LDF INC, 424B3, 1997-09-10

LDF INC
424B3, 1997-09-10
SAVINGS INSTITUTION, FEDERALLY CHARTERED

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<PAGE> 1

PROXY STATEMENT FOR SPECIAL MEETING OF
STOCKHOLDERS OF LABE FEDERAL BANK FOR SAVINGS

To Be Held On September 30, 1997

-------------------------------------

PROSPECTUS
LDF, INC.
UP TO 286,806 SHARES OF COMMON STOCK

-------------------------------------

This Proxy Statement/Prospectus is being furnished to the
stockholders ("Labe Federal Stockholders") of Labe Federal Bank for
Savings, a federally-chartered-savings bank ("Labe Federal") in
connection with the solicitation of proxies by the Board of Directors
of Labe Federal for use at a special meeting of Labe Federal
Stockholders to be held on September 30, 1997, or any adjournment
thereof (the "Special Meeting"). This Proxy Statement/Prospectus is
also being furnished to the Labe Federal Stockholders in connection
with the proposed issuance to such stockholders, upon consummation of
the Merger (as defined below), of up to 286,806 shares of common
stock, $1.00 par value per share ("LDF Common Stock"), of LDF, Inc., a
Delaware corporation formed at the direction of Labe Federal to act as
a holding company for Labe Federal ("LDF").

Labe Federal Stockholders, at the Special Meeting, will consider
and vote upon the approval of a Merger Agreement, dated as of July 22,
1997 (the "Merger Agreement"), between Labe Federal and Interim
Savings Bank, FSB, a federally-chartered-savings bank in organization
("Interim Savings Bank") formed by LDF to facilitate the formation of
a holding company structure for Labe Federal, and joined in by LDF,
pursuant to which Interim Savings Bank will be merged with and into,
and under the charter of, Labe Federal (the "Merger"), and each share
of common stock, par value $1.00 per share, of Labe Federal ("Labe
Federal Common Stock"), other than shares held by any Labe Federal
Stockholder who perfects dissenters' rights and shares held in
treasury, will be converted into the right to receive one share of LDF
Common Stock. Pursuant to the Merger, Labe Federal would become a
wholly-owned subsidiary of LDF, and existing Labe Federal Stockholders
would become stockholders of LDF.

The Merger is being effected by Labe Federal to facilitate its
plan to reorganize ownership of Labe Federal into a holding company
structure. Upon consummation of the Merger, existing Labe Federal
Stockholders would be the only stockholders of LDF, and their
proportional ownership interest in Labe Federal would remain unchanged
except that such interest would be held indirectly through LDF. For a
discussion of Labe Federal's reasons for reorganizing into a holding

<PAGE> 2

company structure, see "THE PROPOSED MERGER -- Reasons for the
Merger."

This Proxy Statement/Prospectus, the Notice of Special Meeting
and form of Proxy are first being mailed to Labe Federal Stockholders
on or about September 10, 1997.

SEE "RISK FACTORS" ON PAGE 5 FOR A DISCUSSION OF CERTAIN
FACTORS TO BE CONSIDERED BY LABE FEDERAL STOCKHOLDERS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS AND WILL NOT BE
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL ENTITY.

The date of this Proxy Statement/Prospectus is September 10, 1997.

<PAGE> 3

AVAILABLE INFORMATION

Neither LDF nor Labe Federal is currently subject to the
informational requirements of the Securities Exchange Act of 1934, as
amended.

LDF has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the LDF Common Stock to be issued
pursuant to the Merger. This Proxy Statement/Prospectus does not
contain all of the information set forth in the Registration Statement
and the exhibits thereto. For further information regarding LDF and
LDF Common Stock, reference is hereby made to such Registration
Statement and such exhibits, which can be inspected without charge at
the office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and copies of which can be obtained from the Commission at
prescribed rates. Such materials also may be available at the SEC's
web site at "http://www.sec.gov."

LDF intends to furnish its stockholders with such annual, semi-
annual and quarterly reports containing unaudited consolidated
financial statements as LDF may determine to be appropriate.

No person has been authorized to give any information or to make
any representation not contained in this Proxy Statement/Prospectus
and, if given or made, the information or representation must not be
relied upon as having been authorized by LDF or Labe Federal.

<PAGE> 4

TABLE OF CONTENTS
Page
----

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Parties . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Special Meeting . . . . . . . . . . . . . . . . . . . . . 2
Holding Company Restructuring . . . . . . . . . . . . . . . . 2
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Reasons for the Merger . . . . . . . . . . . . . . . . . . . . 3
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . 3
Certain Federal and State Income Tax Consequences . . . . . . 3
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . 3
Comparative Per Share Data . . . . . . . . . . . . . . . . . . 4

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Limited Liquidity . . . . . . . . . . . . . . . . . . . . . . 5
Holding Company Structure . . . . . . . . . . . . . . . . . . 5
Federal Legislative Proposals Would Eliminate the Federal Savings
Association and Unitary Savings and Loan Holding Company
Charters . . . . . . . . . . . . . . . . . . . . . . . . 6
Anti-Takeover Provisions . . . . . . . . . . . . . . . . . . . 6

INFORMATION REGARDING THE SPECIAL MEETING . . . . . . . . . . . . . 6
Matters to be Considered at the Special Meeting . . . . . . . 6
Record Date and Voting . . . . . . . . . . . . . . . . . . . . 7
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . 7
Revocability of Proxies . . . . . . . . . . . . . . . . . . . 8
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . 8
Certain Stockholders of Labe Federal . . . . . . . . . . . . . 8
Certain Stockholders of LDF, Inc. . . . . . . . . . . . . . . 9

THE PROPOSED MERGER . . . . . . . . . . . . . . . . . . . . . . . . 10
Holding Company Restructuring . . . . . . . . . . . . . . . . 10
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Reasons for the Merger . . . . . . . . . . . . . . . . . . . . 11
Management Following the Merger . . . . . . . . . . . . . . . 11
Resale of LDF Common Stock by Affiliates of Labe Federal . . . 11
Certain Regulatory Approvals . . . . . . . . . . . . . . . . . 11
Amendment and Termination of the Merger Agreement . . . . . . 12
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . 12
Surrender of Stock Certificates and Receipt of New Certificates
12
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . 13

INFORMATION REGARDING LDF COMMON STOCK . . . . . . . . . . . . . . 13

COMPARISON OF THE RIGHTS OF LABE FEDERAL STOCKHOLDERS AND LDF, INC.
STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 13
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Authorized Capital Stock . . . . . . . . . . . . . . . . . . . 14

<PAGE> 5

Issuance of Capital Stock . . . . . . . . . . . . . . . . . . 14
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . 15
Payment of Dividends . . . . . . . . . . . . . . . . . . . . . 15
Limitations on Liability . . . . . . . . . . . . . . . . . . . 16
Indemnification of Directors and Officers . . . . . . . . . . 16
Stockholder's Rights to Examine Books and Records . . . . . . 17
Non-Stockholder Constituencies . . . . . . . . . . . . . . . . 17
Anti-Takeover Provisions in LDF's Certificate of Incorporation
and Bylaws . . . . . . . . . . . . . . . . . . . . . . . 17
Delaware Takeover Law . . . . . . . . . . . . . . . . . . . . 21

CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES . . . . . . . . . 22

DISSENTERS' RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . 23

INFORMATION REGARDING LDF, INC. . . . . . . . . . . . . . . . . . . 24
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Governmental Monetary Policies . . . . . . . . . . . . . . . . 25
Government Regulation . . . . . . . . . . . . . . . . . . . . 25
Market for and Dividends on LDF Common Stock . . . . . . . . . 26

CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . 26

INFORMATION REGARDING INTERIM SAVINGS BANK, FSB . . . . . . . . . . 27

INFORMATION REGARDING LABE FEDERAL . . . . . . . . . . . . . . . . 27
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Lending Activities . . . . . . . . . . . . . . . . . . . . . . 28
Investment and Mortgage-Backed Securities . . . . . . . . . . 31
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 31
Competition . . . . . . . . . . . . . . . . . . . . . . . . . 31
Government Regulation . . . . . . . . . . . . . . . . . . . . 32
Market for and Dividends on Labe Federal Common Stock . . . . 32

MANAGEMENT OF LDF, INC. . . . . . . . . . . . . . . . . . . . . . . 32
Directors and Officers of LDF, Inc. . . . . . . . . . . . . . 32
Committees of LDF . . . . . . . . . . . . . . . . . . . . . . 33
Compensation of Directors and Officers of LDF, Inc. . . . . . 34

SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . 36
Modernization of the Financial Services Industry . . . . . . . 37
Federal Savings Association Regulation . . . . . . . . . . . . 38
Holding Company Regulation . . . . . . . . . . . . . . . . . . 45

LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

<PAGE> 6

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 46

OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

APPENDICES
----------

Appendix A Merger Agreement
Appendix B Dissenters' Rights
Appendix C Certificate of Incorporation

<PAGE> 7

SUMMARY

The following is a summary of the material features of the
Merger. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained elsewhere in this
Proxy Statement/Prospectus or in the accompanying appendices.
STOCKHOLDERS OF LABE FEDERAL ARE URGED TO READ THIS PROXY
STATEMENT/PROSPECTUS AND THE APPENDICES HERETO IN THEIR ENTIRETY.

THE PARTIES

LDF. LDF is a recently formed Delaware corporation. Upon
consummation of the Merger, it will be a registered savings and loan
holding company under the Home Owners' Loan Act ("HOLA"), owning all
of the issued and outstanding Labe Federal Common Stock. LDF does not
currently own any significant assets and has not yet engaged in any
business activity. It has been solely engaged in the process of
applying for necessary regulatory approvals and other matters of a
procedural nature related to consummating the Merger. Upon
consummation of the Merger, its principal activity will consist of
owning and supervising Labe Federal. LDF's principal executive
offices are located at 4343 North Elston Avenue, Chicago, Illinois
60641-2145 (telephone number (773) 267-2700).

INTERIM SAVINGS BANK, FSB. On May 30, 1997, at the direction of
the Board of Directors of LDF, LDF filed an application with the
Office of Thrift Supervision (the "OTS") for a charter under the laws
of the United States for Interim Savings Bank, FSB ("Interim Savings
Bank"). The OTS declared the charter for Interim Savings Bank
effective on June 17, 1997. Prior to the Merger, Interim Savings
Bank will not conduct any business with the public. Labe Federal will
be the surviving entity in the Merger and upon consummation of the
Merger will be known as "Labe Federal Bank for Savings." When the
Merger is completed, LDF will own all of the outstanding shares of
common stock of the surviving entity in the Merger.

LABE FEDERAL BANK FOR SAVINGS. Labe Federal is a federally-
chartered-savings bank. As of June 30, 1997, there were 306,806
shares of Labe Federal Common Stock issued, and 286,806 shares (net of
20,000 shares held in treasury) outstanding. As of June 30, 1997,
Labe Federal had total assets of $127.2 million, total deposits of
$94.9 million, loans receivable of $99.6 million and total
stockholders' equity of $8.7 million. Labe Federal had net income of
$460,000 for the year ended December 31, 1996. Labe Federal's business
primarily consists of gathering deposits from its local community and
investing these funds, along with borrowings from the Federal Home
Loan Bank of Chicago, in residential one- to four-family permanent and
construction loans, multi-family and commercial real estate mortgage
loans, home equity and consumer loans and U.S. government, agency and
mortgage-backed securities. For a description of the business
conducted by Labe Federal, see "INFORMATION REGARDING LABE FEDERAL."

<PAGE> 8

Labe Federal's principal executive offices are located at 4343 North
Elston Avenue, Chicago, Illinois 60641-2145 (telephone number (773)
267-2700).

THE SPECIAL MEETING

The Special Meeting is scheduled to be held at the main office of
Labe Federal, 4343 North Elston Avenue, Chicago, Illinois 60641-2145,
on September 30, 1997 at 6:00 p.m. At the Special Meeting, Labe
Federal Stockholders will consider and vote upon the approval of
the Merger Agreement. A copy of the Merger Agreement is attached to
this Proxy Statement/Prospectus as APPENDIX A. The Board of Directors
of Labe Federal has fixed the close of business on August 29, 1997
as the record date for the determination of the holders of Labe
Federal Common Stock entitled to receive notice of and to vote at the
Special Meeting. Only holders of record of Labe Federal Common Stock
on such date will be entitled to vote at the Special Meeting and at
any postponement or adjournment thereof. The affirmative vote of the
holders of at least a majority of the outstanding shares of Labe
Federal Common Stock is required in order to approve the Merger
Agreement.

As of June 30, 1997, the directors and executive officers of Labe
Federal and their affiliates owned beneficially an aggregate of
163,123 shares of Labe Federal Common Stock, or approximately 56.88%
of the shares entitled to vote at the Special Meeting. All of these
holders have indicated their intention to vote their shares for the
approval of the Merger Agreement. Should this occur, the Merger
Agreement would be approved.

HOLDING COMPANY RESTRUCTURING

The Board of Directors of Labe Federal unanimously considers it
to be in the best interests of Labe Federal, its customers and Labe
Federal Stockholders to change the corporate structure of Labe Federal
by Labe Federal becoming a subsidiary of a new parent company, LDF,
and with present holders of Labe Federal Common Stock becoming holders
of LDF Common Stock. The holding company structure is a well-
established form of organization, and many savings associations,
banks and other financial institutions have changed their corporate
organization to a holding company structure in the past several years.
The restructuring of Labe Federal into a holding company structure
will be accomplished principally through the Merger pursuant to the
terms and conditions of the Merger Agreement, which are described
herein. See "THE PROPOSED MERGER".

RISK FACTORS

The following factors should be considered carefully by Labe
Federal Stockholders in connection with the matters to be voted upon
at the Special Meeting: limited liquidity for the LDF Common Stock,

<PAGE> 9

holding company structure differences, effect of voting control by
directors and executive officers on corporate governance, federal
legislative proposals that would eliminate the federal savings
association and unitary savings and loan holding company charters and
anti-takeover provisions contained in the charter of LDF. For a more
detailed discussion of such factors, see "RISK FACTORS."

THE MERGER

Labe Federal and Interim Savings Bank have entered into the
Merger Agreement, which provides, in part, for LDF's acquisition of
the outstanding Labe Federal Common Stock in exchange for a maximum of
286,806 shares of LDF Common Stock. Interim Savings Bank, an interim-
federal-savings bank in organization, has been formed to allow the
transaction to be structured as a merger, thereby ensuring that LDF
will acquire 100% of the capital stock of Labe Federal. To accomplish
the transaction, the Merger Agreement provides for the merger of
Interim Savings Bank with and into, and under the charter of, Labe
Federal, as a result of which Labe Federal would become wholly-owned
by LDF and each share of Labe Federal Common Stock (except for any
shares of the Labe Federal Common Stock with respect to which
dissenters' rights are validly exercised and shares held in treasury)
would be converted automatically into one share of LDF Common Stock.
Consummation of the Merger is subject to certain conditions, including
approval of the Merger Agreement by Labe Federal Stockholders and
approval of the Merger by the OTS. See "THE PROPOSED MERGER -- Certain
Regulatory Approvals."

REASONS FOR THE MERGER

The formation of a holding company presents Labe Federal with a
corporate structure utilized by most commercial banks, and positions
Labe Federal to be an active and effective participant in the rapidly
changing financial services industry. A holding company provides
flexibility in structuring mergers and acquisitions by giving such
holding company the opportunity to retain acquired institutions as
separate holding company subsidiaries. The holding company also is
able to acquire other types of financial institutions and make
investments not now available to Labe Federal. For a description of
the ways in which the Merger, and the resulting holding company
structure, will enable Labe Federal to respond to such changes, see
"THE PROPOSED MERGER -- Reasons for the Merger."

REGULATORY APPROVALS

In addition to the approval of the Merger by Labe Federal
Stockholders, the obligations of the parties to effect the Merger is
subject to prior approval of the OTS. The appropriate applications
have been filed with OTS, and the necessary approvals have been
obtained. See "THE PROPOSED MERGER -- Certain Regulatory Approvals."

<PAGE> 10

CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES

Labe Federal has received a favorable opinion of Crowe, Chizek
and Company LLP that the Merger will constitute a tax-free transaction
under Section 351 of the Internal Revenue Code of 1986, as amended
(the "Code"). For a summary of Crowe, Chizek's opinion, see "CERTAIN
FEDERAL AND STATE INCOME TAX CONSEQUENCES."

DISSENTERS' RIGHTS

The Labe Federal Stockholders who do not vote in favor of the
Merger and who follow certain other procedures will have the right to
dissent from the Merger and demand and obtain payment in cash of the
"fair value" of their shares in the event of the consummation of the
Merger. See "DISSENTERS' RIGHTS."

COMPARATIVE PER SHARE DATA

The following table sets forth for the periods indicated
historical per share data of Labe Federal and the corresponding pro
forma and pro forma equivalent per share amounts giving effect to the
Merger. The data presented below is not necessarily indicative of the
results of the future operations of LDF or the actual results that
would have occurred if the Merger had been consummated as of or prior
to the periods indicated.
<TABLE>
<CAPTION>

Labe Labe Federal
Federal LDF Pro Forma
Historical Pro Forma Equivalent(1)
---------- --------- -------------
<S> <C> <C> <C>
Book value per share:
At June, 30, 1997 $30.21 $30.21 $30.21
At December 31, 1996 28.44 28.44 28.44

Cash dividends per share:
Six months ended June 30, 1997 -- -- --
Year ended December 31, 1996 -- -- --
Year ended December 31, 1995 -- -- --
Net income per share:
Six months ended June 30, 1997 1.89 1.89 1.89
Year ended December 31, 1996 1.61 1.61 1.61
Year ended December 31, 1995 2.44 2.44 2.44

</TABLE>
_________________________

(1) The pro forma equivalent data represent LDF pro forma information
multiplied by the exchange ratio of one share. The pro forma
computations include the assumption, among others, that no Labe
Federal Stockholders will exercise dissenters' rights.

<PAGE> 11

RISK FACTORS

The following factors should be considered carefully by Labe
Federal Stockholders in connection with the matters to be voted upon
at the Special Meeting.

LIMITED LIQUIDITY

There is currently no public market for the LDF Common Stock and
there is no expectation that one will develop. This lack of a public
market may make it difficult for a Labe Federal Stockholder to sell
shares of LDF Common Stock. In addition, a Labe Federal Stockholder
desiring to sell shares of LDF Common Stock may find it difficult to
determine the market value of LDF Common Stock because of the lack of
trades in the stock. See "INFORMATION REGARDING LDF COMMON STOCK" and
"INFORMATION REGARDING LDF, INC. -- Market for and Dividends on LDF
Common Stock."

HOLDING COMPANY STRUCTURE

After consummation of the Merger, LDF will be a holding company
whose principal asset will be all of the outstanding stock of Labe
Federal. The ability of LDF to pay its expenses and dividends to
stockholders will depend primarily on receipt of sufficient dividends
from Labe Federal, which may be restricted. Dividend payments by Labe
Federal are subject to limitations under federal law. As a federally-
chartered savings association operating under a savings bank charter,
Labe Federal is subject to the OTS's regulations regarding capital
distributions. The regulations establish three tiers of
associations. An association that exceeds all fully phased-in capital
requirements before and after the proposed capital distribution ("Tier
1 Association") and has not been advised by the OTS that it is in need
of more than normal supervision, could, after prior notice but without
the approval of the OTS, make capital distributions during a calendar
year up to the higher of (a) 100 percent of its net income to date
during the calendar year plus the amount that would reduce by one-half
its "surplus capital ratio" (the excess capital over its fully phased-
in capital requirements) at the beginning of the calendar year or (b)
75 percent of its net reserve over the most recent four-quarter
period. Any additional capital distributions would require prior
regulatory approval. In computing the association's permissible
percentage of capital distributions, previous distributions made
during the prior four quarter period must be included. In the event
an association's capital fell below its fully phased-in requirement or
the OTS notified it that it was in need of more than normal
supervision, an association's ability to make capital distributions
could be restricted. In addition, the OTS could prohibit a proposed
capital distribution by any association, which would otherwise be
permitted by regulation, if the OTS determines that such distribution
would constitute an unsafe or unsound practice. Moreover, under the
OTS prompt corrective action regulations, an association would be

<PAGE> 12

prohibited from making any capital distribution if, after the
distribution, an association would have, (i) total risk-based capital
ratio of less than 8 percent, (ii) Tier 1 risk-based capital ratio of
less than 4 percent, or (iii) a leverage ratio of less than 4 percent
or has a leverage ratio that is less than 3 percent if the association
is rated composite 1 under the CAMEL rating system in the most recent
examination of the association and is not experiencing or anticipating
significant growth. For additional information concerning OTS
regulations governing capital distributions, see "SUPERVISION AND
REGULATION -- Limitations on Capital Distributions."

EFFECT OF VOTING CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS ON CORPORATE
GOVERNANCE

As of June 30, 1997, the directors and executive officers of Labe
Federal and their affiliates owned beneficially an aggregate of 163,123
shares of Labe Federal Common Stock, or approximately 56.88% of Labe
Federal's outstanding shares. In connection with the Merger, these
individuals will exchange their Labe Federal shares for shares of LDF
Common Stock. Because LDF's Certificate of Incorporation requires the
affirmative vote of 85% of the outstanding shares entitled to vote in order
to approve certain mergers, consolidations or other business combinations
without the prior approval of a majority of LDF's directors, the directors
and executive officers and their affiliates could effectively block such
transactions. In addition, other corporate actions, such as amendments to
the Certificate of Incorporation, approval of stock incentive plans and
certain business combinations, that require approval by a majority of the
outstanding shares of LDF Common Stock can be accomplished if directors and
executive officers and their affiliates vote in favor of these proposals,
notwithstanding opposition, if any, by stockholders who are not directors,
executive officers or their affiliates.

FEDERAL LEGISLATIVE PROPOSALS WOULD ELIMINATE THE FEDERAL SAVINGS
ASSOCIATION AND UNITARY SAVINGS AND LOAN HOLDING COMPANY CHARTERS

The U.S. Congress is considering legislative proposals, including
a proposal announced by the Clinton Administration on May 21, 1997,
that would modernize the financial services industry. Many of these
proposals, including the Administration's, would eliminate the federal
savings association charter by requiring that all federal thrifts
convert to national banks or other banking charters. Likewise, the
unitary savings and loan holding company would be eliminated and all
thrift holding companies would become bank holding companies regulated
by the Federal Reserve Board. Labe Federal is a federal savings
association and LDF, upon completion of the Merger, will be a unitary
savings and loan holding company. If federal legislation is enacted
that eliminates the federal savings association and unitary savings
and loan holding company charters, Labe Federal and LDF would be
required to change their charters, which may affect the activities
Labe Federal and LDF can engage in and other aspects of their
operations. No assurance can be given whether federal legislation
will be enacted that affects the federal savings association or
unitary savings and loan holding company charters, or if such
legislation is enacted, what form this legislation might take.
Also, if legislation is enacted, no assurance can be given when the law
would become effective. Accordingly, management of Labe Federal and LDF
cannot predict what effect, if any, such legislation would have on the
activities and operations of Labe Federal and LDF. See "Supervision and
Regulation -- Modernization of the Financial Services Industry."

ANTI-TAKEOVER PROVISIONS

Certain provisions of LDF's certificate of incorporation could
have the effect of making it more difficult for a third party to
acquire, or discourage a third party from attempting to acquire,
control of LDF. See "COMPARISON OF THE RIGHTS OF LABE FEDERAL
STOCKHOLDERS AND LDF, INC. STOCKHOLDERS -- Anti-Takeover Provisions in
LDF's Certificate of Incorporation and Bylaws." These provisions are
intended to discourage any attempt to obtain control of LDF in a
transaction that is not approved by its Board of Directors. It should
be noted, however, that an effect of such provisions may be to make
more difficult or deter a future takeover attempt that is not approved
by the Board of Directors but which the holders of a majority of the
shares might deem to be desirable. The certificate of incorporation

<PAGE> 13

also could make it more difficult to obtain stockholder approval of
transactions, such as mergers and other corporate combinations, with
persons having a defined relationship to LDF even if they were favored
by a majority of the stockholders.

INFORMATION REGARDING THE SPECIAL MEETING

MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING

Each copy of this Proxy Statement/Prospectus that is being mailed
or delivered to Labe Federal Stockholders is accompanied by a proxy
and the Notice of Special Meeting furnished in connection with the
solicitation of proxies by the Board of Directors of Labe Federal for
use at the Special Meeting.

LABE FEDERAL STOCKHOLDERS ARE REQUESTED TO PROMPTLY SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY TO LABE FEDERAL IN THE ENCLOSED
POSTAGE-PAID, ADDRESSED ENVELOPE. Failure to return a properly
executed proxy or to vote at the Special Meeting will have the same
effect as a vote against the Merger Agreement.

RECORD DATE AND VOTING

The Board of Directors of Labe Federal has fixed the close of
business on August 29, 1997 as the record date (the "Record
Date") for the determination of the holders of Labe Federal Common
Stock entitled to receive notice of and to vote at the Special
Meeting. Only holders of record of Labe Federal Common Stock on the
Record Date will be entitled to vote at the Special Meeting and at any
postponement or adjournment thereof. As of the close of business on
the Record Date, there were 286,806 shares of Labe Federal Common
Stock issued and outstanding held by approximately 141 stockholders of
record.

Each holder of Labe Federal Common Stock on the Record Date will
be entitled to one vote for each share held of record upon each matter
properly submitted at the Special Meeting and at any postponement or
adjournment thereof. The presence, in person or by proxy, of the
holders of at least a majority of the total number of outstanding
shares of Labe Federal Common Stock entitled to vote at the Special
Meeting is necessary to constitute a quorum thereat.

LABE FEDERAL STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK
CERTIFICATES WITH THEIR PROXIES. ---

<PAGE> 14

VOTE REQUIRED

The affirmative vote of the holders of at least a majority of the
shares of Labe Federal Common Stock outstanding on the Record Date is
required in order to approve the Merger Agreement. Because approval
of the Merger Agreement requires the affirmative vote of the holders
of at least a majority of the total outstanding shares of Labe Federal
Common Stock, and not a majority of the shares actually voted, the
failure to submit a proxy or to vote in person at the Special Meeting
will have the same effect as a vote "AGAINST" the Merger Agreement.

A properly executed proxy marked "ABSTAIN," although counted for
purposes of determining whether there is a quorum, will not be voted
and will have the same effect as a vote "AGAINST" the Merger
Agreement.

Broker non-votes (referring to where a broker or other nominee
physically indicates on the proxy that it does not have discretionary
authority as to certain shares of Labe Federal Common Stock to vote on
a particular matter), although counted for purposes of determining
whether there is a quorum, will not be voted at the Special Meeting
and will have the same effect as a vote "AGAINST" the Merger
Agreement.

Shares of Labe Federal Common Stock represented by properly
executed proxies will be voted in accordance with the instructions
indicated on the proxies. IF NO INSTRUCTIONS ARE INDICATED, PROPERLY
EXECUTED PROXIES WILL BE VOTED "FOR" THE PROPOSAL TO APPROVE THE
MERGER AGREEMENT AND OTHERWISE IN THE DISCRETION OF PROXY HOLDERS AS
TO ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE SPECIAL MEETING
OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF. The grant of a proxy does
not preclude a Labe Federal Stockholder from subsequently revoking
such proxy and voting in person at the Special Meeting.

If a quorum is not obtained, or if fewer shares are voted in
favor of approval of the Merger Agreement than the number required for
approval, it is expected that the Special Meeting will be postponed or
adjourned for the purpose of allowing additional time for obtaining
additional proxies or votes, and, at any subsequent reconvening of the
Special Meeting, all proxies will be voted in the same manner as such
proxies would have been voted at the original convening of the Special
Meeting (except for any proxies that have theretofore effectively been
revoked or withdrawn).

REVOCABILITY OF PROXIES

The presence of a Labe Federal Stockholder at the Special Meeting
will not automatically revoke such stockholder's proxy. A Labe
Federal Stockholder, however, may revoke a proxy at any time before
its exercise by (i) delivering to the Secretary of Labe Federal a
written notice of revocation at or before the Special Meeting, (ii)

<PAGE> 15

delivering to the Secretary of Labe Federal at or before the Special
Meeting a duly executed proxy bearing a later date, or (iii) attending
the Special Meeting, filing a written notice of revocation with the
secretary of the meeting, and voting in person. All written notices
of revocation and other communications with respect to the revocation
of proxies should be addressed to: Labe Federal Bank for Savings, 4343
North Elston Avenue, Chicago, Illinois 60641-2145, Attention:
Secretary.

SOLICITATION OF PROXIES

In addition to solicitation by mail, directors, officers and
employees of Labe Federal may solicit proxies for the Special Meeting
from Labe Federal Stockholders personally or by telephone or telegram
without remuneration therefor other than the compensation that such
persons otherwise receive in their capacities as directors, officers
and employees. The cost of solicitation of proxies for the special
meeting will be borne by Labe Federal.

CERTAIN STOCKHOLDERS OF LABE FEDERAL

The following table sets forth information regarding the shares
of Labe Federal Common Stock held as of June 30, 1997, by persons
known by Labe Federal to be the beneficial owners of more than five
percent of Labe Federal Common Stock (excluding directors), each
director of Labe Federal, certain named executive officers of Labe
Federal (all of whom are directors) and all of Labe Federal's
directors and executive officers as a group.

<PAGE> 16

<TABLE>
<CAPTION>
Labe Federal Common Stock
Beneficially LDF, Inc. Common Stock to be
Owned as of June 30, 1997(1) Owned After the Merger(2)
----------------------------------- --------------------------------------

Name of Number of Percent of
Beneficial Owner Shares Class Number of Shares Percent of Class
---------------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
5% STOCKHOLDERS

Ciro A. Rossini 19,187 6.69 19,187 6.69
Palmer Printing Co.
739 S. Clark Street
Chicago, Illinois 60605

DIRECTORS

James J. Carmody -- -- -- --

Frank C. Casillas -- -- -- --

William E. Cahill, Jr. 360 .13 360 .13

Dilia Camacho-Saeedi 200 .07 200 .07

John D. Foster 5,000 1.74 5,000 1.74

Frank J. Kross 3,350 1.17 3,350 1.17

Roland G. Ley 1,000 .35 1,000 .35

James R. Sneider 3,000 1.05 3,000 1.05

Lowell I. Stahl 146,788<3> 51.18 146,788 51.18

DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP (9 PERSONS) 163,123 56.88 163,123 56.88

</TABLE>
____________________

(1) The nature of beneficial ownership of shares shown in this column
is sole voting and investment power unless otherwise indicated.

(2) Pro forma percentages represent percentage ownership of issued
and outstanding LDF, Inc. Common Stock after consummation of the
Merger based upon the issuance of 286,806 shares of LDF, Inc. Common
Stock in connection with the Merger and the redemption of one share of
LDF, Inc. Common Stock held by the Chairman of Labe Federal as the
nominee of Labe Federal.

(3) Includes 100 shares held in joint tenancy with Lowell l. Stahl's
wife.

<PAGE> 17

CERTAIN STOCKHOLDERS OF LDF, INC.

There is currently one share of LDF Common Stock issued and
outstanding held by Lowell I. Stahl, Chairman of Labe Federal, as the
nominee of Labe Federal. Upon consummation of the Merger, LDF will
redeem this one share of LDF Common Stock.

THE PROPOSED MERGER

This section of the Proxy Statement/Prospectus describes certain
of the more important aspects of the Merger. To the extent that it
relates to the Merger Agreement, the following description does not
purport to be complete and is qualified in its entirety by reference
to the Merger Agreement, which is attached as APPENDIX A to this Proxy
Statement/Prospectus and is incorporated herein by reference. Labe
Federal Stockholders are urged to read the Merger Agreement in its
entirety. Assuming that there are no dissenting Labe Federal
Stockholders, LDF will have 286,806 shares of LDF Common Stock issued
and outstanding if the Merger is consummated.

HOLDING COMPANY RESTRUCTURING

The Board of Directors of Labe Federal unanimously considers it
to be in the best interests of Labe Federal, its customers and Labe
Federal Stockholders to change the corporate structure of Labe Federal
by Labe Federal becoming a subsidiary of a new parent company, LDF,
Inc., and with present holders of Labe Federal Common Stock becoming
holders of LDF Common Stock. The holding company structure is a well-
established form of organization, and many banks and other financial
institutions have changed their corporate organization to a holding
company structure in the past several years. The restructuring of
Labe Federal into a holding company structure will be accomplished
principally through the Merger pursuant to the terms and conditions of
the Merger Agreement, which are described below.

THE MERGER

Labe Federal, Interim Savings Bank and LDF have entered into the
Merger Agreement, which provides, in part, for LDF's acquisition of
the outstanding Labe Federal Common Stock in exchange for a maximum of
286,806 shares of LDF Common Stock. Interim Savings Bank, a
federally-chartered-interim-savings bank in organization, has been
formed to allow the transaction to be structured as a merger, thereby
ensuring that LDF will acquire 100% of the outstanding shares of
capital stock of Labe Federal. To accomplish the transaction, the
Merger Agreement provides for the merger of Interim Savings Bank with
and into, and under the charter of, Labe Federal, as a result of which
Labe Federal would become wholly-owned by LDF and each share of Labe
Federal Common Stock (except for any shares of Labe Federal Common
Stock with respect to which dissenters' rights are validly exercised)
would be converted automatically into one share of LDF Common Stock.

<PAGE> 18

Consummation of the Merger is subject to certain conditions, including
approval of the Merger Agreement by Labe Federal Stockholders.

REASONS FOR THE MERGER

The formation of a holding company presents Labe Federal with a
corporate structure utilized by most commercial banks, and positions
Labe Federal to be an active and effective participant in the rapidly
changing financial services industry. A holding company provides
flexibility in structuring mergers and acquisitions by giving such
holding company the opportunity to retain acquired institutions as
separate holding company subsidiaries. The holding company also is
able to acquire other types of financial institutions and make
investments not now available to Labe Federal. Although there are no
current plans to enter into an acquisition or investment transaction,
the Board of Directors recognizes that the financial services industry
is in the midst of a rapid consolidation and a dramatic restructuring
of the powers afforded the providers of financial services. The
availability of the holding company structure at this time presents
Labe Federal with an opportunity that the Board of Directors believes
should be acted upon now.

MANAGEMENT FOLLOWING THE MERGER

The directors and officers of LDF and Labe Federal will remain
the same after consummation of the Merger. See "MANAGEMENT OF LDF,
INC." for information with respect to the current directors and
officers of LDF.

RESALE OF LDF COMMON STOCK BY AFFILIATES OF LABE FEDERAL

All shares of LDF Common Stock received by Labe Federal
Stockholders in connection with the Merger will be freely
transferable, except that shares of LDF Common Stock received by
persons who are deemed to be "affiliates" of Labe Federal prior to the
Merger may be resold by them only in transactions permitted by the
resale provisions of Rule 145 under the Securities Act, or as
otherwise permitted under the Securities Act. Persons who may be
deemed to be affiliates of Labe Federal generally include individuals
or entities that control, are controlled by, or are under common
control with, such party and may include certain officers and
directors of such party as well as principal stockholders of such
party.

The certificates representing LDF Common Stock issued to
affiliates of Labe Federal in the Merger may contain a legend
indicating these resale restrictions.

The above is only a general statement of certain restrictions
regarding the sale or transfer of the shares of LDF Common Stock to be
issued in the Merger. Therefore, those stockholders who may be

<PAGE> 19

affiliates of Labe Federal should confer with their legal counsel
regarding the resale restrictions that may apply to them.

CERTAIN REGULATORY APPROVALS

In addition to the approval of the Merger by Labe Federal
Stockholders, the obligations of the parties to effect the Merger is
subject to prior approval of the OTS under HOLA. Under HOLA, the OTS
must take into consideration the financial and managerial resources and
future prospects of LDF and Labe Federal, the effect of the acquisition of
Labe Federal, the insurance risk to the Savings Association Insurance Fund,
and the convenience and needs of the community to be served. The OTS must
withhold approval for the Merger if, among other things, it determines
that the effect of the Merger would be to substantially lessen
competition. LDF filed an application for approval with the OTS on
May 30, 1997, which application was approved on July 15, 1997, subject
to customary conditions relating to filing with the OTS pre- and post-
closing certifications. The OTS's approval is not an opinion that the
proposed transaction is favorable to the Labe Federal Stockholders
from a financial point of view or that the OTS has considered the
adequacy of the terms of the transaction. THE OTS'S APPROVAL IS NOT
AN ENDORSEMENT OR RECOMMENDATION OF THE MERGER.

AMENDMENT AND TERMINATION OF THE MERGER AGREEMENT

Any term of the Merger Agreement may be amended or modified in
whole or in part at any time, to the extent authorized by applicable
law, by a writing signed by the respective parties thereto; provided,
that after Labe Federal Stockholders have approved the Merger
Agreement, there may be no amendment to the Merger Agreement that
materially adversely affects the rights of such stockholders. Any
material change made to the Merger Agreement after the date of this
Proxy Statement/Prospectus would require a resolicitation of Labe
Federal Stockholders to vote upon the proposed transaction.

The Merger Agreement may be terminated by either of the
respective parties thereto by appropriate resolution of its board of
directors at any time prior to the effective date of the Merger,
whether before or after approval of the Merger Agreement by Labe
Federal Stockholders.

EFFECTIVE DATE

If the Merger is approved by the holders of the requisite number
of shares of the Labe Federal Common Stock and the other conditions to
the consummation of the Merger are satisfied or waived, then Labe
Federal and Interim Savings Bank will execute articles of combination,
which articles shall then be filed with the OTS. The Merger will
become effective on the date on which the OTS endorses the articles of
combination (the "Effective Time").

<PAGE> 20

SURRENDER OF STOCK CERTIFICATES AND RECEIPT OF NEW CERTIFICATES

Promptly after the Effective Time, each Labe Federal Stockholder
will be sent a transmittal letter with instructions regarding the
procedure for surrendering his or her Labe Federal stock certificates
in exchange for certificates representing LDF Common Stock. LABE
FEDERAL STOCKHOLDERS SHOULD NOT RETURN ANY CERTIFICATES WITH THE
ENCLOSED PROXY. Each Labe Federal Stockholder who tenders his or her
shares in accordance with the instructions provided will be sent a new
stock certificate for the number of whole shares of LDF Common Stock
such stockholder is entitled to receive under the Merger Agreement.

In the event of lost or destroyed certificates, such affidavits
and indemnity agreements as may be reasonably requested by LDF or its
agent will be accepted in lieu of such certificates.

No dividends or other distributions will be paid to a Labe
Federal Stockholder with respect to shares of LDF Common Stock
received in the Merger until such stockholder's stock certificates
representing the Labe Federal Common Stock are delivered to LDF (or
documentation in lieu of a lost or destroyed certificate is
delivered). All dividends declared between the Effective Time and the
date of the surrender of stock certificates representing the Labe
Federal Common Stock will be held by LDF for the benefit of the Labe
Federal Stockholder and will be paid, without interest thereon, upon
the surrender of such stock certificate (or documentation in lieu
thereof).

ACCOUNTING TREATMENT

The Merger is expected to be accounted for under the "pooling of
interests" method of accounting whereby the assets, liabilities and
equity of LDF and Labe Federal will be carried at their recorded
amounts prior to the Merger. The pooling of interests method of
accounting therefore avoids the creation of goodwill. As a result, the
Merger should not affect the results of operations or financial condition
of Labe Federal.

INFORMATION REGARDING LDF COMMON STOCK

LDF is currently authorized to issue up to 1,000,000 shares of
LDF Common Stock, par value $1.00 per share. There is currently one
share of LDF Common Stock issued and outstanding, which is held by the
Chairman of Labe Federal as the nominee of Labe Federal. Upon
consummation of the Merger, LDF will redeem this one share of LDF
Common Stock. If the Merger is consummated (assuming no dissenting
stockholders), LDF will have 286,806 shares of LDF Common Stock issued
and outstanding. The LDF Common Stock is not traded, and is not
expected to be traded, on an established public trading market.

Holders of LDF Common Stock are entitled to one vote per share on
all matters submitted to a vote of the stockholders of LDF. In the
election of directors, holders of LDF Common Stock will not have

<PAGE> 21

cumulative voting rights. Except as otherwise required by law, the
holders of such shares will exclusively possess all voting power. The
holders of LDF Common Stock will be entitled to such dividends as may
be declared from time to time by the Board of Directors of LDF from
funds legally available therefor, and will be entitled to receive pro
rata all assets of LDF available for distribution to such holders upon
liquidation. Holders of LDF Common Stock will not have preemptive
rights to purchase, subscribe for or otherwise acquire, stock of any
class of LDF. All of the shares offered hereby will be, when issued,
validly issued, fully paid and nonassessable.

COMPARISON OF THE RIGHTS OF LABE FEDERAL STOCKHOLDERS
AND LDF, INC. STOCKHOLDERS

GENERAL

As a result of the Merger, stockholders of Labe Federal, a
federally-chartered-stock- savings bank, will become stockholders of
LDF, a Delaware corporation.

There are certain differences in the rights of stockholders as a
result of the differences between Labe Federal's charter and bylaws
and LDF's certificate of incorporation and bylaws and the differences
between laws with respect to federally-chartered-savings associations
and the DGCL.

THE FOLLOWING DISCUSSION IS NOT INTENDED TO BE A COMPLETE
STATEMENT OF THE DIFFERENCES AFFECTING THE RIGHTS OF STOCKHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE CERTIFICATE OF
INCORPORATION (WHICH IS ATTACHED HERETO AS APPENDIX C) AND BYLAWS OF
LDF AND THE DGCL. THE DISCUSSION, HOWEVER, DOES COVER ALL OF THE MATERIAL
DIFFERENCES AFFECTING STOCKHOLDERS' RIGHTS.

AUTHORIZED CAPITAL STOCK

LDF's authorized capital stock consists of 1,000,000 shares of
common stock, par value $1.00 per share, and 200,000 shares of
preferred stock, par value $1.00 per share, whereas Labe Federal's
authorized capital stock consists of 10,000,000 shares of common
stock, par value $1.00 per share, and 5,000,000 shares of preferred
stock, no stated par value per share. The Board of Directors of LDF
has determined to issue no preferred stock and 286,806 shares of
Common Stock (assuming no dissenting stockholders) in the Merger.

LDF's certificate of incorporation authorizes additional shares
of Common Stock to provide the Board of Directors with as much
flexibility as possible to effect, among other transactions,
financings, acquisitions, stock dividends, stock splits and director
and employee stock options. These additional authorized shares of
Common Stock, however, also may be used by the Board of Directors, to
the extent consistent with its fiduciary duties to the stockholders of
LDF, to deter future attempts to gain control of LDF. With regard to

<PAGE> 22

the authorized but unissued preferred stock of LDF, the Board of
Directors has sole authority to determine the terms of any one or more
series of such preferred stock, including voting rights, conversion
rates, and liquidation preferences. As a result of the ability to fix
voting rights for a series of preferred stock, the Board of Directors
of LDF has the power, to the extent consistent with its fiduciary
duties to the stockholders of LDF, to issue a series of preferred
stock to persons friendly to management in order to attempt to block a
post-tender-offer merger or other transaction by which a third party
seeks control, and thereby to assist management to retain its
position. LDF's Board of Directors currently has no plans for the
issuance of any preferred stock or of any additional shares of Common
Stock.

LDF will be subject to an annual franchise tax in the State of
Delaware and in the State of Illinois. As a federally chartered
institution, Labe Federal is not subject to franchise taxes,
regardless of the amount of its authorized capitalization.

ISSUANCE OF CAPITAL STOCK

The certificate of incorporation of LDF does not contain
restrictions on the issuance of shares of capital stock to directors,
officers or controlling persons of LDF, whereas the charter of Labe
Federal restricts such issuance to general public offerings, or if
qualifying shares, to directors, unless the share issuance or the plan
under which they would be issued has been approved by a majority of
the total votes eligible to be cast at a legal meeting of
stockholders.

Thus, stock-related compensation plans, such as stock option
plans, could be adopted by LDF without stockholder approval, and
shares of LDF capital stock could be issued directly to directors,
officers or controlling persons without stockholder approval.
Stockholder approval of stock-related compensation plans, however, may
be sought in certain instances in order to qualify such plans for
favorable federal income tax treatment under current laws and
regulations.

Neither the charter and bylaws of Labe Federal nor the
certificate of incorporation and bylaws of LDF provide for preemptive
rights to stockholders in connection with the issuance of capital
stock.

VOTING RIGHTS

Under Labe Federal's charter, stockholders may cumulate their
votes for the election of directors. Therefore, the number of votes a
stockholder of Labe Federal could cast in an election of directors
would be an amount equal to the number of shares that the stockholder

<PAGE> 23

owned multiplied by the number of directors to be elected. The
minority stockholder could cast all its votes for one director or
divide the votes among two or more of the director candidates. With
cumulative voting, if a minority stockholder were to cast all its
votes for one nominee, that stockholder may succeed in electing one or
more nominees to the Board of Labe Federal who would not otherwise
have received sufficient votes to be elected. Accordingly, cumulative
voting may allow a minority of the Labe Federal's stockholders to
obtain representation on the Board of Directors against the wishes of
the majority to further objectives that may be contrary to those of
the majority of the stockholders.

LDF's certificate of incorporation and bylaws eliminate
cumulative voting in elections of directors. By prohibiting
cumulative voting and allowing only the straight voting method, LDF's
Board of Directors would be elected by a plurality of the votes and,
therefore, the majority of the stockholders would always be able to
elect the entire Board. Elimination of cumulative voting will help to
ensure continuity and stability of LDF's Board of Directors and the
policies adopted by it by making it more difficult for the holders of
a relatively small amount of the LDF Common Stock to elect their
nominees to the Board of Directors and possibly by delaying, deterring
or discouraging proxy contests.

Labe Federal's charter permits the provision of separate-class-
voting rights for holders of a class of Labe Federal preferred stock
only under specified circumstances, including (i) mergers,
consolidations and sales, leases or conveyances of property of Labe
Federal if the class of Labe Federal preferred stock is to be
exchanged for securities of another corporation, (ii) amendments of
the charter that would adversely change the specific terms of any
class or series of Labe Federal preferred stock and (iii) the
provision of class voting rights to holders of Labe Federal preferred
stock permitting such holders to elect a specified number of directors
of the Board of Directors of Labe Federal (which must be less than a
majority of directors) in the event of default in the payment of
dividends on Labe Federal preferred stock. The certificate of
incorporation of LDF does not contain any specification of or
limitation on the circumstances under which separate class voting
rights may be provided to a particular class or series of LDF
preferred stock.

PAYMENT OF DIVIDENDS

The ability of Labe Federal to pay dividends on its capital stock
is restricted by OTS regulations. See "REGULATION AND SUPERVISION --
Federal Savings Association Regulation -- Limitation on Capital
Distributions." Although LDF is not subject to these restrictions as
a Delaware corporation, such restrictions will indirectly affect it
because dividends from Labe Federal will be a primary source of funds
of LDF for the payment of dividends to its stockholders.

<PAGE> 24

The DGCL generally provides that, subject to any restrictions in
the corporation's certificate of incorporation, dividends may be
declared from the corporation's surplus, as defined by Delaware law,
or, if there is no surplus, from its net profits for the fiscal year
in which the dividend is declared and the preceding fiscal year. If
the corporation's capital, however, has been diminished to an amount
less than the aggregate amount of the capital represented by the
issued and outstanding stock of all classes having a preference upon
the distribution of assets, dividends may not be declared and paid out
of such net profits until the deficiency in such capital has been
repaired.

LIMITATIONS ON LIABILITY

LDF's certificate of incorporation currently provides that
directors of LDF shall not be personally liable to LDF or its
stockholders for monetary damages for breaches of fiduciary duty,
except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or
a knowing violation of law, (iii) for the payment of certain unlawful
dividends and the making of certain stock purchases or redemptions, or
(iv) for any transaction from which the director derived an improper
personal benefit. This provision would absolve directors of personal
liability for simple negligence in the performance of their duties.
It would not permit a director to be exculpated, however, for
liability for actions involving conflicts of interest or breaches of
the traditional "duty of loyalty" to LDF and its stockholders, and it
would not affect the availability of injunctive or other equitable
relief as a remedy.

The provision in LDF's certificate of incorporation that limits
the personal liability of directors is designed to ensure that the
ability of LDF's directors to exercise their best business judgment in
managing LDF's affairs is not unreasonably impeded by exposure to the
potentially high personal costs or other uncertainties of litigation.
The nature of the tasks and responsibilities undertaken by directors
of corporations often require such persons to make difficult judgments
of great importance that can expose such persons to personal
liability, but from which they will acquire no personal benefit. In
recent years, stockholder litigation against corporations and their
directors challenging good faith business judgments and involving no
allegations of personal wrongdoing has become common. Such litigation
regularly involves damage claims in huge amounts that bear no
relationship to the amount of compensation received by the directors,
particularly in the case of directors who are not employees of the
corporation. The expense of such litigation, whether it is well-
founded or not, can be enormous. The provision of the certificate of
incorporation relating to director liability is intended to reduce, in
appropriate cases, the risk incident to serving as a director and to

<PAGE> 25

enable LDF to elect and retain the persons most qualified to serve as
directors.

Currently, federal law does not permit federally-chartered-
savings associations such as Labe Federal to limit the personal
liability of directors in the manner authorized by the DGCL and the
laws of many other states.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Labe Federal's charter and bylaws do not contain any provision
relating to indemnification of directors and officers of Labe Federal.
Under present OTS regulations, however, Labe Federal shall indemnify
its directors, officers and employees for any costs incurred in
connection with any litigation involving any such person's activities
as a director, officer or employee if such person obtains a final
judgment on the merits in his or her favor. In addition,
indemnification is permitted in the case of a settlement, a final
judgment against such person or final judgment other than on the
merits, if a majority of disinterested directors determine that such
person was acting in good faith within the scope of his or her
employment as he or she could reasonably have perceived it under the
circumstances and for a purpose he or she could reasonably have
believed under the circumstances was in the best interest of Labe
Federal or its stockholders. Labe Federal also is permitted to pay
ongoing expenses incurred by a director, officer or employee if a
majority of disinterested directors concludes that such person may
ultimately be entitled to indemnification. Before making any
indemnification payment, Labe Federal is required to notify the OTS of
its intention, and such payment cannot be made if the OTS objects to
it.

LDF's certificate of incorporation and bylaws provide that LDF
shall indemnify and advance expenses to any person who was or is a
party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person is or was a director or officer of LDF, or is or was a director
or officer of LDF serving at the request of LDF as a director or
officer of another enterprise against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with
such action, suit or proceeding to the fullest extent authorized by
the DGCL.

STOCKHOLDER'S RIGHTS TO EXAMINE BOOKS AND RECORDS

A federal regulation that is applicable to Labe Federal provides
that stockholders may inspect and copy specified books and records of
a federally-chartered-savings association after proper written notice
for a proper purpose.

<PAGE> 26

The DGCL similarly provides that a stockholder may inspect books
and records upon written demand under oath stating the purpose of the
inspection, if such purpose is reasonably related to such person's
interest as a stockholder.

NON-STOCKHOLDER CONSTITUENCIES

LDF's certificate of incorporation provides that in evaluating
certain transactions that could effect a change in control of LDF, it
is proper for the Board of Directors to consider the effects of such
transactions on the employees, suppliers and customers of LDF and the
communities in which the principal offices of LDF are located.
Neither Labe Federal's charter nor bylaws provide for a similar
provision.

ANTI-TAKEOVER PROVISIONS IN LDF'S CERTIFICATE OF INCORPORATION AND
BYLAWS

LDF's certificate of incorporation and bylaws differ from the
charter and bylaws of Labe Federal in certain significant respects.
These differences, which are described below, are intended to
discourage any attempt to obtain control of LDF in a transaction that
is not approved by its Board of Directors by making it more difficult
for a person or company to obtain control of LDF in a short time and
to impose its will on the remaining stockholders. None of the
provisions of the certificate of incorporation or bylaws of LDF will
prevent a tender offer for all or part of its stock. It should be
noted, however, that an effect of the provisions of the certificate of
incorporation of LDF may be to make more difficult or deter a future
takeover attempt that is not approved by the Board of Directors but
that the holders of a majority of the shares might deem to be
desirable. The certificate of incorporation could also make it more
difficult to obtain stockholder approval of transactions, such as
mergers and other corporate combinations, with persons having a
defined relationship to LDF even if they were favored by a majority of
the stockholders. Transactions that require stockholder approval,
however, but do not involve a person with a defined relationship to
LDF may still be approved by the holders of a majority of the shares.
Moreover, proposed "Business Combinations" which have been approved by
a majority of the members of the Board of Directors of LDF who are
unaffiliated with an "Interested Stockholder" and were directors
before the Interested Stockholder became an Interested Stockholder or
which satisfy certain price and procedural requirements may be
approved by a simple majority of the outstanding shares. See "--
Supermajority Vote Required for Certain Transactions."

As mentioned in the subsections below describing the various
anti-takeover provisions, LDF's certificate of incorporation may have
effects that could be viewed as disadvantageous to certain
stockholders generally. On balance, however, the Board of Directors
has concluded that the overall advantages of LDF's certificate of

<PAGE> 27

incorporation to LDF and its stockholders outweigh the potential
disadvantages. While management has no knowledge of any efforts,
pending or proposed, by any outside person or group to obtain control
of LDF or Labe Federal, the Board of Directors of LDF believes that
the interest of the stockholders of LDF in connection with any future
takeover of LDF will be best served if such a transaction occurs only
after arms-length negotiations. The Board of Directors of LDF has no
present intention of soliciting a stockholder vote on any other
proposals relating to a possible takeover of LDF.

CLASSIFIED BOARD OF DIRECTORS. Labe Federal's bylaws and the
certificate of incorporation of LDF, respectively, require the Board
of Directors of Labe Federal and LDF to be divided into three classes
as nearly equal in number as possible and that the members of each
class shall be elected for a term of three years and until their
successors are elected and qualified, with one class being elected
annually.

VACANCIES ON THE BOARD OF DIRECTORS. Under Labe Federal's
bylaws, any vacancies in the Board of Directors of Labe Federal may be
filled by the affirmative vote of a majority of the remaining
directors although less than a quorum of the Board of Directors.
Persons elected by the directors of Labe Federal to fill vacancies may
only serve until the next annual meeting of stockholders. Under LDF's
certificate of incorporation, however, any vacancy occurring in the
Board of Directors of LDF, including any vacancy created by reason of
an increase in the number of directors, may be filled by the remaining
directors, and any director so chosen shall hold office for the
remainder of the term to which the director has been elected and until
his or her successor is elected and qualified.

REMOVAL OF DIRECTORS. Under Labe Federal's bylaws, any director
may be removed for cause by the holders of a majority of the
outstanding voting shares, provided that if less than the entire board
is to be removed, none of the directors may be removed if the votes
cast against the removal would be sufficient to elect a director if
then cumulatively voted at an election of the class of directors of
which such director is a member. The certificate of incorporation and
the bylaws of LDF provide that directors may be removed from office
only for cause and only upon the vote of the holders of at least 85%
of the outstanding shares of all classes of capital stock of LDF.

The classification of directors, the removal requirements and the
absence of cumulative voting in LDF's certificate of incorporation and
bylaws have the effect of making it more difficult for stockholders to
change the composition of the Board of Directors in a relatively short
period of time.

<PAGE> 28

SPECIAL MEETINGS OF STOCKHOLDERS. Labe Federal's charter and
bylaws provide that special meetings of its stockholders may be called
by the Chairman, President, a majority of the Board of Directors or
the holders of not less than one-fourth of the outstanding capital
stock of Labe Federal entitled to vote at the meeting.

The certificate of incorporation and bylaws of LDF allow only the
president or a majority of the Board of Directors to call a special
stockholders' meeting. Stockholders do not have the right to call
such a meeting. This provision may have the effect of delaying
consideration of a stockholder proposal until the next annual meeting
of stockholders.

STOCKHOLDER NOMINATIONS AND PROPOSALS. Labe Federal's bylaws
generally provide that stockholders may submit nominations for
election as director at an annual meeting of stockholders at least
five days before the date of any such meeting and any new business to
be taken up at such a meeting at least ten days beforehand.

LDF's certificate of incorporation requires advance notification
to the secretary of LDF regarding nominations of persons for election
to the Board of Directors by a stockholder. The notice must be
received (with some exception) not later than 14 days prior to any
annual meeting of stockholders. The notice by a stockholder must
comply with certain information requirements specified in the
certificate of incorporation. Advance written notification is also
required by LDF's bylaws before a stockholder may bring any item of
business before the annual meeting of stockholders. The notice must
be received by the secretary of LDF not later than the date
corresponding to 60 days before the first anniversary date of the
immediately preceding annual meeting of stockholders. The notice by a
stockholder must comply with certain information requirements
specified in the bylaws. The purpose of such advance notice
requirements is to insure the orderly conduct of business at annual
meetings of stockholders and to afford the board of directors a
meaningful opportunity to consider the qualifications of proposed
nominees and to inform themselves, and where appropriate, to inform
the stockholders in advance of the meeting of any business proposed to
be conducted at the meeting. Such procedures may, however, have the
effect of precluding the nomination of a director, or a slate of
directors, or the consideration of business at a particular meeting if
the proper procedures have not been followed prior to the meeting.

STOCKHOLDER ACTION WITHOUT A MEETING. The bylaws of Labe Federal
provide that any action to be taken or which may be taken at any
annual or special meeting of stockholders may be taken if a consent in
writing, setting forth the actions so taken, is given by the holders
of all outstanding shares entitled to vote.

LDF's certificate of incorporation and bylaws prohibit action
that is required or permitted to be taken at any annual or special

<PAGE> 29

meeting of stockholders of LDF from being taken by the written consent
of the stockholders without a meeting. This provision may have the
effect of delaying consideration of a stockholder proposal until the
next annual meeting of stockholders.

SUPERMAJORITY VOTE REQUIRED FOR CERTAIN TRANSACTIONS. In order
to approve a "Business Combination" of LDF with an "Interested
Stockholder," LDF's certificate of incorporation requires the approval
of holders of 85% of the voting power of the outstanding capital stock
of LDF entitled to vote generally in the election of directors. A
Business Combination is defined to include virtually every
transaction between an Interested Stockholder and LDF or a subsidiary,
including a merger, consolidation, sale or exchange of assets or
issuance of securities of LDF or its subsidiaries. An Interested
Stockholder is defined to include any person, corporation or other
entity which is, directly or indirectly, the beneficial owner of
shares representing 15% or more of the voting power of LDF.
Management is not aware of any person who is now an Interested
Stockholder, other than Lowell I. Stahl.

The above voting requirements would not be applicable (so that,
if a stockholder's vote is required, the proposed Business Combination
could be approved by a simple majority of the outstanding shares), if
(i) the transaction has been approved by a majority of the members of
the Board who are unaffiliated with the Interested Stockholder and
were directors before the Interested Stockholder became an Interested
Stockholder, or (ii) the transaction satisfies certain price and
procedural requirements, such as a transaction in which all holders of
LDF Common Stock will receive consideration per share at least equal
to (a) the highest consideration per share paid by the Interested
Stockholder for any shares of LDF Common Stock within two years prior
to the announcement of the Business Combination or in the transaction
in which it became an Interested Stockholder, or (b) the per share
fair market value of LDF Common Stock on the date of the first
announcement of the proposed Business Combination or the date on which
the Interested Stockholder became an Interested Stockholder, whichever
is higher.

This higher voting requirement provision might tend to encourage
persons seeking control of LDF to negotiate terms of a proposed
acquisition with LDF's management. A request by an outsider for
approval of a transaction prior to becoming an Interested Stockholder
may, however, pose an unavoidable conflict of interest for at least
some members of the Board of Directors. For example, they may be
confronted with the prospect of losing their positions on the Board of
Directors or as officers if the transaction is consummated, yet the
terms of the proposed transaction may be favorable to stockholders.
Also, if the Board of Directors does not approve a proposed
transaction, a determined tender offeror may elect to proceed with the
offer, but because resistance by the directors would make a proposed
transaction or resulting combination more difficult, time-consuming

<PAGE> 30

and, consequently, more expensive, the price offered to stockholder
may be lower than would be the case in the absence of such resistance.

This provision would not in any way restrict another entity that
merely desired to exercise or increase its stock ownership in LDF and
did not intend to effect a subsequent Business Combination. Moreover,
this provision of the certificate of incorporation would not apply to
a Business Combination with a person that is not an Interested
Stockholder. On the other hand, it may prevent a Business Combination
that the stockholders deem to be desirable or which the majority of
the directors (other than directors unaffiliated with the Interested
Stockholder) deem to be in the best interests of LDF and its
stockholders. Another effect of this provision may be to give veto
power to the minority stockholders with respect to a Business
Combination that is opposed by the Board of Directors but that a
majority of stockholders may believe to be desirable and beneficial.

Neither Labe Federal's charter and bylaws nor federal laws and
regulations contain a provision that restricts business combinations
between Labe Federal and interested stockholders in the manner
described above.

AMENDMENT OF GOVERNING INSTRUMENTS. No amendment of Labe
Federal's charter may be made unless it is first proposed by the Board
of Directors of Labe Federal, then preliminarily approved by the OTS,
and thereafter approved by the holders of a majority of the total
votes eligible to be cast at a legal meeting.

No amendment of LDF's certificate of incorporation may be made
unless it is first approved by the Board of Directors of LDF and
thereafter is approved by the holders of a majority of the shares of
LDF entitled to vote generally in an election of directors, voting
together as a single class, as well as such additional vote of the
preferred stock as may be required by the provisions of any series
thereof; provided, however, that the classified board, calling special
meetings and stockholder consent, bylaw amendment, Interested
Stockholder, director and officer indemnification, director
exculpation, electing to be governed by Section 203 of the DGCL (i.e.
Business Combinations with Interested Stockholders), non-stockholder
constituency, and one-share-one-vote provisions of the certificate of
incorporation of LDF may be altered, amended or repealed only if the
holders of at least 85% of the outstanding shares of voting stock
entitled to vote in the election of directors vote in favor of such
action.

The bylaws of Labe Federal may be amended by a majority vote of
the full Board of Directors of Labe Federal or by a majority vote of
the votes cast by the stockholders of Labe Federal at any legal
meeting. Amendments to the bylaws of LDF may be made only upon (i) the
affirmative vote of a majority of the members of the Board of
Directors, or (ii) the affirmative vote of the holders of at least 85%

<PAGE> 31

of the outstanding shares of voting stock entitled to vote in the
election of directors.

DELAWARE TAKEOVER LAW

As permitted by Delaware law, the certificate of incorporation of
LDF provides that LDF will be governed by Section 203 of the Delaware
General Corporation Law, which regulates certain business combinations
involving Delaware corporations. In general, Section 203 prevents an
"Interested Stockholder" (defined generally as an owner of 15% or more
of a corporation's voting stock) from engaging in a "Business
Combination" (defined as a variety of transactions, including mergers
and tender offers) with a Delaware corporation for three years
following the date such person became an Interested Stockholder
unless: (i) before such person became an Interested Stockholder, the
Board of Directors of the corporation approved the transaction in
which the Interested Stockholder became an Interested Stockholder;
(ii) upon consummation of the transaction that resulted in the
Interested Stockholder becoming an Interested Stockholder, the
Interested Stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced
(excluding for the purposes of determining the number of shares
outstanding those shares owned by directors who are also officers and
by employee stock plans in which employee participants do not have the
right to determine confidentially whether plan shares will be tendered
in a tender offer or exchange offer); or (iii) following the
transaction in which such person became an Interested Stockholder, the
Business Combination is (x) approved by the Board of Directors of the
corporation and (y) authorized at a meeting of stockholders by the
affirmative vote of the holders of 66-2/3% of the outstanding voting
stock of the corporation not owned by the Interested Stockholder.

CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES

Labe Federal has received a favorable opinion of Crowe, Chizek
and Company LLP that the Merger will constitute a tax-free transaction
under Section 351 of the Code. The following is a summary of the
opinion of Crowe, Chizek and Company LLP, which has been filed as an
exhibit to the Registration Statement, and the anticipated material
federal and state income tax consequences of the Merger to Labe
Federal Stockholders. The following summary is based upon the
parties' understanding of the federal and state income tax laws as
currently interpreted. It does not constitute a representation by
Labe Federal or LDF.

Because of the complexities of the proposed transaction, it is
strongly recommended that Labe Federal Stockholders consult their own
tax advisers concerning the specific tax consequences of the Merger as
summarized below.

<PAGE> 32

1. The formation of LDF and the merger of Interim Savings Bank
with and into, and under the charter of, Labe Federal will be treated
as involving, in substance, the transfer of Labe Federal Common Stock
for LDF Common Stock. The transitory existence of Interim Savings Bank
and its merger with and into Labe Federal will be disregarded.

2. No gain or loss will be recognized on the receipt of LDF
Common Stock by Labe Federal Stockholders who receive solely LDF
Common Stock in exchange for Labe Federal Common Stock.

3. No gain or loss will be recognized by LDF on the receipt of
Labe Federal Common Stock solely in exchange for shares of LDF Common
Stock.

4. The basis of the LDF Common Stock received by a Labe Federal
Stockholder will be the same as the adjusted basis of the Labe Federal
Common Stock.

5. The holding period of the LDF Common Stock received by a
Labe Federal Stockholder in exchange for the transfer of Labe Federal
Common Stock will include the period during which the Labe Federal
Common Stock surrendered in exchange therefor was held, provided that
the Labe Federal Common Stock was held as a capital asset (generally
property held for investment) on the date of the exchange.

6. Gain or loss, if any, will be recognized by a Labe Federal
Stockholder who dissents from the Merger and receives solely cash in
exchange for Labe Federal Common Stock.

<PAGE> 33

DISSENTERS' RIGHTS

The Labe Federal Stockholders who do not vote in favor of the
Merger and who follow certain other procedures summarized below will
have the right to dissent from the Merger and demand and obtain
payment in cash of the "fair value" of their shares in the event of
the consummation of the Merger.

The following is a summary of the provisions of 12 C.F.R.
Section 552.14, which specifies the procedures that must be followed
by any dissenting Labe Federal Stockholder who wishes to demand
payment for the fair value of his or her shares in the event of the
consummation of the Merger. Such provisions of 12 C.F.R. Section
552.14 are set forth in their entirety in APPENDIX B attached to this
Proxy Statement/Prospectus, and this summary is qualified by reference
to the exact provisions set forth in APPENDIX B.

Pursuant to the provisions of 12 C.F.R. Section 552.14, the
Merger Agreement provides that any stockholder of Labe Federal who (i)
prior to voting on the Merger Agreement files a written statement
identifying himself or herself and stating his or her intention
thereby to demand appraisal of and payment for his or her shares
pursuant to 12 C.F.R. Section 552.14, and (ii) does not vote in favor
of the Merger at the meeting of stockholders at which the Merger
Agreement is submitted to a vote shall be entitled to receive from
Labe Federal (within ten days after the effective date of the Merger)
(a) a written notice of the date on which the Merger was completed and
notification of the sixty day time period during which the dissenting
stockholder may file a petition with the OTS if the stockholder and
Labe Federal do not agree as to the fair value of his or her shares,
and (b) a written offer to pay for dissenting shares at a specified
price deemed by Labe Federal to be the fair value thereof. Such
notice and offer shall be accompanied by a balance sheet and statement
of income of Labe Federal for a fiscal year ending not more than
sixteen months before the date of notice and offer, together with the
latest available interim financial statements. A failure to vote
against the Merger or to give such notice in writing at or prior to
the meeting will be deemed a waiver of rights of appraisal.

If within sixty days of the effective date of the Merger, Labe
Federal and any stockholder who has complied with the provisions of 12
C.F.R. Section 552.14(c)(2) agree as to the fair value of the
dissenting stockholders' shares, payment therefor shall be made within
ninety days after completion of the Merger. If within sixty days of
the effective date of the Merger, Labe Federal and any stockholder who
has complied with the provisions of 12 C.F.R. Section 552.14(c)(2) do
not agree as to the fair value of the dissenting stockholders' shares,
then any such stockholder may file a petition with the OTS (with a
copy by registered or certified mail to Labe Federal Bank for Savings,
Attention: Mr. Frank J. Kross, President, 4343 N. Elston Avenue,
Chicago, Illinois 60641) demanding a determination of the fair market

<PAGE> 34

value of the stock of all such stockholders. A stockholder entitled
to file a petition under 12 C.F.R. Section 552.14(c)(5) who fails to
file such petition within sixty days of the effective date of the
Merger shall be deemed to have accepted the terms offered under the
Merger.

Within sixty days after the effective date of the Merger, each
stockholder demanding appraisal and payment under 12 C.F.R. Section
552.14 shall submit to Labe Federal, acting in its capacity as its own
transfer agent, his or her certificates of stock for notation thereon
that an appraisal and payment have been demanded with respect to such
stock and that appraisal proceedings are pending. Any stockholder who
fails to submit his stock certificates for such notation shall no
longer be entitled to appraisal rights under 12 C.F.R. Section 552.14
and shall be deemed to have accepted the terms offered pursuant to the
Merger. At any time within sixty days after the effective date of the
Merger, any stockholder shall have the right to withdraw his or her
demand for appraisal and to accept the terms offered under the Merger
Agreement.

The Director of the OTS shall, as he or she may elect, either
appoint one or more independent persons or direct appropriate staff of
the OTS to appraise the shares to determine their fair market value,
as of the effective date of the Merger, exclusive of any element of
value arising from the accomplishment or expectation of the Merger.
Appropriate staff of the OTS shall review and provide an opinion on
appraisals prepared by independent persons as to the suitability of
the appraisal methodology and the adequacy of the analysis and
supportive data. The Director after consideration of the appraisal
report and the advice of the appropriate staff shall, if he or she
concurs in the valuation of the shares, direct payment by Labe Federal
of the appraised fair market value of the shares, upon surrender of
the certificates representing such stock. Payment shall be made,
together with interest from the completion of the Merger, at a rate
deemed equitable by the Director.

The costs and expenses of any proceeding under 12 C.F.R. Section
552.14 may be apportioned and assessed by the Director as he or she
may deem equitable against all or some of the parties. In making this
determination the Director shall consider whether any party has acted
arbitrarily, vexatiously, or not in good faith in respect to the
rights provided under 12 C.F.R. Section 552.14.

Any stockholder who has demanded appraisal rights shall
thereafter neither be entitled to vote such stock for any purpose nor
be entitled to the payment of dividends or other distributions on the
stock (except dividends or other distribution payable to, or a vote to
be taken by, stockholders of record at a date which is on or prior to,
the effective date of the Merger); provided that, if any stockholder
becomes unentitled to appraisal and payment of appraised value with
respect to such stock and accepts or is deemed to have accepted the

<PAGE> 35

terms offered pursuant to the Merger, such stockholder shall thereupon
be entitled to vote and receive such distributions.

Should any stockholder become entitled to the payment of the
appraised value of his or her shares pursuant to the exercise of his
or her appraisal rights under 12 C.F.R. Section 552.14, such shares
shall be and become converted into the right to receive cash from LDF
in the amount of the appraised value of such shares.

THE FAILURE OF A STOCKHOLDER TO FOLLOW THE PROCEDURES SET FORTH
IN 12 C.F.R. SECTION 552.14 WILL TERMINATE SUCH STOCKHOLDER'S
APPRAISAL RIGHTS. AS A CONSEQUENCE, EACH STOCKHOLDER WHO DESIRES TO
EXERCISE SUCH RIGHTS SHOULD REVIEW 12 C.F.R. SECTION 552.14 AND FOLLOW
ITS PROVISIONS.

INFORMATION REGARDING LDF, INC.

GENERAL

LDF, Inc. is a recently formed Delaware corporation. A copy of
LDF's certificate of incorporation is attached hereto as APPENDIX C.
Upon consummation of the Merger, it will be a registered savings and
loan holding company under the HOLA, owning all of the issued and
outstanding Labe Federal Common Stock. LDF does not currently own any
significant assets and has not yet engaged in any business activity.
It has been solely engaged in the process of applying for necessary
regulatory approvals and other matters of a procedural nature related
to consummating the Merger. Upon consummation of the Merger, its
principal activity will consist of owning and supervising Labe
Federal. There is currently one share of LDF Common Stock issued and
outstanding held by the Chairman of Labe Federal as the nominee of
Labe Federal. Upon consummation of the Merger, LDF will redeem this
one share of LDF Common Stock.

PROPERTIES

Upon consummation of the Merger, LDF will have its main office at
4343 N. Elston Avenue, Chicago, Illinois 60641, which is the main
office of Labe Federal. LDF believes that these facilities will be
adequate to serve its present and future needs. These facilities are
owned by Labe Federal in fee and are unencumbered.

EMPLOYEES

Lowell I. Stahl, Chairman and President of LDF, James R. Sneider,
Executive Vice President and Secretary of LDF, Frank J. Kross, Vice
President of LDF, and David J. Arts, Vice President, Treasurer and
Chief Financial Officer of LDF, will each receive annual compensation in
the amount of $5,000 from LDF for services rendered to it. Except for
these officers, LDF does not currently have any employees and will not
have any employees upon consummation of the Merger. Other employees will
be at Labe Federal.

<PAGE> 36

GOVERNMENTAL MONETARY POLICIES

The business of LDF may be affected by the fiscal and monetary
policies of the Federal Reserve System, which regulates the national
money supply in order to mitigate recessionary and inflationary
pressures. The techniques used by the Federal Reserve System include
setting the reserve requirements of member banks, establishing the
discount rate on member bank borrowings and regulating the interest
rates payable on certain time and savings deposits of member banks.
The Federal Reserve System also conducts open market operations in
United States Government securities.

The policies of the Federal Reserve System have a direct effect
on the amount of bank loans and deposits, and the interest rates
charged and paid thereon. While the impact of current economic
problems, and the policies of the Federal Reserve System and other
regulatory authorities designed to deal with these problems, upon the
future business and earnings of LDF cannot be accurately predicted,
such policies may materially affect the revenues and income of banking
organizations like Labe Federal and LDF.

GOVERNMENT REGULATION

LDF, as a savings and loan holding company, will be extensively
regulated under federal law. From time to time, various types of
federal legislation are proposed that could result in additional
regulation of, and restrictions on, the business of LDF. It cannot be
predicted whether any such legislation will be adopted or how such
legislation would affect the business of LDF. See "SUPERVISION AND
REGULATION" for a detailed discussion of the federal statutes and
regulations applicable to LDF and "RISK FACTORS -- Federal Legislative
Proposals Would Eliminate the Federal Savings Association and Unitary
Savings and Loan Holding Company Charters" for information concerning
recent legislative proposals that may affect Labe Federal and LDF.

MARKET FOR AND DIVIDENDS ON LDF COMMON STOCK

The shares of Labe Federal Common Stock are not traded on any
national or regional exchange and there is not, and there is not
expected to be, an established public trading market for the shares of
LDF Common Stock. Labe Federal does not pay cash dividends on Labe
Federal Common Stock. Likewise, LDF does not expect to pay cash
dividends on the LDF Common Stock. The declaration and payment of
future dividends will be determined solely at the discretion of the
Board of Directors of LDF and will depend upon earnings, capital
requirements, financial condition, dividends from Labe Federal and
other factors that the Board of Directors deems relevant.

<PAGE> 37

CAPITALIZATION

The following table sets forth the capitalization of LDF, Labe
Federal and Interim Savings Bank as of June, 30, 1997, and the pro
forma consolidated capitalization of LDF and Labe Federal after giving
effect to the consummation of the Merger.
<TABLE>
<CAPTION>
At June 30, 1997 Pro Forma
----------------------------------------------- -------------------------

Interim
Labe Savings Labe
LDF Federal Bank(1) LDF Federal
--- ------- -------- --- -------

Stockholders' Equity:
<S> <C> <C> <C> <C> <C>
Common Stock, $1.00 par value, $100 $ -- $ -- $286,806 $ --
1,000,000 shares authorized,
286,806 shares issued(2)

Common Stock, $1.00 par value, -- 306,806 -- 306,806
10,000,000 authorized,
306,806 shares issued

Common Stock, $1.00 par value, -- -- $1,000 --
1,000 to be issued upon
organization(3) that will be
canceled pursuant
to the Merger

Capital surplus -- 1,833,585 -- 8,378,356 1,833,585

Treasury Stock (20,000 -- (231,900) -- -- (231,900)
shares at cost)

Undivided profits -- 6,698,865 -- -- 6,698,865

Unrealized gain on securities
available-for-sale, net
of tax -- 57,806 -- -- 57,806
---- ---------- ------ ---------- ----------

TOTALS $100 $8,665,162 $1,000 $8,665,162 $8,665,162
==== ========== ====== ========== ==========
</TABLE>

<PAGE> 38

(1) Interim Savings Bank will not be capitalized until immediately
prior to, and will commence operations upon, consummation of the
Merger.

(2) One share purchased by incorporator to provide initial capital
will be repurchased by LDF immediately after the Merger; 286,806
shares will be issued to existing Labe Federal Stockholders for their
shares of Labe Federal Common Stock.

(3) Initial capital for Interim Savings Bank of $1,000 to be provided
by LDF through a purchase of 1,000 shares, which will be canceled
pursuant to the Merger.

INFORMATION REGARDING INTERIM SAVINGS BANK, FSB

On May 30, 1997, at the direction of the Board of Directors of
LDF, LDF filed an application with the OTS for a charter under the
laws of the United States for Interim Savings Bank. The OTS declared
the charter for Interim Savings Bank effective on June 17, 1997.

Interim Savings Bank will have total capital of $1,000. See
"CAPITALIZATION." To raise the capital, LDF will purchase 1,000
shares of common stock of Interim Savings Bank. The funds used by
LDF to purchase such stock will be borrowed from a non-related bank.

Labe Federal will be the surviving entity in the Merger and upon
consummation of the Merger will be known as "Labe Federal Bank for
Savings." Upon the consummation of the Merger, LDF will own all of
the outstanding shares of common stock of the surviving entity in the
Merger.

After the Merger, the surviving entity in the Merger will be
managed by the same officers and directors as were formerly officers
and directors of Labe Federal before the Merger, and will engage in
the same business activities as did Labe Federal before the Merger.

INFORMATION REGARDING LABE FEDERAL

GENERAL

Labe Federal was organized as a federally-chartered-savings
association in 1982. Labe Federal is a member of the Federal Home
Loan Bank System and its deposits are insured under the Savings
Association Insurance Fund of the Federal Deposit Insurance
Corporation. As of March 31, 1997, there were 306,806 shares of Labe
Federal Common Stock issued, and 286,806 shares outstanding (net of
20,000 shares held in treasury). As of June 30, 1997, Labe Federal
had total assets of $127.2 million, total deposits of $94.9 million,
loans receivable of $99.6 million and total stockholders' equity of
$8.7 million. Labe Federal had net income of $460,000 for the year
ended December 31, 1996. Labe Federal has one wholly-owned subsidiary

<PAGE> 39

-- Labe Financial Services, Inc. -- that engages in annuity and
security sales.

Labe Federal's business primarily consists of gathering deposits
from its local community and investing these funds, along with
borrowings from the Federal Home Loan Bank of Chicago, in residential
one- to four-family permanent and construction loans, multi-family and
commercial real estate mortgage loans, home equity and consumer loans
and U.S. government, agency and mortgage-backed securities.

PROPERTIES

Labe Federal has its main office at 4343 N. Elston Avenue,
Chicago, Illinois. The building is comprised of approximately 13,000
square feet. The main office building is a two-story structure
constructed principally of masonry which was opened in 1905. The Bank
operates three drive-in lanes at this main office. Labe Federal does
not have any branch offices.

The Bank believes that its facilities are adequate to serve its
present needs. These facilities are owned by Labe Federal in fee and
are unencumbered.

EMPLOYEES

As of June 30, 1997, Labe Federal had 32 full-time employees.

LENDING ACTIVITIES

GENERAL. Labe Federal's primary source of revenue is interest
income from its lending activities. Depending on the type and size of
the loan, a loan origination may require approvals by various
officers. During the approval process for loans it originates, Labe
Federal assesses both the applicant's ability to repay the loan and
the value of any collateral securing the loan. Labe Federal verifies
the applicant's ability to repay the loan by using credit reports,
financial statements, confirmations and other items. In the case of
loans secured by real property, a qualified appraiser inspects and
appraises the property.

Labe Federal has a Loan Committee responsible for approving loans
that exceed the individual approval limits of Labe Federal's officers
up to its legal lending limit, monitoring concentrations of credit,
problem and past due loans, and charge-offs of uncollectible loans,
formulating recommendations for the Board of Directors regarding loan
policy modifications, loan classifications and charge-offs and
establishing interest rate and fee guidelines. The Board of Directors
is responsible for policy review and oversight of the loan and
investment functions of Labe Federal. The Board of Directors also
monitors the adequacy of Labe Federal's allowance for loan losses.

<PAGE> 40

Labe Federal's net loan portfolio totaled $99.6 million at June 30,
1997, representing 78% of Labe Federal's total assets at that date. Labe
Federal's loan portfolio consists of residential one- to four-family
permanent and construction loans, multi-family and commercial real estate
mortgage loans, and home equity and consumer loans.

CREDIT AND OTHER LENDING RISKS. Although the risk of non-payment for
any reason exists with respect to all loans, certain other more specific
risks are associated with each type of loan. Construction lending, for
instance, is generally considered to involve a higher degree of credit risk
than residential mortgage lending because the risk of loss is dependent
largely upon the accuracy of the initial estimate of the property's
value at completion of construction and the estimated cost (including
interest) of construction. If the estimate of construction cost
proves to be inaccurate, Labe Federal may be required to advance funds
beyond the amount originally committed to permit completion of the
dwelling. If the estimate of value proves to be inaccurate, Labe
Federal may be confronted with, at or before the maturity of the loan,
loan security with a value which is insufficient to assure full
repayment. In addition, construction lending entails the risk that
the project may not be completed due to cost overruns or changes in
market conditions.

Multi-family and commercial real estate loans generally entail
significant additional risks as compared to one- to four-family
residential mortgage lending and carry larger loan balances. The
increased credit risk is a result of several factors, including the
concentration of principal in a smaller number of loans and borrowers,
the effects of general economic conditions on income producing
properties and the increased difficulty in evaluating and monitoring
these types of loans. Furthermore, the repayment of loans secured by
commercial real estate is typically dependent upon the successful
operation of the related property. If the cash flow of the property
is reduced, the borrower's ability to repay the loan may be impaired.
Loans secured by commercial real estate also may involve a greater
degree of environmental risk.

Consumer loans may entail greater risk than do residential
mortgage loans, particularly in the case of consumer loans that are
unsecured or secured by assets that depreciate rapidly, such as
automobiles.

STRATEGIES FOR MANAGING LENDING RISK. Labe Federal's strategy with
respect to addressing and managing these types of risks, whether loan
demand is weak or strong, is for Labe Federal to follow its conservative
loan policies and underwriting practices, which include: (i) granting loans
on a sound and collectible basis, (ii) investing funds profitably for the
benefit of the stockholders and the protection of depositors, (iii) serving
the legitimate needs of the community and Labe Federal's general market
area while obtaining a balance between maximum yield and minimum risk,

<PAGE> 41

(iv) ensuring that primary and secondary sources of repayment are
adequate in relation to the amount of the loan, (v) administering loan
policies through a directors' loan committee, (vi) developing and
maintaining adequate diversification of the loan portfolio as a whole
and of the loans within each loan category, (vii) ensuring that each
loan is properly documented and, if appropriate, secured or guaranteed
by government agencies, and that insurance coverage is adequate, and
(viii) developing and applying adequate collection procedures.

ONE- TO FOUR-FAMILY RESIDENTIAL LENDING. The primary lending
activity of Labe Federal has been the extension of first mortgage
residential loans to enable borrowers to purchase existing one- to
four-family homes located in the Chicago metropolitan area. At June
30, 1997, approximately $51.5 million, or 52% of Labe Federal's gross
loan portfolio consisted of loans secured by one- to four-family
homes. Because of the highly competitive mortgage market in which
Labe Federal originates loans, it offers a variety of mortgage
products with a variety of interest rates, maturities, fees or other
origination terms, which include fixed-rate loans and adjustable-rate
loans ("ARMs").

The retention of ARMs, as opposed to fixed-rate mortgage loans,
in Labe Federal's loan portfolio helps it manage its exposure to
interest rate risk. In an environment of rapidly increasing interest
rates, however, as was experienced in the late 1970's, it is possible
for the interest rate increase to exceed the maximum aggregate
adjustment on ARMs and negatively affect the spread between Labe
Federal's interest income and its cost of funds. In addition, because
the interest earned on ARMs varies with prevailing interest rates,
such loans do not offer Labe Federal as predictable a cash flow as do
longer-term, fixed-rate loans.

Labe Federal's lending policies generally limit the maximum loan-to-
value on one- to four-family residential loans to 80% of the lesser of
the appraised value or purchase price of the underlying residential
property unless private mortgage insurance to cover the excess over 80%
is obtained, in which case the mortgage is limited to 90% of the lesser of
appraised value or purchase price. The loan-to-value ratio, maturity, and
other provisions of the loans made by Labe Federal are generally reflected
in the policy of making less than the maximum loan permissible under federal
regulations, in accordance with established lending practices, market condi-
tions, and underwriting standards maintained by Labe Federal.

CONSTRUCTION LENDING. Labe Federal originates residential
construction loans for the construction of owner-occupied, single-
family dwellings. Construction loans have a set term for construction
of the dwelling and then are converted to long-term mortgage loans
upon completion of the dwelling. Construction loans are generally
made with terms of 12 months or less and with adjustable interest
rates that are tied to a market index. The aggregate outstanding
balance of such loans at June 30, 1997 was $8.7 million.

MULTI-FAMILY RESIDENTIAL LENDING. At June 30, 1997,
approximately $25.7 million, or 26%, of Labe Federal's gross loan
portfolio consisted of loans secured by multi-family residential real
estate. At June 30, 1997, Labe Federal had a total of 70 multi-
family loans, substantially all of which were secured by properties
located within Labe Federal's market area. Labe Federal's multi-
family loans had an average principal balance of $367,500 at June 30,
1997, and the largest multi-family loan held in Labe Federal's
portfolio had a principal balance of $1.2 million. Multi-family loans
are generally offered with adjustable rates tied to a market index for

<PAGE> 42

terms of one to three years with adjustment periods from one to three
years, but may be made at fixed rates for terms of 10 years. Multi-family
real estate loans are generally originated at 70% of the appraised value
of the property or the selling price, whichever is less.

COMMERCIAL REAL ESTATE LENDING. At June 30, 1997, Labe
Federal's commercial real estate loan portfolio amounted to $9.8
million, or 10%, of the Bank's gross loan portfolio as of that date,
consisting primarily of loans secured by commercial real estate. At
June 30, 1997, substantially all of Labe Federal's commercial real
estate loans were secured by properties located within Labe Federal's
market area, and in management's opinion consisted primarily of
seasoned loans. Commercial real estate loans are generally offered as
balloon loans for terms of five to seven years. Commercial real estate
loans are generally originated at 70% of the appraised value of the
property or the selling price, whichever is less.

CONSUMER LENDING. Labe Federal originates a variety of consumer
loans, generally consisting of direct installment loans for the
purchase of automobiles, loans to purchase consumer goods, loans
secured by savings accounts at Labe Federal, unsecured personal loans
and home equity loans. At June 30, 1997, Labe Federal's portfolio of
consumer loans totaled approximately $8.1 million, or 8%, of Labe
Federal's gross loan portfolio.

INTEREST RATES AND FEES. Interest rates and fees charged on Labe
Federal's loans are affected primarily by the market demand for loans
and the supply of money available for lending purposes. These factors
are affected by, among other things, general economic conditions and
the policies of the federal government, including the Federal Reserve
Board, legislative tax policies and governmental budgetary matters.

DELINQUENCIES. Labe Federal's collection procedures with respect
to delinquent loans include written notice of delinquency and contact
by letter or telephone by Labe Federal personnel. Most loan
delinquencies are cured within 90 days and no legal action is taken.
With respect to residential mortgage loans and consumer loans, if the
delinquency exceeds 90 days, Labe Federal institutes measures to
enforce its remedies resulting from the default, including mailing a
30 day notice of the commencement of a foreclosure action or the
repossession of collateral. Labe Federal handles delinquencies
involving Labe Federal's multi-family and commercial real estate on a
case-by-case basis. When a borrower fails to make a required payment
on a loan and does not cure the delinquency within 30 days, the loan
is classified as delinquent. In this event, the normal procedure
followed by Labe Federal is to make contact with the borrower at
prescribed intervals in an effort to bring the loan to a current
status. In most cases, delinquencies are cured promptly, but, if not,
Labe Federal normally records a notice of default, subject to any
required prior notice to the borrower, and commences foreclosure
proceedings when loan payments are 90 days past due.

ALLOWANCE FOR LOAN LOSSES. Labe Federal maintains an allowance
for possible loan losses. The allowance is increased by charges to
income and decreased by charge-offs, net of recoveries. Management's

<PAGE> 43

periodic evaluation of the adequacy of the allowance is based on Labe
Federal's past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability
to repay, the estimated value of any underlying collateral, and
current economic conditions. At March 31, 1997, the balance in the
allowance was $200,000, or .2% of gross loans outstanding. Based on data
compiled by Labe Federal's public accounting firm (as of March 31, 1997)
covering all savings institutions in the United States having assets
between $50 and $100 million and between $100 million and $300 million,
Labe Federal's ratio of allowance for possible loan losses to gross loans
would place it in the bottom 10th percentile relative to institutions in
these two groups.

INVESTMENT AND MORTGAGE-BACKED SECURITIES

Investment decisions are made by authorized officers of Labe
Federal under policies established by the Board of Directors and
recommended by the Investment Committee. Such investments are managed
in an effort to produce the highest yield consistent with maintaining
safety of principal, compliance with regulations governing the banking
industry and interest-rate risk management. At June 30, 1997, Labe
Federal had U.S. government and agency securities and mortgage-backed
securities of $18.2 million and $3.1 million, respectively, or 14% and
2%, respectively, of total assets.

DEPOSITS

Deposits are Labe Federal's principal source of funds for
supporting its lending activities. Deposits totaled $94.9 million at
June 30, 1997.

Labe Federal attracts both short-term and long-term deposits from
the general public by offering a variety of accounts and rates. Labe
Federal offers savings accounts, checking accounts, various money
market accounts and fixed interest rate certificates with varying
maturities. Labe Federal's savings deposits traditionally have been
obtained primarily from Chicago, Illinois.

LEGAL PROCEEDINGS

Labe Federal is from time to time a party to legal proceedings in
the ordinary course of business that are incident to the business of
banking. Labe Federal is not engaged in any other legal proceedings
of a material nature at the present time.

COMPETITION

Labe Federal has active competition in all areas in which it
presently engages. Labe Federal competes for commercial and
individual deposits and loans with other Chicago banks, savings
associations, credit unions and other financial service companies .
The principal methods of competition in the banking and financial
services industry are quality of services to the customer, ease of
access to services and pricing of services, including interest rates
paid on deposits and interest rates charged on borrowings.

<PAGE> 44

GOVERNMENT REGULATION

Labe Federal, as a federally-chartered-savings association, is
principally regulated under the HOLA. From time to time, various
types of federal and state legislation are proposed that could result
in additional regulation of, and restrictions on, the business of Labe
Federal. It cannot be predicted whether any such legislation will be
adopted or how such legislation would affect the business of Labe
Federal. See "SUPERVISION AND REGULATION" for a detailed discussion
of the federal statutes and regulations applicable to Labe Federal and
"RISK FACTORS -- Federal Legislative Proposals Would Eliminate the
Federal Savings Association and Unitary Savings and Loan Holding
Company Charters" for information concerning recent legislative
proposals that may affect Labe Federal and LDF.

MARKET FOR AND DIVIDENDS ON LABE FEDERAL COMMON STOCK

The shares of Labe Federal Common Stock are not traded on any
national or regional securities exchange and there is no established
public trading market for the shares of Labe Federal Common Stock.
Transactions in Labe Federal Common Stock have been infrequent. As of
June 30, 1997, Labe Federal had approximately 141 stockholders of
record.

Labe Federal has not historically paid cash dividends. LDF, upon
completion of the Merger, does not intend to pay any cash dividends.

MANAGEMENT OF LDF, INC.

DIRECTORS AND OFFICERS OF LDF, INC.

The following table sets forth certain information concerning the
directors and executive officers of LDF as of the date of this Proxy
Statement/Prospectus.

Name Age Position
---- --- --------

Lowell I. Stahl 63 Chairman of the Board, Director
and President

John D. Foster 82 Director
William E. Cahill, Jr. 60 Director

Roland G. Ley 64 Director
James R. Sneider 60 Executive Vice President,
Secretary and Director

Dilia Camacho-Saeedi 42 Director

<PAGE> 45

Name Age Position
---- --- --------

Frank J. Kross 60 Vice President and Director

David J. Arts 50 Vice President, Treasurer
and Chief Financial Officer

Lowell I. Stahl has served as director of LDF since May 1997 and
as LDF's Chairman of the Board since June 1997. He was President and
Chief Executive Officer of Century 21 North Central, Inc., Des
Plaines, Illinois until 1995, when the corporation was sold, and for
more than five years prior thereto. Mr. Stahl also serves as a
director and Chairman of the Board of Labe Federal.

John D. Foster has served as director of LDF since May 1997.
Since 1992, Mr. Foster has been a management consultant with his own
firm, John Foster & Associates, Inc., Chicago, Illinois. Prior to
1992, Mr. Foster was a Vice President with Montgomery Ward, Chicago,
Illinois. Mr. Foster also serves as a director of Labe Federal.

William E. Cahill, Jr. has served as a director of LDF since May
1997. He has been a real estate broker for, and owner of, Century 21
Cahill Brothers Realtors, Chicago, Illinois, for more than the past
five years. Mr. Cahill also serves as a director of Labe Federal.

Roland G. Ley has served as a director of LDF since May 1997.
Since 1992, Mr. Ley has been a consultant with his own firm, Ley &
Associates, Palatine, Illinois. Prior to 1992, Mr. Ley was a partner
with the accounting firm of Ernst & Young, Chicago, Illinois. Mr. Ley
also serves as a director of Labe Federal.

James R. Sneider has served as a director of LDF since May 1997
and as its Executive Vice President and Secretary since June 1997. He
has been an attorney with his own law firm, Law Offices of James R.
Sneider, which recently became the law firm of Sneider & Joyce,
Northfield, Illinois, for more than the past five years. Mr. Sneider
also serves as a director of Labe Federal.

Dilia Camacho-Saeedi has served as a director of LDF since May
1997. Ms. Camacho-Saeedi has been Vice President for Property
Management, Hispanic Housing Development Corp., Chicago, Illinois, for
more than the past five years. Ms. Camacho-Saeedi also serves as a
director of Labe Federal.

Frank J. Kross has served as a director of LDF since May 1997 and
as its Vice President since June 1997. Mr. Kross has served as
President of Labe Federal since 1992, and prior to joining Labe
Federal he was Vice President, Irving Federal Bank. Mr. Kross also
serves as a director of Labe Federal.

<PAGE> 46

David J. Arts has served as Vice President, Treasurer and Chief
Financial Officer of LDF since June 1997. Since 1997, he has been an
Executive Vice President of Labe Federal. From 1995 and until joining
Labe Federal in 1996, Mr. Arts was Vice President Business Services
for Century 21, Parsippany, New Jersey. From 1978 through 1995, Mr.
Arts was Executive Vice President of Century 21 North Central, Inc.,
Des Plaines, Illinois.

COMMITTEES OF LDF

LDF has established three standing committees: audit,
compensation and nominating. The Board of Directors intends for each
committee to meet only a few times each year.

Directors Dilia Camacho-Saeedi, Ley and Cahill are members of the
audit committee. The audit committee is principally responsible for
recommending which firm to engage as LDF's external auditor and for
reviewing LDF's annual consolidated financial statements and related
matters.

Directors Sneider, Foster, Stahl and Ley are members of the
compensation committee. The compensation committee is principally
responsible for administering LDF's benefit plans and addressing other
compensation issues at the holding company level.

Directors Sneider, Foster, Stahl and Ley are members of the
nominating committee. The nominating committee is principally
responsible for recommending to the Board of Directors the slate of
nominees to be elected by stockholders of LDF and directors to serve
on various committees of the Board of Directors.

COMPENSATION OF DIRECTORS AND OFFICERS OF LDF, INC.

The executive officers of LDF will receive compensation for the
services they provide to it. For additional information see
"INFORMATION REGARDING LDF, INC. -- Employees." The directors of LDF
will not receive compensation for their services to LDF, except that
Directors who are members of the audit, compensation and nominating
committees will receive fees from LDF for services in this capacity.
Committee members will receive $250 for each committee meeting
attended depending on the committee, while committee chairman will
receive $350 per committee meeting attended. The information
presented below reflects compensation paid by Labe Federal.

<PAGE> 47

The table below sets forth the total amount of cash compensation
awarded to, earned by or paid to the chief executive officer of Labe
Federal during the fiscal year ended December 31, 1996. No officers
of Labe Federal received compensation in excess of $100,000 during the
fiscal year ended December 31, 1996 other than the named executive
officer presented in the table below.
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------

Other Annual All Other
Name and Principal Position Year Salary Bonus Compensation Compensation
--------------------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Frank J. Kross 1996 $85,680 $25,700 $6,600(a) $3,000(b)
President and Chief
Executive
Officer
</TABLE>
(a) Directors' fees.
(b) Represents the matching contribution by Labe Federal under the
Deferred Compensation Plan. See "Deferred Compensation Plan."
<TABLE>
<CAPTION>
Long-Term Incentive Plans - Awards in Last Fiscal Year
------------------------------------------------------
Number of Shares, Units or Other
Rights Performance or Other Period
Name (#) Until Maturation or Payout
------------------------------- ----------------------------------- ----------------------------------------
<S> <C> <C>
Frank J. Kross 10,000 (a) 20% of the units are earned per year for
President and Chief five years.
Executive Officer

</TABLE>
(a) Units awarded on October 1, 1996 under Labe Federal's Stock
Equivalent Plan. See "Stock Equivalent Plan" for information
regarding the material terms of the award.

DIRECTORS' FEES. Each of Labe Federal's directors is paid a fee
of $750 per month for Board meetings and $250 for each committee
meeting attended depending upon the committee. The Chairman of the
Board receives a fee of $950 per month and committee chairmen receive
$350 per committee meeting attended. In 1996, there were twelve
regular and one special meetings of the Board of Directors of Labe
Federal.

HEALTH, DENTAL AND LIFE INSURANCE. Employees' health insurance,
including major medical and dental coverage, and life and disability
insurance is provided by Labe Federal at no cost to its employees

<PAGE> 48

under group plans available generally, and on the same basis, to all
employees who work 30 hours a week or more.

401 (K) PLAN. Effective December 1992, the Board of Directors
adopted a 401(k) Plan, which is tax-qualified under the Code. After
having attained age 21 and having worked six months with Labe Federal,
an employee is eligible to participate in the 401(k) Plan starting on
January 1 or July 1 thereafter.

Employees may elect to contribute up to 10% of their compensation
to be invested under the Plan. In addition, Labe Federal provides
matching contributions as follows: 100% matching of the first 1% of
compensation contributed by the employee and 50% matching additional
employee contributions up to 6% of compensation. The 401(k) Plan
permits employees to invest their accounts in various investment
funds.

Employer matching contributions are not taxable to participating
employees until funds are withdrawn or distributed to them. The
earnings attributable to a participant's account accumulate tax free
until they are distributed to the participant or his or her
beneficiary.

Employees are immediately vested in all amounts contributed by
them, but are vested in amounts contributed by Labe Federal through
contributions at the following rate: 30% vesting after one year of
service, 55% vesting after two years of service, 70% vesting after
three years of service, 85% vesting after four years of service and
100% vesting after five years of service.

STOCK EQUIVALENT PLAN. Effective October 1, 1996, Labe Federal
established a Stock Equivalent Plan. The plan is administered by the
compensation committee of the Board of Directors of Labe Federal. The
committee may designate any employee of Labe Federal to participate in
the plan, but the only current participants are Frank J. Kross,
President of Labe Federal, and David J. Arts, Executive Vice President
and Chief Financial Officer of Labe Federal. The committee also has
the authority to award units under the plan. The maximum number of
units available for award under the plan is established by the
committee and approved by the Board of Directors. Currently, there
are 15,000 units available for award under the plan. The value of
each unit is determined as the difference between the value of one
share of Labe Federal common stock on the date a unit is awarded and
the value of one share of Labe Federal common stock on such date as
the employee terminates employment or the plan is terminated by the
Board of Directors. Units are valued using the book value per share
of Labe Federal common stock. Messrs. Kross and Arts vest in their
units at the rate of one-fifth of the unit every twelve months
beginning on the date of award. Messrs. Kross and Arts have been
awarded, as of October 1, 1996, 10,000 and 5,000 units, respectively.
If Labe Federal declares cash dividends, the per share amount of such

<PAGE> 49

dividends shall be credited to the account of Messrs. Kross and Arts
for each unit they have been awarded.

Upon termination of a participant's employment due to death,
retirement, resignation, discharge for cause or otherwise, change in
control of Labe Federal or termination of the plan by the Board of
Directors, the participant (or in the event of his death his
beneficiaries) shall be entitled to the value of his vested units
payable in cash in equal quarterly installments over a period of ten
years, the first payment to be made within four months from the
participant's termination date. The committee has discretion to
accelerate the payment of benefits under the plan. The plan provides
for an adjustment to the number of units awarded under the plan for
stock dividends, any split-up or combination of the shares, and any
reorganization or business combination involving Labe Federal, among
other circumstances.

DEFERRED COMPENSATION PLAN. Effective January 1, 1994, the Board
of Directors adopted a nontax-qualified deferred compensation plan
(the "Deferred Compensation Plan") for executive officers, pursuant to
which Labe Federal's executive officers may defer up to 10% of their
salary. Under the plan, Labe Federal will make a matching
contribution up to 100% of the first 1% of the participant's deferrals
and 50% on the next 5% of the participant's deferrals for each plan
year. Distributions under the plan are made 30 days after the
earliest of the following to occur: retirement, termination of
employment, disability or death. Distributions may be taken at the
discretion of the participant in a lump sum or in five or ten
approximately equal annual installments. The Board of Directors of
Labe may permit a participant to withdraw his account balance earlier
than otherwise provided under the plan if the participant shows
financial hardship. Employees included in the Deferred Compensation
Plan are not eligible to participate in the 401(k) Plan.

LOANS TO OFFICERS, DIRECTORS AND EMPLOYEES. Labe Federal makes
loans to their respective employees, officers and directors in the
ordinary course of business. Such loans are currently made on
substantially the same terms, including interest rates and collateral,
as those prevailing at the time the transaction is originated for
comparable transactions with nonaffiliated persons and do not, in the
opinion of management of Labe Federal, involve more than the normal
risk of collectibility or present any other unfavorable features.

SUPERVISION AND REGULATION

Labe Federal is chartered under federal law by the OTS. It is a
member of the FHLB System, and its deposit accounts are insured up to
legal limits by the FDIC under the SAIF. The OTS is charged with
overseeing and regulating Labe Federal's activities and monitoring its
financial condition. This regulatory framework sets parameters for

<PAGE> 50

Labe Federal's activities and operations and grants the OTS extensive
discretion with regard to its supervisory and enforcement powers and
examination policies. Labe Federal files periodic reports with the
OTS concerning its activities and financial condition, must obtain OTS
approval prior to entering into certain transactions or initiating new
activities, and is subject to periodic examination by the OTS to
evaluate Labe Federal's compliance with various regulatory
requirements.

LDF, upon completion of the Merger, will become a savings and
loan holding company and, like Labe Federal, will be subject to
regulation by the OTS. As part of this regulation, LDF will be
required to file certain reports with, and is subject to periodic
examination by, the OTS.

MODERNIZATION OF THE FINANCIAL SERVICES INDUSTRY

On May 21, 1997, the Clinton Administration announced a plan to
modernize the financial services industry. The proposal, among other
things, addresses the ongoing debate concerning mixing banking and
commerce, elimination of the savings association charter and the
merger of the SAIF and Bank Insurance Fund (the "BIF"). Under the
proposal, companies that own banks (bank holding companies) and meet
certain qualifications would -- subject to certain safeguards -- be
permitted to engage in any financial activity, including the full
range of securities activities, insurance activities, investment
advisory activities and mutual fund sponsorship and merchant banking.
Likewise, financial companies could own banks.

Regarding financial activities of insured depository
institutions and their subsidiaries, the proposal provides that
national banks (and state banks to the extent permitted by state law)
would be authorized, subject to certain safeguards, to conduct any
financial activity through subsidiaries (except that national bank
subsidiaries would not be authorized to engage in real estate
development). National banks would be permitted to engage in the full
scope of activities that have previously been permissible for national
banks or federally chartered savings associations (except engaging in
real estate development). Moreover, national banks (and state banks
to the extent permitted by state law) would be permitted to act as
general agents for the sale of insurance, but would be prohibited from
engaging directly in insurance underwriting other than what is
currently permissible (for instance, credit-related insurance).
Additionally, national banks (and state banks to the extent permitted
by state law) would be permitted to underwrite and deal in municipal
revenue bonds in addition to other securities activities currently
permissible in the bank.

The Clinton Administration's proposal also addressed affiliations
between banking organizations and non-financial companies. The
proposal recommended two alternative approaches -- the "basket"

<PAGE> 51

approach and the "financial-only" approach. Under the basket
approach, bank holding companies that derive some significant
percentage (as specified by the U.S. Congress) of their gross revenues
in the U.S. from financial activities could derive the remainder of
their revenues from non-financial activities. In addition to the
basket limitation, the proposal suggested prohibiting any affiliation
between a bank holding company and a non-financial firm having assets
in excess of a specified amount (calculated to approximate the 1,000
largest non-financial companies). Moreover, banks would be prohibited
from extending any credit to, or for the benefit of, any non-financial
affiliate.

Under the basket approach, the federal savings association
charter would be eliminated after two years (thereby requiring all
federal thrifts to convert to bank charters), and existing unitary
thrift holding companies (which presently have no activity
restrictions) would be given a grandfather exemption from the "basket
test (terminable upon a change of control). All remaining state-
chartered thrifts would be treated as banks for federal bank
regulatory purposes. The OTS and the Office of the Comptroller of the
Currency (the "OCC") would be merged at the end of the two-year-
conversion period and the SAIF and BIF would be merged. The Federal
Reserve Board, however, would continue to approve the formation of,
and to supervise and regulate all bank holding companies.

Under the financial-only approach, bank holding companies would
not be permitted to engage in any non-financial activities. But the
existing federal savings association charter would be preserved, and
thrift holding companies would retain their current authority to
engage in any lawful activity. Furthermore, the OTS and OCC would be
kept intact, but the SAIF and BIF would be merged.

The Administration's proposal also sets forth capital protections
and other safeguards associated with the new activities contemplated
for banks. In order for a bank holding company or a subsidiary of a
bank to engage as a principal in activities not permissible for a
national bank to engage in directly, the bank would have to remain
"well capitalized" -- that is, to be in the highest regulatory capital
category, with regulatory capital exceeding normal requirements -- and
it would have to deduct from its regulatory capital the entire amount
of its equity investment in a subsidiary engaged in such activities.
The bank also would have to be well-managed.

On June 20, 1997, the House Committee on Banking and Financial Services
of the U.S. House of Representatives passed H.R. 10 (the "Act"), the
Financial Services Competition Act of 1997, by a vote of 28 to 26. Like
the proposal announced by the Clinton Administration on May 2, 1997, H.R.
10 is a sweeping proposal for financial modernization of the banking system
that would permit affiliations between commercial banks, securities firms,
insurance companies and, subject to certain limitations, other commercial
enterprises. The stated purposes of the Act are to enhance consumer choice
in the financial services marketplace, level the playing field among
providers of financial services, and increase competition. The Act has

<PAGE> 52

been sent to the House Commerce Committee, which has jurisdiction over
insurance and securities and is expected to vote on the bill in
mid-September 1997. If approved, it would then be sent to the full
House for consideration. The Senate also would need to approve the Act
before it would be sent to the President for his signature.

H.R. 10 removes the restrictions contained in the Glass-Steagall Act of
1933 and the Bank Holding Company Act of 1956, thereby allowing qualified
financial holding companies to control banks, securities firms, insurance
companies, and other financial firms. Conversely, securities firms,
insurance companies and financial firms would be allowed to own or
affiliate with a commercial bank. The Act also provides that subsidiaries
of national banks may engage in financial activities not allowed in the bank
itself (except real estate investment and development, merchant banking and
insurance underwriting), but only if the bank and all of its depository
institutions are well capitalized and well managed and have achieved a
"satisfactory" rating under the Community Reinvestment Act.

Under the new framework, the Federal Reserve would serve as an umbrella
regulator to oversee the new financial holding company structure.
Securities affiliates would be required to comply with all applicable
federal securities laws, including registration and other requirements
applicable to broker-dealers. The Act also would provide that insurance
affiliates be subject to applicable state insurance regulation and
supervision.

With respect to the thrift industry, H.R. 10 would eliminate the federal
savings association charter by requiring all federal thrifts to convert to
national banks or state-chartered savings associations within two years
after the date of the Act s adoption. State-chartered savings associations
would be treated as commercial banks for purposes of federal banking law.
After conversion, the new institution would be permitted to retain its
existing investments, affiliations and branches. In addition, the Act
would merge the OTS with the OCC, and merge the SAIF and BIF. Unitary
savings and loan holding companies could maintain their affiliations with
nonfinancial enterprises and engage in all currently permissible activities.
There can be no assurance that legislation will be enacted that modernizes
the financial services industry, or if enacted, what form such legislation
might take. Also, if legislation is enacted, no assurance can be given when
the law would become effective.

<PAGE> 53

FEDERAL SAVINGS ASSOCIATION REGULATION

BUSINESS ACTIVITIES. The activities of savings associations are
governed by the HOLA, and, in certain respects, the Federal Deposit
Insurance Act (the "FDI Act"). The HOLA and the FDI 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"). FIRREA was enacted for the
purpose of resolving problem savings associations, establishing a new
thrift insurance fund, reorganizing the regulatory structure
applicable to savings associations, and imposing bank-like standards
on savings associations. FDICIA, among other things, requires that
federal banking regulators intervene promptly when a depository
institution experiences financial difficulties, mandates the
establishment of a risk-based deposit insurance assessment system and
requires imposition of numerous additional safety and soundness
operational standards and restrictions. FIRREA and FDICIA both
contain provisions affecting numerous aspects of the operations and
regulations of federally-insured savings associations and empowers the
OTS and the FDIC, among other agencies, to promulgate regulations
implementing its provisions.

ENFORCEMENT. Under the FDI Act, the OTS has primary enforcement
responsibility over savings associations and has the authority to
bring enforcement action against all "institution-related parties,"
including stockholders, and any attorneys, appraisers and accountants
who knowingly or recklessly participate in wrongful action likely to
have an adverse effect on an insured association. Civil penalties
cover a wide range of violations and actions. Criminal penalties for
most financial association crimes include fines and imprisonment. In
addition, regulators have substantial discretion to impose enforcement
action on an association that fails to comply with its regulatory
requirements, particularly with respect to amounts of capital.
Possible enforcement action ranges from requiring the preparation of a
capital plan or imposition of a capital directive to receivership,
conservatorship or the termination of deposit insurance. Under the
FDI Act, the FDIC has the authority to recommend to the Director of
OTS enforcement action be taken with respect to a particular savings
association. If action is not taken by the Director, the FDIC has
authority to take enforcement action under certain circumstances.

BRANCHING. A federally-chartered savings association, like Labe
Federal, can establish branches in any state or states in the United
States and its territories, subject to a few exceptions. The exercise
by the OTS of its authority to permit interstate branching by federal
savings associations is preemptive of any state law purporting to
address the subject of branching by a federal savings association.

THE QUALIFIED THRIFT LENDER TEST. In September 1996, the
Economic Growth and Regulatory Paperwork Reduction Act of 1996 became
law (the "Economic Growth Act of 1996"). In the past, savings

<PAGE> 54

associations were required to satisfy a qualified thrift lender test
("QTL" test) by maintaining 65 percent of their portfolio assets
(defined as all assets minus intangible assets, property used by the
association in conducting its business and liquid assets equal to 20%
of total assets) in certain "qualified thrift investments" (primarily
residential mortgages and related investments, including certain
mortgage-backed securities) on a monthly basis in nine out of every
twelve months.

The Economic Growth Act of 1996 liberalized the QTL test for
savings associations by permitting them to satisfy a similar-but-
different 60 percent asset test under the Code. Alternatively,
savings associations may meet the QTL test by satisfying a more
liberal 65 percent asset test that allows an institution to include
small business, credit card and education loans as qualified
investments for purposes of the test. Furthermore, consumer loans now
count as qualified thrift investments up to 20 percent of portfolio
assets. On November 27, 1996, OTS issued an interim final rule that
implements provisions of the Economic Growth Act of 1996, including
the amended QTL test.

ASSESSMENTS. Savings associations are required by OTS regulation
to pay assessments to the OTS to fund the operations of the OTS. The
general assessment paid on a semi-annual basis is computed based upon
the savings association's total assets, including consolidated
subsidiaries, as reported in the association's latest quarterly thrift
financial report.

FEDERAL HOME LOAN BANK SYSTEM. Labe Federal is a member of the
FHLB System, which consists of 12 regional FHLB's. The FHLB provides
a central credit facility primarily for member associations. Labe
Federal, as a member of the FHLB-Chicago, is required to acquire and
hold shares of capital stock in that FHLB in an amount at least equal
to 1 percent of the aggregate principal amount of its unpaid
residential mortgage loans and similar obligations at the beginning of
each year, or 1/20 of its advances (borrowings) from the FHLB-Chicago,
whichever is greater. Labe Federal is in compliance with this
requirement, with an investment in FHLB-Chicago stock at June 30,
1997, of $1.2 million. FHLB advances must be secured by specified
types of collateral and may be obtained only for the purpose of
purchasing or funding new residential housing finance assets.

OTS CAPITAL REQUIREMENTS. The OTS capital regulations require
savings associations to meet three capital standards: a 1.5 percent
tangible capital standard, a 3 percent leverage ratio (or core capital
ratio) and an 8 percent risk-based capital standard.

Tangible capital is defined as common stockholders' equity
(including retained earnings), noncumulative perpetual preferred stock
and related earnings, certain nonwithdrawable accounts and pledged
deposits of mutual savings associations, and minority interests in

<PAGE> 55

equity accounts of fully consolidated subsidiaries, less intangible
assets (other than certain mortgage servicing rights) and certain
equity and debt investments in nonqualifying subsidiaries (as
hereinafter defined).

Core capital is defined as common stockholders' equity (including
retained earnings), certain noncumulative perpetual preferred stock
and related surplus, minority interests in equity accounts of
consolidated subsidiaries, certain nonwithdrawable accounts and
pledged deposits of mutual savings associations, certain amounts of
goodwill resulting from prior regulatory accounting practices, less
intangible assets (other than certain mortgage servicing rights) and
certain equity and debt investments in nonqualifying subsidiaries.

The OTS capital regulation requires that in meeting the leverage
ratio, tangible and risk-based capital standards, savings associations
must deduct investments in and loans to subsidiaries engaged in
activities not permissible for a national bank (a "nonqualifying
subsidiary"). At December 31, 1996, Labe Federal did not own a
nonqualifying subsidiary.

In April 1991, the OTS issued a proposal to amend its regulatory
capital regulation to establish a 3 percent leverage ratio (defined as
the ratio of core capital to adjusted total assets) for associations
in the strongest financial and managerial condition, with a 1 CAMEL
Rating (the highest rating of the OTS for savings associations). For
all other associations, the minimum core capital leverage ratio would
be 3 percent plus at least an additional 100 to 200 basis points. In
determining the amount of additional capital under the proposal, the
OTS would assess both the quality of risk management systems and the
level of overall risk in each individual association through the
supervisory process on a case-by-case basis. Associations that failed
the new leverage ratio would be required to file with the OTS a
capital plan that details the steps they would take to reach
compliance. If enacted in final form as proposed, management does not
believe that the proposed regulation would have a material effect on
Labe Federal.

Although the OTS has not adopted this regulation in final form,
generally a savings association that has a leverage capital ratio of
less than 4 percent will be deemed to be "undercapitalized" under the
OTS prompt corrective action regulations and consequently can be
subject to various limitations on activities.

Since the date of this proposal, the OTS has amended its regulations to
refer to the Uniform Financial Institutions Rating System ("UFIRS")
established by the Federal Financial Institutions Examination Council (the
"FFIEC") in lieu of the traditional CAMEL rating system. The UFIRS is a
supervisory rating system used by the OTS and other agencies represented on
the FFIEC to evaluate the soundness of depository institutions on a uniform
basis. The agencies have implemented UFIRS through CAMEL ratings, which are
a series of five factors for assessing a depository institution -- capital
adequacy, asset quality, management, earnings and liquidity. Accordingly,
where OTS regulations before referred to "CAMEL" ratings, the regulations
now refer to UFIRS as it may exist from time to time, or a comparable rating
system that the OTS may adopt in lieu of UFIRS. References herein to UFIRS
also refer to a comparable rating system that the OTS may adopt in lieu of
UFIRS.

The OTS' risk-based capital standard requires that savings
associations maintain a ratio of total capital (which is defined as
core capital and supplementary capital) to risk-weighted assets of 8
percent. In calculating total capital, a savings association must
deduct reciprocal holdings of depository institution capital
instruments, all equity investments and that portion of land loans and
nonresidential construction loans in excess of 80 percent loan-to-

<PAGE> 56

value ratio and its interest rate risk component (as discussed below),
in addition to the assets that must be deducted in calculating core
capital. In determining the amount of risk-weighted assets, all
assets, including certain off-balance sheet assets, are multiplied by
a risk-weight of 0 percent to 100 percent, as assigned by the OTS
capital regulation based on the risks OTS believes are inherent in the
type of asset.

The components of core capital are equivalent to those discussed
above under the 3 percent leverage standard. The components of
supplementary capital include cumulative preferred stock, long-term
perpetual preferred stock, mutual capital certificates, certain
nonwithdrawable accounts and pledged deposits, certain net worth
certificates, income capital certificates, certain perpetual
subordinated debt, mandatory convertible subordinated debt, certain
intermediate-term preferred stock, certain mandatorily redeemable
preferred stock and allowance for loan and lease losses (up to 1.25
percent of risk-weighted assets). Allowance for loan and lease losses
includable in supplementary capital is limited to a maximum of 1.25
percent. Overall, the amount of capital counted toward supplementary
capital cannot exceed 100 percent of core capital. At March 31, 1997,
Labe Federal met each of its capital requirements.

FDICIA required that the OTS (and other federal banking agencies)
revise risk-based capital standards, with appropriate transition
rules, to ensure that they take account of interest rate risk,
concentration of risk and the risks of nontraditional activities.

The OTS' interest rate risk component became effective on January
1, 1994. Under the rule, savings associations with "above normal"
interest rate risk exposure would be subject to a deduction from total
capital for purposes of calculating their risk-based capital
requirements. A savings association's interest rate risk is measured
by the decline in the net portfolio value of its assets (i.e., the
difference between incoming and outgoing discounted cash flows from
assets, liabilities and off-balance sheet contracts) that would result
from a hypothetical 200-basis point increase or decrease in market
interest rates (except when the three-month Treasury bond equivalent
yield falls below 4%, then the decrease would be equal to one-half of
that Treasury rate) divided by the estimated economic value of the
association's assets, as calculated in accordance with guidelines set
forth by the OTS. A savings association whose measured interest rate
risk exposure exceeds 2% must deduct an interest rate component in
calculating its total capital under the risk-based capital rule. The
interest rate risk component is an amount equal to one-half of the
difference between the association's measured interest rate risk and
2%, multiplied by the estimated economic value of the association's
assets. That dollar amount is deducted from an association's total
capital in calculating compliance with its risk-based capital
requirement. Savings associations with assets of less than $300
million and risk-based capital ratios in excess of 12% are not subject

<PAGE> 57

to the interest rate risk component. The rule also provides that the
Director of the OTS may waive or defer an association's interest rate
risk component. The OTS has postponed the date that the risk
component will first be deducted from an institution's total capital
to allow, among other things, the OTS to evaluate the interest rate
risk proposals issued by the other banking agencies.

INSURANCE OF DEPOSIT ACCOUNTS. The SAIF and the BIF were required
by law to achieve and maintain a ratio of insurance reserves to total
insured deposits equal to 1.25 percent. The BIF reached this required
reserve ratio during 1995, while some predictions indicated the SAIF
would not reach this target until the year 2002. The SAIF had not
grown as quickly as the BIF for many reasons, but in large part
because almost half of SAIF premiums had to be used to retire bonds
issued by the Financing Corporation ("FICO Bonds") in the late 1980's
to recapitalize the Federal Savings and Loan Insurance Corporation.

Until 1995, the SAIF and BIF deposit insurance premium rate
schedules had been identical. But in-mid 1995, the FDIC issued final
rules modifying its assessment rate schedules for SAIF and BIF member
institutions. Under the revised schedule, SAIF members continued to
pay assessments ranging from $0.23 to $0.31 per $100 of deposits,
while BIF members paid assessments ranging from zero to $0.27 per $100
of deposits. But the majority of BIF members paid only the $2,000
minimum annual premium. Thrift industry representatives argued that
this significant premium differential caused savings associations to
operate at a competitive disadvantage to their BIF-insured bank
counterparts.

On September 30, 1996, President Clinton signed the Deposit
Insurance Funds Act of 1996 ("DIFA") that was part of the omnibus
spending bill enacted by Congress at the end of its 1996 session.
DIFA mandated that the FDIC impose a special assessment on the SAIF-
assessable deposits of each insured depository institution at a rate
applicable to all such institutions that the FDIC determined would
cause the SAIF to achieve its designated reserve ratio of 1.25 percent
as of October 1, 1996. The assessment was based on the amount of
SAIF-insured deposits owned by each institution as of March 31, 1995,
the record date established in the original drafts of the legislation.
DIFA allowed the FDIC to exempt any insured institution that it
determined to be weak from paying the special assessment if the FDIC
determined that the exemption would reduce the risk to the SAIF.

DIFA provides that the FDIC may not set semiannual assessments
with respect to SAIF or BIF in excess of the amount needed to maintain
the 1.25 percent designated reserve ratio or, if the reserve ratio is
less than the designated reserve ratio, to increase the reserve ratio
to the designated reserve ratio.

On October 10, 1996, the FDIC adopted a final rule governing the
payment of the SAIF special assessment. The FDIC imposed a special

<PAGE> 58

assessment in the amount of 65.7 basis points, which is less than the
85-95 basis points estimated during the early stages of the law's
enactment in 1995. The SAIF special assessment was due by November
27, 1996. Labe Federal's portion of this special assessment amounted
to $510,000 on a pre-tax basis. Labe Federal paid this amount to the
FDIC during its fiscal third quarter ended September 30, 1996, as
mandated by the Financial Accounting Standards Board that ruled that
the SAIF special assessment should be recorded as an ordinary non-
interest expense for the quarter ended September 30, 1996 for calender
year reporting institutions. DIFA also confirmed that the special
assessment is tax deductible.

In response to the recapitalization of the SAIF, the FDIC
announced on December 11, 1996 that deposit insurance rates for most
savings associations insured under the SAIF would be lowered to zero
effective January 1, 1997. BIF-insured institutions would also no
longer have to pay the $2,000 minimum for deposit insurance, thereby
equalizing deposit premiums for savings associations and banks.

DIFA mandates the merger of the SAIF and BIF, effective January
1, 1999, but only if no insured depository institution is a savings
association on that date. The combined deposit insurance fund will be
called the "Deposit Insurance Fund," or "DIF."

Before DIFA, federal regulators and thrift industry trade groups
were predicting that a default would occur on the FICO Bonds as early
as 1998, as SAIF-assessable deposits continued to decline. DIFA
amends The Federal Home Loan Bank Act to impose the FICO assessment
against both SAIF and BIF deposits beginning after December 31, 1996.
But the assessment imposed on insured depository institutions with
respect to any BIF-assessable deposit will be assessed at a rate equal
to one-fifth of the rate (approximately 1.3 basis points) of the
assessments imposed on insured depository institutions with respect to
any SAIF-assessable deposit (approximately 6.7 basis points). The
FICO assessment for 1996 was paid entirely by SAIF-insured
institutions. BIF-insured banks will pay the same FICO assessment as
SAIF-insured institutions beginning as of the earlier of December 31,
1999 or the date as of which the last savings association ceases to
exist.

LIMITATION ON CAPITAL DISTRIBUTIONS. The OTS regulations impose
limitations upon all capital distributions by savings associations,
such as cash dividends, payments to repurchase or otherwise acquire
its shares, payments to stockholders of another association in a cash-
out merger and other distributions charged against capital. The
regulations establish three tiers of associations. An association
that exceeds all fully phased-in capital requirements before and after
the proposed capital distribution ("Tier 1 Association") and has not
been advised by the OTS that it is in need of more than normal
supervision, could, after prior notice but without the approval of the
OTS, make capital distributions during a calendar year up to the

<PAGE> 59

higher of (a) 100 percent of its net income to date during the
calendar year plus the amount that would reduce by one-half its
"surplus capital ratio" (the excess capital over its fully phased-in
capital requirements) at the beginning of the calendar year or (b) 75
percent of its net reserve over the most recent four-quarter period.
Any additional capital distributions would require prior regulatory
approval. In computing the association's permissible percentage of
capital distributions, previous distributions made during the prior
four quarter period must be included. As of June 30, 1997, Labe
Federal met the requirements of a Tier 1 Association. In the event an
association's capital fell below its fully phased-in requirement or
the OTS notified it that it was in need of more than normal
supervision, an association's ability to make capital distributions
could be restricted. In addition, the OTS could prohibit a proposed
capital distribution by any association, which would otherwise be
permitted by regulation, if the OTS determines that such distribution
would constitute an unsafe or unsound practice. Moreover, under the
OTS prompt corrective action regulations, an association would be
prohibited from making any capital distribution if, after the
distribution, an association would have, (i) total risk-based capital
ratio of less than 8 percent, (ii) Tier 1 risk-based capital ratio of
less than 4 percent, or (iii) a leverage ratio of less than 4 percent
or has a leverage ratio that is less than 3 percent if the association
is rated composite 1 under the UFIRS rating system in the most recent
examination of the association and is not experiencing or anticipating
significant growth.

TRANSACTIONS WITH RELATED PARTIES. Labe Federal's authority to
engage in transactions with related parties or "affiliates," (i.e.,
any company that controls or is under common control with an
association) including LDF and its non-savings-association
subsidiaries or to make loans to certain insiders, will be limited by
Sections 23A and 23B of the Federal Reserve Act ("FRA"). Subsidiaries
of a savings association are generally exempted from the definition of
"affiliate." Section 23A limits the aggregate amount of transactions
with any individual affiliate to 10 percent of the capital and surplus
of the savings association and also limits the aggregate amount of
transactions with all affiliates to 20 percent of the savings
association's capital and surplus. Certain transactions with
affiliates are required to be secured by collateral in an amount and
of a type described in the FRA and the purchase of low quality assets
from affiliates is generally prohibited. Section 23B provides that
certain transactions with affiliates, including loans and asset
purchases, must be on terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to
the association as those prevailing at the time for comparable
transactions with non-affiliated companies. In the absence of
comparable transactions, such transactions may only occur under terms
and circumstances, including credit standards, that in good faith
would be offered to or would apply to non-affiliated companies.
Notwithstanding Sections 23A and 23B, FIRREA prohibits any savings

<PAGE> 60

association from lending to any affiliate that is engaged in
activities that are not permissible for bank holding companies under
Section 4(c) of the Bank Holding Company Act ("BHC Act"). Further, no
savings association may purchase the securities of any affiliate other
than a subsidiary.

Labe Federal's authority to extend credit to executive officers,
directors and 10 percent stockholders, as well as such entities such
persons control are currently governed by Section 22(g) and 22(h) of
the FRA and Regulation O promulgated by the Federal Reserve Board.
Among other things, these regulations require such loans to be made on
terms substantially similar to those offered to unaffiliated
individuals, place limits on the amount of loans Labe Federal may make
to such persons based, in part, on Labe Federal's capital position,
and require certain approval procedures to be followed. OTS
regulations, with the exception of minor variations, apply Regulation
O to savings associations.

BAD DEBT RECAPTURE. The Small Business Job Protection Act of
1996, signed by President Clinton on August 20, 1996, removed a
significant tax obstacle for savings associations that desire to
become commercial banks. It also eliminated a potential impediment to
business combinations between banks and thrifts and the creation of a
new depository institution charter.

Before this new law, savings associations that converted to
commercial banks had to change their method of accounting for bad debt
reserves, which forced a recapture of the savings association's
untaxed bad debt reserves into taxable income. Under prior law,
savings associations were allowed to use the reserve method for
establishing bad debt reserves. This meant in recent years they could
deduct up to 8 percent of their taxable income each year as a charge
for bad debts, regardless of their actual loan loss experience. Since
the 1950's, this deduction has steadily declined from its initial rate
of 100 percent. These annual deductions resulted in significant tax
savings for savings associations and an accumulation by savings
associations of untaxed income.

Under the new law, a savings association's base-year reserves
established before 1988 will not be taxed should it convert to a
commercial bank. But reserves created after 1987 would be recaptured
into taxable income ratably over six years (beginning with the first
tax year after December 31, 1995) whether or not a savings association
converts to a commercial bank. Recapture of post-1987 reserves may be
deferred until after January 1, 1998 if the savings association
maintains a high level of residential loan originations. In the
future, all savings associations must account for bad debts under tax
rules applicable to commercial banks.

<PAGE> 61

HOLDING COMPANY REGULATION

LDF, upon completion of the Merger, will be considered a non-
diversified, savings and loan holding company within the meaning of
the HOLA, will register as a savings and loan holding company with the
OTS and will be subject to OTS regulations, examinations, supervision
and reporting requirements. In addition, the OTS will have
enforcement authority over LDF and its non-savings association
subsidiaries. Among other things, this authority permits the OTS to
restrict or prohibit activities that are determined to be a serious
risk to the subsidiary savings association.

The HOLA prohibits a savings and loan holding company, directly
or indirectly, or through one or more subsidiaries, from (i) acquiring
control of, or acquiring by merger or purchase of assets, another
savings association or holding company thereof, without prior written
approval of the OTS; (ii) acquiring or retaining, with certain
exceptions, more than 5 percent of a non-subsidiary savings
association, a non-subsidiary holding company, or a non-subsidiary
company engaged in activities other than those permitted by the HOLA;
or (iii) acquiring or retaining control of an institution that is not
federally insured. In evaluating applications by holding companies to
acquire savings associations, the OTS must consider the financial and
managerial resources and future prospects of the company and
institution involved, the effect of the acquisition on the risk to the
insurance funds, the convenience and needs of the community and
competitive factors.

As a unitary savings and loan holding company, LDF generally will
not be restricted under existing laws as to the types of business
activities in which it may engage, provided that Labe Federal
continues to satisfy the QTL test. Upon any acquisition by LDF of
another SAIF-insured institution (other than LDF), a federal savings
bank insured by the BIF, or a state-chartered BIF-insured savings bank
meeting the QTL test that is deemed to be a savings institution by
OTS, except for a supervisory acquisition, LDF would become a multiple
savings and loan holding company (if the acquired institution is held
as a separate subsidiary) and would be subject to extensive
limitations on the types of business activities in which it could
engage. The HOLA, as amended by the FIRREA, limits the activities of
a multiple savings and loan holding company and its non-insured
institution subsidiaries primarily to activities permissible for bank
holding companies under Section 4(c)(8) of the BHC Act, subject to the
prior approval of the OTS, and activities in which multiple savings
and loan holding companies were authorized by regulation to engage in
on March 5, 1987. Such activities include mortgage banking, consumer
finance, operation of a trust company, and certain types of securities
brokerage. The services and activities in which multiple holding
companies were authorized to engage in on March 5, 1987 generally
correspond to the activities that are permitted for service
corporations of federally-chartered savings institutions.

<PAGE> 62

LEGAL MATTERS

Certain legal matters will be passed upon for LDF and the Labe
Federal by Schiff Hardin & Waite, Chicago, Illinois.

FINANCIAL STATEMENTS

The consolidated financial statements of Labe Federal as of
December 31, 1996 and 1995, and for the years then ended, are being
delivered with this Proxy Statement/Prospectus and have been audited
by Crowe, Chizek and Company LLP, independent certified public
accountants, as stated in its report attached thereto.

OTHER MATTERS

The Board of Directors of Labe Federal, at the date hereof, is
not aware of any business to be presented at the Special Meeting other
than that referred to in the applicable Notice of Special Meeting and
discussed herein. If any other matter should properly come before the
Special Meeting, the persons named as proxies for the Special Meeting
will have discretionary authority to vote the shares represented by
proxies in accordance with their discretion and judgment as to the
best interests of Labe Federal.

<PAGE> 63

APPENDIX A

MERGER AGREEMENT

BETWEEN

LABE FEDERAL BANK FOR SAVINGS

AND INTERIM SAVINGS BANK, FSB

UNDER THE CHARTER OF LABE FEDERAL BANK FOR SAVINGS

AND JOINED IN BY LDF, INC.

This Merger Agreement (this "Agreement") is made and entered
into this 22nd day of July, 1997, by and between LABE FEDERAL BANK FOR
SAVINGS (hereinafter called "Labe Federal," or where appropriate, the
"Resulting Savings Bank") and INTERIM SAVINGS BANK, FSB (hereinafter
called "Interim"), and joined in by LDF, INC. (hereinafter called
"Holding Company").

RECITALS

A. Labe Federal is a federal savings bank organized in stock
form with its main banking premises located in Chicago, Illinois. As
of December 31, 1996, Labe Federal had capital stock of $306,806,
consisting of 306,806 shares of common stock with a par value of $1.00
per share, additional paid-in capital of $1,833,585, retained earnings
of $6,156,439 and treasury stock of $231,900. As of December 31,
1996, Labe Federal had 141 stockholders of record. As of that date,
Lowell I. Stahl, Chairman of the Board of Directors of Labe Federal,
owned of record 146,037 shares of Labe Federal common stock and the
remaining eight Directors owned of record collectively 12,910 shares
of Labe Federal's common stock.

B. Interim is a federal savings bank in formation with its main
banking premises located in Chicago, Illinois. As of the date of
consummation of the merger provided for in Article I hereof, Interim
will have capital stock outstanding of $100, consisting of 100 shares
of common stock with a par value of $1.00 per share. All of the
capital stock of Interim will be owned of record by Holding Company.

C. Holding Company is a corporation duly organized and validly
existing under the laws of the State of Delaware with its registered
office in the City of Wilmington, County of New Castle, State of
Delaware. Holding Company has received the approval of the Office of
Thrift Supervision (the "OTS") to conduct its business as a savings
and loan holding company formed under the Home Owners' Loan Act. As
of the date hereof, Holding Company had authorized capital stock
consisting of 1,000,000 shares of common stock, $1.00 par value per
share, of which one (1) share was outstanding.

<PAGE> 64

D. Labe Federal has adopted a Plan of Reorganization dated as
of April 16, 1997 (the "Plan of Reorganization") providing for the
formation of Holding Company as the savings and loan holding company
for Labe Federal. The merger of Interim with and into Labe Federal
with Labe Federal surviving such merger, pursuant to the terms of this
Agreement, is an integral part of the Plan of Reorganization.

E. The Resulting Savings Bank will have capital stock
outstanding of $286,806 divided into 286,806 shares of issued and
outstanding common stock, $1.00 par value per share, additional paid
in capital of $1,833,585, and retained earnings (based upon the March
31, 1997 reports of condition and income of the merging savings banks)
of approximately $6,416,707.

F. The board of directors of each of Labe Federal and Interim
(the "Merging Savings Banks") deem it advisable to merge the Merging
Savings Banks under the charter of Labe Federal and the name of "Labe
Federal Bank for Savings," subject to the terms and conditions set
forth in this Agreement, the Plan of Reorganization, and in accordance
with applicable laws of the United States.

G. At least two-thirds of the entire Board of Directors of each
of Labe Federal and Interim has approved this Merger Agreement and
authorized its execution, and a majority of the entire Board of
Directors of Holding Company has approved this Merger Agreement and
the undertakings of Holding Company herein set forth and has
authorized Holding Company, by its execution hereof, to join in and be
bound hereby. This Merger Agreement is subject to approval by the
stockholders of Labe Federal and Interim and by the OTS pursuant to 12
C.F.R. Sections 552.13 and 563.22.

H. Labe Federal and Holding Company have received an opinion of
their certified public accounting firm to the effect that the exchange
of the common stock of Labe Federal for common stock of Holding
Company pursuant to Section 3.1(c) hereof shall constitute a transfer
to a controlled corporation and shall be governed by Section 351 of
the Internal Revenue Code of 1986, as amended.

NOW THEREFORE, in consideration of the premises and of the
agreements, covenants and conditions hereinafter contained, the
Merging Savings Banks agree as follows, as joined in by Holding
Company:

<PAGE> 65

ARTICLE I
THE MERGER

1.1 RESULTING SAVINGS BANK. Subject to the terms and conditions
set forth herein, Interim shall be merged into, and under the charter
of, Labe Federal pursuant to the provisions of, and with the effect
provided in, Sections 5(d) and 18(c) of the Federal Deposit Insurance
Act, Sections 5(d)(3)(A) and 10(s) of the Home Owners' Loan Act, and
12 C.F.R. Sections 552.13 and 563.22, and Labe Federal shall be the
association resulting from such merger (the "Resulting Savings Bank")
(the "Merger"). The name of the Resulting Savings Bank shall be "Labe
Federal Bank for Savings," and the present main banking premises of
Labe Federal at 4343 N. Elston Avenue, Chicago, Illinois 60641
shall be the main banking premises of the Resulting Savings Bank.

1.2 EFFECTIVE TIME. This Agreement shall be submitted to the
OTS for approval pursuant to 12 C.F.R. Sections 552.13 and 563.22.
This Agreement also shall be submitted to the stockholders of each of
the Merging Savings Banks for approval and adoption as provided for by
12 C.F.R. Section 552.13(h)(3). Subject to and upon satisfaction of
all requirements of law and other conditions specified in this
Agreement, articles of combination shall be executed in duplicate by
each of the Merging Savings Banks, by its chief executive officer or
executive vice president and by its secretary or assistant secretary,
and verified by one of the officers of each of such Merging Savings
Banks signing such articles, and shall set forth (i) this Agreement,
(ii) the number of shares outstanding in each of the Merging Savings
Banks, and (iii) the number of shares in each of the Merging Savings
Banks voted for and against this Agreement and the transactions
contemplated thereby. The Merger shall become effective on the date
on which the OTS endorses the articles of combination pursuant to 12
C.F.R. Section 552.13(j)(2) (the "Effective Time").

1.3 CHARTER. The charter of Labe Federal, as in effect as of
the Effective Time, shall be the charter of the Resulting Savings Bank
until the same shall be thereafter altered, amended or repealed in
accordance with said charter and applicable laws.

1.4 BYLAWS. The bylaws of Labe Federal, as in effect as of the
Effective Time, shall be the bylaws of the Resulting Savings Bank
until the same shall be thereafter altered, amended or repealed in
accordance with said bylaws, the charter of the Resulting Savings
Bank, and applicable law.

1.5 DIRECTORS AND OFFICERS. As of the Effective Time, the
directors of the Resulting Savings Bank shall consist of the persons
list below with terms expiring as indicated, or for such longer term
as subsequently approved by Labe Federal's stockholders at an annual
meeting called for that purpose.

<PAGE> 66

Name of Director Residence Address Term Expiring
---------------- ----------------- -------------

Frank J. Kross 5656 Longview Drive 2000
Countryside, IL 60525-3550

James J. Carmody 161 Carriage Way 2000
Burr Ridge, IL 60521

Frank C. Casillas 1432 West 63rd Street 2000
Downers Grove, IL 60516

Lowell I. Stahl 19 Bridlewood Road 1998
Northbrook, IL 60062

John D. Foster 233 East Walton Place 1998
Chicago, IL 60611

William E. Cahill, Jr. 6724 Navajo 1998
Lincolnwood, IL 60646

Dilia Camacho-Saeedi 1700 North Nashville-1W 1999
Chicago, IL 60707-3904

Roland G. Ley 1534 Circle Lane 1999
Palatine, IL 60067

James R. Sneider 325 Jeffrey Lane 1999
Northfield, IL 60093

As of the Effective Time, the officers of the Resulting Savings Bank
shall consist of the officers of Labe Federal immediately prior to the
Effective Time.

1.6 REGULATORY AND STOCKHOLDER APPROVALS. This Agreement is
subject to the approval of the stockholders of each of the Merging
Savings Banks, the OTS and all other governmental and banking
authorities whose consent or approval may be required.

ARTICLE II
EFFECT OF MERGER

2.1 CORPORATE EXISTENCE. As of the Effective Time, the
corporate existences of each of the Merging Savings Banks shall, with
the full effect provided for in the Home Owners' Loan Act and
regulations promulgated thereunder, be merged into and continued in
the Resulting Savings Bank under the charter of Labe Federal. The
Resulting Savings Bank shall be considered the same business and
corporate entity as each of the Merging Savings Banks, with all the
property, rights, powers, duties and obligations of each of the
Merging Savings Banks except as affected by federal law and by the
charter and bylaws of the Resulting Savings Bank. The separate

<PAGE> 67

existence of Interim shall cease except to the extent provided by
applicable law.

2.2 RIGHTS AND LIABILITIES OF THE RESULTING SAVINGS BANK. The
Resulting Savings Bank shall be liable for all liabilities of each of
the Merging Savings Banks, and all rights, franchises and interests of
each of the Merging Savings Banks in and to every species of property,
real, personal and mixed, and choses in action thereunto belonging,
shall be deemed to be transferred to and vested in the Resulting
Savings Bank without any deed or other transfer, and the Resulting
Savings Bank, without any order or other action on the part of any
court or otherwise, shall hold and enjoy the same and all rights of
property, franchises, and interests, including appointments,
designations and nominations and all other rights and interests as
trustee, executor, administrator, registrar or transfer agent of
stocks and bonds, guardian, assignee, receiver, and in every other
fiduciary capacity, in the same manner and to the same extent as such
rights of property, franchises and interests were held and enjoyed by
each of the Merging Savings Banks. All deposit accounts in Labe
Federal shall retain the same status after the Merger as such accounts
had prior to the Merger. The liquidation account established by Labe
Federal at the time of its mutual-to-stock conversion shall be
unaffected by the Merger and shall be retained by the Resulting
Savings Bank according to its terms. Any reference to any of the
Merging Savings Bank in any writing, whether executed or taking effect
before or after the Merger, shall be deemed a reference to the
Resulting Savings Bank if not inconsistent with the other provisions
of such writing.

2.3 BOOKS OF THE RESULTING SAVINGS BANK. The assets,
liabilities, reserves and accounts of each of the Merging Savings
Banks shall be recorded on the books of the Resulting Savings Bank at
the amounts at which each shall have been carried on the books of the
Merging Savings Banks at the Effective Time.

2.4 EFFECTIVENESS OF PRIOR CORPORATE ACTS AND AUTHORIZATIONS.
All corporate acts, plans, policies, contracts, approvals and
authorizations of each of the Merging Savings Banks, their respective
stockholders, boards of directors, committees elected or appointed by
their boards of directors, officers and agents, which were valid and
effective immediately prior to the Effective Time, shall be taken for
all purposes as the acts, plans, policies, contracts, approvals and
authorizations of the Resulting Savings Bank and shall be as effective
and binding thereon as the same were with respect to any of the
Merging Savings Banks. The employees of the Merging Savings Banks
shall become the employees of the Resulting Savings Bank.

<PAGE> 68

ARTICLE III
TREATMENT OF AND PAYMENT FOR STOCK

3.1 TREATMENT OF SHARES. At the Effective Time, by virtue of
the Merger and without any action on the part of the holders of such
shares of stock,

(a) Each share of capital stock of Labe Federal that is
issued and outstanding immediately prior to the Effective Time,
shall IPSO FACTO and without any action on the part of the holder
thereof, become and be converted into one (1) share of common
stock of Holding Company, and outstanding certificate(s)
(hereinafter called the "Old Certificate(s)") representing shares
of capital stock of Labe Federal shall thereafter represent
shares of common stock of Holding Company. All shares of common
stock of Holding Company into which capital stock of Labe Federal
is converted, as above provided, shall be fully paid and
nonassessable.

(b) All shares of capital stock of Labe Federal that are
owned by Labe Federal as treasury stock shall be canceled and
shall cease to exist, and no stock of Holding Company or other
consideration shall be delivered in exchange therefor.

(c) Each holder of shares of capital stock of Labe Federal
which shall have been so converted into common stock of Holding
Company, upon surrender of such Old Certificate(s) in proper form
to the Resulting Savings Bank for cancellation, shall be entitled
to receive, as evidence of the shares of capital stock so
converted, stock certificate(s) (hereinafter called "New
Certificate(s)") bearing the name of Holding Company as issuer,
for one (1) share of Holding Company for each one (1) share of
Labe Federal represented by such Old Certificate(s) when sur-
rendered. Until so surrendered, each Old Certificate shall be
deemed, for all corporate purposes, to evidence the ownership of
the number of shares of common stock of Holding Company which the
holder thereof would be entitled to receive upon its surrender,
except that Holding Company may withhold, from the holder of
shares represented by such Old Certificate, distribution of any
or all dividends declared by Holding Company on such shares until
such time as such Old Certificate shall be surrendered in
exchange for New Certificate(s), at which time dividends so
withheld by Holding Company with respect to such shares shall be
delivered, without interest thereon, to the stockholder to whom
such New Certificate(s) are issued.

(d) Each share of common stock, $1.00 par value per share,
of Interim issued and outstanding and owned of record by Holding
Company immediately prior to the Effective Time shall be
surrendered and canceled, and Holding Company shall not receive
any payment for such Interim shares.

<PAGE> 69

3.2 DISSENTERS' RIGHTS. Labe Federal shall notify holders of
its common stock of their right to dissent from the Merger and demand
payment of the appraised value of their shares not less than twenty
days prior to the date of the meeting at which this Agreement is to be
submitted for stockholder approval. Any stockholder of Labe Federal
who (i) prior to voting on the Agreement files a written statement
identifying himself or herself and stating his or her intention
thereby to demand appraisal of and payment for his or her shares
pursuant to 12 C.F.R. Section 552.14, and (ii) does not vote in favor
of the Merger at the meeting of stockholders at which this Agreement
is submitted to a vote shall be entitled to receive from the Resulting
Savings Bank within ten days after the Effective Time a written notice
of the Effective Time of the Merger and notification of the sixty day
time period during which the dissenting stockholder may file a
petition with the OTS if the stockholder and the Resulting Savings
Bank do not agree as to the fair value of his or her shares, and a
written offer to pay for dissenting shares at a specified price deemed
by the Resulting Savings Bank to be the fair value thereof. Such
notice and offer shall be accompanied by a balance sheet and statement
of income of Labe Federal for a fiscal year ending not more than
sixteen months before the date of notice and offer, together with the
latest available interim financial statements.

If within sixty days of the Effective Time the Resulting
Savings Bank and any stockholder who has complied with the provisions
of 12 C.F.R. Section 552.14(c)(2) agree as to the fair value of the
dissenting stockholders' shares, payment therefor shall be made within
ninety days of the Effective Time. If within sixty days of the
Effective Time the Resulting Savings Bank and any stockholder who has
complied with the provisions of 12 C.F.R. Section 552.14(c)(2) do not
agree as to the fair value of the dissenting stockholders' shares,
then any such stockholder may file a petition with the OTS (with a
copy by registered or certified mail to the Resulting Savings Bank)
demanding a determination of the fair market value of the stock of all
such stockholders. A stockholder entitled to file a petition under 12
C.F.R. Section 552.14(c)(5) who fails to file such petition within
sixty days of the Effective Time shall be deemed to have accepted the
terms offered under the Merger.

Within sixty days of the Effective Time of the Merger, each
stockholder demanding appraisal and payment under 12 C.F.R. Section
552.14 shall submit to Labe Federal's transfer agent his or her
certificates of stock for notation thereon that an appraisal and
payment have been demanded with respect to such stock and that
appraisal proceedings are pending. Any stockholder who fails to
submit his stock certificates for such notation shall no longer be
entitled to appraisal rights under 12 C.F.R. Section 552.14 and shall
be deemed to have accepted the terms offered pursuant to the Merger.
At any time within sixty days after the Effective Time, any

<PAGE> 70

stockholder shall have the right to withdraw his or her demand for
appraisal and to accept the terms offered upon this Agreement.

The Director of the OTS shall, as he or she may elect,
either appoint one or more independent persons or direct appropriate
staff of the OTS to appraise the shares to determine their fair market
value, as of the Effective Time, exclusive of any element of value
arising from the accomplishment or expectation of the Merger.
Appropriate staff of the OTS shall review and provide an opinion on
appraisals prepared by independent persons as to the suitability of
the appraisal methodology and the adequacy of the analysis and
supportive data. The Director after consideration of the appraisal
report and the advice of the appropriate staff shall, if he or she
concurs in the valuation of the shares, direct payment by the
resulting association of the appraised fair market value of the
shares, upon surrender of the certificates representing such stock.
Payment shall be made, together with interest from the Effective Time,
at a rate deemed equitable by the Director.

The costs and expenses of any proceeding under 12 C.F.R.
Section 552.14 may be apportioned and assessed by the Director as he
or she may deem equitable against all or some of the parties. In
making this determination the Director shall consider whether any
party has acted arbitrarily, vexatiously, or not in good faith in
respect to the rights provided under 12 C.F.R. Section 552.14.

Any stockholder who has demanded appraisal rights shall
thereafter neither be entitled to vote such stock for any purpose nor
be entitled to the payment of dividends or other distributions on the
stock (except dividends or other distribution payable to, or a vote to
be taken by, stockholders of record at a date which is on or prior to,
the Effective Time); provided that, if any stockholder becomes
unentitled to appraisal and payment of appraised value with respect to
such stock and accepts or is deemed to have accepted the terms offered
pursuant to the Merger, such stockholder shall thereupon be entitled
to vote and receive such distributions.

Should any stockholder become entitled to the payment of the
appraised value of his or her shares pursuant to the exercise of his
or her appraisal rights under 12 C.F.R. Section 552.14, such shares
shall be and become converted into the right to receive cash from
Holding Company in the amount of the appraised value of such shares.

3.4 CONDITIONS PRECEDENT. Effectuation of the Merger herein
provided for is conditioned upon:

(a) approval of this Agreement by vote of the Board of
Directors of Labe Federal and Interim as required by 12 C.F.R.
Section 552.13(e);

<PAGE> 71

(b) approval of this Agreement by the affirmative vote of a
majority of the outstanding voting stock of Labe Federal and
Interim, as required by 12 C.F.R. Section 552.13(h)(3);

(d) procurement of all other consents and approvals, and
satisfaction of all other requirements prescribed by law, which
are necessary for consummation of the Merger.

ARTICLE IV
GENERAL PROVISIONS

4.1 POST-MERGER AGREEMENTS. Each of the Merging Savings Banks
hereby appoints the Resulting Savings Bank to be its true and lawful
attorney for the purpose of taking, in its name, place and stead, any
and all actions that the Resulting Savings Bank deems necessary or
advisable to vest in the Resulting Savings Bank title to all property
or rights of each of the Merging Banks or otherwise to effect the
purposes of this Agreement, and each of the Merging Savings Banks
hereby grants to said attorney full power and authority to take all
actions necessary to effect those purposes, including the power to
execute, in its name, place and stead, such further assignments or
assurances in law necessary or advisable to vest in the Resulting
Savings Bank title to all property and rights of each of the Merging
Savings Banks.

4.2 ORDINARY COURSE OF BUSINESS; DIVIDENDS. Between the date of
this Agreement and the Effective Time, each of the Merging Savings
Banks may conduct any business in the ordinary course, including
without limitation, the declaration and payment of dividends,
incurring liabilities and disposing of any of its assets for adequate
value.

4.3 TERMINATION. Anything herein to the contrary
notwithstanding, this Agreement may be abandoned by either of the
Merging Savings Banks by appropriate resolution of its board of
directors at any time prior to the Merger becoming effective, whether
before or after any stockholder action.

4.4 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the Merging Savings
Banks; provided, however that after this Agreement has been approved
by the stockholders of the Merging Savings Banks, no such amendment
shall affect the rights of such stockholders in a manner which is
materially adverse to the interests of such stockholders.

4.5 CAPTIONS. The captions in this Agreement have been inserted
for convenience only and shall not be considered a part of or affect
the construction or interpretation of any provision of this Agreement.

<PAGE> 72

4.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when so executed shall constitute an
original, but all of which together shall constitute one and the same
instrument.

4.7 GOVERNING LAW. This Agreement shall be governed in all
respects by federal law or regulation.

IN WITNESS WHEREOF, each of the Merging Savings Banks has
caused this Agreement to be executed by its duly authorized officers
and its corporate seal to be affixed hereto as of the date first above
written.

LABE FEDERAL BANK FOR SAVINGS

BY /s/ Frank J. Kross
---------------------------
Frank J. Kross
(SEAL) President

ATTEST:

/s/ David J. Arts
--------------------------------
David J. Arts
Senior Vice President and
Chief Financial Officer
INTERIM SAVINGS BANK, FSB

BY /s/ Lowell I. Stahl
---------------------------
Lowell I. Stahl
(SEAL) President

ATTEST:

/s/ David J. Arts
--------------------------------
David J. Arts
Treasurer

<PAGE> 73

LDF, Inc. hereby joins in the foregoing Merger Agreement and
undertakes that it will be bound thereby, that it will do and perform
all the acts and things therein provided to be done by it, and that it
will cooperate in carrying out the transactions therein contemplated.

IN WITNESS WHEREOF, LDF, Inc. has caused this undertaking to
be made by its duly authorized officers and its corporate seal to be
hereunto affixed as of the date first above written.

LDF, INC.

By: /s/ Lowell I. Stahl
--------------------------------
Lowell I. Stahl
(SEAL) President

ATTEST:

/s/ David J. Arts
--------------------------------
David J. Arts
Vice President, Treasurer and
Chief Financial Officer

<PAGE> 74

APPENDIX B

Section 552.14 Dissenter and Appraisal Rights

(a) RIGHT TO DEMAND PAYMENT OF FAIR OR APPRAISED VALUE. Except as
provided in paragraph (b) of this section, any stockholder of a
Federal stock association combining in accordance with Section 552.13
of this part shall have the right to demand payment of the fair or
appraised value of his stock: PROVIDED, That such stockholder has not
voted in favor of the combination and complies with the provisions of
paragraph (c) of this section.

(b) EXCEPTIONS. No stockholder required to accept only qualified
consideration for his or her stock shall have the right under this
section to demand payment of the stock's fair or appraised value, if
such stock was listed on a national securities exchange or quoted on
the National Association of Securities Dealers' Automated Quotation
System ("NASDAQ") on the date of the meeting at which the combination
was acted upon or stockholder action is not required for a combination
made pursuant to Section 552.13(h)(2) of this part. "Qualified
consideration" means cash, shares of stock of any association or
corporation which at the effective date of the combination will be
listed on a national securities exchange or quoted on NASDAQ or any
combination of such shares of stock and cash.

(1) NOTICE. Each constituent Federal stock association shall notify
all stockholders entitled to rights under this section, not less than
twenty days prior to the meeting at which the combination agreement is
to be submitted for stockholder approval, of the right to demand
payment of appraised value of shares, and shall include in such notice
a copy of this section. Such written notice shall be mailed to
stockholders of record and may be part of the management's proxy
solicitation for such meeting.

(2) DEMAND FOR APPRAISAL AND PAYMENT. Each stockholder electing to
make a demand under this section shall deliver to the Federal stock
association, before voting on the combination, a writing identifying
himself or herself and stating his or her intention thereby to demand
appraisal of and payment for his or her shares. Such demand must be
in addition to and separate from any proxy or vote against the
combination by the stockholder.

(3) NOTIFICATION OF EFFECTIVE DATE AND WRITTEN OFFER. Within ten
days after the effective date of the combination, the resulting
association shall:

(i) Give written notice by mail to stockholders of constituent
Federal Stock associations who have complied with the provisions of

<PAGE> 75

paragraph (c)(2) of this section and have not voted in favor of the
combination, of the effective date of the combination;

(ii) Make a written offer to each stockholder to pay for dissenting
shares at a specified price deemed by the resulting association to be
the fair value thereof; and

(iii) Inform them that, within sixty days of such date, the
respective requirements of paragraphs (c)(5) and (6) of this section
(set out in the notice) must be satisfied.

The notice and offer shall be accompanied by a balance sheet and
statement of income of the association the shares of which the
dissenting stockholder holds, for a fiscal year ending not more than
sixteen months before the date of notice and offer, together with the
latest available interim financial statements.

(4) ACCEPTANCE OF OFFER. If within sixty days of the effective date
of the combination the fair value is agreed upon between the resulting
association and any stockholder who has complied with the provisions
of paragraph (c)(2) of this section, payment therefor shall be made
within ninety days of the effective date of the combination.

(5) PETITION TO BE FILED IF OFFER NOT ACCEPTED. If within sixty days
of the effective date of the combination the resulting association and
any stockholder who has complied with the provisions of paragraph
(c)(2) of this section do not agree as to the fair value, then any
such stockholder may file a petition with the Office, with a copy by
registered or certified mail to the resulting association, demanding a
determination of the fair market value of the stock of all such
stockholders. A stockholder entitled to file a petition under this
section who fails to file such petition within sixty days of the
effective date of the combination shall be deemed to have accepted the
terms offered under the combination.

(6) STOCK CERTIFICATES TO BE NOTED. Within sixty days of the
effective date of the combination, each stockholder demanding
appraisal and payment under this section shall submit to the transfer
agent his certificates of stock for notation thereon that an appraisal
and payment have been demanded with respect to such stock and that
appraisal proceedings are pending. Any stockholder who fails to
submit his stock certificates for such notation shall no longer be
entitled to appraisal rights under this section and shall be deemed to
have accepted the terms offered under the combination.

(7) WITHDRAWAL OF DEMAND. Notwithstanding the foregoing, at any time
within sixty days after the effective date of the combination, any
stockholder shall have the right to withdraw his or her demand for
appraisal and to accept the terms offered upon the combination.

<PAGE> 76

(8) VALUATION AND PAYMENT. The Director shall, as he or she may
elect, either appoint one or more independent persons or direct
appropriate staff of the Office to appraise the shares to determine
their fair market value, as of the effective date of the combination,
exclusive of any element of value arising from the accomplishment or
expectation of the combination. Appropriate staff of the Office shall
review and provide an opinion on appraisals prepared by independent
persons as to the suitability of the appraisal methodology and the
adequacy of the analysis and supportive data. The Director after
consideration of the appraisal report and the advice of the
appropriate staff shall, if he or she concurs in the valuation of the
shares, direct payment by the resulting association of the appraised
fair market value of the shares, upon surrender of the certificates
representing such stock. Payment shall be made, together with
interest from the effective date of the combination, at a rate deemed
equitable by the Director.

(9) COSTS AND EXPENSES. The costs and expenses of any proceeding
under this section may be apportioned and assessed by the Director as
he or she may deem equitable against all or some of the parties. In
making this determination the Director shall consider whether any
party has acted arbitrarily, vexatiously, or not in good faith in
respect to the rights provided by this section.

(10) VOTING AND DISTRIBUTION. Any stockholder who has demanded
appraisal rights as provided in paragraph (c)(2) of this section shall
thereafter neither be entitled to vote such stock for any purpose nor
be entitled to the payment of dividends or other distributions on the
stock (except dividends or other distribution payable to, or a vote to
be taken by stockholders of record at a date which is on or prior to,
the effective date of the combination): PROVIDED, That if any
stockholder becomes unentitled to appraisal and payment of appraised
value with respect to such stock and accepts or is deemed to have
accepted the terms offered upon the combination, such stockholder
shall thereupon be entitled to vote and receive the distributions
described above.

(11) STATUS. Shares of the resulting association into which shares
of the stockholders demanding appraisal rights would have been
converted or exchanged, had they assented to the combination, shall
have the status of authorized and unissued shares of the resulting
association.

<PAGE> 77

APPENDIX C

CERTIFICATE OF INCORPORATION

LDF, INC.

ARTICLE I

The name of the Corporation is: LDF, Inc.

ARTICLE II

The address of the registered office of the Corporation in
the State of Delaware is 1013 Centre Road, City of Wilmington, County
of New Castle. The name of its registered agent at such address is
Corporation Service Company.

ARTICLE III

The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the
General Corporation Law of Delaware.

ARTICLE IV

The total number of shares of all classes of capital stock
which the Corporation has the authority to issue is 1,200,000 shares,
which are divided into two classes as follows:

(a) 200,000 shares of Preferred Stock with a par value of
$1.00 per share (the "Preferred Stock"); and

(b) 1,000,000 shares of Common Stock with a par value of
$1.00 per share (the "Common Stock").

The designations, voting powers, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions of the above classes of stock are as
follows:

SECTION 1. PREFERRED STOCK. The board of directors is
authorized, at any time and from time to time, to provide for the
issuance of shares of Preferred Stock in one or more series with such
designations, preferences, voting powers and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof as are stated and expressed in the resolution or
resolutions providing for the issuance of such Preferred Stock adopted

<PAGE> 78

by the board of directors, including, but not limited to,
determination of any of the following:

(a) the distinctive serial designation and the number of
shares constituting a series;

(b) the dividend rate or rates, whether dividends are
cumulative (and if so on what terms and conditions), the payment date
or dates for dividends and the participating or other special rights,
if any, with respect to dividends;

(c) the voting rights, full or limited, if any, of the
shares of the series, which could include the right to elect a
specified number of directors in any case if dividends on the series
are not paid for in a specified period of time;

(d) whether the shares of the series are redeemable and, if
so, the price or prices at which, and the terms and conditions on
which, the shares may be redeemed, which prices, terms and conditions
may vary under different conditions and at different redemption dates;

(e) the amount or amounts, if any, payable upon the shares
of the series in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation prior to any payment or
distribution of the assets of the Corporation to any class or classes
of stock of the Corporation ranking junior to the series;

(f) whether the shares of the series are entitled to the
benefit of a sinking or retirement fund to be applied to the purchase
or redemption of shares of the series and the amount of the fund and
the manner of its application, including the price or prices at which
the shares of the series may be redeemed or purchased through the
application of the fund;

(g) whether the shares are convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation and the conversion price or prices, or the rates of
exchange, and the adjustments thereof, if any, at which the conversion
or exchange may be made, and any other terms and conditions of the
conversion or exchange; and

(h) any other preferences, privileges and powers, and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions of a series, as the board
of directors may deem advisable and as are not inconsistent with the
provisions of this Certificate of Incorporation.

<PAGE> 79

SECTION 2. COMMON STOCK.

A. DIVIDENDS. Subject to the preferential rights of the
Preferred Stock, the holders of the Common Stock are entitled to
receive, to the extent permitted by law, such dividends as may be
declared from time to time by the board of directors.

B. LIQUIDATION. In the event of the voluntary or
involuntary liquidation, dissolution, distribution of assets or
winding up of the Corporation, after distribution in full of the
preferential amounts, if any, to be distributed to the holders of
shares of Preferred Stock, holders of Common Stock shall be entitled
to receive all of the remaining assets of the Corporation of whatever
kind available for distribution to stockholders ratably in proportion
to the number of shares of Common Stock held by them respectively.
The board of directors may distribute in kind to the holders of Common
Stock such remaining assets of the Corporation or may sell, transfer
or otherwise dispose of all or any part of such remaining assets to
any other corporation, trust or other entity and receive payment
therefor in cash, stock or obligations of such other corporation,
trust or other entity, or any combination hereof, and may sell all or
any part of the consideration so received and distribute any balance
thereof in kind to holders of Common Stock. Neither the merger or
consolidation of the Corporation into or with any other corporation or
corporations, nor the purchase or redemption of shares of stock of the
Corporation of any class, nor the sale or transfer by the Corporation
of all or any part of its assets, nor the reorganization or
recapitalization of the Corporation, shall be deemed to be a
dissolution, liquidation or winding up of the Corporation for the
purposes of this paragraph.

C. VOTING RIGHTS. Except as may be otherwise required by
law or this Certificate of Incorporation, each holder of Common Stock
has one vote in respect of each share of stock held by the holder of
record on the books of the Corporation on all matters voted upon by
the stockholders.

SECTION 3. OTHER PROVISIONS.

A. NO PREEMPTIVE RIGHTS. No stockholder shall have any
preemptive right to subscribe to an additional issue of stock, whether
now or hereafter authorized, of any class or series or to any
securities of the Corporation convertible into such stock.

B. CHANGES IN AUTHORIZED CAPITAL STOCK. Subject to the
protective conditions and restrictions of any outstanding Preferred
Stock, any amendment to this Certificate of Incorporation which
increases or decreases the authorized capital stock of any class or
classes may be made only by the affirmative vote of the holders of a
majority of the outstanding shares of all classes of stock of the
Corporation generally entitled to vote in the election of directors,

<PAGE> 80

considered for purposes of this Section 3.B of Article IV as one
class.

C. UNCLAIMED DIVIDENDS. Any and all right, title,
interest and claim in or to any dividends declared by the Corporation,
whether in cash, stock, or otherwise, which are unclaimed by the
stockholder entitled thereto for a period of six years after the close
of business on the payment date, shall be and be deemed to be
extinguished and abandoned; and such unclaimed dividends in the
possession of the Corporation, its transfer agents or other agents or
depositaries shall at such time become the absolute property of the
Corporation, free and clear of any and all claims of any persons
whatsoever.

ARTICLE V

SECTION 1. NUMBER, ELECTION AND TERMS OF DIRECTORS. The
business and affairs of the Corporation shall be managed by or under
the direction of a Board of Directors consisting of not less than six
(6) nor more than fifteen (15) persons. The exact number of directors
within the minimum and maximum limitations specified in the preceding
sentence shall be fixed from time to time by the Board of Directors
pursuant to a resolution adopted by a majority of the entire Board of
Directors. The Board of Directors shall be divided into three classes
as nearly equal in number as possible, with the term of office of
Class I expiring at the first annual meeting of stockholders, of Class
II expiring at the second annual meeting of stockholders in the
following year, and of Class III expiring at the third annual meeting
of stockholders in the following year. At each annual meeting of
stockholders, directors chosen to succeed those whose terms then
expire shall be elected for a term of office expiring at the third
succeeding annual meeting of stockholders after their election.

The names and mailing addresses of the persons who are to
serve as directors for the terms indicated below until their
successors are elected and qualified or until their earlier
resignation or removal:

<PAGE> 81

<TABLE>
<CAPTION>
First Annual Meeting
Term Expires At
Annual Meeting Of
Stockholders
Name Address Class Designation Indicated
---- ------- ----------------- ---------
<S> <C> <C> <C>
Lowell I. Stahl 19 Bridlewood Road I First Annual
Northbrook, Illinois 60062 Meeting

John D. Foster 233 East Walton Place I First Annual
Chicago, Illinois 60657 Meeting
Dilia Camacho-Saeedi 17701 North Nashville II Second Annual
Chicago, Illinois 60707 Meeting

Roland G. Ley 1534 Circle Lane II Second Annual
Palatine, Illinois 60067 Meeting
James R. Sneider 325 Jeffrey Lane II Second Annual
Northfield, Illinois 60093 Meeting

Frank J. Kross 5656 Longview Drive III Third Annual
Countryside, Illinois 60525 Meeting

William E. Cahill, Jr. 6724 Navajo III Third Annual
Lincolnwood, Illinois 60646 Meeting

</TABLE>
SECTION 2. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall be filled
by a majority vote of the directors then in office. Directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of the class to which they have been
elected expires. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent
director.

SECTION 3. REMOVAL. Any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause
and only by the affirmative vote of the holders of at least 85% of the
voting power of all of the shares of the Corporation entitled to vote
for the election of directors.

Section 4. NOMINATIONS FOR DIRECTORS. Nominations for the
election of directors may be made by the Board of Directors or by any
stockholder entitled to vote for the election of directors. Any
stockholder desiring to nominate an individual for election as a
director shall so indicate by notice in writing, delivered or mailed
by first class United States mail, postage prepaid, to the Secretary

<PAGE> 82

of the Corporation not less than 14 days prior to any meeting of the
stockholders called for the election of directors, provided, however,
that if less than 21 days notice of the meeting is given to
stockholders, such written notice shall be delivered or mailed, as
prescribed, to the Secretary of the Corporation not later than the
close of the seventh day following the day on which notice of the
meeting was mailed to stockholders.

Each such stockholder notice hereunder shall set forth (i)
the name, age, business address and, if known, residence address of
each nominee proposed in such notice, (ii) the principal occupation or
employment of each such nominee, and (iii) the number of shares of
capital stock of the Corporation which are beneficially owned by each
such nominee; and in addition evidence of the nominee's willingness to
serve shall also be provided.

ARTICLE VI

Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called
annual or special meeting of stockholders of the Corporation and may
not be effected by any consent in writing by such stockholders.
Special meetings of stockholders of the Corporation may be called only
by the President, or by the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of Directors,
upon not less than 10 nor more than 60 days' written notice.

ARTICLE VII

In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is
expressly authorized and empowered to make, alter, amend or repeal the
By-Laws of the Corporation. By-Laws shall not be altered, amended or
repealed by the stockholders of this Corporation except by the vote of
holders of not less than 85% of the total voting power of all
outstanding shares of capital stock of the Corporation.

ARTICLE VIII

SECTION 1. VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS.

A. HIGHER VOTE FOR CERTAIN BUSINESS COMBINATIONS. In
addition to any affirmative vote required by law or this Certificate
of Incorporation, and except as otherwise expressly provided in
Section 2 of this Article VIII:

(i) any merger or consolidation of the Corporation or
any Subsidiary (as hereinafter defined) with (a) any
Interested Stockholder (as hereinafter defined) or (b) any
other corporation (whether or not itself an Interested

<PAGE> 83

Stockholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an
Interested Stockholder; or

(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a
series of transactions) to or with any Interested
Stockholder or any Affiliate of any Interested Stockholder
of all or any substantial part of the assets of the
Corporation or any Subsidiary; or

(iii) the issuance or transfer by the Corporation or
any Subsidiary (in one transaction or a series of
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of five percent or more of the
consolidated assets of the Corporation and its Subsidiaries
as of the end of the fiscal year of the Corporation next
preceding the record date for determination of stockholders
entitled to notice thereof and to vote thereon; or

(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or
on behalf of an Interested Stockholder or any Affiliate of
any Interested Stockholder; or

(v) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder or any Affiliate of any Interested Stockholder;

shall require the affirmative vote of the holders of at least 85% of
the voting power of the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of
directors (the "Voting Stock"), voting together as a single class.
Such affirmative vote shall be required notwithstanding the fact that
no vote may be required, or that a lesser percentage may be specified,
by law or in any agreement with any national securities exchange or
otherwise.

B. DEFINITION OF "BUSINESS COMBINATION". The term
"Business Combination" as used in this Article VIII shall mean any

<PAGE> 84

transaction which is referred to in any one or more of clauses (i)
through (v) of paragraph A of this Section 1.

SECTION 2. WHEN HIGHER VOTE IS NOT REQUIRED. The
provisions of Section 1 of this Article VIII shall not be applicable
to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any
other provision of this Certificate of Incorporation, if all of the
conditions specified in either of the following paragraphs A and B are
met:

A. APPROVAL BY DISINTERESTED DIRECTORS. The Business
Combination shall have been approved by a majority of the
Disinterested Directors (as hereinafter defined).

B. PRICE AND PROCEDURE REQUIREMENTS. All of the
following conditions shall have been met:

(i) The aggregate amount of the cash and the Fair
Market Value (as hereinafter defined) as of the date of the
consummation of the Business Combination of consideration
other than cash to be received per share by holders of
Common Stock in such Business Combination shall be at least
equal to the higher of the following:

(a) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by the Interested
Stockholder for any shares of Common Stock acquired by
it (1) within the two-year period immediately prior to
the first public announcement of the proposal of the
Business Combination (the "Announcement Date") or (2)
in the transaction in which it became an Interested
Stockholder, whichever is higher; and

(b) the Fair Market Value per share of Common
Stock on the Announcement Date or on the date on which
the Interested Stockholder became an Interested
Stockholder (such latter date is referred to in this
Article VIII as the "Determination Date"), whichever is
higher.

(ii) The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the
Business Combination of consideration other than cash to be
received per share by holders of shares of any other class
of outstanding Voting Stock shall be at least equal to the
highest of the following (it being intended that the
requirements of this paragraph B(ii) shall be required to be
met with respect to every class of outstanding Voting Stock,
whether or not the Interested Stockholder has previously

<PAGE> 85

acquired any shares of a particular class of Voting Stock):

(a) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by the Interested
Stockholder of any shares of such class of Voting Stock
acquired by it (1) within the two-year period
immediately prior to the Announcement Date or (2) in
the transaction in which it became an Interested
Stockholder, whichever is higher;

(b) (if applicable) the highest preferential
amount per share to which the holders of shares of such
class of Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution or
winding up of the Company; and

(c) the Fair Market Value per share of such class
of Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher.

(iii) The consideration to be received by holders
of a particular class of outstanding Voting Stock (including
Common Stock) shall be in cash or in the same form as the
Interested Stockholder has previously paid for shares of
such class of Voting Stock. If the Interested Stockholder
has paid for shares of any class of Voting Stock with
varying forms of consideration, the form of consideration
for such class of Voting Stock shall be either cash or the
form used to acquire the largest number of shares of such
class of Voting Stock previously acquired by it. The price
determined in accordance with paragraphs B(i) and B(ii) of
this Section 2 shall be subject to appropriate adjustment in
the event of any stock dividend, stock split, combination of
share or similar events.

(iv) After such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such
Business Combination: (a) except as approved by a majority
of the Disinterested Directors, there shall have been no
failure to declare and pay at the regular date therefor any
full quarterly dividends (whether or not cumulative) on the
outstanding Preferred Stock; (b) there shall have been (1)
no reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any subdivision
of the Common Stock), except as approved by a majority of
the Disinterested Directors, and (2) an increase in such
annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction

<PAGE> 86

which has the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure so to
increase such annual rate is approved by a majority of the
Disinterested Directors; and (c) such Interested Stockholder
shall have not become the beneficial owner of any additional
shares of Voting Stock except as part of the transaction
which results in such Interested Stockholder becoming an
Interested Stockholder.

(v) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall
not have received the benefit, directly or indirectly
(except proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial assistance
or any tax credits or other tax advantages provided by the
Company, whether in anticipation of or in connection with
such Business Combination or otherwise.

(vi) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall
be mailed to public stockholders of the Company at least 30
days prior to the consummation of such Business Combination
(whether or not such proxy or information statement is
required to be mailed pursuant to such Act or subsequent
provisions).

SECTION 3. CERTAIN DEFINITIONS. For the purposes of this
Article VIII:

A. A "person" shall mean any individual, firm, corporation
or other entity.

B. "Interested Stockholder" shall mean any person (other
than the Corporation or any Subsidiary) who or which: (i) is the
beneficial owner, directly or indirectly, of more than 15% of the
voting power of the outstanding Voting Stock; or (ii) is an Affiliate
of the Corporation and at any time within the two-year period
immediately prior to the date in question was the beneficial owner,
directly or indirectly, of 15% or more of the voting power of the then
outstanding Voting Stock; or (iii) is an assignee of or has otherwise
succeeded to any shares of Voting Stock which were at any time within
the two-year period immediately prior to the date in question
beneficially owned by any Interested Stockholder, if such assignment
or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the
meaning of the Securities Act of 1933.

<PAGE> 87

C. A person shall be a "beneficial owner" of any Voting
Stock: (i) which such person or any of its Affiliates or Associates
(as hereinafter defined) beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has (a)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (b) the
right to vote pursuant to any agreement, arrangement or understanding;
or (iii) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates had any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Voting Stock.

D. For the purposes of determining whether a person is an
Interested Stockholder pursuant to paragraph B of this Section 3, the
number of shares of Voting Stock deemed to be outstanding shall
include shares deemed owned through application of paragraph C of this
Section 3 but shall not include any other shares of Voting Stock which
may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.

E. "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
January 1, 1994.

F. "Subsidiary" means any corporation of which a majority
of any class of equity security is owned, directly or indirectly, by
the Corporation; PROVIDED, HOWEVER, that for the purposes of the
definition of Interested Stockholder set forth in paragraph B of this
Section 3, the term "Subsidiary" shall mean only a corporation of
which a majority of each class of equity security is owned, directly
or indirectly, by the Corporation.

G. "Disinterested Director" means any member of the Board
of Directors of the Corporation (the "Board") who is unaffiliated with
the Interested Stockholder and was a member of the Board prior to the
time that the Interested Stockholder became an Interested Stockholder,
and any successor of a Disinterested Director who is unaffiliated with
the Interested Stockholder and is recommended to succeed a
Disinterested Director by a majority of Disinterested Directors then
on the Board.

H. "Fair Market Value" means: (i) in the case of stock,
the highest closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the
Composite Tape for New York Stock Exchange-Listed Stocks, or, if such
stock is not quoted on the Composite Tape, on the New York Stock

<PAGE> 88

Exchange, or, if such stock is not listed on such Exchange, on the
principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed, or, if
such stock is not listed on any such exchange, the highest closing bid
quotation with respect to a share of such stock during the 30-day
period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system
then in use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock as determined
by the Board of Directors in good faith; and (ii) in the case of
property other than cash or stock, the fair market value of such
property on the date in question as determined by the Board of
Directors in good faith.

I. In the event of any Business Combination in which the
Company survives, the phrase "other consideration to be received" as
used in paragraphs B(i) and (ii) of Section 2 of this Article VIII
shall include the shares of Common Stock and/or the shares of any
other class of outstanding Voting Stock retained by the holders of
such shares.

A majority of the directors of the Corporation shall have
the power and duty to determine for the purposes of this Article VIII,
on the basis of information known to them after reasonable inquiry,
(A) whether a person is an Interested Stockholder, (B) the number of
shares of Voting Stock beneficially owned by any person, (C) whether a
person is an Affiliate or Associate of another, and (D) whether the
assets which are the subject of any Business Combination (i) have, or
the consideration to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate fair market value of five percent or
more of the consolidated assets of the Corporation and its
Subsidiaries, or (ii) constitute all or any substantial part of the
assets of the Corporation or any Subsidiary. A majority of the
directors shall have the further power to interpret all the terms and
provisions of this Article VIII.

SECTION 4. NO EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED
STOCKHOLDERS. Nothing contained in this Article VIII shall be
construed to relieve any Interested Stockholder from any fiduciary
obligation imposed by law.

<PAGE> 89

ARTICLE IX

The name and mailing address of the incorporator of this
Corporation is as follows:

Name Address
---- -------

Lowell I. Stahl 19 Bridlewood Road
Northbrook, Illinois 60062

ARTICLE X

Elections of directors need not be by written ballot unless
the By-Laws of the Corporation so provide.

ARTICLE XI

Except as otherwise provided in the Certificate of
Incorporation, the Board of Directors shall have authority to
authorize the issuance, from time to time without any vote or other
action by the stockholders, of any or all shares of stock of the
Corporation of any class at any time authorized, any securities
convertible into or exchangeable for any such shares so authorized,
and any warrant, option or right to purchase, subscribe for or
otherwise acquire, shares of stock of the Corporation of any class at
any time authorized, in each case to such persons and for such
consideration and on such terms as the Board of Directors from time to
time in its discretion lawfully may determine. Stock so issued, for
which the consideration has been paid to the Corporation, shall be
fully paid stock, and the holders of such stock shall not be liable to
any further call or assessments thereon.

ARTICLE XII

Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between
this Corporation and its stockholders or any class of them, any court
of equitable jurisdiction within the State of Delaware, may, on the
application in a summary way of this Corporation or of any creditor or
stockholder thereof, or on the application of any receiver or
receivers appointed for this Corporation under the provision of
Section 291 of Title 8 of the Delaware Code or in the application of
trustees in dissolution or of any receiver or receivers appointed for
this Corporation under Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or stockholders of the Corporation,
as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value
of the creditors, or class of creditors and/or of the stockholders or
class of stockholders of this Corporation, as the case may be, agree
to any compromise or arrangement and to any reorganization of this

<PAGE> 90

Corporation as a consequence of such compromise or arrangement, the
said compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders of this Corporation, as the
case may be, and also on this Corporation.

ARTICLE XIII

Each person who is or was a director or officer of the
Corporation, and each person who serves or served at the request of
the Corporation as a director or officer of another enterprise, shall
be indemnified by the Corporation in accordance with, and to the
fullest extent authorized by, the General Corporation Law of the State
of Delaware as it may be in effect from time to time.

ARTICLE XIV

No person who was at any time a director of the Corporation
shall be personally liable to the Corporation or its stockholders for
monetary damages for any breach of fiduciary duty by such person as a
director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. If the Delaware
General Corporation Law is hereafter amended to authorize corporate
action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall
be eliminated or limited to the fullest extent permitted by the
Delaware General Corporation Law, as so amended.

Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right
or protection of a director of the Corporation existing at the time of
such repeal or modification.

ARTICLE XV

The Corporation hereby elects to be governed by Section 203
of the Delaware General Corporation Law.

ARTICLE XVI

In addition to any other consideration which the directors
or officers of the Corporation may lawfully take into account in
determining whether to take or refrain from taking corporate action on
any matter (including proposing any matter to stockholders of the
Corporation) or otherwise discharging the duties of their respective
positions, the Board of Directors, committees of the Board of

<PAGE> 91

Directors, individual directors and individual officers may, in
considering the best interests of the Corporation, consider the
effects of any action upon employees, suppliers and customers of the
Corporation and its subsidiaries, communities in which offices or
other establishments of the Corporation or its subsidiaries are
located and all other pertinent factors.

ARTICLE XVII

At all elections for directors, every stockholder shall have
the right to vote, in person or by proxy, the number of shares owned
by him for as many persons as there are directors to be elected.

ARTICLE XIII

The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute,
and all rights conferred upon stockholders herein are granted subject
to this reservation. Notwithstanding any other provision of the
Certificate of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, by the terms
of any series of Preferred Stock then outstanding, this Certificate of
Incorporation or the By-Laws of the Corporation), the affirmative vote
of the holders of not less than 85% of the total voting power of all
outstanding shares of capital stock of the Corporation shall be
required to amend or repeal, or to adopt any provision inconsistent
with, all Articles of this Certificate of Incorporation except
Articles I, II, III, IV, IX, X, XI and XII.

THE UNDERSIGNED, being the sole incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the
General Corporation Law of Delaware, does make this certificate,
hereby declaring and certifying that this is his act and deed and the
facts herein stated are true, and accordingly, has hereunto set his
hand this 12th day of May, 1997

/s/ Lowell I. Stahl
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Lowell I. Stahl