Acquiror of any of its assets in any material
respect, (e) to the date of this Agreement, any entry by the Acquiror or any of
the Acquiror Subsidiaries into any commitment or transactions material to the
Acquiror and the Acquiror Subsidiaries taken as a whole, except in connection
with the Merger, or (f) except for regular quarterly cash dividends on Acquiror
Common Stock with usual record and payment dates, to the date of this Agreement,
any declaration, setting aside or payment of any dividends or distributions in
respect of shares of Acquiror Common Stock or any redemption, purchase or other
acquisition of any of its subsidiaries or any of the securities of any Acquiror
Subsidiary.
SECTION 3.13 TAX MATTERS. Neither the Acquiror nor any of its affiliates
has through the date of this Agreement taken or agreed to take or omitted to
take any action that would prevent the Merger from qualifying as a
reorganization under Section 368 of the Code.
SECTION 3.14 DISCLOSURE SCHEDULE, MATERIALITY. The inclusion of any matters
or items on the Acquiror Disclosure Schedule shall not constitute an
acknowledgement by the Acquiror (or evidence) as to the materiality or Material
Adverse Effect of any matter or item so disclosed.
ARTICLE IV -- COVENANTS OF THE COMPANY
SECTION 4.1 AFFIRMATIVE COVENANTS. The Company hereby covenants and agrees
with the Acquiror that prior to the Effective Time, unless the prior written
consent of the Acquiror shall have been obtained and except as otherwise
contemplated herein, it will and it will cause each Company Subsidiary to:
(a) operate its business only in the ordinary course consistent with past
practices;
(b) use all reasonable efforts to preserve intact its business organization
and assets, maintain its rights and franchises, retain the services of its
officers and key employees and maintain its relationships with customers;
(c) use all reasonable efforts to maintain and keep its properties in as
good repair and condition as at present, ordinary wear and tear excepted;
(d) use all reasonable efforts to keep in full force and effect insurance
and bonds comparable in amount and scope of coverage to that now maintained by
it;
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(e) use all reasonable efforts to perform in all material respects all
obligations required to be performed by it under all material contracts, leases,
and documents relating to or affecting its assets, properties, and business; and
(f) take such reasonable actions as are requested by the Acquiror to
complete the Merger.
SECTION 4.2 NEGATIVE COVENANTS. Except as specifically contemplated by this
Agreement and the Stock Option Agreement, from the date of this Agreement until
the Effective Time, the Company shall not do, or permit any Company Subsidiary
to do, without the prior written consent of the Acquiror, any of the following:
(a) except as required by applicable law or to maintain qualification
pursuant to the Code, adopt, amend, renew or terminate any Company Plan or any
agreement, arrangement, plan or policy between the Company or any Company
Subsidiary and one or more of its current or former directors or officers, (i)
except for (A) amendment of the Company's option plans to provide discretion to
permit extension of the option exercise period for up to three years following a
change in control (as defined therein), (B) such other arrangements as are
approved by the Acquiror relating to "stay bonuses" that may be entered into by
certain employees, (which "stay bonuses" shall not include individuals
identified as "named executive officers" in the proxy statement disseminated by
the Company for its most recently held annual meeting, and shall not in the
aggregate exceed $175,000), and (C) amendment of the SERPs, on terms mutually
satisfactory to the Company and Acquiror (which amendments may (but which shall
not be required to) be made by the Company, with the Acquiror's consent,
subsequent to the execution of this Agreement but prior to the Effective Time)
to provide continued funding for the obligations of the Company, as assumed by
the Acquiror, to maintain such life insurance coverage as is required and to
make such payments as are due after the retirement of the beneficiaries
thereunder, provided that such provisions, as so amended, will (x) not require
that the Acquiror be compelled to suffer a below-market rate of return on the
funds or assets committed to such funding (provided that the adequacy of the
funding to provide the benefits is maintained to the reasonable satisfaction of
the beneficiaries), and (y) permit the Acquiror to withdraw funds or reduce the
amount funded as and when benefit payments are made (the "SERP Amendments") or
(ii) except for normal increases in the ordinary course of business consistent
with past practice or except as required by applicable law, increase in any
manner the base salary, bonus incentive compensation or fringe benefits of any
director or officer or pay any benefit not required by any plan or agreement as
in effect as of the date hereof (including, without limitation, the granting of
stock options, stock appreciation rights, restricted stock, restricted stock
units or performance units or shares), provided that the Company or any Company
Subsidiary may make bonus payments consistent with its existing cash bonus plan
and consistent with past practice in amount (such bonus amounts to be prorated
through the Effective Time);
(b) declare or pay any dividend on, or make any other distribution in
respect of, its outstanding shares of capital stock, except for (i) regular
quarterly cash dividends on Company Common Stock with usual record and payment
dates for such dividends with each such dividend at a rate per share of Company
Common Stock not in excess of $0.05 per share and (ii) dividends by a Company
Subsidiary to the Company;
(c) (i) redeem, purchase or otherwise acquire any shares of its capital
stock (except as otherwise provided by currently existing agreements relating to
outstanding stock options) or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options, warrants,
conversion or other rights to acquire any shares of its capital stock or any
such securities or obligations; (ii) merge with or into any other corporation or
bank, permit any other corporation or bank to merge into it or consolidate with
any other corporation or bank, or effect any reorganization or recapitalization;
(iii) purchase or otherwise acquire any substantial portion of the assets, or
more than 5% of any class of stock, of any corporation, bank or other business
other than in the ordinary course of business and consistent with past practice
and except to satisfy debts previously contracted as set forth in the Company
Disclosure Schedule (iv) liquidate, sell, dispose of, or encumber any assets or
acquire any assets, other than in the ordinary course of its business consistent
with past practice; or (v) split, combine or reclassify
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any of its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock; provided, however, that nothing contained in this Section 4.2(c)
shall prevent the Company from consummating a Third Party Acquisition Event if
the Company terminates this Agreement pursuant to Section 8.1(a)(iv) and pays
the Termination Fee pursuant to Section 8.2(b);
(d) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale of, any shares of any class of capital
stock of the Company or any Company Subsidiary (including shares held in
treasury) or any rights, warrants or options to acquire, any such shares, other
than the issuance of Company Common Stock issuable upon exercise of employee or
director stock options outstanding as of the date of this Agreement or pursuant
to Company Plans, in effect as of the date of this Agreement;
(e) authorize, permit or cause any of its officers, directors, employees or
agents to directly or indirectly solicit, initiate or encourage any inquiries
relating to, or the making of any proposal which constitutes, a "Takeover
Proposal" (as defined below), or (i) recommend, endorse or agree to any Takeover
Proposal, (ii) participate in any discussions or negotiations with respect to a
Takeover Proposal, or (iii) provide third parties with any nonpublic information
relating to any such inquiry or proposal; provided, however, that the Company
may, and may authorize and permit its officers, directors, employees or agents
to, provide third parties with nonpublic information, otherwise facilitate any
effort or attempt by any third party to make or implement an unsolicited
Takeover Proposal and participate in discussions and negotiations with any third
party relating to any unsolicited Takeover Proposal, if the Company, after
having consulted with and considered the advice of outside counsel, has
determined in good faith that such actions are appropriate in the discharge of
the fiduciary duties of the Company's Board of Directors. As used in this
Agreement, "Takeover Proposal" shall mean any tender or exchange offer, proposal
for a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any
Company Subsidiary or any proposal or offer to acquire in any manner
substantially all of the stock or the assets of the Company or any Company
Subsidiary other than the transactions contemplated or permitted by this
Agreement;
(f) propose or adopt any amendments to its Articles of Incorporation or
By-Laws in any way adverse to the Acquiror;
(g) change any of its methods of accounting in effect at June 30, 2000, or
change any of its methods of reporting income or deductions for Federal income
tax purposes from those employed in the preparation of the Federal income tax
returns for the taxable year ended June 30, 2000, except as may be required by
Law or GAAP;
(h) change in any material respect any lending, investment, liability
management or other material policies concerning the business or operations of
the Company or any of the Company Subsidiaries, except as required by Law;
(i) take or cause to be taken any action or omit to take any action which
action or omission would disqualify the Merger as a tax-free reorganization
under Section 368 of the Code;
(j) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect, or in any of the conditions to
the Merger set forth in Article VII not being satisfied, or in a violation of
any provision of this Agreement except, in every case, as may be required by
applicable Law; or
(k) agree in writing or otherwise to do any of the foregoing.
SECTION 4.3 LETTER OF THE COMPANY'S ACCOUNTANTS. The Company shall use its
reasonable best efforts to cause to be delivered to the Acquiror "comfort"
letters of KPMG LLP, the Company's independent public accountants, dated the
date on which the Registration Statement shall become effective and the
Effective Time, respectively, and addressed to the Acquiror, in a form
reasonably satisfactory to the
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Acquiror and reasonably customary in scope and substance for letters delivered
by independent public accountants in connection with registration statements
similar to the Registration Statement and transactions such as those
contemplated by this Agreement.
SECTION 4.4 ACCESS AND INFORMATION.
(a) Until the Effective Time and upon reasonable notice, and subject to
applicable Laws relating to the exchange of information, the Company shall, and
shall cause each Company Subsidiary to, afford to the Acquiror's officers,
employees, accountants, legal counsel and other representatives of the Acquiror,
access, during normal business hours, to all its properties, books, contracts,
commitments and records. Prior to the Effective Time, the Company shall (and
shall cause each Company Subsidiary to) furnish promptly (as soon as available
or received by the Company or any Company Subsidiary) to the Acquiror (i) a copy
of each Company Report filed by it or received by it (to the extent not
prohibited by Law and if so prohibited the Company shall promptly so notify the
Acquiror) after the date of this Agreement and prior to the Effective Time
pursuant to the requirements of federal or state securities laws, the BHC Act,
the Federal Deposit Insurance Act, or any other federal or state banking laws or
any other applicable Laws promptly after such documents are available, (ii) a
copy of any correspondence received from the IRS or any other governmental
entity or taxing authority or agency and any other correspondence relating to
Taxes, and any other documents relating to Taxes as the Acquiror may reasonably
request, and (iii) all other information concerning its business, properties and
personnel as the Acquiror may reasonably request, other than in each case
reports or documents which the Company is not permitted to disclose under
applicable Law or binding agreements entered into prior to the date of this
Agreement. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
(b) Unless otherwise required by Law, the parties will hold any such
information which is nonpublic in confidence until such time as such information
becomes publicly available through no wrongful act of either party, and in the
event of termination of this Agreement for any reason each party shall promptly
return all nonpublic documents obtained from any other party, and any copies
made of such documents, to such other party or destroy such documents and
copies.
SECTION 4.5 UPDATE DISCLOSURE; BREACHES.
(a) From and after the date of this Agreement until the Effective Time, the
Company shall update the Company Disclosure Schedule on a regular basis by
written notice to the Acquiror to reflect any matters which have occurred from
and after the date of this Agreement which, if existing on the date of this
Agreement, would have been required to be described therein; provided that, to
the extent that updating required under this Section is unduly burdensome to the
Company, the Acquiror and the Company will use their best efforts to develop
alternate updating procedures utilizing, wherever possible, existing reporting
systems.
(b) The Company shall, in the event it becomes aware of the impending or
threatened occurrence of any event or condition which would cause or constitute
a material breach (or would have caused or constituted a material breach had
such event occurred or been known prior to the date of this Agreement) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to the Acquiror and use its best efforts to prevent or
promptly remedy the same.
SECTION 4.6 AFFILIATES. Within thirty (30) days after the date of this
Agreement, (a) the Company shall deliver to the Acquiror a letter identifying
all persons who are then "affiliates" of the Company, including, without
limitation, all directors and executive officers of the Company, for purposes of
Rule 145 promulgated under the Securities Act (each a "Company Affiliate") and
(b) the Company shall advise the persons identified in such letter of the resale
restrictions imposed by applicable securities laws and shall use reasonable
efforts to obtain from each person identified in such letter a written
agreement, substantially in the form attached hereto as Exhibit E. The Company
shall use its reasonable efforts to obtain from any person who becomes an
affiliate of the Company after the Company's delivery of the
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letter referred to above, and on or prior to the Effective Time, a written
agreement substantially in such form as soon as practicable after attaining such
status.
SECTION 4.7 TAX TREATMENT. The Company will use its reasonable efforts to
cause the Merger to qualify as a reorganization under Section 368 of the Code.
ARTICLE V -- COVENANTS OF THE ACQUIROR
SECTION 5.1 AFFIRMATIVE COVENANTS. The Acquiror hereby covenants and agrees
with the Company that prior to the Effective Time, unless the prior written
consent of the Company shall have been obtained and except as otherwise
contemplated herein, it will and it will cause each Acquiror Subsidiary to:
(a) operate its business only in the ordinary course consistent with past
practices;
(b) take such reasonable actions as are requested by the Company to
complete the Merger and Bank Merger.
SECTION 5.2 NEGATIVE COVENANTS. Except as otherwise contemplated by this
Agreement, from the date of this Agreement until the Effective Time, the
Acquiror shall not do, or agree to commit to do, or permit any Acquiror
Subsidiaries to do, without the prior written consent of the Company any of the
following:
(a) declare or pay any extraordinary or special dividends on or make any
other extraordinary or special distributions in respect of any of its capital
stock unless appropriate adjustment or adjustments are made to the Exchange
Ratio as set forth in Section 1.6 hereof;
(b) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect, or in any of the conditions to
the Merger set forth in Article VII not being satisfied, or in a violation of
any provision of this Agreement except, in every case, as may be required by
applicable Law;
(c) take or cause to be taken any action or omit to take any action which
action or omission would disqualify the Merger as a tax free reorganization
under Section 368 of the Code;
(d) amend its Articles of Incorporation or By-Laws or other governing
instrument in a manner which would adversely affect in any manner the terms of
the Acquiror Common Stock or the ability of the Acquiror to consummate the
transactions contemplated hereby; or
(e) enter into any agreement providing for, or otherwise participate in,
any merger, consolidation or other transaction in which the Acquiror or any
surviving corporation would be required not to consummate the Merger or Bank
Merger or any of the other transactions or agreements contemplated hereby in
accordance with this Agreement, including but not limited to Section 1.5.
(f) agree in writing or otherwise to do any of the foregoing.
SECTION 5.3 NOTICE REGARDING BREACHES.
The Acquiror shall, in the event it becomes aware of the impending or
threatened occurrence of any event or condition which would cause or constitute
a material breach (or would have caused or constituted a material breach had
such event occurred or been known prior to the date of this Agreement) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to the Company and use its best efforts to prevent or
promptly remedy the same.
SECTION 5.4 STOCK EXCHANGE LISTING. The Acquiror shall use its best efforts
to cause the shares of Acquiror Common Stock to be issued in the Merger to be
approved for listing on The NASDAQ Stock Market prior to the Effective Time.
SECTION 5.5 TAX TREATMENT. The Acquiror will use its reasonable best
efforts to cause the Merger to qualify as a reorganization under Section 368 of
the Code.
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SECTION 5.6 ACCESS AND INFORMATION.
Prior to the Effective Time, the Acquiror shall (and shall cause each
Acquiror Subsidiary to) furnish promptly (as soon as available or received by
the Acquiror or any Acquiror Subsidiary) to the Company a copy of each Acquiror
Report filed by it or received by it (to the extent not prohibited by Law and if
so prohibited the Acquiror shall promptly so notify the Company) after the date
of this Agreement and prior to the Effective Time pursuant to the requirements
of federal or state securities laws, the BHC Act, the Federal Deposit Insurance
Act, or any other federal or state banking laws or any other applicable Laws
promptly after such documents are available.
SECTION 5.7 UPDATE DISCLOSURE, BREACHES.
(a) From and after the date of this Agreement until the Effective Time, the
Acquiror shall update the Acquiror Disclosure Schedule on a regular basis by
written notice to the Company to reflect any matters which have occurred from
and after the date of this Agreement which, if existing on the date of this
Agreement, would have been required to be described therein; provided that, to
the extent that updating required under this Section is unduly burdensome to the
Acquiror, the Acquiror and the Company will use their best efforts to develop
alternate updating procedures utilizing, wherever possible, existing reporting
systems.
(b) The Acquiror shall, in the event it becomes aware of the impending or
threatened occurrence of any event or condition which would cause or constitute
a material breach (or would have caused or constituted a material breach had
such event occurred or been known prior to the date of this Agreement) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to the Company and use its best efforts to prevent or
promptly remedy the same.
SECTION 5.8 STOCK OPTIONS.
(a) At the Effective Time, the Acquiror will assume the Ledger Capital
Corp. 1993 Stock Option Plan for Outside Directors and the Ledger Capital Corp.
1993 Incentive Stock Option Plan, (collectively, the "Option Plans") and all of
the Company's obligations thereunder and may, at its election, provide for the
merger of the Company's option plans into those of the Acquiror. At the
Effective Time, the Option Plans shall be amended to provide that each
outstanding option issued pursuant to the Option Plans shall become an option to
acquire, on the same terms and conditions as were applicable under such option
(including, without limitation, the time periods allowed for exercise), a number
of shares of Acquiror Common Stock equal to the product of the Exchange Ratio
and the number of shares of Company Common Stock subject to such option
(provided that any fractional shares of Acquiror Common Stock resulting from
such multiplication shall be rounded up to the nearest share), at a price per
share (rounded down to the nearest cent) equal to the exercise price per share
of the shares of Company Common Stock subject to such option divided by the
Exchange Ratio. Notwithstanding the foregoing, with respect to options that are
incentive stock options, the excess of the aggregate fair market value of the
shares subject to the option immediately after the substitution over the
aggregate option price of such shares shall not be more than the excess of the
aggregate fair market value of all shares subject to the option immediately
before the substitution over the aggregate option price of such shares. The
duration and other terms of the option shall remain the same, except that all
references to the Company shall refer to the Acquiror. All options granted under
the Options Plans shall be fully vested as of the day preceding the Effective
Time. The Acquiror agrees to take all corporate action necessary to reserve for
issuance a sufficient number of shares of Acquiror Common Stock for delivery
upon exercise of options under the Option Plans assumed by the Acquiror in
accordance with this Agreement.
(b) Within ten (10) days after the Effective Time, the Acquiror shall, to
the extent necessary, and may, at its option, file with the SEC a registration
statement on an appropriate form under the Securities Act with respect to the
shares of Acquiror Common Stock subject to options to acquire Acquiror Common
Stock issued pursuant to Section 5.8 hereof, and shall use its best efforts to
maintain the current status of the prospectus related thereto, as well as comply
with applicable state securities or Blue Sky Laws, for so long as such options
remain outstanding.
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SECTION 5.9 MRRP SHARES. All Shares awarded under the Company MRRP are
fully-vested and will be converted into Acquiror Common Stock or cash pursuant
to Section 1.6 of this Agreement. No further Shares shall be issued under the
Company MRRP prior to the Effective Time and Acquiror may, at its option,
terminate, continue, or merge the Company's MRRP following the Effective Time.
SECTION 5.10 SEC FILINGS. The Surviving Corporation shall make all filings
with the SEC that are described in subsection (c) of Rule 144 under the
Securities Act for a period of two years following the Effective Time.
SECTION 5.11 SERP AMENDMENTS. If the SERP Amendments have not been
completed prior to the Effective Time, the Acquiror will negotiate in good faith
with the beneficiaries of the SERPs to complete and enter into the SERP
Amendments as soon as practicable after the Effective Time.
ARTICLE VI -- ADDITIONAL AGREEMENTS
SECTION 6.1 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As promptly
as practicable after the execution of this Agreement, the Acquiror and the
Company shall prepare and file with the SEC the Proxy Statement/Prospectus and
Registration Statement under the Securities Act and the Exchange Act relating to
the approval of the Merger by the shareholders of the Company and shall use all
reasonable efforts to cause the Registration Statement to become effective as
soon thereafter as practicable. It shall be a condition precedent to the mailing
of the Proxy Statement/Prospectus to the shareholders of the Acquiror and the
Company that (i) the Company shall have received an opinion from William Blair &
Company, L.L.C., or such other financial advisory firm as Company may select
upon consultation with and consent of the Acquiror, and that, as of the date
thereof, the Exchange Ratio is fair from a financial point of view to the
holders of Company Common Stock (other than the Acquiror), and (ii) the Acquiror
shall have received an opinion from Howe Barnes Investments that, as of the date
thereof, the Exchange Ratio is fair from a financial point of view to Acquiror.
SECTION 6.2 MEETINGS OF SHAREHOLDERS. Promptly after the date of this
Agreement the Company shall take all action necessary in accordance with the
WBCL, the Company Articles and the Company By-Laws, to convene the Company
Shareholders' Meeting. The Company shall use its best efforts to solicit from
its shareholders proxies in favor of the Merger and shall take all other action
necessary or advisable to secure the vote or consent of its shareholders
required by the WBCL to approve the Merger (including, without limitation,
recommending that its shareholders approve this Agreement, the Merger and the
transactions contemplated hereby and thereby), unless the Board of Directors of
the Company shall have determined in good faith based on the advice of counsel
that such actions could reasonably be deemed to violate its fiduciary duty to
the shareholders of the Company.
SECTION 6.3 APPROPRIATE ACTION; CONSENTS; FILINGS. The Company and the
Acquiror shall use all reasonable efforts to (a) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary, proper or
advisable under applicable Law to consummate and make effective the transactions
contemplated by this Agreement and the Stock Option Agreement, (b) obtain all
consents, licenses, permits, waivers, approvals, authorizations or orders
required under Law (including, without limitation, all foreign and domestic
(federal, state and local) governmental and regulatory rulings and approvals and
parties to contracts) required in connection with the authorization, execution
and delivery of this Agreement and the Stock Option Agreement and the
consummation by them of the transactions contemplated hereby and thereby, (c)
make all necessary filings, and thereafter make any other required submissions,
with respect to this Agreement, the Stock Option Agreement and the Merger
required under (i) the Securities Act and the Exchange Act and the rules and
regulations thereunder, and any other applicable federal or state securities
laws, (ii) [the HSR Act], (iii) applicable federal or state banking laws and
(iv) any other applicable Law; provided that, the Acquiror and the Company shall
cooperate with each other in connection with the making of all such filings,
including providing copies of all such documents to the non-filing party and its
advisors prior to filing and, if requested, to accept all reasonable additions,
deletions or changes suggested in connection therewith. The Company and the
Acquiror shall furnish all information required for any application or other
filing to be made pursuant to the rules and
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regulations of any applicable Law (including all information required to be
included in the Proxy Statement/Prospectus and the Registration Statement) in
connection with the transactions contemplated by this Agreement. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and directors of
each party to this Agreement shall use all reasonable efforts to take all such
necessary action.
SECTION 6.4 BENEFIT PLANS.
Prior to the Effective Time the Company will, in accordance with all
applicable requirements of the Code and ERISA, make a cash contribution to its
existing Employee Stock Ownership Plan (the "Company ESOP") sufficient to repay
all of the remaining bank indebtedness of the ESOP; provided that such
contribution shall not be in excess of $405,000. Acquiror shall merge the
Company ESOP and the Company 401(k) Plan into one or more qualified retirement
plan(s) of Acquiror or Acquiror Bank, as soon as practicable after the end of
the plan year containing the Effective Time. From and after the Effective Time:
(i) no employees, other than employees who were participants in the Company ESOP
or Company 401(k) Plan on the day preceding the Effective Time, shall
participate in the Company ESOP or 401(k) Plan; (ii) no additional contributions
shall be made to the Company 401(k) Plan or Company ESOP (other than elective
deferrals made with respect to compensation earned prior to the Effective Time
and the matching contributions attributable thereto); (iii) contributions made
to the Company ESOP shall be allocated to all participants in the Company ESOP
who are employed on the day preceding the Effective Time (regardless of whether
such employees are employed on the last day of the plan year, complete 1000
hours of service during the plan year, or satisfy any other plan condition for
receiving an allocation for the plan year) based on compensation earned prior to
the Effective Time; (iv) Acquiror or Acquiror Bank shall maintain records with
respect to the cost or other basis of employer securities held in its qualified
retirement plans (sufficient under one or more of the alternatives provided
under Treas. Reg. ss.1.402(a)-1(b)(2)) for a period of at least five (5) years
after the Effective Time, such that participants in the Company ESOP could
determine the "net unrealized appreciation" (as defined in IRC ss. 402(e)(4)) on
stock allocated to participants under the Company ESOP; and (v) the participants
in the Company ESOP and Company 401(k) Plan shall be fully vested in all
accounts under such plans. The Company ESOP and Company 401(k) Plan shall be
amended prior to the Effective Time to provide that any contributions made to a
participant in excess of IRC ss. 415 limits shall be reduced by distributing
excess elective deferrals to participants. Employees of the Company and Company
Subsidiaries shall begin to participate in the qualified retirement plans of the
Acquiror and Acquiror Subsidiaries as of the Effective Time or on such later
date as they satisfy the eligibility and vesting requirements for such plans,
counting service with the Company and Company Subsidiaries as service with the
Acquiror and Acquiror Subsidiaries for purposes of satisfying such eligibility
and vesting requirements. The contributions and benefits received from the
qualified plans of the Acquiror and Acquiror Subsidiaries for the plan year
containing the Effective Time shall be based on compensation received by
employees of the Company and the Company Subsidiaries after the Effective Time
and an employee of the Company and the Company Subsidiaries shall be deemed to
satisfy any service requirement applicable to such contributions or benefits if
the employee would satisfy such service requirement based on the employee's
combined service with the Company, Company Subsidiaries, the Acquiror and the
Acquiror Subsidiaries.
Service with the Company and the Company Subsidiaries shall be counted as
service with the Acquiror and Acquiror Subsidiaries for purposes of eligibility
and vesting, but not benefit accrual, under all of benefit plans of the Acquiror
and the Acquiror Subsidiaries. In addition, service with the Company and the
Company Subsidiaries shall be counted as service with Acquiror or Acquiror
Subsidiaries for purposes of determining vacation accruals. Employees of the
Company and Company Subsidiaries with accrued vacation as of the Effective Time
will be entitled to retain such accrued vacation or, in the Acquiror's
discretion, be paid out such accrued vacation. The employees of the Company and
Company Subsidiaries shall participate in the health and welfare plans provided
to similarly situated employees of the Acquiror or Acquiror Subsidiaries as of
the Effective Time or as of the beginning of the next plan year for such plans,
provided that the employees of the Company and the Company Subsidiaries shall
continue to participate
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in the health and welfare plans of the Company and the Company Subsidiaries
until they begin participation in the comparable plans of the Acquiror or
Acquiror Subsidiaries.
SECTION 6.5 CONTRACTS HONORED, SEVERANCE PLAN, CONSULTING CONTRACTS. The
Acquiror acknowledges that five (5) Company employees have employment agreements
(the "Contract Employees"), each of which provides for the payment of benefits,
and in some cases require the satisfaction of certain ongoing obligations, in
the event of a change in control such as would be effected by the Merger
contemplated herein. Acquiror agrees that, with respect to each of the Contract
Employees, it will honor their existing contracts by providing, at the Effective
Time of the Merger, a change in control severance payment (as calculated and set
forth in the attached Statement of Benefits and Acquiror's Obligations attached
hereto as Exhibit C (the "Statement of Benefits") as prepared for each of the
Contract Employees) and shall, where applicable, be responsible for such ongoing
obligations as the Statement of Benefits may provide; provided that the payment
of any such benefit to a Contract Employee shall be conditioned upon such
employee's execution of an agreement, reasonably satisfactory to Acquiror, under
which such employee acknowledges the termination of his or her employment
agreement and releases the Company and Acquiror from any further liability
thereunder. In addition, Acquiror agrees to apply the terms of the Company's
severance pay policy as set forth in Exhibit D, attached hereto. Acquiror
acknowledges its obligation, from and after the Effective Time, to honor the
emeritus directors plan of the Company and Company Bank as presently in effect
for the three (3) covered emeritus directors, to the same (but no greater)
extent, and on the same terms, as the Company would be obligated thereunder in
the absence of the Merger, provided that Acquiror agrees that such obligations
include the provision of supplemental Medicare insurance coverage at no cost to
said emeritus directors.
SECTION 6.6 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. In the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including, without
limitation, any such claim, action, suit, proceeding or investigation in which
any person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director, officer or
employee of the Company or any of the Company Subsidiaries (including in his/her
role as a fiduciary of the employee benefit plans of the Company or the Company
Subsidiaries, if applicable) (the "Indemnified Parties") is, or is threatened to
be, made a party based in whole or in part on, or arising in whole or in part
out of, or pertaining to (i) the fact that he is or was a director, officer or
employee of the Company, any of the Company Subsidiaries or any of their
respective predecessors or (ii) this Agreement or any of the transactions
contemplated hereby, whether in any case asserted or arising before or after the
Effective Time, the parties hereto agree to cooperate and use their best efforts
to defend against and respond thereto. It is understood and agreed that after
the Effective Time, the Acquiror shall indemnify and hold harmless, to the
fullest extent permitted by law, each such Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including reasonable attorney's
fees and expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the fullest extent
permitted by law upon receipt of any undertaking required by applicable law),
judgments, fines and amounts paid in settlement in connection with any such
threatened or actual claim, action, suit, proceeding or investigation, and in
the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective Time),
the Indemnified Parties may retain counsel satisfactory to them; provided,
however, that (A) Acquiror shall have the right to assume the defense thereof
and upon such assumption the Acquiror shall not be liable to any Indemnified
Party for any legal expenses of other counsel or any other expenses subsequently
incurred by any Indemnified Party in connection with the defense thereof, except
that if the Acquiror elects not to assume such defense or counsel for the
Indemnified Parties reasonably advises that there are issues which raise
conflicts of interest between the Acquiror and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and the Acquiror
shall pay the reasonable fees and expenses of such counsel for the Indemnified
Parties, (B) Acquiror shall in all cases be obligated pursuant to this Section
6.6(a) to pay for only one firm of counsel for all Indemnified Parties, (C)
Acquiror shall not be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld) and (D)
Acquiror shall have no obligation hereunder to any Indemnified Party when and if
a court of competent jurisdiction shall ultimately determine, and such
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determination shall have become final and nonappealable, that indemnification of
such Indemnified Party in the manner contemplated hereby is prohibited by
applicable Law. Any Indemnified Party wishing to claim indemnification under
this Section 6.6, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Acquiror thereof, provided that the
failure to so notify shall not affect the obligations of the Acquiror under this
Section 6.6 except to the extent such failure to notify materially prejudices
the Acquiror.
(b) The Surviving Corporation shall use its best efforts to purchase, and
for a period of six (6) years after the Effective Time maintain in effect,
directors and officers liability insurance coverage with respect to wrongful
acts and/or omissions committed or allegedly committed by any of the officers or
directors of the Company prior to the Effective Time ("D&O Coverage"). Such D&O
Coverage shall have an aggregate coverage limit over the term of such policy in
an amount no less than the aggregate annual coverage limit under the Company's
existing directors' and officers' liability insurance policy, and in all other
material respects shall be least comparable to such existing policy; provided,
however, that in no event will the Surviving Corporation be required to expend,
on an annual basis, as the cost of maintaining such D&O Coverage, more than the
amount currently expended by the Company to procure its existing D&O Coverage
(the "Maximum Premium"); and provided further, that if the Surviving Corporation
is unable to obtain or maintain the D&O Coverage called for by this Section
6.6(b) for an amount equal to or less than the Maximum Premium, then the
Surviving Corporation will nonetheless use its best efforts to procure and
maintain as much comparable D&O Coverage as it can obtain for such Maximum
Premium. Notwithstanding the foregoing, the Surviving Corporation, if it so
elects, may satisfy its obligations under this Section 6.6(b) at any time by
procuring one or more so-called "tail" or "runoff" policies of directors' and
officers' liability insurance that insure against the risks that would be
insured against by the D&O Coverage.
(c) In the event the Acquiror or the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially all
of its properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Acquiror or
the Surviving Corporation, as the case may be, assume the obligations set forth
in this section.
(d) In addition to the other indemnification obligations set forth in this
Section 6.6, the Acquiror will fulfill the obligations to indemnify directors
and officers of the Company contained in the Company Articles.
(e) The provisions of this Section 6.6 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
SECTION 6.7 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to the Acquiror, and the Acquiror shall give prompt notice to the
Company, of (a) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate and (b) any
failure of the Company or the Acquiror, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.7 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.8 PUBLIC ANNOUNCEMENTS. The Acquiror and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Merger and shall not issue any such press
release or make any such public statement prior to such consultation, except
with agreement of the other or except as may be required by Law or any listing
agreement with or rule of the market or exchange on which the securities of the
Acquiror or the Company, as the case may be, are then traded.
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SECTION 6.9 DIVIDENDS. After the date of this Agreement, each of the
Acquiror and the Company shall coordinate with the other the payment of
dividends with respect to the Acquiror Common Stock and the Company Common Stock
and the record and payment dates relating thereto, it being the intention of the
parties hereto that the holders of Acquiror Common Stock and Company Common
Stock shall not receive two dividends, or fail to receive one dividend, in any
single quarter with respect to their shares of Acquiror Common Stock and/or
Company Common Stock or the shares of Acquiror Common Stock any holder of
Company Common Stock receives in exchange therefor in the Merger.
SECTION 6.10 EXPENSES
(a) Except as otherwise provided in this Agreement, all Expenses (as
defined below) incurred by the Acquiror and the Company shall be borne solely
and entirely by the party which has incurred the same, except that, in the event
this Agreement is terminated and the Merger is abandoned, the parties shall
share equally in the out-of-pocket expenses relating to the printing of the
Registration Statement and the Proxy Statement/Prospectus.
(b) "Expenses" as used in this Agreement shall include all out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to the party and its
affiliates) incurred by a party or on its behalf in connection with or related
to the authorization, preparation and execution of this Agreement and the Stock
Option Agreement, the solicitation of shareholder approvals and all other
matters related to the closing of the transactions contemplated hereby and
thereby.
SECTION 6.11 COMPANY REPURCHASE PROGRAM. Subsequent to execution of this
Agreement and prior to the Effective Time the Company may, as permitted by law
and in accordance with applicable regulations, repurchase up to 5% (or a greater
percentage with Acquiror approval) of the issued and outstanding shares of
Company; provided, however, that the Company agrees to consult with Acquiror
regarding the timing and amount of such repurchases prior to consummating them.
ARTICLE VII -- CONDITIONS OF MERGER
SECTION 7.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Effectiveness of the Registration Statement. The Registration Statement
shall have been declared effective by the SEC under the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose shall, on or prior to the
Effective Time, have been initiated or, to the knowledge of the Acquiror or the
Company, threatened by the SEC.
(b) Shareholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the shareholders of the Company.
(c) Regulatory Approvals. (i) The Merger shall have been approved by the
applicable Regulatory Agencies; (ii) all conditions required to be satisfied
prior to the Effective Time imposed by the terms of such approval shall have
been satisfied; and (iii) all waiting periods relating to such approval shall
have expired.
(d) No Order. No federal or state governmental or regulatory authority or
other agency or commission, or federal or state court of competent jurisdiction,
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect restricting, preventing
or prohibiting consummation of the transactions contemplated by this Agreement.
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SECTION 7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE ACQUIROR. The
obligations of the Acquiror to effect the Merger are also subject to the
following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement, without giving effect to
any update to the Company Disclosure Schedule or notice to the Acquiror under
Section 4.5 or Section 6.7, shall be true and correct in all respects as of the
date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Effective Time as though made
on and as of the Effective Time; provided, however, that, for purposes of this
clause, such representations and warranties shall be deemed to be true and
correct unless the failure or failures of such representations and warranties to
be so true and correct, individually or in the aggregate, represent a Material
Adverse Effect on the Company and the Company Subsidiaries taken as a whole; but
provided further, that solely for purposes of this clause, any such
representations or warranties which are by their terms qualified or limited by
the concept of "Material Adverse Effect" shall be deemed not to be so limited or
qualified. Acquiror shall have received a certificate signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer of the
Company to the foregoing effect.
(b) Agreements and Covenants. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time.
(c) Consents Obtained. All Company Approvals and all filings required to be
made by the Company for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by the Company, except those for which failure
to obtain such Company Approvals or make such filings would not, individually or
in the aggregate, have a Material Adverse Effect on the Company and the Company
Subsidiaries taken as a whole.
(d) No Challenge. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by a government
agency (i) challenging or seeking material damages in connection with the Merger
or the conversion of Company Common Stock into Acquiror Common Stock pursuant to
the Merger or (ii) seeking to restrain, prohibit or limit the exercise of full
rights of ownership or operation by the Acquiror or the Acquiror Subsidiaries of
all or any portion of the business or assets of the Company, which in either
case is reasonably likely to have a Material Adverse Effect on either the
Company and the Company Subsidiaries taken as a whole or the Acquiror and the
Acquiror Subsidiaries taken as a whole.
(e) Federal Tax Opinion. The Acquiror shall have received an opinion of
Whyte Hirschboeck Dudek S.C., independent counsel to the Acquiror, dated as of
the Effective Time, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Effective Time, the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and accordingly that no gain or loss will be
recognized by Company as a result of the Merger. In rendering such opinion,
Whyte Hirschboeck Dudek S.C. may require and rely upon representations and
covenants contained in certificates of officers of the Acquiror, the Company and
others.
(f) Comfort Letters. The Acquiror shall have received from KPMG LLP the
"comfort" letters referred to in Section 4.3.
(g) No Material Adverse Changes. Since the date of this Agreement, there
shall not have been any change in the financial condition, results of operations
or business of the Company and the Company Subsidiaries, taken as a whole, that
either individually or in the aggregate would have a Material Adverse Effect on
the Company and the Company Subsidiaries taken as a whole. For purposes of this
Section 7.2(g) only, a Material Adverse Effect on the Company and the Company
Subsidiaries shall be deemed to have been incurred if there has been (i) any
reduction in the CAMELS (Capital, Assets, Management, Earnings, Liquidity and
Sensitivity to Market Risk) composite rating of Company Bank to 3
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or higher (i.e., 4 or 5) and/or (ii) any reduction in Company Bank's CRA
(Community Reinvestment Act) rating to "substantial noncompliance" or worse. The
Acquiror shall have received a certificate of the Chief Executive Officer and
the Chief Financial Officer of the Company with respect to the foregoing
matters.
(h) Loan Loss Reserves. The Acquiror shall be satisfied in its sole
judgment as to the adequacy of the Company's Subsidiaries' reserves for possible
loan losses as of the date of Closing to provide for possible losses on loans
outstanding.
SECTION 7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Acquiror set forth in this Agreement, without giving effect to
any notice to the Company under Section 5.4 or Section 6.7, shall be true and
correct in all respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Effective Time, as though made on and as of the Effective Time; provided,
however, that for purposes of this clause, such representations and warranties
shall be deemed to be true and correct unless the failure or failures of such
representations and warranties to be so true and correct, individually or in the
aggregate, represent a Material Adverse Effect on the Acquiror and the Acquiror
Subsidiaries taken as a whole; but provided further, that solely for purposes of
this clause, any such representations or warranties which are by their terms
qualified or limited by the concept of "Material Adverse Effect" shall be deemed
not to be so limited or qualified. The Company shall have received a certificate
signed on behalf of the Acquiror by the Chief Executive Officer and the Chief
Financial Officer of the Acquiror to the foregoing effect.
(b) Agreements and Covenants. The Acquiror shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time.
(c) Consents Obtained. All consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made by the
Acquiror for the authorization, execution and delivery of this Agreement and the
consummation by it of the transactions contemplated hereby shall have been
obtained and made by the Acquiror, except where failure to obtain any consents,
waivers, approvals, authorizations or orders required to be obtained or any
filings required to be made would not have a Material Adverse Effect on the
Acquiror and the Acquiror Subsidiaries taken as a whole.
(d) Federal Tax Opinion. The Company shall have received an opinion of
Michael, Best & Friedrich LLP, independent counsel to the Company, in form and
substance reasonably satisfactory to the Company, dated as of the Effective
Time, substantially to the effect that on the basis of facts, representations,
assumptions and the Acquiror's, Company's, and other certificates set forth in
such opinion which are consistent with the state of facts existing at the
Effective Time, the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code, and that, accordingly, for federal income
tax purposes:
(i) No gain or loss will be recognized by the Company as a result of
the Merger;
(ii) No gain or loss will be recognized by those shareholders of the
Company who receive Acquiror Common Stock solely in exchange for their
shares of Company Common Stock;
(iii) The gain, if any, realized by those shareholders of the Company
who receive Acquiror Common Stock and cash in exchange for their Company
Common Stock will be recognized by each such shareholder (but in an amount
not in excess of the amount of cash received) and no loss shall be
recognized by such a shareholder on the exchange;
(iv) The basis of the Acquiror Common Stock received by the
shareholders of the Company will, in each instance, be the same as the
basis of the Company Common Stock surrendered in exchange therefor,
decreased by the amount of cash received, and increased by the amount of
cash
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that is treated as a dividend (if any), and increased by the amount of gain
recognized on the exchange, not including any portion of that gain that is
treated as a dividend; and
(v) The holding period of Acquiror Common Stock received by each
shareholder of the Company in the Merger will include the holding period of
Company Common Stock exchanged therefor, provided that such shareholder
held such Company Common Stock as a capital asset within the meaning of
Section 1221 of the Code on the Effective Time.
In rendering such opinion, the Company's counsel may require and rely upon
representations and covenants contained in certificates of officers of the
Acquiror, the Company and others. The Acquiror and the Company agree to make
such representations and covenants to the Company's counsel to facilitate the
delivery of such opinion.
(e) No Challenge. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by a government
agency (i) challenging or seeking material damages in connection with the Merger
or the conversion of Company Common Stock into Acquiror Common Stock pursuant to
the Merger or (ii) seeking to restrain, prohibit or limit the exercise of full
rights of ownership or operation by the Acquiror or the Acquiror Subsidiaries of
all or any portion of the business or assets of Company, which in either case is
reasonably likely to have a Material Adverse Effect on either the Company and
the Company Subsidiaries taken as a whole or the Acquiror and the Acquiror
Subsidiaries taken as a whole.
(f) Fairness Opinion. The Company shall have received an updated opinion
from William Blair & Company, L.L.C. as of the date of mailing of proxy
materials to the Company's shareholders in connection with solicitation of
proxies for approval of the Merger, which update opinion confirms their initial
opinion as to the fairness, from a financial point of view, of the proposed
consideration or the proposed exchange ratio, as the case may be, to the
Company's shareholders (other than Acquiror) in the Merger.
(g) No Material Adverse Changes. Since the date of this Agreement, there
shall not have been any change in the financial condition, results of operations
or business of the Acquiror and Acquiror Subsidiaries, taken as a whole, that
either individually or in the aggregate would have a Material Adverse Effect on
the Acquiror and the Acquiror Subsidiaries, taken as a whole.
ARTICLE VIII -- TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION.
(a) This Agreement may be terminated at any time prior to the Effective
Time:
(i) by mutual consent of the Acquiror and the Company by a vote of a
majority of the members of the entire Boards of Directors of the Acquiror
and the Company;
(ii) by either the Acquiror or the Company if any approval of the
shareholders of the Company required for the consummation of the Merger
shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of such shareholders or at any
adjournment or postponement thereof;
(iii) by either the Company or the Acquiror (A) if there has been a
breach in any material respect (except that where any statement in a
representation or warranty is qualified by a standard of materiality, such
statement, as so qualified, shall have been breached) of any
representation, warranty, covenant or agreement on the part of Company, on
the one hand, or the Acquiror, on the other hand, set forth in this
Agreement, or (B) if any representation or warranty of the Company, on the
one hand, or the Acquiror, on the other hand, shall be discovered to have
become untrue in any material respect, (except that where any statement in
a representation or warranty is qualified by a standard of materiality,
such statement, as so qualified, shall have become untrue in any respect)
in either case which breach or other condition has not been cured within 30
business days following receipt by the non-terminating party of notice of
such breach or other condition, or which breach by its nature,
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cannot be cured prior to the Effective Time; provided, however, neither
party shall have the right to terminate this Agreement pursuant to this
Section 8.1(a)(iii) unless the breach of any representation or warranty
(but not breaches of covenants or agreements), together with all other such
breaches, would entitle the party receiving such representation or warranty
not to consummate the transactions contemplated hereby under Section 7.2(a)
(in the case of a breach of a representation or warranty by the Company) or
Section 7.3(a) (in the case of a breach of a representation or warranty by
the Acquiror); and, provided further that this Agreement may not be
terminated pursuant to this clause (iii) by the breaching party or party
making any representation or warranty which shall have become untrue in any
material respect;
(iv) by the Company upon ten days' prior written notice to the
Acquiror if, as a result of an unsolicited Takeover Proposal (as defined in
Section 4.2(e)) by a party other than the Acquiror or its affiliates, the
Board of Directors of the Company determines in good faith (A) after
consultation with an outside financial advisor, that such Takeover Proposal
(if consummated in accordance with its terms) would be more favorable to
the Company's shareholders than the Merger (a "Superior Proposal"), and (B)
after consultation with and receipt of advice from outside counsel, that
its failure to accept such Superior Proposal could reasonably be deemed to
constitute a breach of its fiduciary obligations under applicable Law;
provided, however, that, prior to any such termination, the Company (after
disclosing to the Acquiror the identity of the party making the Takeover
Proposal and the financial terms thereof) shall, and shall cause its
financial and legal advisors to, negotiate with the Acquiror to make such
adjustments in the terms and conditions of this Agreement as would enable
the Company to proceed with the transactions contemplated herein on such
adjusted terms;
(v) by the Company or by the Acquiror if as a result of the failure of
the Company to receive an updated fairness opinion as of the date of
mailing the Proxy Statement/Prospectus (as contemplated by Section 7.3(f)
hereof), the Board of Directors of the Company shall not have recommended,
or shall have resolved not to recommend, or shall have qualified, modified
or withdrawn its recommendation of the Merger or declaration that the
Merger is advisable and fair to and in the best interest of the Company and
its shareholders, or shall have resolved to do so;
(vi) by Acquiror if (A) except under the circumstances described in
Subsection 8.1(a)(v) above, the Board of Directors of the Company shall not
have recommended, or shall have resolved not to recommend or shall have
qualified, modified or withdrawn its recommendation of the Merger or
declaration that the Merger is advisable and fair to and in the best
interest of the Company and its shareholders, or shall have resolved to do
so, (B) any person (other than Acquiror) acquires or becomes the beneficial
owner of 20% or more of the outstanding shares of the Company Common Stock,
(C) the Board of Directors of the Company shall have recommended to the
shareholders of the Company any Takeover Proposal or shall have resolved to
do so, or (D) a tender offer or exchange offer for 20% or more of the
outstanding shares of capital stock is commenced, and the Board of
Directors of the Company fails to recommend against acceptance of such
tender offer or exchange offer by its shareholders (including by taking no
position with respect to the acceptance of such tender offer or exchange
offer by its shareholders);
(vii) by either the Acquiror or the Company if any permanent
injunction preventing the consummation of the Merger shall have become
final and nonappealable;
(viii) by either the Acquiror or the Company if the Merger shall not
have been consummated by March 31, 2002;
(ix) by either the Acquiror or the Company if any Regulatory Agency
has denied approval of the Merger, and if such denial has become final and
nonappealable; or
(x) by the Company or the Acquiror pursuant to Section 1.6(e) hereof.
SECTION 8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void
and all rights and obligations of any party hereto shall cease except: (i) as
set forth in Section 9.1 of this Agreement and (ii) nothing herein shall relieve
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any party from liability for any willful breach of this Agreement or shall
restrict either party's rights in the case thereof.
(b) Notwithstanding any provision in this Agreement to the contrary, if (i)
this Agreement is terminated by the Company or Acquiror pursuant to Section
8.1(a)(ii) or (a)(v) and a Takeover Proposal existed between the date of this
Agreement and the date of the Company's shareholder meeting to approve the
Merger (or the date of the action by the Company's Board of Directors pursuant
to Section 8.1(a)(v)), and concurrently with or within twelve months after any
such termination, a Third Party Acquisition Event (as defined below) occurs or
the Company shall enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement with respect to a Third Party
Acquisition Event, (ii) this Agreement is terminated by the Company pursuant to
Section 8.1(a)(iv), or (iii) this Agreement is terminated by Acquiror pursuant
to Section 8.1(a)(vi), then, in each case, the Company shall pay to Acquiror a
fee (the "Termination Fee") of One Million Dollars ($1,000,000) in cash, such
payment to be made promptly, but in no event later than, in the case of clause
(i), the later to occur of such termination and such Third Party Acquisition
Event or, in the case of clauses (ii) or (iii), such termination.
(c) As used in this Agreement, a "Third Party Acquisition Event" involving
the Company means (i) a transaction or series of transactions pursuant to which
any person or group (as such term is defined under the Exchange Act), other than
Acquiror or any affiliate thereof ("Third Party"), acquires (or would acquire
upon completion of such transaction or series of transactions) more than twenty
percent (20%) of the equity securities or voting power of the Company or any
Company Subsidiary, pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger, consolidation, share exchange or other business combination
involving the Company or any Company Subsidiary pursuant to which any person
other than Acquiror acquires ownership (or would acquire ownership upon
consummation of such merger, consolidation, share exchange or other business
combination) of more than twenty percent (20%) of the outstanding equity
securities or voting power of the Company or any Company Subsidiary or of the
entity surviving such merger or business combination or resulting from such
consolidation, (iii) any other transaction or series of transactions pursuant to
which any Third Party acquires (or would acquire upon completion of such
transaction or series of transactions) control of assets of the Company or any
Company Subsidiary (including, for this purpose, outstanding equity securities
of subsidiaries of such party) having a fair market value equal to more than
twenty percent (20%) of the fair market value of all the consolidated assets of
the Company immediately prior to such transaction or series of transactions, or
(iv) any transaction or series of transactions pursuant to which any Third Party
acquires (or would acquire upon completion of such transaction or series of
transactions) control of the Board of Directors of the Company or by which
nominees of any Third Party are (or would be) elected or appointed to a majority
of the seats on the Board of Directors of the Company.
SECTION 8.3 TERMINATION BY ACQUIROR IN BREACH. If the Acquiror terminates
this Agreement otherwise than in accordance with its rights to do so under
Section 8.1, or fails to consummate the Merger in breach of its obligations
under this Agreement to do so, then the Company shall be entitled to recover
from the Acquiror, as liquidated damages and in lieu of any and all other rights
or remedies the Company may have against the Acquiror, the sum of One Million
Dollars ($1,000,000).
SECTION 8.4 AMENDMENT. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after approval of the
Merger by the shareholders of the Company, no amendment may be made without
further approval of such shareholders which would reduce the amount or change
the type of consideration into which each share of Company Common Stock shall be
converted pursuant to this Agreement upon consummation of the Merger. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 8.5 WAIVER. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant
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hereto and (c) waive compliance with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
ARTICLE IX -- GENERAL PROVISIONS
SECTION 9.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements in this Agreement shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to Article
VIII, except that the agreements set forth in Article I and Sections 5.8, 5.10,
5.11, 6.4, 6.5, and 6.6 shall survive the Effective Time and those set forth in
Sections 4.4(b), 6.10, 8.2(b), 8.3 and Article IX hereof shall survive
termination indefinitely.
SECTION 9.2 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that the provisions of this
Agreement (including, without limitation, the provisions contained in each of
Sections 1.6, 4.4(b), 5.8, 5.10, 6.4, 6.5, and 6.6 of this Agreement) were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
SECTION 9.3 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation), mailed by registered or certified
mail (postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice) and shall be effective upon receipt:
(a) If to the Acquiror:
Anchor BanCorp Wisconsin Inc.
25 West Main Street
Madison, Wisconsin 53703
Attention: Douglas J. Timmerman, Chairman of the Board,
President and Chief Executive Officer
Facsimile No.: (608) 252-8783
With a copy to:
Whyte Hirschboeck Dudek S.C.
Suite 2100
111 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: John F. Emanuel and Andrew J. Guzikowski
Facsimile No.: (414) 223-5000
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(b) If to the Company:
Ledger Capital Corp.
5555 North Port Washington Road
Glendale, Wisconsin 53217
Attention: James D. Smessaert, Chairman of the Board,
President and Chief Executive Officer
Facsimile No.: (414) 290-7979
With a copy to:
Michael Best & Friedrich, LLP
100 E. Wisconsin Ave., #3300
Milwaukee, WI 53202-4108
Attention: W. Charles Jackson, Esq.
Facsimile No.: (414) 277-0656
SECTION 9.4 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person; including, without limitation, any partnership
or joint venture in which any person (either alone, or through or together with
any other subsidiary) has, directly or indirectly, an interest of 5% or more;
(b) "business day" means any day other than a day on which banks in
Wisconsin are required or authorized to be closed;
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "Material Adverse Effect" means, with respect to the Acquiror or the
Company, as the case may be, any effect that (i) is material and adverse to the
business, assets, liabilities, results of operations or financial condition of
the Acquiror and the Acquiror Subsidiaries taken as a whole or to the Company
and the Company Subsidiaries taken as a whole, respectively, or (ii) materially
impairs the ability of the Acquiror or the Company to consummate the
transactions contemplated hereby; provided, however, that Material Adverse
Effect shall not be deemed to include the impact of (A) actions contemplated by
this Agreement, (B) changes in laws and regulations or interpretations thereof
that are generally applicable to the banking or savings industries, (C) changes
in generally accepted accounting principles ("GAAP") that are generally
applicable to the banking or savings industries, (D) expenses incurred in
connection with the transactions contemplated hereby, and (E) changes
attributable to or resulting from changes in general economic conditions
affecting banks, savings institutions or their holding companies generally,
including changes in the prevailing level of interest rates.
(e) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in Section
13(d) of the Exchange Act); and
(f) "subsidiary" or "subsidiaries" of the Company, the Acquiror, the
Surviving Corporation, or any other person, means any corporation, partnership,
joint venture or other legal entity of which the Company, the Acquiror, the
Surviving Corporation or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
50% or more of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
SECTION 9.5 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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SECTION 9.6 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.7 ENTIRE AGREEMENT. This Agreement (including the agreements
contemplated hereby) and the written confidentiality agreement in effect between
the parties constitute the entire agreement of the parties and supersede all
prior agreements and undertakings, both written and oral, between the parties,
or any of them, with respect to the subject matter hereof and, except as
otherwise expressly provided herein, are not intended to confer upon any other
person any rights or remedies hereunder.
SECTION 9.8 ASSIGNMENT. This Agreement shall not be assigned by operation
of law or otherwise, except that the Acquiror may assign all or any of its
rights hereunder and thereunder to any affiliate provided that no such
assignment shall relieve the assigning party of its obligations hereunder.
SECTION 9.9 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than (a) Section 1.5 (which is intended to be for the benefit
of the directors of the Company and may be enforced by such persons), (b)
Section 6.6 (which is intended to be for the benefit of the Indemnified Parties
and may be enforced by such Indemnified Parties), (c) Sections 5.8, 6.4, and 6.5
(which are intended to be for the benefit of the directors, officers and
employees of the Company and the Company Subsidiaries and may be enforced by
such persons), and (d) Section 5.10 (which is intended for the benefit of
affiliates of the Company and may be enforced by such persons).
SECTION 9.10 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Wisconsin, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
SECTION 9.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the Acquiror and the Company have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
ANCHOR BANCORP WISCONSIN INC.
By: /s/ DOUGLAS J. TIMMERMAN
------------------------------------
Douglas J. Timmerman
President and Chief Executive
Officer
LEDGER CAPITAL CORP.
By: /s/ JAMES D. SMESSAERT
------------------------------------
James D. Smessaert
President and Chief Executive
Officer
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APPENDIX B
SUMMARY OF OPINION OF LEDGER'S FINANCIAL ADVISOR
145
SUMMARY OF OPINION OF LEDGER'S FINANCIAL ADVISOR
In arriving at its opinion, Blair, among other things:
- reviewed the merger agreement and a draft of the proxy
statement/prospectus;
- reviewed certain of Ledger's and Anchor's publicly available financial
information as well as certain of Ledger's and Anchor's internal
management reports;
- reviewed certain other publicly available information on each of Ledger
and Anchor;
- reviewed Ledger's and Anchor's management-prepared financial forecasts
for their respective next fiscal years;
- discussed Ledger's and Anchor's historical and prospective business,
financial position, and financial performance with the companies'
respective senior managements;
- reviewed historical market prices and trading activity in Ledger's and
Anchor's common stocks and compared the merger consideration to selected
historical market prices of Ledger common stock;
- compared a recent market price for each of Ledger and Anchor common stock
and the merger consideration to selected market pricing multiples and
ratios of certain other publicly traded companies Blair deemed relevant;
- performed a discounted cash flow analysis of Ledger's common stock on a
"stand-alone" basis and compared Ledger's recent stock price and the
merger consideration to the imputed values yielded by this analysis;
- performed a discounted cash flow analysis of Anchor's common stock on a
"stand-alone" basis and compared Anchor's recent stock price to the
imputed values yielded by this analysis;
- reviewed information regarding the strategic, financial, and operational
benefits, including the amount and timing of cost savings and related
expenses and synergies, which the senior managements of Ledger and Anchor
expect from the merger;
- compared the merger consideration with the financial terms, to the extent
publicly available, of certain other thrift-industry
merger-and-acquisition transactions that Blair deemed relevant; and
- reviewed the relative contributions to, and pro forma impact of, the
merger on certain financial amounts of Ledger and Anchor.
In rendering its opinion, Blair assumed and relied, without independent
verification, upon the accuracy and completeness of all the information examined
by or otherwise reviewed or discussed with Blair for purposes of its opinion
including without limitation the financial forecasts provided by Ledger's and
Anchor's senior managements. Blair did not make or obtain an independent
valuation or appraisal of the assets, liabilities, or solvency of Ledger or
Anchor.
The following is a summary of the material financial analyses Blair
employed and summarized for the Ledger board in connection with the Ledger
board's June 7, 2001 evaluation of the merger and Blair's opinion dated as of
the date of the merger agreement. In connection with its updated opinion dated
as of the mailing date of this combined proxy statement/prospectus, Blair
reviewed the assumptions, analyses, and other factors considered in connection
with its opinion dated as of the date of the merger agreement. In updating its
opinion, Blair did not use any method of analysis in addition to those described
below.
In the following analyses, for comparison purposes, Blair interchangeably
uses aggregate merger consideration of $43.2 million and merger consideration
per fully diluted common share of $16.46, in each case reflecting an Anchor
closing market price per share of $14.96 on June 1, 2001, the stock exchange
ratio of 1.10, and the effect of Ledger's issued and outstanding stock options.
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LEDGER ANALYSES
Stock Trading History and Relative Performance
Blair compared the merger consideration to Ledger's recent stock price and
related 52-week trading range. This examination showed that the $16.46 per share
merger consideration to be paid in the proposed merger was a 57.5% premium over
Ledger's closing market price per share of $10.45 on June 1, 2001. Blair
presented a graph which showed that over the prior year, Ledger common stock
ranged in price from a low of $8.19 to a high of $11.06 per share, noting that
the proposed merger consideration was 101.0% and 48.8% above these 52-week low
and high trading prices, respectively.
Blair presented a graph of Ledger's stock price since its initial public
offering completed in January 1994. Blair observed that the merger consideration
of $16.46 was near Ledger's all-time high market trading price range during
late-1998 and early-1999, was a substantial premium over Ledger's market trading
price during the two years prior to the date of Blair's analysis, and was over
400% of Ledger's split-adjusted IPO price of $4 per share.
Blair further examined the total-return performance of Ledger common stock
during the three-year period preceding the date of Blair's analysis relative to
the S&P 500 Index, the S&P Smallcap Bank Index, and an index of the companies
Blair selected for use in the "Comparable Market-Value Analysis" of Ledger
described below (the "Ledger Comparable Index"). The graph showed that over the
three-year period, Ledger's total-return performance was similar to that of the
Ledger Comparable Index, with a slight underperformance overall. The graph also
showed that both Ledger and the Ledger Comparable Index underperformed the two
S&P indexes over the three years, and Blair noted that the S&P indexes
represented companies significantly larger than Ledger and the Ledger Comparable
Companies.
Comparable Market-Value Analysis
Blair compared selected pricing multiples and ratios implied by Ledger's
recent stock price and the merger consideration to corresponding current
trading-market multiples and ratios of comparable companies Blair deemed
relevant to Ledger. Blair selected publicly traded thrift holding companies
according to the following criteria:
- geographic emphasis on metropolitan and mid-size Midwestern markets;
- market capitalization generally between $15 million and $50 million;
- total assets generally between $250 million and $650 million; and
- excluding companies sufficiently large to be an acquirer of Ledger and
targets of pending merger-and-acquisition transactions.
The selected Ledger comparable companies included the following twelve
organizations:
<Table>
American Bancorp, New Castle, IN Kankakee Bancorp Inc., Kankakee, IL
Citizens First Financial Corp., Bloomington, IL LSB Financial Corp., Lafayette, IN
EFC Bancorp Inc., Elgin, IL MFB Corp., Mishawaka, IN
Fidelity Bancorp, Inc., Chicago, IL Pulaski Financial Corp., St. Louis, MO
First Franklin Corp., Cincinnati, OH Western Ohio Financial Corp., Springfield, OH
Hemlock Federal Financial Corp., Oak Forest, IL Winton Financial Corp., Cincinnati, OH
</Table>
Blair calculated and presented the selected market pricing multiples and
ratios summarized below using market price data as of June 1, 2001, and
financial data as of the then-most-recently available financial statement date,
and for the twelve-month period then ended.
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147
<Table>
<Caption>
LEDGER COMPARABLE MARKET RANGE LEDGER
CURRENT ----------------------- MERGER
STOCK PRICE LOW MEDIAN HIGH CONSIDERATION
----------- ---- ------ ----- -------------
MULTIPLE OF MARKET PRICE TO:
Reported earnings........................ 10.0x 9.3x 12.0x 16.5x 16.6x
Tangible core earnings................... 9.9 9.6 11.4 15.8 16.6
Current-year estimated earnings.......... 9.5 9.1 12.3 15.0 15.6
Capital-equivalent tangible core
earnings.............................. 9.8 9.0 10.9 13.7 16.1
RATIO OF MARKET PRICE TO:
Book value............................... 70.5% 72.9% 80.9% 107.3% 120.7%
Tangible book value...................... 70.5 76.7 83.2 125.5 120.7
Capital-equivalent tangible book value... 70.2 61.0 81.5 114.9 120.9
</Table>
In the preceding analysis, "tangible core earnings" excludes
intangible-asset amortization expense and non-recurring income and expense
items. "Estimated earnings" are those prepared by securities analysts following
each comparable company. "Capital-equivalent" figures include adjustments to
price, tangible core earnings (based on an assumed earnings rate), and tangible
book value, in each case for the "excess" capital of each company relative to a
7% tangible equity-to-assets ratio.
Blair noted that Ledger's market pricing multiples and ratios were near or
below the range of those for the comparable companies. Blair expressed that this
market pricing discount likely reflected Ledger's significant "wholesale"
lending-and-funding strategy and relatively high interest-rate risk position.
Blair also observed that all of the earnings multiples, and two of the three
book value ratios, implied by the merger consideration were above the range of
those for the comparable companies.
Stand-Alone Discounted Cash Flow Analysis
Blair compared Ledger's recent stock price and the merger consideration to
the imputed values yielded by a discounted cash flow ("DCF") analysis Blair
performed of Ledger on a "stand-alone" basis, assuming Ledger would continue to
operate as an independent, publicly traded company. In preparing the DCF
analysis, Blair studied Ledger's historical and present earnings and growth
patterns and then projected income statements and balance sheets for a five-year
period using a series of assumptions pertaining to growth, interest margins,
loan losses, non-interest income and expenses, income taxes, and cash dividends.
Prior to completion, Blair reviewed and discussed the financial projections and
underlying assumptions with Ledger's senior management. To estimate projected
net cash flows, Blair adjusted projected earnings for certain non-cash expense
items such as loan loss provisions and certain stock-related benefit plans.
Blair calculated the terminal value (the value of cash flows following the
five-year projection period) based upon a growth-adjusted perpetuity of the
fifth projected year's estimated net cash flow. To estimate the present value of
the five years' estimated net cash flows and terminal value, Blair used a
discount rate of 13.5%. The DCF analysis, which Blair tested over a range of
balance sheet growth, net interest spread, loan-loss provision, discount rate,
and stock-repurchase assumptions, yielded imputed values for Ledger common stock
ranging from $10.81 to $13.77 per share with a midpoint of $12.27 per share,
compared to a recent stock price of $10.45 per share and merger consideration of
$16.46 per share.
ANCHOR ANALYSES
Stock Trading and Relative Performance
Blair compared Anchor's recent stock price to its 52-week trading range,
noting that Anchor's market price per share of $14.96 on June 1, 2001 was near
the middle of the range during the period from a low of $12.88 per share to a
high of $16.75 per share.
Blair presented a graph of Anchor's stock price since its initial public
offering completed in July 1992. The graph highlighted a peak in Anchor's share
price in the range of approximately $20 to $24 per share from early 1998 to
January 1999. The graph also showed a significant decline in Anchor's stock
price
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following a merger announcement in January 1999 through early 2000, after which
Anchor's stock traded in a range of approximately $13 to $17 per share.
Blair further examined the total-return performance of Anchor common stock
during the three-year period preceding the date of Blair's analysis relative to
the S&P 500 Index, the S&P Smallcap Bank Index, and an index of the companies
Blair selected for use in the "Comparable Market-Value Analysis" of Anchor
described below (the "Anchor Comparable Index"). Blair noted two time periods
when the performance of Anchor common stock varied significantly from that of
the S&P Smallcap Bank Index and Anchor Comparable Index. The first period
occurred during the approximate six months prior and three months following
Anchor's January 1999 acquisition announcement, when Anchor stock significantly
outperformed the two indexes prior to the announcement and markedly
underperformed the indexes after the announcement. In the other period, from the
beginning of calendar year 2001 to the date of Blair's analysis, Anchor common
stock underperformed the Anchor Comparable Index by approximately 25 percentage
points (not annualized). In this regard Blair noted that Anchor common stock had
not participated in the generally strong market for similar-size and larger
financial stocks to date in calendar year 2001.
Comparable Market-Value Analysis
Blair compared selected pricing multiples and ratios implied by Anchor's
recent stock price to corresponding current trading-market multiples and ratios
of comparable companies Blair deemed relevant to Anchor. Blair selected publicly
traded thrift holding companies according to the following criteria:
- geographic emphasis on companies operating in Wisconsin and metropolitan
and mid-size Midwestern markets;
- market capitalization generally over $100 million;
- total assets generally between $1 billion and $5 billion; and
- excluding companies sufficiently large to be an acquirer of Anchor and
targets of pending merger-and-acquisition transactions.
The selected Anchor comparable companies included the following eight
organizations:
<Table>
Camco Financial Corp., Cambridge, OH First Indiana Corp., Indianapolis, IN
CFS Bancorp Inc., Munster, IN MAF Bancorp Inc., Clarendon Hills, IL
First Defiance Financial, Defiance, OH NASB Financial Inc., Grandview, MO
First Federal Capital Corp., LaCrosse, WI St. Francis Capital Corp., Brookfield, WI
</Table>
Blair calculated and presented the selected market pricing multiples and
ratios summarized below using market price data as of June 1, 2001, and
financial data as of the then-most-recently available financial statement date,
and for the twelve-month period then ended.
<Table>
<Caption>
ANCHOR COMPARABLE MARKET RANGE
CURRENT ------------------------
STOCK PRICE LOW MEDIAN HIGH
----------- ----- ------ -----
MULTIPLE OF MARKET PRICE TO:
Reported earnings.................................... 12.9x 8.8x 11.1x 12.3x
Tangible core earnings............................... 12.9 8.5 10.7 12.3
Current-year estimated earnings...................... 12.0 8.0 10.8 11.3
Capital-equivalent tangible core earnings............ 12.9 7.6 11.2 14.0
RATIO OF MARKET PRICE TO:
Book value........................................... 155.4% 107.7% 140.2% 182.9%
Tangible book value.................................. 155.4 108.6 148.1 197.4
Capital-equivalent tangible book value............... 155.6 112.9 148.8 182.0
</Table>
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149
In the preceding analysis, "tangible core earnings" excludes
intangible-asset amortization expense and non-recurring income and expense
items. "Estimated earnings" are those prepared by securities analysts following
each company. "Capital-equivalent" figures include adjustments to price,
tangible core earnings (based on an assumed earnings rate), and tangible book
value, in each case for the "excess" capital of each company relative to a 7%
tangible equity-to-assets ratio.
Blair noted that Anchor was qualitatively similar to the comparable
companies as a group, except that Anchor had relatively higher asset quality and
relatively lower earnings than the median of the group. Blair also identified
Anchor's real estate development activities as a factor in Anchor's relatively
lower earnings in recent periods and as a risk characteristic different from the
group as a whole. The tabular analysis showed that Anchor's market pricing
multiples and ratios were near or above the comparable-company range with
respect to earnings multiples and near the median of the range with respect to
book-value ratios.
Stand-Alone Discounted Cash Flow Analysis
Blair compared Anchor's recent stock price to the imputed values yielded by
a DCF analysis Blair performed of Anchor on a "stand-alone" basis, assuming
Anchor would continue to operate as an independent, publicly traded company. In
preparing the DCF analysis, Blair studied Anchor's historical and present
earnings and growth patterns and then projected income statements and balance
sheets for a five-year period using a series of assumptions pertaining to
growth, interest margins, loan losses, non-interest income and expenses, income
taxes, and cash dividends. Prior to completion, Blair reviewed and discussed the
financial projections and underlying assumptions with Ledger's senior
management. To estimate projected net cash flows, Blair adjusted projected
earnings for certain non-cash expense items such as loan-loss provisions and
certain stock-related benefit plans. Blair calculated the terminal value (the
value of cash flows following the five-year projection period) based upon a
growth-adjusted perpetuity of the fifth projected year's estimated net cash
flow. To estimate the present value of the five years' estimated net cash flows
and terminal value, Blair used a discount rate of 13.5%. The DCF analysis, which
Blair tested over a range of balance sheet growth, net interest spread,
loan-loss provision, discount rate, non-interest income, and stock-repurchase
assumptions, yielded imputed values for Anchor common stock ranging from $13.78
to $19.11 per share with a midpoint of $16.13 per share, compared to Anchor's
recent stock price of $14.96 per share.
TRANSACTION ASSESSMENT
In addition to the analyses of Ledger and Anchor as independent entities
and the related comparisons of prices and merger consideration described above,
Blair presented the following transaction analyses.
Comparable Transactions Analysis
Blair compared selected pricing multiples and ratios implied by the merger
consideration to corresponding merger-and-acquisition pricing multiples and
ratios observed in transactions Blair deemed relevant to the merger. Blair
selected thrift-industry merger-and-acquisition transactions according to the
following criteria:
- transactions announced since January 1, 2000;
- geographic emphasis on selling companies operating in Midwestern markets;
- total assets of seller generally between $200 million and $700 million;
and
- excluding "merger-of-equals" transactions.
B-5
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The selected comparable transactions included the following:
<Table>
<Caption>
BUYER SELLER
----- ------
Chemical Financial Corp., Midland, MI Bank West Financial Corporation, Grand Rapids, MI
MB Financial, Inc., Chicago, IL FSL Holdings, Inc., South Holland, IL
United Community Financial Corp., Youngstown, OH Industrial Bancorp, Inc., Bellevue, OH
DFC Acquisition Corporation Two, Kansas City, MO Cameron Financial Corporation Cameron, MO
Allegiant Bancorp, Inc. St. Louis, MO Equality Bancorp, Inc., St. Louis, MO
Old Kent Financial Corporation, Grand Rapids, MI Home Bancorp, Fort Wayne, IN
BancFirst Ohio Corp., Zanesville, OH Milton Federal Financial Corporation, West
Milton, OH
</Table>
Blair calculated and presented the selected pricing multiples and ratios
summarized below using financial data for Ledger and each acquired company as of
the most-recent financial-statement date available at the time the transaction
was announced, and for the twelve-month period then ended. Blair used
merger-and-acquisition transaction prices and related multiples and ratios as of
the respective announcement dates for each of the comparable transactions.
<Table>
<Caption>
COMPARABLE TRANSACTION RANGE LEDGER
------------------------------ MERGER
LOW MEDIAN HIGH CONSIDERATION
------- -------- ------- -------------
MULTIPLE OF TRANSACTION PRICE TO:
Reported earnings................................... 13.0x 19.5x 20.1x 16.6x
Recurring earnings.................................. 12.4 18.9 25.9 16.6
Forward earnings.................................... 12.9 15.8 18.0 15.6
RATIO OF TRANSACTION PRICE TO:
Book value.......................................... 99.7% 124.7% 153.9% 120.7%
Tangible book value................................. 99.7 124.7 153.9 120.7
Capital-equivalent tangible book value.............. 105.2 133.4 227.7 120.9
TRANSACTION PRICE PREMIUM OVER/(UNDER) MARKET PRICE:
One day before announcement......................... 3.8% 19.8% 38.1% 57.5%
One month before announcement....................... 16.1 34.1 65.5 64.6
Three months before announcement.................... 22.5 29.9 66.3 63.5
One year before announcement........................ (28.7) 23.4 87.8 93.6
</Table>
In the preceding analysis, "Capital-equivalent" figures include adjustments to
price and tangible book value, in each case for the "excess" capital of each
company relative to a 7% tangible equity-to-assets ratio.
The analysis showed that the merger consideration represented multiples of
earnings between the low and the median, and book value ratios near the median,
of the range of corresponding multiples and ratios for the comparable
transactions. Blair expressed that this transaction pricing discount was
consistent with, and likely reflected the same factors as for, Ledger's
Comparable Market-Value Analysis described above. Blair also highlighted that
the merger consideration represented a transaction value premium over market at
or above the maximum for the range of comparable transactions.
RELATIVE CONTRIBUTION
Blair prepared a contribution analysis displaying selected financial data
of Ledger and Anchor along with the percentages these financial data would
represent of the combined company. The analysis assumes all of Ledger's
outstanding stock and options to purchase Ledger stock would be converted to
Anchor stock and options to purchase Anchor stock. The table below combines
selected historical financial information with projected earnings and present
values derived from the Ledger and Anchor DCF analysis described above and
compares selected percentage financial contributions to the percentage ownership
contribution.
B-6
151
<Table>
<Caption>
PERCENTAGE
CONTRIBUTION
----------------
LEDGER ANCHOR
------ ------
EARNINGS:
Latest twelve months ended March 31, 2001................. 8.80% 91.20%
Projected twelve months to end March 31, 2002............. 8.06 91.94
Projected twelve months to end March 31, 2003............. 7.86 92.14
Book value.................................................. 14.03 85.97
Market value................................................ 6.94 93.06
Present value of net cash flows............................. 7.52 92.48
Ownership................................................... 10.69 89.31
</Table>
Blair noted that through the merger, Ledger stockholders would receive
relatively more ownership in the combined company than Ledger's contributions to
the companies' combined earnings, market value, and present value of cash flows.
PRO FORMA IMPACT
Blair prepared a pro forma merger analysis illustrating the estimated
effects on selected historical and projected financial data of Ledger using the
projected financial data for each of Ledger and Anchor from the DCF analyses
described previously and assuming:
- The conversion of all shares and options to purchase shares of Ledger
stock into shares and options to purchase shares of Anchor stock;
- Annual cost savings totaling $2.25 million (pre-tax);
- One-time merger charges totaling $6.5 million (after taxes),
approximately $5.3 million of such charges in cash (after taxes); and
- "Purchase" transaction accounting without any specifically identifiable
intangible assets or goodwill amortization.
The table below summarizes the estimated effect of the merger on selected
Ledger per-share amounts.
<Table>
<Caption>
PRO FORMA LEDGER EFFECT
------------------------------------------------------------ ---------------
DILUTED EARNINGS PER SHARE:
Latest twelve months ended March 31, 2001................. 23.8% accretion
Projected twelve months to end March 31, 2002............. 34.8% accretion
Projected twelve months to end March 31, 2003............. 39.0% accretion
AT MARCH 31, 2001:
Book value per share...................................... 23.5% dilution
Tangible book value per share............................. 27.5% dilution
Current cash dividend per share............................. 65.0% increase
</Table>
GENERAL
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the process
underlying Blair's opinion. In arriving at its fairness determination, Blair
considered the results of all such analyses. No company or transaction used in
the above analyses as a comparison is identical to Ledger or the merger. The
analyses were prepared solely for the purposes of Blair's opinion provided to
Ledger's board as to the fairness from a financial point of view of the merger
consideration to be received by the
B-7
152
stockholders of Ledger pursuant to the merger and do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon projections of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control of the parties or Blair, none of Ledger, Blair, or any other
person assumes responsibility if future results are materially different from
those projected.
B-8
153
APPENDIX C
FAIRNESS OPINION OF WILLIAM BLAIR & COMPANY, L.L.C.
154
September 21, 2001
Board of Directors
Ledger Capital Corp.
5555 North Port Washington Road
Glendale, WI 53217-0499
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the outstanding shares of common stock (other than
Anchor BanCorp Wisconsin, Inc.) (collectively the "Stockholders") of Ledger
Capital Corp. ("Ledger") of the Merger Consideration (as defined below) proposed
to be paid to the Stockholders pursuant to the Agreement and Plan of Merger
dated as of June 15, 2001 (the "Merger Agreement") by and between Ledger and
Anchor BanCorp Wisconsin, Inc. ("Anchor"). Pursuant to the terms of and subject
to the conditions set forth in the Merger Agreement, Ledger will be merged into
Anchor (the "Merger") and each share of common stock of Ledger, $1.00 par value
per share, will be converted into 1.1 shares (the "Stock Exchange Ratio") of
Anchor common stock, $0.10 par value per share, with an option for Stockholders
to elect to receive cash per share equal to the Stock Exchange Ratio multiplied
by the closing price of Anchor common shares on the Merger's closing date (the
"Cash Election Amount") subject to a limit of 20% of Ledger's common shares
outstanding to be converted to Cash Election Amounts. The Merger Agreement sets
forth in detail the election and allocation procedures for Stockholders to elect
to receive cash instead of stock in the Merger. The aggregate number of shares
of Anchor common stock to be issued to the Stockholders pursuant to the Stock
Exchange Ratio, together with the limited option to receive Cash Election
Amounts, are collectively the "Merger Consideration".
In connection with our review of the proposed Merger and the preparation of
our opinion herein, we have examined: (a) the Merger Agreement and a draft of
the proxy statement/prospectus to be used in connection with the Merger; (b)
certain audited historical financial statements of Ledger and Anchor for the
four fiscal years ended June 30 and March 31, 2001, respectively; (c) the
unaudited financial statements of Anchor for the three months ended June 30,
2001; (d) certain internal business, operating and financial information and
forecasts of Ledger and Anchor (the "Forecasts"), prepared by the senior
managements of Ledger and Anchor, respectively; (e) information regarding the
strategic, financial and operational benefits anticipated from the Merger
prepared by the senior managements of Ledger and Anchor, (f) the relative
contributions to, and pro forma impact of, the Merger on certain financial
amounts of Ledger and Anchor; (g) information regarding the amount and timing of
cost savings and related expenses and synergies which the senior managements of
Ledger and Anchor expect will result from the Merger (the "Expected Synergies");
(h) information regarding publicly available financial terms of certain recently
announced or completed transactions in the thrift industry; (i) current and
historical market prices and trading volumes of the common stocks of Ledger and
Anchor; and (j) certain other publicly available information on Ledger and
Anchor. We have also held discussions with members of the senior managements of
Ledger and Anchor to discuss the foregoing, have considered other matters which
we have deemed relevant to our inquiry and have taken into account such accepted
financial and investment-banking procedures and considerations as we have deemed
relevant.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all the information examined
by or otherwise reviewed or discussed with us for purposes of this opinion
including without limitation the Forecasts provided by the senior managements of
Ledger and Anchor. We have not made or obtained an independent valuation or
appraisal of the assets, liabilities or solvency of Ledger or Anchor. We have
been advised by the senior managements of Ledger and Anchor that the Forecasts
and the Expected Synergies examined by us have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the senior
managements of Ledger and Anchor, as the case may be. In that regard, we have
assumed, with your consent, that (i) the Forecasts will be achieved and the
Expected Synergies will be realized in the amounts and at the times contemplated
thereby and (ii) all material assets and liabilities (contingent or otherwise)
of Ledger are as
C-1
155
Board of Directors September 21, 2001
Ledger Capital Corp.
set forth in Ledger's financial statements or other information made available
to us. We express no opinion with respect to the Forecasts or Expected Synergies
or the estimates and judgments on which they are based. We were not requested
to, and did not, participate in the negotiation or structuring of the Merger nor
were we asked to consider, and our opinion does not address, the relative merits
of the Merger as compared to any alternative business strategies that might
exist for Ledger or the effect of any other transaction in which Ledger might
engage. Our opinion herein is based upon economic, market, financial and other
conditions existing on, and other information disclosed to us as of, the date of
this letter. It should be understood that, although subsequent developments may
affect this opinion, we do not have any obligation to update, revise or reaffirm
this opinion except as provided in the Merger Agreement. We have further
assumed, with your consent, that the Merger will qualify as a tax-free
reorganization for U.S. federal income tax purposes for Stockholders electing to
receive Anchor common stock. We have relied as to all legal matters on advice of
counsel to Ledger, and have assumed that the Merger will be consummated on the
terms described in the Merger Agreement, without any waiver of any material
terms or conditions by Ledger. We were not requested to, nor did we seek,
alternative participants for the proposed Merger.
William Blair & Company has been engaged in the investment-banking business
since 1935. We continually undertake the valuation of investment securities in
connection with public offerings, private placements, business combinations,
estate and gift tax valuations and similar transactions. In the ordinary course
of our business, we may from time to time trade the securities of Ledger or
Anchor for our own account and for the accounts of customers, and accordingly
may at any time hold a long or short position in such securities. We have acted
as the investment banker to Ledger in connection with the Merger and will
receive a fee from Ledger for our services. In addition, Ledger has agreed to
indemnify us against certain liabilities arising out of our engagement.
We are expressing no opinion herein as to the price at which the common
stock of Ledger and Anchor will trade at any future time or as to the effect of
the Merger on the trading price of the common stock of Ledger or Anchor. Such
trading prices may be affected by a number of factors, including but not limited
to (i) dispositions of the common stock of Anchor by stockholders within a short
period of time after the effective date of the Merger, (ii) changes in
prevailing interest rates and other factors which generally influence the price
of securities, (iii) adverse changes in the current capital markets, (iv) the
occurrence of adverse changes in the financial condition, business, assets,
results of operations or prospects of Ledger or of Anchor or in the banking
market, (v) any necessary actions by or restrictions of federal, state or other
governmental agencies or regulatory authorities, and (vi) timely completion of
the Merger on terms and conditions that are acceptable to all parties at
interest.
Our investment-banking services and our opinion were provided for the use
and benefit of the Board of Directors of Ledger in connection with its
consideration of the transaction contemplated by the Merger Agreement. Our
opinion is limited to fairness, from a financial point of view, to the
Stockholders of Ledger of the Merger Consideration in connection with the
Merger, and we do not address the merits of the underlying decision by Ledger to
engage in the Merger and this opinion does not constitute a recommendation to
any stockholder as to how such stockholder should vote with respect to the
Merger. It is understood that this letter may not be disclosed or otherwise
referred to without prior written consent, except that the opinion may be
included in its entirety in a proxy statement mailed to the stockholders by
Ledger with respect to the Merger.
C-2
156
Board of Directors September 21, 2001
Ledger Capital Corp.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the Merger Consideration is fair, from a
financial point of view, to the Stockholders other than Anchor.
Very truly yours,
/s/ WILLIAM BLAIR & COMPANY,
L.L.C.
--------------------------------------
WILLIAM BLAIR & COMPANY, L.L.C.
C-3
157
LEDGER CAPITAL CORP.
5555 North Port Washington Road REVOCABLE PROXY
Glendale, Wisconsin 53217
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
LEDGER CAPITAL CORP. FOR USE ONLY AT THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON OCTOBER 24, 2001
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders (the "Annual Meeting") and the Proxy Statement/Prospectus and,
revoking any proxy heretofore given, hereby constitutes and appoints Messrs.
James D. Smessaert and Peter A. Gilbert, directors of Ledger Capital Corp.
("Ledger"), to represent and to vote, as designated on the reverse side, all the
shares of common stock, $1.00 par value per share ("Common Stock"), of Ledger
held of record by the undersigned on September 14, 2001, at the Annual Meeting
that will be held on October 24, 2001 at 7:00 p.m., local time, at the Pettit
National Ice Center, Hall of Fame Room, 500 South 84th Street, Milwaukee,
Wisconsin, or any adjournments or postponements thereof.
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 matters. If
any other business is presented at the Annual Meeting, this proxy will be voted
by the Ledger Board of Directors in their best judgment. At the present time,
the Ledger Board of Directors knows of no other business to be presented at the
Annual Meeting.
SEE REVERSE FOR TELEPHONE VOTING INSTRUCTIONS AND PROXY CARD
158
----------------------
| CONTROL NUMBER |
| |
----------------------
-----------------------------------------------------------------
OPTION 1: VOTE BY PHONE - TOLL FREE - 1-877-215-9164 - QUICK *** EASY ***
VOTE BY IMMEDIATE
TELEPHONE
- Your telephone vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and
returned your proxy card.
- Use any touch-tone telephone to vote your proxy 24 hours a
day, 7 days a week, until 5:00 p.m., central time, on
October 23, 2001.
- You will be prompted to enter your control number, which is
located above.
- Follow the simple instructions given over the telephone.
OPTION 2: VOTE BY MAIL
MAIL YOUR
PROXY CARD Mark, sign and date your proxy card and return it in the
postage-paid envelope we've provided. If you return the proxy
card instead of voting by phone, please mark your votes as in
this example: [X]
-----------------------------------------------------------------
PLEASE DETACH, SIGN AND DATE THE PROXY CARD BELOW AND RETURN PROMPTLY USING THE
ENCLOSED ENVELOPE
--------------------------------------------------------------------------------
LEDGER CAPITAL CORP. 2001 ANNUAL MEETING
1. Approval and adoption of the Merger Agreement, dated [ ] FOR [ ] AGAINST [ ] ABSTAIN
June 15, 2001, between Anchor Bancorp Wisconsin, Inc.
and Ledger, and approval of the related merger
between Anchor and Ledger.
2. Election of three Directors to serve until the merger - PETER A. GILBERT [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
is consummated or, if the merger is not consummated, - REGINALD M. HISLOP, III listed to the to vote for all
until the 2004 annual meeting of Ledger shareholders: - CHARLES E. RICKHEIM left (except as nominees listed to
specified below). the left.
(Instructions: To withhold authority to vote for any -------------------------------------
indicated nominee, write the number(s) of the nominee(s) | |
in the box provided to the right.) -------------------------------------
3. Ratification of the appointment of KPMG LLP as independent [ ] FOR [ ] AGAINST [ ] ABSTAIN
auditors of Ledger for the fiscal year ending June 30,
2002 if the merger is not consummated, or for any such
shorter period of time as may be called for or deemed
necessary by Ledger.
4. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting
or any adjournments or postponements thereof, including proposals to adjourn the meeting to permit further solicitation of
proxies if Ledger has not received sufficient votes to approve the merger. However, if you vote against the merger, your shares
will not be voted in favor of an adjournment to solicit proxies.
Check appropriate box and Date NO. OF SHARES
and indicate changes below: ----------------
Address Change? [ ] Name Change? [ ] ----------------------------------------------------
| |
| |
----------------------------------------------------
SIGNATURE(S) IN BOX
IMPORTANT: Please sign exactly as name appears on
this Proxy. When shares are held by joint tenants,
both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please
sign in full corporate name by President or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.