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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of 15(d)
of the Securities and Exchange Act of 1934
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Date of Report (Date of earliest event reported): October 1, 1998
BAYLAKE CORP.
(Exact name of registrant as specified in its charter)
Wisconsin 000-8679 39-1268055
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
217 NORTH FOURTH AVENUE, STURGEON BAY, WISCONSIN 54235
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (920) 743-5551
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On October 1, 1998, Baylake Corp. ("Baylake") consummated its
previously announced acquisition of all of the outstanding shares of common
stock of Evergreen Bank, National Association ("Evergreen"). Evergreen has four
full service offices in east central Wisconsin, and has been renamed "Baylake
Bank, NA". At September 30, 1998, Evergreen had estimated total assets of
between $95 and $100 million, although the precise amount of assets is subject
to the discussion below.
Baylake acquired the Evergreen shares pursuant to a Stock Purchase
Agreement dated as of September 2, 1998 among Baylake, M&I Marshall & Ilsley
Bank ("M&I Bank") and Evergreen (the "Agreement"). The Agreement provides that
Baylake acquired the Evergreen shares from M&I Bank, the creditor of Evergreen's
former holding company) for cash payable on May 5, 1999, in a formula amount set
forth in the Agreement. In summary, the formula provides for a payment of the
lesser of (a) $2.0 million or (b) the amount of retained earnings generated by
Evergreen (as defined) from the closing date until April 30, 1999. In addition,
upon the closing of the transaction, Baylake made a cash contribution of $4
million to Evergreen to provide it with additional capital. The 316 outstanding
shares of Evergreen Preferred Stock, $10,000 par (and face) value, remain issued
and outstanding.
Prior to its acquisition by Baylake, Evergreen was the victim of
substantial fraud by former Evergreen insiders. Evergreen's regulators had
discovered extensive financial irregularities at Evergreen which resulted from
unauthorized and/or improper transactions effected by former members of
Evergreen management. Evergreen has been in the process of investigating and
correcting these situations, which process will continue after the transaction.
Evergreen and Baylake therefore may discover additional "assets" on Evergreen's
books which are not valid assets or are otherwise impaired as a result of the
fraud. The ongoing status of these reviews forms part of the reason for the
formula-based purchase price described above, which will cause the purchase
price to vary according to the ultimate determination of Evergreen's financial
condition prior to closing.
Because of the situation and circumstances, Baylake anticipates that
ongoing operations of Evergreen may differ significantly from its past
operations because these former operations were substantially affected by the
unauthorized and improper transactions by former members of Evergreen
management. As a result of these unauthorized activities, Evergreen was
designated a "troubled institution" by the Office of the Comptroller of the
Currency ("OCC") and was also determined to be "critically undercapitalized" and
thus required to address its
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capital needs promptly. Baylake expects that the "troubled institution"
designation to be removed by the OCC upon its demonstration of resolution of
related issues, and believes that with the capital infusion by Baylake discussed
above, it has addressed, on a current basis, Evergreen's regulators' request for
infusion of additional capital.
In connection with the transaction, Daniel F. Maggle, an executive
officer of Baylake, was appointed the president and chief executive officer of
Evergreen. Other officers and employees of Evergreen at the time of the
acquisition, who were not involved in the improper or fraudulent activities, are
expected to be retained.
The acquisition transaction was negotiated at arm's length between
Baylake and the representatives of M&I and Evergreen (none of whom were
affiliated at that time with Baylake, its affiliates, its directors and officers
and their associates). The transaction is being accounted for by Baylake using
the purchase method of accounting.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired:
Baylake is continuing its review to determine whether Evergreen
financial statements (and pro forma financial information of Baylake)
are in fact required to be filed as a result of the relative
significance of Evergreen and its operations to Baylake. Because of the
approximate relative size near the level at which such statements may
or may not be required, and the need to further assess and quantify the
effects of the prior fraudulent activities on Evergreen, that process
has not yet been completed. Not later than 60 days after the due date
of this report, Baylake will either (a) amend this report to confirm
that such financial information is not required, (b) file such
financial statements or information, or (c) request a waiver from the
Securities and Exchange Commission of the requirement to file all or
part of the otherwise required financial information in the event it
cannot reasonably be obtained.
(b) Pro forma financial information:
See the discussion in Item 7(a) above.
(c) Exhibits.
See Exhibit Index on the last page of this report, which is
incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BAYLAKE CORP.
Date: October 15, 1998 By: /s/ Steven D. Jennerjohn
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Steven D. Jennerjohn
Chief Financial Officer
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BAYLAKE CORP.
EXHIBIT INDEX
to
FORM 8-K CURRENT REPORT
Dated as of October 1, 1998
Exhibit Incorporated by Filed
Number Description Reference To Herewith
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2.1 Stock Purchase X
Agreement dated as
of September 2,
1998, by and among
Baylake, M&I Bank
and Evergreen*
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*Omitting schedules and exhibits, which will be provided
to the Commission upon request.
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