<PAGE>
Registration No. 333-
As filed with the Securities and Exchange Commission on August 19, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PROGRESSIVE BANCORP, INC.
----------------------------------------------------
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
Delaware 6120 To be applied for
- - - - ------------------------------- ---------------- ----------------------
(State or jurisdiction of (Primary SIC No.) (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
601-617 Court Street
Pekin, Illinois 61554
(309) 347-5101
-----------------------------------------------------------------------
(Address, including Zip Code, and telephone number, including area code
of Registrant's principal executive offices)
Robert B. Pomerenk, Esq.
Luse Lehman Gorman Pomerenk & Schick
A Professional Corporation
5335 Wisconsin Avenue, N.W.
Suite 400
Washington, D.C. 20015
(202) 274-2011
--------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after receipt of all regulatory approvals.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. /X/
- - - - --------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- - - - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of each class Proposed maximum
of securities to be Amount to be offering price per Proposed maximum Amount of
registered registered unit offering price registration fee
- - - - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value 168,172 shares $42.25 (1) $7,105,267 $2160
- - - - --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee based
on the average of the bid and asked price of the Common Stock of Pekin
Savings, s.b. as of August 18, 1997 (a date within 5 days prior to the
filing of this registration statement).
<PAGE>
, 1997
Dear Stockholder:
We invite you to attend a Special Meeting of Stockholders (the "Special
Meeting") of Pekin Savings, s.b. (the "Bank") to be held at the Bank's main
office, 601-617 Court Street, Pekin, Illinois, on [ ], , 1997 at 1:30
p.m., Illinois time.
The attached Notice of Special Meeting and Prospectus/Proxy Statement
describe the formal business to be transacted at the Special Meeting.
Stockholders will vote upon a proposal to reorganize the Bank into the holding
company form of ownership by approving an Agreement and Plan of Reorganization
by which: (i) the Bank will become a wholly owned subsidiary of Progressive
Bancorp, Inc., a newly formed Delaware corporation, and (ii) each outstanding
share of Common Stock of the Bank will be converted into one share of common
stock par value $.01 per share of Progressive Bancorp, Inc. Management believes
that the reorganization into the holding company form of ownership will provide
the Bank greater financial and operating flexibility, since the holding company
will be able to engage in a broader range of financial and business activities
than the Bank may engage. Stockholders will also be asked to vote on a proposal
to adjourn the Special Meeting if there are not enough votes to approve the
holding company reorganization. Finally, stockholders will be asked to vote on a
proposal to amend the Articles of Incorporation of the Bank to change the name
of the Bank to "Pekin Savings Bank." Directors and officers of the Bank will be
present to respond to any questions that our stockholders may have.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. On
behalf of the Board of Directors, we urge you to please sign, date and return
the enclosed proxy card in the enclosed postage-prepaid envelope as soon as
possible even if you currently plan to attend the Special Meeting. This will not
prevent you from voting in person, but will assure that your vote is counted if
you are unable to attend the meeting.
Sincerely,
Arthur E. Krile, Jr.
President and Chief
Executive Officer
<PAGE>
- - - - ------------------------------------------------------------------------------
PEKIN SAVINGS, S.B.
601-617 Court Street
Pekin, Illinois 61554
- - - - --------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on , 1997
A Special Meeting of Stockholders (the "Special Meeting") of Pekin Savings,
s.b. (the "Bank") will be held at the Bank's main office, 601-617 Court Street,
Pekin, Illinois, on , 1997, at 1:30 p.m., Illinois time.
The Special Meeting is for the following purposes which are more completely
described in the accompanying Prospectus/Proxy Statement:
1. The approval of the reorganization of the Bank into the holding
company form of ownership by approving an Agreement and Plan of
Reorganization, pursuant to which the Bank will become a wholly owned
subsidiary of Progressive Bancorp, Inc., a newly formed Delaware
corporation, and each outstanding share of Common Stock of the Bank will be
converted into one share of Common Stock of Progressive Bancorp, Inc.
2. The adjournment of the Special Meeting to a later date if an
insufficient number of shares are present in person or by proxy at the
Special Meeting to approve the Agreement and Plan of Reorganization.
3. The approval of an amendment to the Articles of Incorporation of the
Bank to change the name of the Bank to "Pekin Savings Bank."
The Board of Directors is not aware of any other business to come before the
Special Meeting.
Any action may be taken on any one of the foregoing proposals at the Special
Meeting or any adjournments thereof. Stockholders of record at the close of
business on , 1997, are the stockholders entitled to vote at the Special
Meeting and any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Arthur E. Krile, Jr.
President and Chief
Executive Officer
Pekin, Illinois
, 1997
You are requested to fill in and sign the enclosed proxy which is solicited
by the Board of Directors and to mail it promptly in the enclosed envelope. The
proxy will not be used if you attend and vote at the Special Meeting in person.
- - - - ------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE BANK THE EXPENSE OF A
FURTHER REQUEST FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES.
- - - - -------------------------------------------------------------------------------
<PAGE>
PEKIN SAVINGS, S.B.
Proxy Statement for Special
Meeting of Stockholders
- - - - -------------------------------------------------------------------------------
PROGRESSIVE BANCORP, INC.
- - - - -------------------------------------------------------------------------------
Prospectus for
shares of Common Stock par value $.01 per share
PROSPECTUS AND PROXY STATEMENT
This Prospectus and Proxy Statement is being furnished to the holders of
common stock of Pekin Savings, s.b. (the "Bank"), an Illinois-chartered stock
savings bank, in connection with the solicitation of proxies by the Board of
Directors of the Bank for use at a Special Meeting of Stockholders to be held on
, 1997.
This Prospectus and Proxy Statement also serves as the Prospectus of
Progressive Bancorp, Inc. (the "Holding Company"), a Delaware corporation, under
the Securities Act of 1933 with respect to the issuance of shares of Progressive
Bancorp, Inc. common stock, par value $.01 per share (the "Common Stock"), in
the Reorganization described herein. The accompanying Notice of Special Meeting
and this Prospectus and Proxy Statement are first being mailed to stockholders
on or about , 1997.
At the Special Meeting, holders of shares of Common Stock of the Bank will
be asked to vote upon a proposal to approve an Agreement and Plan of
Reorganization dated as of , 1997 as a result of which (i) the Bank will
become a wholly-owned subsidiary of the Holding Company; and (ii) all of the
outstanding shares of the Bank's Common Stock will be converted, on a
one-for-one basis, into outstanding shares of Common Stock, par value $.01 per
share, of the Holding Company. The stockholders of Common Stock of the Bank will
thus become the stockholders of Common Stock of the Holding Company. This
transaction is hereinafter referred to as the "Reorganization."
In the event the Reorganization is not approved by stockholders at the
Special Meeting, the Bank will continue to operate in its current form.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE ILLINOIS OFFICE OF BANKS AND REAL ESTATE OR THE FEDERAL
DEPOSIT INSURANCE CORPORATION, OR ANY OTHER FEDERAL OR STATE AGENCY NOR HAS THE
COMMISSION, OFFICE, CORPORATION OR ANY OTHER AGENCY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT AND PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY. THE SHARES ARE NOT GUARANTEED BY THE BANK OR THE
HOLDING COMPANY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS
OF THE PRINCIPAL INVESTED.
The date of this Prospectus and Proxy Statement is , 1997.
<PAGE>
AVAILABLE INFORMATION
Under the rules and regulations of the Securities and Exchange Commission
("SEC"), the solicitation of stockholders of the Bank to approve the
Reorganization may be deemed to constitute an offering of Holding Company
Common Stock to be issued in connection therewith. Accordingly, the Holding
Company has filed a Registration Statement with the SEC on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended
("Securities Act"), with respect to such offering, and this Prospectus/Proxy
Statement constitutes a Prospectus of the Holding Company filed as part of
the Registration Statement. This Prospectus/Proxy Statement does not contain
all of the information set forth in the Registration Statement, certain parts
of which are omitted in accordance with the rules and regulations of the SEC.
For further information pertaining to the Holding Company Common Stock and
related matters, reference is made to the Registration Statement, including
the exhibits filed as a part thereof. The Registration Statement, including
exhibits, may be inspected or copied at prescribed rates at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549; Room 1024, and at the public reference facilities in
the SEC's regional offices located at 7 World Trade Center, 13th Floor, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60621. Copies of such material may be obtained at
prescribed rates by writing to the SEC, Public Reference Section, 450 Fifth
Street, N.W., Washington, D.C. 20549. If available, such information may also
be accessed through the SEC's electronic data gathering, analysis and
retrieval system via electronic means, including the SEC's web site on the
Internet (http:// www.sec.gov).
The Bank is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Federal Deposit Insurance Corporation (the "FDIC"). Documents filed by the Bank
with the FDIC can be inspected and copies may be obtained at prescribed rates
from the FDIC Registration and Disclosure Section at Room F-643, 550 17th
Street, N.W., Washington, D.C. 20429, telephone number 202-898-8913. In
addition, the Bank's latest annual report on Form F-2 and quarterly report on
Form F-4 will be made available upon request. The Holding Company is currently a
wholly-owned subsidiary of the Bank that was formed solely for the purpose of
effecting the Reorganization. As a wholly-owned subsidiary, the Holding Company
has not previously been subject to the requirements of the Exchange Act, and
there is currently no public market for its stock. If the Reorganization is
consummated, the Holding Company will become subject to the reporting and proxy
statement requirements of the Exchange Act as currently apply to the Bank and,
in accordance therewith, will file reports, proxy statements and other
information with the SEC. In addition, in connection with the annual meeting of
shareholders of the Holding Company, proxy statements accompanied or preceded by
annual reports to shareholders will contain financial statements that have been
examined and reported upon, with an opinion expressed by an independent auditor.
No person is authorized to give any information or to make any
representation not contained in this Prospectus and Proxy Statement and, if
given or made, such information or representation should not be relied upon as
having been authorized. This Prospectus and Proxy Statement does not constitute
an offer to sell or a solicitation of an offer to purchase a security, or a
solicitation of a proxy, in any jurisdiction in which, or to any person to whom,
it would be unlawful to make such offer or solicitation. Neither the delivery of
this Prospectus and Proxy Statement nor any distribution of the securities being
offered pursuant to this Prospectus and Proxy Statement shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Holding Company or of Bank since the date of this Prospectus and
Proxy Statement.
A copy of the Bank's Annual Report may be obtained at no cost by writing E.
Glen Rittenhouse, Pekin Savings, s.b., 601-617 Court Street, Pekin, Illinois
61554.
(ii)
<PAGE>
- - - - ------------------------------------------------------------------------------
SUMMARY INFORMATION
ON
PROPOSED HOLDING COMPANY
- - - - ------------------------------------------------------------------------------
The following summary does not purport to be complete and is qualified in
its entirety by reference to the more detailed information appearing elsewhere
in this Prospectus and Proxy Statement under "Proposal I--Proposed Formation of
Holding Company", and Exhibits A, B and C attached hereto.
GENERAL
The formation of a holding company will be accomplished under an Agreement
and Plan of Reorganization dated February 26, 1997 ("Plan of Reorganization"),
pursuant to which the Bank will become a wholly owned subsidiary of Progressive
Bancorp, Inc., a newly formed Delaware corporation. Under the terms of the
proposed reorganization (the "Reorganization"), each outstanding share of the
Bank's Common Stock, par value $1.00 per share ("Bank Common Stock"), will be
converted into one share of common stock of the Holding Company, par value $.01
per share ("Common Stock"), and the holders of Bank Common Stock will become the
holders of all of the outstanding Common Stock of the Holding Company. The
Holding Company was incorporated in July 1997 solely for the purpose of becoming
a savings bank holding company and has no prior operating history. Following the
Reorganization, it is intended that the Bank will continue its operations at the
same locations, with the same management, and subject to all the rights,
obligations and liabilities of the Bank existing immediately prior to the
Reorganization.
REASONS FOR THE HOLDING COMPANY REORGANIZATION
The Board of Directors of the Bank believes that a holding company
structure will provide greater flexibility than is currently enjoyed by the
Bank, including flexibility for potential acquisition activities. A holding
company structure will permit the acquisition or formation of other
institutions, which could then be operated on an autonomous basis as separate
subsidiaries of the Holding Company. Upon consummation of the Reorganization,
the Holding Company will be in a position to take immediate advantage of any
acquisition opportunities which may arise, though at this time there are no
agreements or understandings for any specific acquisitions. The establishment
of a bank holding company also permits diversification of operations and the
acquisition and formation of companies engaged in lines of business which,
while complementary to the banking business, may help to reduce the risks
inherent in an industry which is sensitive to interest rate changes. Finally,
the Reorganization will permit the Holding Company to repurchase shares of
its outstanding Common Stock if the Holding Company's capital position and
other available investment opportunities makes such repurchases desirable;
however, management of the Bank has no current plans to implement such
repurchases. Currently, the Bank may not itself repurchase shares of Bank
Common Stock without triggering certain potentially adverse tax consequences.
For further information, see "PROPOSAL I--PROPOSED FORMATION OF HOLDING
COMPANY--Reasons for the Holding Company Reorganization."
(iii)
<PAGE>
MARKET FOR COMMON STOCK
The Bank Common Stock is traded over the counter through the National Daily
Quotation System "Pink Sheets" published by the National Quotation Bureau, Inc.
The Holding Company is currently a subsidiary of the Bank, and consequently
there is no established trading market for its common stock at this time.
Following consummation of the Reorganization, it is anticipated that the Common
Stock of the Holding Company will also be traded over the counter through the
National Daily Quotation System "Pink Sheets".
DIVIDENDS
Following the Reorganization, holders of Holding Company Common Stock will
be entitled to receive dividends when, as and if declared by the Board of
Directors of the Holding Company out of funds legally available therefor. The
timing and amount of future dividends will be within the discretion of the Board
of Directors of the Holding Company and will depend on the consolidated
earnings, financial condition, liquidity and capital requirements of the Holding
Company and its subsidiaries, including the Bank, applicable governmental
regulations and policies and other factors deemed relevant by the Holding
Company's Board of Directors. Currently, it is not anticipated that the dividend
policy of the Holding Company will differ from that of the Bank. See "Proposal
I--Proposed Formation of Holding Company--Comparison of Stockholder
Rights--Payment of Dividends."
MANAGEMENT OF THE HOLDING COMPANY
The Board of Directors of the Holding Company presently consists, and is
expected to continue to consist upon the completion of the Reorganization, of
all of the present directors of the Bank. The officers of the Holding Company
will consist of certain persons now serving as officers of the Bank. See
"Proposal I--Proposed Formation of Holding Company--Management of the Holding
Company."
TAX CONSEQUENCES
Consummation of the Reorganization is expressly conditioned upon receipt by
the Bank of an opinion of its special counsel, Luse Lehman Gorman Pomerenk &
Schick, A Professional Corporation, that, among other things, the Reorganization
will be treated as a non-taxable transaction at the corporate and stockholder
levels. Receipt of this opinion or a ruling from the Internal Revenue Service
("IRS") is a condition to the consummation of the Reorganization. This opinion
will not be binding on the IRS. Each Bank stockholder should consult his or her
own tax counsel as to specific federal, state and local tax consequences of the
Reorganization, if any, to such stockholder. See "Proposal I--Proposed Formation
of Holding Company--Tax Consequences."
CONDITIONS TO THE REORGANIZATION
The Plan of Reorganization sets forth a number of conditions which must be
met before the Reorganization will be completed, including: (i) approval of the
Plan of Reorganization by the holders of a majority of the outstanding shares of
Bank Common Stock; (ii) receipt of either a ruling from the IRS or an opinion of
special counsel that the Reorganization will be treated as a non-taxable
transaction for federal income tax purposes; (iii) approval of the
Reorganization by the Illinois Office of Banks and Real Estate (the "Office"),
the SEC and any other federal or state agency having jurisdiction necessary for
consummation of the Reorganization; and (iv) registration of the shares of the
Common Stock to be issued in the
(iv)
<PAGE>
Reorganization under the Securities Act of 1933 and the compliance by the
Holding Company with all applicable state securities laws relating to the
issuance of the Holding Company's Common Stock.
COMPARISON OF STOCKHOLDERS' RIGHTS
As a result of the Reorganization, holders of the Bank Common Stock,
whose rights are presently governed by Illinois banking law and regulations
and the Articles of Incorporation and Bylaws of the Bank, will become
stockholders of Progressive Bancorp, Inc., a Delaware corporation.
Accordingly, their rights will be governed by the Delaware General
Corporation Law and the Certificate of Incorporation and Bylaws of
Progressive Bancorp, Inc. Certain differences arise from this change of
governing law, as well as from distinctions between the Articles of
Incorporation and Bylaws of the Bank and the Certificate of Incorporation and
Bylaws of Progressive Bancorp, Inc. See "Proposal I--Proposed Holding Company
Formation--Comparison of Stockholders Rights."
The Holding Company's Certificate of Incorporation contains provisions
limiting the liability of directors and officers of the Holding Company for
certain breaches of their fiduciary duty to the Holding Company's stockholders,
indemnifying directors and officers in certain proceedings against them,
providing for a staggered Board of Directors, and providing a supermajority vote
requirement in order to remove a director. Such provisions may have the effect
of protecting the management of the Holding Company against attempts to change
or replace it. Directors and officers of the Bank thus have a personal interest
in the completion of the Reorganization. See "Proposal I--Proposed Holding
Company Formation--Management of the Holding Company--Indemnification of
Officers and Directors and Limitation of Liability" and "--Comparison of
Stockholder Rights."
RECOMMENDATION
The Board of Directors of the Bank has unanimously approved the
Reorganization and recommends that the stockholders vote "FOR" the Plan of
Reorganization.
(v)
<PAGE>
- - - - ------------------------------------------------------------------------------
PROGRESSIVE BANCORP, INC.
PEKIN SAVINGS, S.B.
601-617 Court Street Pekin,
Illinois 61554
(309) 347-5101
- - - - ----------------------------------------------------------------------------
SPECIAL MEETING OF STOCKHOLDERS
, 1997
- - - - -----------------------------------------------------------------------------
INTRODUCTION
This Prospectus and Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Pekin Savings, s.b. (the
"Bank") for a Special Meeting of Stockholders of the Bank (the "Special
Meeting") to be held at the Bank's main office, 601-617 Court Street, Pekin,
Illinois, on [ ], , 1997, at 1:30 p.m., Illinois time. The
accompanying Notice of Special Meeting and this Prospectus and Proxy
Statement, together with the enclosed proxy card, are first being mailed to
stockholders on or about , 1997.
REVOCABILITY OF PROXIES
Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Special Meeting and all adjournments thereof. Proxies may be revoked by
written notice delivered to the Secretary of the Bank at the address shown
above, or by filing of a properly executed later-dated proxy. A proxy will not
be voted if a stockholder attends the Special Meeting and votes in person. The
presence of a stockholder at the Special Meeting alone will not revoke such
stockholder's proxy. Proxies solicited by the Board of Directors will be voted
in accordance with the directions given therein. If no voting directions are
indicated, proxies will be voted in favor of the proposals to be considered at
the Special Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Stockholders of record as of the close of business on , 1997 (the
"Record Date"), are entitled to one vote for each share then held. As of
, 1997, the Bank had approximately [ ] shares of Bank Common Stock, issued
and outstanding. The presence, in person or by proxy, of a majority of the
total number of shares of Bank Common Stock outstanding on , 1997 will
be required to constitute a quorum at the Special Meeting.
The affirmative vote of at least two-thirds of the total shares eligible to
vote is required for approval of Proposal I. The affirmative vote of at least a
majority of the shares of Bank Common Stock present in person or by proxy is
required for approval of Proposal II. At least a majority of the total votes
eligible to be cast is required for approval of Proposal III. Abstentions and
broker non-votes will be counted for purposes of determining that a quorum is
present but will not be counted as votes in favor of Proposal II. Abstentions
and broker non-votes will have the same effect as votes against Proposals I and
III.
<PAGE>
The following table sets forth information with respect to the beneficial
ownership in Bank Common Stock as of the Record Date by persons known by the
Bank to own more than 5% of Bank Common Stock and all officers and directors
as a group. Other than as set forth below, to the best knowledge of the Bank,
no person beneficially owns more than 5% of the outstanding Bank Common
Stock. Ownership is direct unless otherwise specified.
<TABLE>
<CAPTION>
Percent of Shares of
Name and Address Amount and Nature of Bank Common Stock
of Beneficial Owner Beneficial Ownership(1) Outstanding (3)
--------------------- ---------------------- ---------------------
<S> <C> <C>
Arthur E. Krile, Jr. 13,310 7.43%
224 Cypress
Pekin, Illinois 61554
E. Glen Rittenhouse 11,626 6.52%
1804 Columbus Drive
Pekin, Illinois 61554
All Directors and Executive Officers
as a Group (11 persons) 36,801(2) 20.6%
</TABLE>
- - - - ------------------------
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is deemed to be the beneficial owner for purposes of this table, of
any shares of Common Stock if he has shared voting or investment power with
respect to such security, or has a right to acquire beneficial ownership at
any time within 60 days from the Record Date. As used herein, "voting power"
is the power to vote or direct the voting of shares, and "investment power"
is the power to dispose or direct the disposition of shares. Includes all
shares held directly as well as by spouses and minor children, in trust and
other indirect ownership, over which shares the named individuals
effectively exercise sole or shared voting and investment power.
(2) Includes 10,853 shares of Common Stock underlying options granted pursuant
to the Pekin Savings and Loan Association 1992 Stock Option Plan. Does not
include 2,643 shares subject to such options under the Pekin Savings and
Loan Association 1992 Stock Option Plan because such options may not be
exercised within 60 days of the Record Date.
(3) Includes shares underlying options exercisable at any time within 60 days
from the Record Date.
MARKET INFORMATION
The Bank's Common Stock is traded over the counter through the National
Daily Quotation System "Pink Sheets" published by the National Quotation Bureau,
Inc. On the Record Date, there were approximately shares of Bank Common
Stock outstanding and there were approximately holders of record of Bank
Common Stock.
On March 17, 1997, the last full trading day prior to the public
announcement of the proposed Reorganization, the closing price of the Bank
Common Stock was $39.00. On August 1, 1997, the closing price of the Bank
Common Stock was $42.00.
During each of fiscal year 1995 and 1996, the Bank paid an annual cash
dividend of $.25 per share on the Bank Common Stock. In fiscal year 1997, the
Bank paid an annual cash dividend of $1.00 per share on the Bank Common Stock.
2
<PAGE>
The following table sets forth the range of high and low sales prices of
the Bank Common Stock during the two most recent fiscal years and subsequent
interim periods based on information obtained by the Bank. Due to the fact
that the Bank Common Stock is not actively traded, the high and low sales
price may not be an accurate indication of the Bank Common Stock's actual
value.
<TABLE>
<CAPTION>
Sales Price
--------------------
High Low
--------- ---------
1995
- - - - -----
<S> <C> <C>
First Quarter.............................................................................................. $ 21.00 $ 21.00
Second Quarter............................................................................................. 21.00 21.00
Third Quarter.............................................................................................. 21.00 23.50
Fourth Quarter............................................................................................. 23.50 23.50
1996
- - - - ----
First Quarter.............................................................................................. 23.50 23.50
Second Quarter............................................................................................. 23.50 25.00
Third Quarter.............................................................................................. 25.00 28.50
Fourth Quarter............................................................................................. 28.50 35.00
1997
- - - - -----
First Quarter.............................................................................................. 35.00 39.00
Second Quarter............................................................................................. 39.00 42.00
Third Quarter.............................................................................................. 42.00 44.00
</TABLE>
3
<PAGE>
PEKIN SAVINGS, s.b.
Pekin Savings, s.b. is an Illinois-chartered stock savings bank
headquartered in Pekin, Illinois. The Bank was founded in 1882 and has been a
member of the Federal Home Loan Bank System since 1955. Its deposits are insured
up to the regulatory maximum by the Savings Association Insurance Fund, which is
administered by the Federal Deposit Insurance Corporation. On January 17, 1994,
the Bank converted from an Illinois-chartered savings and loan association to an
Illinois-chartered savings bank.
The Bank is, and intends to continue to be, a community-oriented financial
institution committed to offering a variety of financial services to meet the
needs of its local community. The Bank is engaged primarily in the business of
attracting deposits from the general public and using such funds to originate
mortgage loans for the purchase of single-family homes in Tazewell and Mason
counties, Illinois. The Bank also invests in mortgage-backed securities, all of
which are secured by one- to four-family residential mortgage loans that are
insured or guaranteed by the Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association or Government National Mortgage Association. The
Bank also makes home equity loans secured by the borrower's principal residence
and other types of consumer loans such as auto loans and home improvement loans.
To a lesser extent, the Bank makes interim construction loans. Although the Bank
has a small number of commercial real estate loans in its portfolio, such loans
are not actively originated by the Bank. In addition to its lending activities
and investments in mortgage-backed securities, the Bank invests in securities
issued by the United States Government and its agencies.
4
<PAGE>
SUMMARY FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF THE BANK
Set forth below are selected financial and other data of Pekin Savings, s.b.
("Pekin Savings" or the "Bank"). This financial data is derived in part from,
and should be read in conjunction with, the Consolidated Financial Statements of
the Bank and notes thereto presented elsewhere in this Annual Report.
<TABLE>
<CAPTION>
At September 30,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Total amount of:
Assets............................................................... $ 83,299 $ 82,359 $ 78,802 $ 76,051 $ 81,466
Loans receivable, net................................................ 55,777 48,419 43,683 32,749 32,802
Mortgage-backed securities........................................... 10,639 14,589 16,601 22,105 26,107
Total investments:
Interest-bearing deposits.......................................... 1,419 2,755 3,364 1,471 5,596
Investment securities.............................................. 11,238 12,696 11,276 4,182 4,783
Assets held for sale (1)............................................. -- -- -- 12,644 8,991
Deposits............................................................. 67,323 66,913 66,537 68,327 77,127
Borrowed funds..................................................... 8,000 8,000 6,000 2,000 --
Retained earnings, substantially restricted........................ 5,372 5,021 4,357 3,472 2,526
Stockholders' equity................................................. 6,657 6,408 5,466 4,789 3,839
</TABLE>
- - - - ------------------------
(1) Consists of certain U.S. Treasury securities, mortgage-backed securities and
fixed-rate first mortgage loans that may not be held to their contractual
maturity.
5
<PAGE>
SELECTED FINANCIAL RATIOS AND OTHER DATA
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Return on average assets (net income divided by average total assets)........ 0.46% 0.88% 1.15% 1.21% 0.61%
Return on average equity (net income divided by average equity).............. 5.88 11.95 17.05 21.77 22.42
Average equity to average assets............................................. 7.90 7.34 6.72 5.54 2.70
Average equity to average liabilities........................................ 8.58 7.92 7.21 5.86 2.78
Retained earnings to total assets at end of period........................... 6.45 6.10 5.53 4.56 3.10
Total stockholders' equity to total assets at end of period.................. 7.99 7.78 6.94 6.30 4.71
Interest rate spread during period........................................... 2.33 2.86 3.30 2.84 2.03
Net interest margin during period (1)........................................ 2.62 3.11 3.47 3.04 2.03
Interest expense to average interest-earning assets.......................... 4.79 4.48 4.12 4.91 6.27
Interest income to average assets............................................ 7.05 7.29 7.29 7.66 7.97
Interest expense to average assets........................................... 4.56 4.30 3.96 4.73 6.03
Non-interest expense to average assets....................................... 2.82 2.32 2.45 2.18 1.99
Nonperforming loans to total loans at end of period.......................... 0.20 0.25 0.11 0.43 1.19
Nonperforming assets to total assets......................................... 0.28 0.17 0.09 0.32 0.91
Allowance for loan losses to net loans receivable at end of period........... 0.39 0.44 0.46 0.64 0.77
Average interest-earning assets to average interest-bearing liabilities...... 106.12 105.48 104.44 104.08 100.00
Net interest income to other operating expenses.............................. 88.33 128.58 136.22 134.68 98.00
Number of:
Real estate loans outstanding............................................... 1,482 1,483 1,454 1,514 1,546
Deposit accounts............................................................ 9,387 9,367 9,504 9,853 10,562
Offices..................................................................... 2 2 2 2 2
</TABLE>
- - - - ------------------------
(1) Net interest margin represents net interest income divided by average
interest-earning assets.
6
<PAGE>
SUMMARY OF OPERATING DATA
<TABLE>
<CAPTION> At or For the Year Ended September 30,
------------------------------------------
<CAPTION> 1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Interest income (1).......................................................... $ 5,963 $ 5,861 $ 5,638 $ 6,001 $ 6,708
Interest expense............................................................. 3,855 3,460 3,059 3,703 5,071
--------- --------- --------- --------- ---------
Net interest income.......................................................... 2,108 2,401 2,579 2,298 1,637
Provision for loan losses.................................................... 12 20 41 36 24
--------- --------- --------- --------- ---------
Net interest income after provision for loan losses...................... 2,096 2,381 2,538 2,262 1,613
--------- --------- --------- --------- ---------
Noninterest income:
Service charges............................................................ 111 112 136 124 111
Travel agency fees, net of direct expenses................................. 200 153 113 -- --
Commissions from sale of annuities......................................... 51 10 9 15 21
Net gain on sale of investments, mortgage-backed securities, assets
held for sale, and loans held for sale................................... 122 72 112 514 523
Other...................................................................... 287 242 248 205 166
--------- --------- --------- --------- ---------
Total noninterest income................................................. 771 589 618 858 821
--------- --------- --------- --------- ---------
Noninterest expense:
General and administrative expense......................................... 1,928 1,865 1,815 1,628 1,523
Net (gain) loss on sale of real estate owned............................... (6) 1 8 42 25
Real estate owned expense, net of income................................... 24 (6) 38 34 22
BIF/SAIF special assessment................................................ 440 -- -- -- --
Other...................................................................... -- 7 32 2 100
--------- --------- --------- --------- ---------
Total noninterest expense................................................ 2,386 1,867 1,893 1,706 1,670
--------- --------- --------- --------- ---------
Income before income taxes and cumulative effect of change in accounting
principle.................................................................. 481 1,103 1,263 1,414 764
Income taxes................................................................. 88 398 447 469 255
--------- --------- --------- --------- ---------
Income before cumulative effect of change in accounting principle............ 393 705 816 945 509
Cumulative effect of change in accounting for income taxes................... -- -- 70 -- --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income................................................................. $ 393 $ 705 $ 886 $ 945 $ 509
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Per common share data (2):
Primary income per share before cumulative effect of change in accounting
principle.............................................................. $ 2.24 $ 4.05 $ 4.74 $ 5.75 $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Primary income per share..................................................... $ 2.24 $ 4.05 $ 5.14 $ 5.75 $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- - - - ------------------------
(1) Includes fee income on the servicing of loans originated and sold by the
Bank.
(2) Income per share information for the year ended September 30, 1992 is not
applicable as the Bank was not a capital stock company until September 29,
1992.
7
<PAGE>
MANAGEMENT
The Bank's Board of Directors is currently composed of seven members. The
Bank's bylaws provide that approximately one-third of the directors are to be
elected annually. Directors of the Bank are generally elected to serve for a
three year period or until their respective successors shall have been elected
and shall qualify.
The table below sets forth certain information regarding the composition of
the Bank's Board of Directors, including the terms of office of Board members.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
POSITIONS OWNED ON
HELD IN THE DIRECTOR CURRENT TERM THE RECORD
NAME (1) AGE (7) BANK SINCE (2) TO EXPIRE DATE (3)
- - - - ----------------------------------- ----------- ----------------------------------- ----------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Patrick E. Oberle 49 Director 1994 1999 933(6)
James S. Wolf 51 Director 1994 1999 2,233
Arthur E. Krile, Jr. 60 President, Chief Executive Officer 1985 1997 13,310(4)
and Director
E. Glen Rittenhouse 48 Senior Vice President, Secretary
and Director 1987 1997 11,626(5)
Orville G. Deppert 80 Chairman of the Board 1951 1998 2,641
R.H. More 83 Vice Chairman of the Board 1953 1998 2,641
John L. Steger 33 Director 1996 1998 200
<CAPTION>
PERCENT
OF
NAME (1) CLASS
- - - - ----------------------------------- -----------
<S> <C>
Patrick E. Oberle *%
James S. Wolf 1.30
Arthur E. Krile, Jr. 7.43
E. Glen Rittenhouse 6.52
Orville G. Deppert 1.50
R.H. More 1.50
John L. Steger *
(footnotes on following page)
</TABLE>
8
<PAGE>
- - - - ------------------------
(*) Less than 1%.
(1) The mailing address for each person listed is 601 Court Street, Pekin,
Illinois 61554.
(2) Reflects initial appointment to the Board of Directors of the Bank's mutual
predecessor.
(3) Includes shares subject to options granted under the Pekin Savings and Loan
Association 1992 Stock Option Plan (the "Option Plan") and exercisable
within 60 days of the Record Date; does not include shares subject to
options that are not exercisable within 60 days of the Record Date.
(4) Includes 4,936 shares subject to options granted pursuant to the Option
Plan.
(5) Includes 4,376 shares subject to options granted pursuant to the Option
Plan.
(6) Includes 683 shares subject to options granted pursuant to the Option Plan.
(7) As of September 30, 1996.
The principal occupation during the past five years of each director and
executive officer of the Bank is set forth below. All directors and executive
officers have held their present positions for five years unless otherwise
stated.
Orville G. Deppert became Chairman of the Board in 1967. He is currently
retired.
R.H. More became Vice Chairman of the Board in 1981. He is currently
retired, and was the former publisher of The Pekin Daily Times.
Arthur E. Krile, Jr. has been President and Chief Executive Officer of the
Bank since 1985.
E. Glen Rittenhouse is the Senior Vice President and Secretary of the Bank.
John L. Steger is a partner and vice president of Steger's Ltd., a furniture
retailer located in Pekin, Illinois.
James S. Wolf is a certified public accountant and has been President of
Wolf, Tesar & Company, P.C., an accounting firm, since 1980.
Patrick E. Oberle has been a principal of the law firm Elliff, Keyser,
Oberle & Dancey, P.C. since 1976.
James A. Crafton has been employed by the Bank since 1977 and is presently
Vice President-Installment Loans.
Lisa M. Harness has been employed by the Bank since 1976, and presently
serves as Vice President-Mortgage Loans--Servicing.
David Earl Riley has been employed by the Bank since 1986, and presently
serves as Vice President--Mortgage Loan Originations.
Eugene Van Vooren has been employed by the Bank since 1985 and presently
serves as Vice President and Treasurer. He is the chief financial officer of the
Bank.
9
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended September 30,
1996, 1995, and 1994, certain information as to the total remuneration paid by
the Bank to the Chief Executive Officer of the Bank as of September 30, 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1)
----------------------------------------------------------
FISCAL
NAME AND YEARS ENDED OTHER ANNUAL
PRINCIPAL POSITION (2) SEPTEMBER 30, SALARY (3) BONUS COMPENSATION (4)
- - - - ---------------------------------------------------- --------------- ----------- --------- -----------------
<S> <C> <C> <C> <C>
Arthur E. Krile, Jr. 1996 $ 64,473 $ 5,875 $--
President and Chief 1995 62,588 5,400 --
Executive Officer 1994 62,348 4,500 --
<CAPTION>
NAME AND ALL OTHER
PRINCIPAL POSITION (2) COMPENSATION (5)
- - - - ---------------------------------------------------- -------------------
<S> <C>
Arthur E. Krile, Jr. $ 2,096
President and Chief 1,863
Executive Officer 2,013
</TABLE>
- - - - ------------------------
(1) Does not include benefits pursuant to the Bank's Pension Plan. See
"Benefits."
(2) No other executive officer received salary and bonuses that in the aggregate
exceeded $100,000.
(3) Includes amounts deferred at the election of the named executive officer
pursuant to the Bank's 401(k) Plan.
(4) Does not include earnings on the named executive officer's 401(k) Plan
account. No long-term compensation, stock options (other than pursuant to
the Option Plan), or other stock awards were awarded to this executive
officer during the fiscal years ended September 30, 1996, 1995, or 1994.
(5) Includes matching payments made by the Bank on deferred amounts under the
Bank's 401(k) Plan.
DIRECTORS' COMPENSATION
Members of the Board of Directors of the Bank each received $6,000 during
the year ended September 30, 1996; the Vice Chairman of the Board received an
additional fee of $600 and the Chairman received an additional fee of $1,200
during the year ended September 30, 1996. Members of the Board committees are
not paid additional amounts for attendance at committee meetings. The Bank paid
a total of $43,800 in directors' and committee fees for the year ended September
30, 1996.
BENEFITS
CHANGE OF CONTROL AGREEMENTS. The continued success of the Bank depends
to a significant degree on the skills and competence of its officers. In
August 1995, the Board of Directors of the Bank approved Change of Control
Agreements for each of the following officers: Arthur E. Krile, Jr.,
President and Chief Executive Officer; E. Glen Rittenhouse, Senior Vice
President and Secretary; Eugene Van Vooren, Vice President and Treasurer;
James A. Crafton, Vice President-Installment Loans; D. Earl Riley, Vice
President-Mortgage Loan Originations; and Lisa M. Harness, Vice
President-Mortgage Loans-Servicing. The Change of Control Agreements were not
presented to shareholders of the Bank for a vote. The Change of Control
Agreements are intended to assist the Bank in maintaining a stable and
competent management base by enabling the Bank to offer to the designated
officers certain protections against termination without cause in the event
of a "change in control" as defined in the agreements.
Each of the Change of Control Agreements for Messrs. Krile and Rittenhouse
has a term of 36 months. As of March 31, 1997, the Change of Control Agreement
for Mr. Van Vooren had a remaining term of eight months. Each of the Change of
Control Agreements for Messrs. Crafton and Riley and Ms. Harness has a term of
12 months. Each agreement provides that at any time following a "change in
control" of the Bank, if the officer's employment with the Bank is
involuntarily, or in certain circumstances voluntarily, terminated during the
term of the agreement, for any reason other than "cause" (as defined in the
agreement), the officer would be entitled to receive a payment in an amount
determined by the average of the five preceding years' annual base salary,
including bonuses and any other cash compensation paid during such years, and
the amount of any benefits received pursuant to any employee benefit plans on
behalf
10
<PAGE>
of such officer maintained by the Bank during such years, excluding life,
medical, dental and disability insurance coverage. For the purposes of the
agreements, a "change in control" is defined to include the execution of an
agreement for the sale of all, or a substantial portion, of the assets of the
Bank, or for a merger or recapitalization of the Bank whereby the Bank is not
the surviving entity, but does not include the Reorganization.
If the "change in control" provisions are triggered under the terms of the
Change of Control Agreements, the following officers would receive approximately
the amounts set forth opposite their names in severance compensation if the
termination of employment occurred in the year ended September 30, 1996:
TERMINATION
OFFICERS AMOUNT
------------ -----------
Arthur E. Krile, Jr............. $ 199,710
E. Glen Rittenhouse............. 172,032
Eugene Van Vooren............... 59,890
The aggregate amount of severance compensation for all officers of the Bank
if termination of employment occurred in the year ended September 30, 1996 would
be $542,369.
PENSION PLAN. All full-time salaried employees who have attained the age of
21 and completed one year of service with the Bank are enrolled in the Bank's
defined benefit multiple employer non-contributory pension plan sponsored by the
Financial Institutions Retirement Fund. Employees remain eligible for plan
benefits for so long as such employees complete 1,000 hours of service in each
calendar year. The pension plan provides for monthly payments to or on behalf of
each covered employee upon the employee's attainment of normal retirement age,
at age 65. These payments are calculated in accordance with a formula based on
the employee's average annual salary for the five consecutive years of highest
salary during benefit service and his number of years of benefit service. Early
retirement and disability benefits are also payable under the Plan. In addition,
if an eligible employee dies while in active service, his beneficiary is
entitled to a lump sum death benefit equal to 100% of such employee's last 12
months' salary, plus an additional 10% of such salary for each year of benefit
service until a maximum of 300% of such salary is reached for 20 or more years.
Forms of payment, in addition to an annuity, are also available under the Plan.
Under the Plan, the Bank makes an annual contribution for the benefit of
eligible employees computed on an actuarial basis. At September 30, 1996, the
market value of the pension plan trust fund equaled approximately $805,000.
Employee benefits under the Plan vest as designated in the schedule below:
YEARS OF CREDITED SERVICE VESTED
VESTING PURPOSES* FOR PERCENTAGES
------------------------- ------------
Less than 5.................. 0%
5 or more.................... 100%
- - - - ------------------------
* Eligible employees who have reached age 65 are automatically 100% vested,
regardless of completed years of employment.
11
<PAGE>
The following table illustrates annual pension benefits at age 65 under the
most advantageous plan provisions available at various levels of compensation
and years of service. Under the Plan, the benefit amounts in the following table
are not subject to any deduction for social security or other offset amounts.
<TABLE>
<CAPTION>
YEARS OF BENEFIT SERVICE
-----------------------------------------------------
AVERAGE
SALARY 10 15 20 25 30
- - - - ---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 20,000 $ 3,000 $ 4,600 $ 6,000 $ 7,600 $ 9,000
$ 30,000 $ 4,500 $ 6,900 $ 9,000 $ 11,400 $ 13,500
$ 50,000 $ 7,500 $ 11,500 $ 15,000 $ 19,000 $ 22,500
$ 75,000 $ 11,250 $ 17,250 $ 22,500 $ 28,500 $ 33,750
$ 100,000 $ 15,000 $ 23,000 $ 30,000 $ 38,000 $ 45,000
$ 150,000 $ 22,500 $ 34,500 $ 45,000 $ 57,000 $ 67,500
</TABLE>
As of September 30, 1996, Arthur E. Krile and E. Glen Rittenhouse had 35
years and 23.25 years of creditable service, respectively, under the Plan. Also
as of September 30, 1996, the average annual salary for the five consecutive
years of highest salary for Messrs. Krile and Rittenhouse was $65,170 and
$57,344, respectively.
FLEXIBLE BENEFITS PROGRAM (SECTION 125 PLAN). The Bank has established a
Flexible Benefits Program pursuant to Section 125 of the Internal Revenue Code
of 1986, as amended. The Program provides for payment of eligible employee
health care and dependent care expenses through fixed payroll deductions. All
full-time employees of the Bank are eligible to participate in the Program after
six continuous months of employment. The Bank absorbs the costs of
administration of the Program. The third party administrator of the Program is
Employee Benefits Cooperative, Madison, Wisconsin.
STOCK OPTION PLAN. The Bank adopted the Pekin Savings and Loan Association
1992 Stock Option Plan (the "Option Plan"), pursuant to which a number of
options have been granted to officers, directors and employees of the Bank. The
purpose of the Option Plan is to provide additional incentive to certain
officers, directors and employees by facilitating their purchase of stock in the
Bank. The Option Plan provides for a term of ten years, after which no awards
may be made, unless earlier terminated by the Board of Directors pursuant to the
Option Plan.
The Option Plan is administered by a committee of non-employee directors
designated by the Board of Directors (the "Option Committee"). Such members of
the Option Committee are "disinterested" within the meaning of Rule 16b-3
pursuant to the Securities Exchange Act of 1934. The Option Committee selects
those to whom options are to be granted and the number of such options to be
granted.
Officers, directors and employees are eligible to receive, at no cost to
them, options under the Option Plan. Options granted under the Option Plan
constitute both incentive stock options (options that afford favorable tax
treatment to recipients upon compliance with certain restrictions pursuant to
Section 422 of the Code and that do not normally result in tax deductions to the
Bank) and options that do not so qualify. The option price may not be less than
100% of the fair market value of the shares on the date of
12
<PAGE>
the grant, and no option shall be exercisable after the expiration of ten years
from the date it is granted; provided, however, that in the case of any
employee who owns more than 10% of the outstanding Common Stock at the time the
option is granted, the option price may not be less than 110% of the fair
market value of the shares on the date of the grant, and the option shall not
be exercisable after the expiration of five years from the date it is granted.
Option shares may be paid in cash, shares of the Common Stock, or a
combination of both.
No federal income tax consequences are incurred by the Bank or the optionee
at the time of grant of an option. The exercise of an option which is an
incentive stock option will generally not by itself result in the recognition of
taxable income to the optionee nor entitle the Bank to a deduction at the time
of such exercise. However, the difference between the exercise price and the
fair market value of the option shares on the date of exercise is an item of tax
preference which may, in certain situations, trigger the alternative minimum tax
under the Code. The optionee will recognize capital gain or loss upon resale of
the shares received upon such exercise; provided that he held such shares for at
least one year after transfer of the shares to him or two years after the grant
of the option, whichever is later. If the shares are not held for that period,
the optionee will recognize ordinary income upon disposition in an amount equal
to the lesser of (i) the difference between the exercise price and the fair
market value on the date of the exercise of the shares or (ii) the gain realized
upon the sale. The exercise of a non-incentive stock option will generally
result in the recognition of ordinary income by the optionee on the date of
exercise in an amount equal to the difference between the exercise price and the
fair market value of the shares acquired pursuant to the option. The Bank will
be entitled to a deduction for federal income tax purposes at the same time and
in the same amount as any ordinary income is recognized by the optionee.
The Option Plan provides that, in the event of a change in control or
imminent change in control of the Bank, any option which provides for its
exercise in installments shall become immediately exercisable, and the optionee
shall, at the discretion of the Option Committee, be entitled to receive cash in
an amount equal to the excess of the fair market value of the stock subject to
the option over the option price in exchange for the surrender of the option.
"Control" generally refers to the acquisition by any person or group of the
ownership or power to vote more than 25% of the Bank's stock, the control of the
election of a majority of the directors or the exercise of a controlling
influence over the management or policies of the Bank. However, pursuant to the
terms of the Option Plan, the Reorganization is not a change in control that
would cause the immediate exerciseability of the options.
The Bank will receive no monetary consideration for granting of stock
options under the Option Plan. It will receive no monetary consideration other
than the option price for each share issued to optionees upon the exercise of
such options.
TRANSACTIONS WITH CERTAIN RELATED PERSONS. The Bank, like many financial
institutions, has followed a policy of granting loans to its officers, directors
and employees. All loans by the Bank to its directors and executive officers are
subject to FDIC regulations regarding loans and other transactions with
affiliated persons of the Bank. In the past, loans to such persons have been
made in the ordinary course of business on substantially the same terms and
conditions, except for reduced interest rates and loan fees, as those prevailing
at the time for comparable transactions with other persons, and did not involve
more than the normal risk of collectibility or present any other unfavorable
features. In 1989, federal laws regarding transactions with affiliates were
amended to require that all loans to directors and executive officers be made on
terms and conditions comparable to those for similar transactions with non-
affiliates. The Bank's policy is to make loans to affiliates in compliance with
the federal laws.
13
<PAGE>
Set forth below is certain information as to loans made by the Bank to each
of its directors and executive officers whose aggregate indebtedness to the Bank
exceeded $60,000 at any time since October 1, 1995. Unless otherwise
indicated, all of the loans are secured loans and all loans designated as
residential loans are first mortgage loans secured by the borrower's principal
place of residence.
<TABLE>
<CAPTION>
HIGHEST BALANCE AS
BALANCE OF
ORIGINAL DURING SEPTEMBER
NAME OF OFFICER DATE LOAN 1996 FISCAL 30,
OR DIRECTOR LOAN TYPE ORIGINATED AMOUNT YEAR 1996
- - - - -------------------------------- -------------------------------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Lisa M. Harness Home Mortgage 10/93 $ 65,500 $ 62,555 $ 60,784
Vice President Home Improvement 11/95 4,000 4,000 3,436
2nd Mortgage 12/95 22,000 22,000 21,536
D. Earl Riley Home Mortgage 08/95 $ 60,000 $ 59,949 $ 58,865
Vice President Home Mortgage 07/93 75,000 73,468 72,650
2nd Mortgage 4/96 23,500 23,500 21,928
1st Mortgage 07/95 108,000 107,902 106,686
James S. Wolf Home Mortgage 08/95 $ 160,000 $ 159,511 $ 153,935
Director
<CAPTION>
INTEREST
RATE ON
NAME OF OFFICER SEPTEMBER 30,
OR DIRECTOR 1996
- - - - -------------------------------- ---------------
<S> <C>
Lisa M. Harness 7.00%
Vice President 9.50%
8.00%
D. Earl Riley 7.25%
Vice President 7.50%
7.25%
7.25%
James S. Wolf 7.375%
Director
</TABLE>
PROPOSAL I--PROPOSED FORMATION OF HOLDING COMPANY
SUMMARY
The formation of a holding company will be accomplished under the Plan of
Reorganization, pursuant to which the Bank will become a wholly owned subsidiary
of the Holding Company. Under the terms of the Plan of Reorganization, each
outstanding share of Bank Common Stock will be converted into one share of
Common Stock and the holders of Bank Common Stock will become the holders of all
of the outstanding Common Stock of the Holding Company. The Holding Company was
incorporated in July 1997 solely for the purpose of becoming a savings bank
holding company and has no prior operating history. Following the
Reorganization, it is intended that the Bank will continue its operations at the
same locations, with the same management, and subject to all the rights,
obligations and liabilities of the Bank existing immediately prior to the
Reorganization.
REASONS FOR THE HOLDING COMPANY REORGANIZATION
The Board of Directors of the Bank believes that a holding company structure
is in the best interest of the Bank's shareholders because it will provide
greater flexibility than is currently enjoyed by the Bank, including flexibility
in acquisition activities and management structure. If the holding company
acquires additional subsidiaries, the acquired institution would be able to
operate on an autonomous basis as a separate, wholly-owned subsidiary of the
Holding Company rather than as a division of the Bank. This more autonomous
operation may be decisive in acquisition negotiations. The holding company form
of organization would permit flexibility in management structure in that it
would allow an acquired institution to retain its own directors, officers and
corporate name as well as having representation on the Holding Company board of
directors. The holding company structure would also permit the Bank and the
Holding Company to have different officers and directors, although the Bank
currently intends that all officers and directors of the Holding Company be
officers and directors of the Bank. Although there are no pending or ongoing
agreements or understandings for acquisitions, and although there have been no
recent discussions concerning any acquisitions by or of the Bank, the Holding
Company will be in a position to take immediate advantage of any acquisition
opportunities that arise. The acquisition of another banking institution would
be subject to regulatory approval, and certain aspects of the operations of the
Holding Company and those of
14
<PAGE>
its banking institution subsidiaries would still be subject to oversight and
supervision by the applicable regulatory agency. See "REGULATION OF THE HOLDING
COMPANY."
The establishment of a bank holding company also permits diversification of
operations and the acquisition and formation of companies engaged in lines of
business which, while complementary to the banking business, may help to reduce
the risks inherent in an industry that is sensitive to interest rate changes.
Accordingly, upon consummation of the Reorganization, the Holding Company will
be in a position to take immediate advantage of any acquisition opportunities
that may arise, though at this time there are no agreements or understandings
for any specific acquisitions. Management believes that acquisition or formation
of such enterprises, which do not have the degree of asset and liability
interest rate sensitivity inherent in the structure of a financial institution,
will provide a beneficial stabilizing effect on operations. Federal Reserve
regulations, however, prohibit a bank holding company from engaging in nonbank
activities that are not closely related to banking. Such prohibited activities
currently include, for example, real estate development and securities
underwriting.
The Board of Directors of the Bank believes that the holding company form of
organization will also provide flexibility for meeting the future financial
needs of the Bank or any other subsidiaries of the Holding Company. For example,
the holding company form of organization would permit the holding company to
repurchase shares of common stock without the adverse tax consequences that
would be experienced by the Bank in the event that it repurchased shares of Bank
Common Stock, which tax consequences would be a result of the recapture of a
portion of the bad debt reserves which the Bank has established for federal
income tax purposes under Section 593 of the Internal Revenue Code of 1986, as
amended.
The Holding Company may ultimately consider a private or public offering of
equity securities following completion of the Reorganization in order to raise
capital for possible diversification and expansion, although the Board of
Directors of the Holding Company has no intention at this time of issuing
additional equity or debt securities immediately following completion of the
Reorganization. The timing, type of security, size and terms of any offering
will depend upon market and interest rate conditions at that time. No
stockholder approval of such an offering would be required by the chartering
instruments of the Holding Company. There can be no assurance that any such
offering will occur.
THE BOARD OF DIRECTORS OF THE BANK HAS UNANIMOUSLY APPROVED THE
REORGANIZATION AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE PLAN OF
REORGANIZATION.
PLAN OF REORGANIZATION
The Reorganization will be accomplished under the Plan of Reorganization,
which is attached as Exhibit A hereto. The following discussion is qualified in
its entirety by reference to the Plan of Reorganization. The Plan of
Reorganization was unanimously approved by the Board of Directors on February
26, 1997.
The Holding Company is a newly organized Delaware corporation which was
formed by the Bank solely for the purpose of effecting the Reorganization.
Therefore, the Holding Company has no prior operating history. The Plan of
Reorganization is by and among the Holding Company, the Bank, and Pekin Interim
Savings Bank, a to-be-formed interim Illinois stock savings bank ("Interim").
The reorganization of the Bank will be accomplished by the following steps:
(i) the formation by the Bank of a wholly owned service corporation, the Holding
Company, incorporated under the laws of the State
15
<PAGE>
of Delaware for the primary purpose of becoming the sole stockholder of a
newly formed interim stock savings bank, and subsequently becoming the sole
stockholder of the Bank Common Stock, which formation shall include the
issuance of up to 500 shares of the Common Stock to the Bank for a price of
$100 per share; (ii) the formation of an interim Illinois stock savings bank,
"Interim," which will be wholly owned by the Holding Company; and (iii) the
merger of Interim into the Bank, with the Bank as the surviving corporation.
Pursuant to such merger: (a) all of the issued and outstanding shares of Bank
Common Stock will automatically be converted by operation of law on a one-for-
one basis into an equal number of issued and outstanding shares of Common
Stock, and (b) all of the issued and outstanding shares of common stock of
Interim will automatically be converted by operation of law on a one-for-one
basis into an equal number of issued and outstanding shares of Bank Common
Stock, which will be all of the issued and outstanding stock of the Bank.
After the Reorganization, the former holders of Bank Common Stock will be
the holders of all of the outstanding Common Stock of the Holding Company. Thus,
because the Holding Company will hold all of the issued and outstanding voting
stock of the Bank, the Bank is described herein as a "wholly owned" subsidiary
of the Holding Company following the Reorganization.
The Board of Directors of the Bank presently intends to capitalize the
Holding Company up to approximately $50,000, subject to the approval of
regulatory authorities. Future capitalization of the Holding Company will be
dependent upon dividends declared by the Bank based on future earnings, or the
raising of additional capital by the Holding Company through a future issuance
of securities, debt or by other means. The Board of Directors of the Holding
Company has no present plans or intentions with respect to any future issuance
of securities or debt at this time.
After the Reorganization, the Bank will continue its existing business and
operations as a wholly owned subsidiary of the Holding Company and the
consolidated capitalization, assets, liabilities, income and financial
statements of the Holding Company immediately following the Reorganization will
be substantially the same as those of the Bank immediately prior to consummation
of the Reorganization. The Articles of Incorporation and the Bylaws of the Bank
will continue in effect, and will not be affected in any manner by the
Reorganization, except that, if approved by stockholders, the Articles of
Incorporation and Bylaws of the Bank will be amended to change the name of the
Bank to "Pekin Savings Bank." The corporate existence of the Bank will continue
unaffected and unimpaired by the Reorganization.
EFFECTIVE DATE
The "Effective Date" of the Reorganization will be the date upon which the
Articles of Merger pertaining to the Reorganization are filed with and endorsed
by the State of Delaware. Although management of the Bank does not anticipate
any significant delays in obtaining the endorsement of the Articles of Merger,
the effects of any such delays on holders of the Bank Common Stock would depend
upon the attendant facts and circumstances surrounding the specific delay.
OPTIONAL EXCHANGE OF STOCK CERTIFICATES
After the Effective Date of the Reorganization, Bank Common Stock
certificates evidencing shares of the Bank Common Stock will represent, by
operation of law, the same number of shares of the Holding Company's Common
Stock. Former holders of the Bank Common Stock will not be required to exchange
their Bank Common Stock certificates for the Common Stock certificates, but will
have the option to exchange Bank stock certificates for the Holding Company
stock certificates. Any stockholder desiring more
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information about such exchange may request exchange may request additional
information from the Bank by writing the Secretary of the Bank, 601-617
Court Street, Pekin, Illinois 61554.
TAX CONSEQUENCES
The Bank has received an opinion of its special counsel, Luse Lehman
Gorman Pomerenk & Schick, A Professional Corporation, Washington, D.C., as to
certain federal income tax consequences of the Reorganization. Receipt of
this opinion of counsel or a letter ruling of the Internal Revenue Service
(the "IRS"), is a condition to the consummation of the Reorganization. This
opinion, which is not binding on the IRS, provides as follows:
(1) The merger of Interim with and into the Bank will constitute a
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended ("Code"), and the Holding Company, the Bank and Interim will each
be a "party to a reorganization" within the meaning of Section 368(b) of
the Code.
(2) No gain or loss will be recognized by the Bank's stockholders on the
exchange of their Bank Common Stock for the Holding Company Common Stock.
(3) No gain or loss will be recognized by the Holding Company on the
receipt by it of the Bank Common Stock solely in exchange for Interim
common stock.
(4) The basis of the Holding Company Common Stock received by the
Bank's stockholders will be the same as the basis of the Bank Common Stock
surrendered in exchange therefor.
(5) The holding period of the Holding Company Common Stock to be
received by the stockholders of the Bank will include the holding period of
the Bank Common Stock surrendered in exchange therefor, provided the Bank
Common Stock was held as a capital asset on the date of the exchange.
(6) No gain or loss will be recognized by the Bank by reason of the
holding company formation, except to the extent that the Bank might have
taxable income as a result of payments to stockholders who exercise
dissenters' appraisal rights and/or the transfer to the Holding Company of
an amount that exceeds current and accumulated earnings and profits of the
Bank and such income or amounts are deemed to be paid out of the bad debt
reserves of the Bank.
(7) Where a Bank stockholder, upon exercise of his dissenters'
appraisal rights, receives solely cash in exchange for his Bank Common
Stock, such cash will be taxable as having been received by the stockholder
as a distribution in redemption of his stock subject to the provisions and
limitations of Section 302 of the Code.
Each Bank stockholder should consult his own tax counsel as to specific
federal, state and local tax consequences of the Reorganization, if any, to
such stockholder.
CONSEQUENCES UNDER FEDERAL SECURITIES LAWS
The Holding Company has filed with the Securities and Exchange Commission
(the "SEC") a registration statement under the Securities Act of 1933 (the
"Securities Act") for the registration of the
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Common Stock to be issued pursuant to the Plan of Reorganization. This Proxy
Statement and the accompanying Notice of Special Meeting constitute the
prospectus of the Holding Company filed as part of such registration statement.
Upon consummation of the Reorganization, the Holding Company, will register the
Common Stock under the Securities Exchange Act of 1934 ("Exchange Act") and
will be required to comply with the insider trading reporting and proxy
requirements under the Exchange Act. In addition, the Holding Company will be
required to file periodic reports with the SEC.
Holding Company Common Stock received by persons who are not affiliates of
the Bank or the Holding Company may be resold without registration. Shares
received by affiliates of the Bank will be subject to the resale restrictions of
Rule 145 under the Securities Act of 1933, as amended (the "Securities Act"),
which are substantially the same as the restrictions of Rule 144 discussed
below. The Rule 145 restrictions terminate after one year if the Holding Company
continues to comply with the reporting requirements under the Exchange Act, but
any affiliate of the Bank who becomes an affiliate of the Holding Company will
continue to be subject to the restrictions of Rule 144.
This Prospectus/Proxy Statement does not cover any resales of Holding
Company Common Stock received by persons who may be deemed to be affiliates of
the Holding Company upon consummation of the Reorganization. If the Holding
Company satisfies the current public information requirements of Rule 144 under
the Securities Act, each affiliate of the Bank who complies with the other
conditions of Rule 144, including those that require the affiliate sales to be
aggregated with those of certain other persons, would be able to sell in the
public market, without registration, in any three-month period, a number of
shares not to exceed the greater of 1% of the outstanding shares of the Holding
Company, or the average weekly volume of trading in such shares during the
preceding four calendar years.
CONDITIONS TO THE REORGANIZATION
The Plan of Reorganization sets forth a number of conditions which must be
met before the Reorganization will be consummated, including, among others: (i)
the approval of the Plan of Reorganization by the holders of two-thirds of the
outstanding shares of Bank Common Stock; (ii) the receipt of either a ruling
from the IRS or an opinion of counsel that the Reorganization will be treated as
a non-taxable transaction under the Code (see "Tax Consequences"); (iii) the
approval of the Reorganization by the Illinois Office of Banks and Real Estate
and the Federal Reserve, and the receipt of all approvals from any other
governmental agencies which may be required for the completion of the
Reorganization; and (iv) registration of the shares of Common Stock of the
Holding Company to be issued in the Reorganization under the Securities Act and
the compliance by the Holding Company with all applicable state securities laws
relating to the issuance of the Holding Company's Common Stock. Additionally,
the Plan of Reorganization may be terminated at any time prior to the Effective
Date of the Reorganization by the Board of Directors of the Bank.
If stockholders of the Bank approve the Reorganization, the Reorganization
is expected to become effective as soon thereafter as required regulatory
approvals are received, required waiting periods have expired and the other
conditions to consummation of the Reorganization have either been satisfied or
waived. If the Reorganization is not approved by the Bank's stockholders, the
Bank will continue to operate without a holding company structure. All expenses
relating solely to the Reorganization will be paid by the Bank whether or not
the Reorganization is approved by its stockholders and the Reorganization is
consummated.
AMENDMENT, TERMINATION OR WAIVER
The Board of Directors of the Bank may cause the Plan of Reorganization to
be amended or terminated if the Board determines for any reason that such
amendment or termination would be advisable.
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Such amendment or termination may occur at any time prior to the filing of
Articles of Merger with the State of Delaware, provided that no such
amendment may be made to the Plan of Reorganization after stockholder
approval if such amendment is deemed to be materially adverse to the
stockholders of the Bank. Additionally, any of the terms or conditions of the
Plan of Reorganization may be waived by the party which is entitled to the
benefit thereof.
BUSINESS OF THE BANK
The Bank is an Illinois-chartered stock savings bank headquartered in Pekin,
Illinois. The business of the Bank consists primarily of attracting savings
deposits from the general public and originating mortgage loans for the purpose
of financing or refinancing one- to four-family dwellings and other improved
residential and commercial properties located in the State of Illinois. The Bank
also invests in mortgage-backed securities, all of which are secured by one- to
four-family residential mortgage loans that are insured or guaranteed by the
Federal Home Loan Mortgage Corporation, Federal National Mortgage Association or
Government National Mortgage Association. The Bank also makes home equity loans
secured by the borrower's principal residence and other types of consumer loans
such as auto loans and home improvement loans. To a lesser extent, the Bank
makes interim construction loans. Although the Bank has a small number of
commercial real estate loans in its portfolio, such loans are not actively
originated by the Bank. In addition to its lending activities and investments in
mortgage-backed securities, the Bank invests in securities issued by the United
States Government and its agencies.
The Bank conducts its operations from its main office at 601-617 Court
Street, Pekin, Illinois, and from one branch office located at 108 South Adams
Street, Manito, Illinois.
The Bank was founded in 1882 and has been a member of the Federal Home Loan
Bank System since 1955. Its deposits are insured up to the regulatory maximum by
the Savings Association Insurance Fund, which is administered by the Federal
Deposit Insurance Corporation. On January 17, 1994, the Bank converted from an
Illinois-chartered savings and loan association to an Illinois-chartered savings
bank.
BUSINESS OF THE HOLDING COMPANY
GENERAL. The Holding Company is currently a non-operating, wholly owned
subsidiary of the Bank. Upon the completion of the Reorganization, the Bank
will become a wholly owned subsidiary of the Holding Company and each
stockholder of the Bank will become a stockholder of the Holding Company with
the same respective ownership interests therein as presently held in the Bank.
Immediately after consummation of the Reorganization, it is expected that
the Holding Company will not engage in any business activity other than to hold
all of the stock of the Bank. The Holding Company does not presently have any
arrangements or understandings regarding any acquisition or merger
opportunities. It is anticipated, however, that the Holding Company in the
future may pursue other investment opportunities, including possible
diversification through acquisitions and mergers.
PROPERTY. The Holding Company is not expected to own or lease real or
personal property initially. Instead, it intends to utilize the premises,
equipment and furniture of the Bank without the direct payment of any rental
fees to the Bank.
LEGAL PROCEEDINGS. Since its organization, the Holding Company has not been
a party to any legal proceedings.
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EMPLOYEES. At the present time, the Holding Company does not intend to
employ any persons other than its management. It will utilize the support staff
of the Bank from time to time without the payment of any fees. If the Holding
Company acquires other savings institutions or pursues other lines of business,
it may hire additional employees at such time.
COMPETITION. It is expected that for the immediate future the primary
business of the Holding Company will be the ownership of the Bank Common Stock.
Therefore, the competitive conditions to be faced by the Holding Company will be
the same as those faced by the Bank.
MANAGEMENT OF THE HOLDING COMPANY
DIRECTORS. The directors of the Holding Company are, and upon completion
of Reorganization will continue to be, the same persons who are at present
the directors of the Bank. The three-year terms of the directors are
staggered to provide for the election of approximately one-third of the board
members each year.
EXECUTIVE OFFICERS. The executive officers of the Holding Company are, and
upon completion of the Reorganization will be the following persons, each of
whom is an officer of the Bank:
NAME POSITION
- - - - ----- --------
Arthur E. Krile, Jr. President and Chief Executive Officer
E. Glen Rittenhouse Senior Vice President and Secretary
REMUNERATION. Since the formation of the Holding Company, none of its
executive officers or directors have received any remuneration from the Holding
Company. It is expected that unless and until the Holding Company becomes
actively involved in additional businesses, no separate compensation will be
paid to its directors and officers in addition to compensation paid to them by
the Bank. However, the Holding Company may determine that such separate
compensation is appropriate in the future. Because the directors and officers of
the Holding Company initially will not be compensated by the Holding Company but
will continue to serve and be compensated by the Bank, no separate employee
benefit plans of the Holding Company are anticipated at this time. The Bank will
continue to maintain its employee benefit plans.
At the present time, the Holding Company does not intend to employ any
persons other than its present management. If the Holding Company acquires other
businesses, it may hire additional employees at such time.
INDEMNIFICATION OF OFFICERS AND DIRECTORS AND LIMITATION OF LIABILITY.
Neither the Bank's Articles of Incorporation or Bylaws provide for
indemnification of directors, officer or employees of the Bank against legal and
other expenses incurred by them.
The Holding Company's Bylaws provide that the Holding Company shall
indemnify 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, officer or employee of the Holding Company or
any predecessor of the Holding Company, or is or was serving at the request of
the Holding Company or any predecessor of the Holding Company as a director,
officer or employee of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments,
fines, excise taxes 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 Section 145(a)-(d) of the Delaware General
Corporation Law, provided that the
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Holding Company shall not be liable for any amounts which may be due in
connection with a settlement of any action, suit or proceeding effected
without its prior written consent or any action, suit or proceeding initiated
by any person seeking indemnification thereunder without its prior written
consent.
Under Section 145(a)-(d) of the Delaware General Corporation Law as
currently in effect, other than in actions brought by or in the right of the
Holding Company, such indemnification would apply if it was determined in the
specific case that the proposed indemnitee acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Holding Company and, with respect to any criminal proceeding, if he had no
reasonable cause to believe that his conduct was unlawful. In actions brought by
or in the right of the Holding Company, such indemnification would probably be
limited to reasonable expenses (including attorneys' fees), and would apply if
it were determined in the specific case that the proposed indemnitee acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Holding Company, except that no indemnification may be
made with respect to any claim, issue or matter as to which such person is
adjusted liable to the Holding Company unless, and only to the extent that, the
Delaware Court of Chancery or the court in which that action was brought
determines upon application that, in view of all the circumstances of the case,
the proposed indemnitee if fairly and reasonably entitled to indemnity for such
expenses as the court deems proper. To the extent that any director, officer,
employee or agent of the Holding Company has been successful on the merits or
otherwise in defense of any proceeding, he must be indemnified against
reasonable expenses incurred by him in connection therewith.
The Holding Company's Bylaws also provide that reasonable expenses
(including attorneys' fees) incurred by a director, officer or employee of the
Holding Company in defending any civil, criminal, administrative or
investigative action, suit or proceeding described above shall be paid by the
Holding Company in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that the person is not entitled to be indemnified by
the Holding Company.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Holding
Company, pursuant to the foregoing provisions, the Holding Company has been
informed that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
In addition, the Holding Company's Articles of Incorporation provide that a
director shall not be personally liable to the Holding Company or its
stockholders for monetary damages for breach of their fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Holding Company or its stockholders; (ii) for acts of omission
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) for any transaction from which the director derived an improper
personal benefit; or (iv) for an unlawful distribution or the making of certain
stock purchases or redemptions.
This provision eliminates the potential liability of the Holding Company's
directors for failure, through negligence or gross negligence, to satisfy their
duty of care, which requires directors to exercise informed business judgment in
discharging their duties. It may thus reduce the likelihood of derivative
litigation against directors and discourage or deter stockholders or management
from bringing a lawsuit against directors for breach of their duty of care, even
though such an action, if successful, might otherwise have been beneficial to
the Holding Company and its stockholders. Stockholders will thus be surrendering
a cause of action based upon negligent business decisions, including those
relating to attempts to change control of the Holding Company. The provision
will not, however, affect the right to pursue equitable remedies for breach of
the duty of care, although such remedies might not be available as a practical
matter.
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Currently, the scope of the provision in the Holding Company's Certificate
of Incorporation limiting the personal liability of directors is uncertain
because of the absence of judicial precedent interpreting similar provisions. In
addition, the SEC takes the position that similar provisions added to other
corporations' certificates of incorporation would not protect those
corporations' directors from liability for violations of the federal securities
laws. Federal banking regulators also may take the same position with respect to
violations of federal banking laws and regulations.
The provision limiting the personal liability of the Holding Company's
directors does not eliminate or alter the duty of the Holding Company's
directors; it merely limits personal liability for monetary damages to the
maximum extent now or hereafter permitted by the Delaware General Corporation
Law. Moreover, it currently applies only to claims against a director arising
out of his role as a director; it currently does not apply to claims arising out
of his role as an officer (if he is also an officer) or arising out of any other
capacity in which he serves because Section 102(b)(7) does not authorize such a
limitation of liability.
To the best of management's knowledge, there is currently no pending or
threatened litigation for which indemnification may be sought or any recent
litigation involving directors of the Bank that might have been affected by the
limited liability provision in the Holding Company's Articles of Incorporation
had it been in effect at the time of the litigation.
The above provisions seek to ensure that the ability of the Holding
Company's directors to exercise their best business judgment in managing the
Holding Company's affairs, subject to their continuing fiduciary duties of
loyalty to the Holding Company and its stockholders, 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
and officers often requires such persons to make difficult judgments of great
importance which can expose such persons to personal liability, but from which
they will acquire no personal benefit (other than as stockholders). In recent
years, litigation against corporations and their directors and officers, often
amounting to mere "second guessing" of good-faith judgments and involving no
allegations of personal wrongdoing, has become common. Such litigation often
claims damages in large amounts which bear no relationship to the amount of
compensation received by the directors or officers, particularly in the case of
directors who are not officers of the corporation, and the expense of defending
such litigation, regardless of whether it is well founded, can be enormous.
Individual directors and officers can seldom bear either the legal defense costs
involved or the risk of a large judgment.
In order to attract and retain competent and conscientious directors and
officers in the face of these potential serious risks, corporations have
historically provided for corporate indemnification in their bylaws and have
obtained liability insurance protecting the company and its directors and
officers against the cost of litigation and related expenses. The Bank currently
has insurance coverage for its directors and officers and the Bank's management
currently anticipates that the Holding Company will be able to obtain such
coverage for its directors and officers. Based upon the publicized trends in the
insurance industry and the reported experience of other companies, the Bank's
management has no reason to believe that these problems will be alleviated in
the near future. While in the opinion of the Bank's management current
conditions have not, to date, impaired the Bank's ability to secure qualified
directors and officers, management of the Bank believes that these trends may
result in individuals being unwilling, in many instances, to serve as directors
of the Holding Company without at least a partial substitute for the protection
which such insurance has historically provided. The provisions of the Holding
Company's Articles of Incorporation relating to director liability and the
Delaware law authorizing such provisions are intended to reduce, in appropriate
cases, the risks incident to serving as a director, which otherwise could be
covered by liability insurance. The Holding Company's Board of Directors, the
individual members of which will benefit from the inclusion of the
indemnification
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and limitation of liability provisions, has a personal interest in including
these provisions in the Holding Company's Articles of Incorporation at the
potential expense of stockholders.
COMPARISON OF STOCKHOLDER RIGHTS
INTRODUCTION. As a result of the Reorganization, holders of Bank Common
Stock, whose rights are presently governed by the Illinois banking law, and
the Articles of Incorporation and Bylaws of the Bank, will become
stockholders of the Holding Company, a Delaware corporation. Accordingly,
their rights will be governed solely by the Delaware General Corporation Law
and the Certificate of Incorporation and Bylaws of the Holding Company.
Certain differences arise from this change of governing law, as well as from
distinctions between the Articles of Incorporation and Bylaws of the Bank and
the Certificate of Incorporation and Bylaws of the Holding Company. The
following discussion is not intended to be a complete statement of the
differences affecting the rights of stockholders, but summarizes certain
significant differences. The Certificate of Incorporation of the Holding
Company are attached hereto as Exhibit B and should be reviewed for more
detailed information.
ISSUANCE OF CAPITAL STOCK. The Bank's Articles of Incorporation
authorize the issuance of 15,000,000 shares of capital stock: 10,000,000 of
which are Bank Common Stock, $1.00 par value per share; and 5,000,000 of
which are shares of serial preferred stock, no par value per share. No shares
of serial preferred stock are outstanding. The Certificate of Incorporation
of the Holding Company authorizes the issuance of 250,000 shares of Common
Stock, par value $0.01 per share and 50,000 shares of serial preferred stock,
par value $.01 per share. Management has chosen $.01 par value for the
authorized shares of Common Stock of the Holding Company in order to reduce,
to the extent possible, the franchise tax levied by Delaware on
Delaware-chartered companies. At , 1997, there were approximately
shares of Bank Common Stock outstanding. Following the Reorganization,
there will be the same number of shares of the Holding Company's Common Stock
outstanding.
Upon consummation of the Reorganization, the Holding Company will be subject
to annual franchise taxes under Delaware law based on its authorized
capitalization. As a state-chartered savings bank, the Bank is not subject to
franchise taxes, regardless of the amount of its authorized capitalization.
The Holding Company has no present intention to issue additional shares of
stock at this time. If additional shares were issued, the percentage ownership
interests of existing stockholders would be reduced and, depending on the terms
pursuant to which new shares are issued, the book value and earnings per share
of outstanding stock might be diluted. Moreover, such additional share issuance
could be construed as having an anti-takeover effect. The ability to issue
additional shares, which exists under both the Articles of Incorporation of the
Bank and the Certificate of Incorporation of the Holding Company, gives
management greater flexibility in financing corporate operations.
PAYMENT OF DIVIDENDS. Following the Reorganization, holders of Holding
Company Common Stock will be entitled to receive dividends when, as and if
declared by the Board of Directors of the Holding Company out of funds legally
available therefor. The timing and amount of future dividends will be within the
discretion of the Board of Directors of the Holding Company and will depend on
the consolidated earnings, financial condition, liquidity and capital
requirements of the Holding Company and its subsidiaries, including the Bank,
applicable governmental regulations and policies and other factors deemed
relevant by the Holding Company's Board of Directors. Currently, it is not
anticipated that the dividend policy of the Holding Company will differ from
that of the Bank.
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The ability of the Bank to pay dividends on its Bank Common Stock is
restricted by tax considerations related to financial institutions and by
Illinois law and regulations applicable to savings banks. Income appropriated
to bad debt reserves and deducted for federal income tax purposes may not be
used to pay cash dividends without the payment of federal income taxes by the
Bank on the amount of such income removed from reserves for such purpose at
the then current income tax rate. Additionally, the Bank is precluded from
paying dividends on its Bank Common Stock if its regulatory capital would
thereby be reduced below the regulatory capital requirements prescribed for
savings banks. The Bank currently satisfies its applicable regulatory capital
requirements. Finally, an Illinois savings bank may not declare dividends in
excess of its net profits in any year without the approval of the Office and
may not declare or pay a cash dividend on its capital stock if the effect
would be to reduce the capital of the Bank below the amount required for the
Bank's liquidation account. Management does not anticipate that the
liquidation account will have any impact on the declaration or payment of
cash dividends on the Bank Common Stock.
After the Reorganization, the Holding Company's principal source of income
will initially consist of its equity in the earnings, if any, of the Bank.
Although the Holding Company will not be subject to the above dividend
restrictions regarding dividend payments to its stockholders, the restrictions
on the Bank's ability to pay dividends to the Holding Company will continue in
effect.
The Delaware General Corporation Law generally provides that, subject to any
restrictions in a corporation's Certificate of Incorporation, dividends may be
declared from the corporation's surplus 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. However, if the corporation's capital (generally defined in the
Delaware General Corporation Law as the sum of the aggregate par value of all
shares of the corporation's capital stock, where all such shares have a par
value and the board of directors has not established a higher level of capital)
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.
The payment of future cash dividends by the Bank, and thus by the Holding
Company, will continue to depend upon the Bank's earnings, financial condition
and capital requirements, as well as the tax and regulatory considerations
discussed herein. The Bank's Board of Directors considers many factors including
the Bank's profitability, maintenance of adequate capital, the Bank's current
and anticipated future income, outstanding loan commitments, adequacy of loan
loss reserves, cash flow requirements and economic conditions prior to declaring
a dividend. Moreover, before declaring a dividend, the Board of Directors must
determine that the Bank will exceed its regulatory capital requirements after
the payment of the dividend.
SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of the holders of
Bank Common Stock may be called by the chairman of the board, the president
or a majority of the Board of Directors, and shall be called upon the written
request of the holders of not less than one-tenth of all of the outstanding
capital stock of the Bank entitled to vote at the meeting. The Certificate of
Incorporation of the Holding Company provides that special meetings of the
stockholders of the Holding Company may be called by the Board of Directors
pursuant to a resolution adopted by a majority of the total number of
directors which the Holding Company would have if there were no vacancy on
the Board. This provision will make it more difficult for stockholders to
call for a special meeting of stockholders.
CUMULATIVE VOTING. Unlike the Bank's Articles of Incorporation and Bylaws,
which authorize cumulative voting in the election of directors commencing on the
fifth anniversary of the effective date of the Articles of Incorporation, the
Certificate of Incorporation of the Holding Company does not provide for
cumulative voting. Cumulative voting entitles each stockholder to cast a number
of votes in the election of
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directors equal to the number of such stockholders' shares of Bank Common
Stock multiplied by the number of directors to be elected and to distribute
such votes among one or more of the nominees to be elected. Elimination of
cumulative voting will help to ensure continuity and stability of the Holding
Company's Board of Directors and the policies adopted by it by making it more
difficult for holders of Common Stock to elect their nominees to the Board of
Directors and possibly by delaying, deterring or discouraging proxy contests.
APPROVAL OF MERGERS, CONSOLIDATIONS, SALES OF SUBSTANTIALLY ALL ASSETS. The
Holding Company's Articles of Incorporation require the affirmative vote of the
holders of at least 80% of the voting power of the then-outstanding shares of
Holding Company Common Stock, voting together as a single class, to approve
certain "Business Combinations," except in cases where the proposed transaction
has been approved by a majority of the Holding Company's "Disinterested
Directors" or certain "fair price" criteria have been satisfied. In such cases,
the proposed Business Combination shall require only the affirmative vote of the
majority of the outstanding shares of capital stock entitled to vote. These
provisions in the Articles of Incorporation define "Business Combination" to
include any merger or consolidation of the Holding Company or any subsidiary
with an "Interested Stockholder," any sale, lease, exchange or other disposition
to or with any Interested Stockholder of any assets of the Holding Company or
any subsidiary having a fair market value equal to or exceeding 25% of its
combined assets, or the issuance or transfer by the Holding Company or any
subsidiary of any of its securities to any Interested Stockholder in exchange
for cash, securities or other property having an aggregate fair market value
equal to or exceeding 25% of the combined fair market value of the outstanding
common stock of the Holding Company and its subsidiaries. For the purposes of
these provisions, "Interested Stockholder" means any person who is the
beneficial owner, directly or indirectly, of more than 5% of the outstanding
voting stock of the Holding Company or who was at any time within the two year
period immediately prior to the date in question such beneficial owner, or an
assignee or successor in ownership within the two year period immediately prior
to the date in question of such Interested Stockholder. The increased
stockholder vote required to approve a Business Combination may have the effect
of foreclosing mergers and other Business Combinations which a majority of
stockholders deems desirable and place the power to prevent such a merger or
combination in the hands of a minority of stockholders. The Bank's chartering
instruments contain no similar provisions.
VOTING LIMITATIONS. The Bank's Articles of Incorporation provide that for a
period of five years from the effective date of such Articles of Incorporation,
no person may acquire beneficial ownership of more than 10% of the Bank Common
Stock, and if such shares are acquired in violation of this section, all shares
beneficially owned in excess of such 10% limitation shall be considered "excess
shares" and shall not be counted as shares entitled to vote in connection with
any matters submitted to the stockholders for a vote. The Certificate of
Incorporation of the Holding Company contains a similar provision, but has no
time limitation on the effectiveness of such provision. These provisions will
deter any person or entity from engaging in a "creeping" takeover of the Bank or
the Holding Company whereby such person or entity accumulates shares in an
effort to obtain control. Such provisions will encourage any such potential
acquiror to negotiate with the Board of Directors and obtain approval to acquire
a significant ownership stake in the Bank or the Holding Company.
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS. Section 203 of the
Delaware General Corporation Law ("Section 203") imposes certain restrictions on
business combinations between the Holding Company and large stockholders.
Specifically, Section 203 prohibits a "business combination" (as defined in
Section 203, generally including mergers, sales and leases of assets, issuances
of securities and similar transactions) between the Holding Company or a
subsidiary and an "interested stockholder" (as defined in Section 203, generally
the beneficial owner of 15% or more of the Holding Company Common Stock) within
three years after the person or entity becomes an interested stockholder, unless
(i) prior to the person or entity becoming an interested stockholder, the
business combination or the transaction pursuant to which such person
25
<PAGE>
or entity became an interested stockholder shall have been approved by the
Holding Company's Board of Directors, (ii) upon consummation of the
transaction in which the interested stockholder became such, the interested
stockholder holds at least 85% of the Holding Company Common Stock (excluding
shares held by persons who are both officers and directors and shares held by
certain employee benefit plans), or (iii) the business combination is
approved by the Holding Company's Board of Directors and by the holders of at
least two-thirds of the outstanding Holding Company Common Stock, excluding
shares owned by the interested stockholders.
One of the effects of Section 203 may be to prevent highly leveraged
takeovers, which depend upon getting access to the acquired corporation's
assets to support or repay acquisition indebtedness and certain coercive
acquisition tactics. By requiring approval of the holders of two-thirds of
the shares held by disinterested stockholders for business combinations
involving an interested stockholder, Section 203 may prevent any interested
stockholder from taking advantage of its position as a substantial, if not
controlling, stockholder and engaging in transactions with the Holding
Company that may not be fair to the Holding Company's other stockholders or
that may otherwise not be in the best interests of the Holding Company, its
stockholders and other constituencies.
For similar reasons, however, these provisions may make more difficult or
discourage an acquisition of the Holding Company, or the acquisition of control
of the Holding Company by a principal stockholder, and thus the removal of
incumbent management, because a business combination within the specified
three-year period that is not approved by a majority of the Board of Directors
prior to the transaction in which a person becomes an interested stockholder
will require the approval of the Board of Directors and the holders of
two-thirds of the shares held by disinterested stockholders. In addition, to the
extent that Section 203 discourages takeovers that would result in the change of
the Holding Company's management, such a change may be less likely to occur.
Neither the Bank's Articles of Incorporation and Bylaws, nor federal or
Illinois laws and regulations contain a provision which restricts business
combinations between the Bank and interested stockholders in the manner set
forth in Section 203.
RIGHTS OF STOCKHOLDERS TO DISSENT. Stockholders of the Bank have
dissenters' appraisal rights in connection with a plan of merger or
consolidation to which the Bank is a party. Stockholders of the Holding
Company similarly will have dissenters' appraisal rights in connection with a
plan of merger or consolidation to which the Holding Company is a party.
Under Delaware law and regulations applicable to the Bank, such stockholders
will have no dissenters' rights with respect to, among other things, a merger
or consolidation to which the Holding Company is a party if the class of
shares of the Holding Company held by such stockholders is listed on a
national securities exchange.
SHAREHOLDER ACTION WITHOUT A MEETING. The Bylaws of the Bank provide that
any action required to be taken or which may be taken at any annual or special
meeting of stockholders may be taken without a meeting if a consent in writing,
setting forth the actions so taken, is given by all of the stockholders entitled
to vote with respect to the subject matter. The Certificate of Incorporation of
the Holding Company provides that any action required or permitted to be taken
by the stockholders of the Holding Company must be effected at a duly called
annual or special meeting of stockholders of the Holding Company and may not be
effected by any consent in writing by such stockholders.
REMOVAL OF DIRECTORS. The Bank's Bylaws provide that at a meeting of
stockholders called expressly for such purpose, any director may be removed for
cause by a vote of the holders of a majority of the shares then entitled to vote
at a election of directors. The Holding Company's Certificate of Incorporation
provides
26
<PAGE>
that any director or the entire Board of Directors, may be removed from
office at any time, but only for cause and only upon the affirmative vote of
the holders of at least 80% of the voting power of all of the then
outstanding shares of capital stock of the Holding Company entitled to vote
generally in the election of directors, voting together as a single class.
The requirement that directors may be removed only upon an 80% vote and only
for cause makes it difficult for a person immediately to acquire control of
the Holding Company's Board of Directors through the removal of existing
directors and the election of his nominees to fill the newly created
vacancies.
VACANCIES ON THE BOARD OF DIRECTORS. Any vacancy on the Board of Directors
of the Bank may be filled by the affirmative vote of a majority of the remaining
directors although less than a quorum of the Board of Directors, and any
director so appointed is to serve until the next election of directors by the
stockholders. Additionally, any directorship of the Bank to be filled by reason
of an increase in the number of directors may be filled by election by the Board
of Directors for a term of office only until the next election of directors by
the stockholders. The Certificate of Incorporation of the Holding Company
provides that vacancies on the board and newly created directorships may be
filled by a majority vote of the directors then in office, though less than a
quorum. Directors so appointed to fill a vacancy may serve until the annual
meeting of stockholders at which the term of office of the class of directors to
which they have been chosen expires.
ELIGIBILITY FOR SERVICE ON THE BOARD OF DIRECTORS. Unlike the Bylaws of
the Bank, which have no similar provision, the Bylaws of the Holding Company
provide that no person shall be eligible for nomination to the Board of
Directors or be qualified to be elected to or serve as a member of the Board
of Directors unless such person owns at least 100 shares of capital stock of
the Holding Company (after consummation of the Reorganization) and, except
for new directors who may be added to the Board of Directors of the Holding
Company as a result of a merger or combination involving the Holding Company,
has been domiciled in the market area of the Bank for at least 24 months
prior to such person's name being submitted for nomination to the Board of
Directors. The purpose of this provision is to ensure that prospective
members of the Board of Directors are familiar with the market area of the
Bank and also have an economic interest in the success of the Bank. The
effect of this provision, however, may be to make it more difficult for a
person immediately to acquire control of the Holding Company by nominating
and electing directors to the Board of Directors of the Holding Company.
NUMBER AND TERM OF DIRECTORS. The Bank's Articles of Incorporation
provide that its Board of Directors shall consist of not less than seven nor
more than 15 members, as set forth in the Bylaws. The Holding Company's
Certificate of Incorporation provides that its Board of Directors shall be
fixed from time to time exclusively pursuant to a resolution adopted by a
majority of the whole Board. The Board of Directors of the Holding Company
has set the number of directors at seven persons.
The Bank's Articles of Incorporation provide for a classified board of
directors, consisting of three substantially equal classes of directors, each
serving for a three year term, with the term of each class of directors
ending in successive years. The Holding Company's Certificate of
Incorporation also provides for a classified board of directors. This method
of electing directors makes a change in the composition of the Board of
Directors, and a potential change in control of a corporation, a lengthier
and more difficult process. Since the terms of only one-third of the
incumbent directors expire each year, at least two annual elections would be
required for the shareholders to change a majority of the directors.
Management of the Holding Company believes that the staggered election of
directors will help to promote the continuity of management for the Holding
Company which has been experienced by the Bank in past years, because only
one-third of the Board of Directors is subject to election each year.
27
<PAGE>
PRESENTATION OF NEW BUSINESS AT MEETINGS OF STOCKHOLDERS. The Bank's
Bylaws provide that any new business to be taken up at an annual meeting of
Stockholders must be stated in writing and filed with the Secretary of the
Bank at least 5 days prior to the date of the annual meeting. Any stockholder
may make any other proposal at the annual meeting and such proposal may be
discussed and considered, but unless stated in writing and filed with the
Secretary at least 5 days before the meeting, such proposal shall be laid
over for action at an adjourned, special or annual meeting of the
stockholders taking place 30 days or more thereafter. Nominations by
stockholders for the Board of Directors of the Bank, if made in writing and
delivered to the Secretary of the Bank at least 5 days prior to the date of
an annual meeting, shall be voted on at such annual meeting.
The Holding Company's Bylaws provide that a stockholder wishing to make
nominations or proposals must give written notice to the Secretary of the
Holding Company not less than 120 days in advance of the date of the Holding
Company's proxy statement which was released to stockholders in connection with
the previous year's annual meeting, together with certain information relating
to the nomination or proposed new business.
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain corporate takeover practices could be highly disruptive to a company
and could result in inequitable treatment among the company's shareholders.
These practices typically involve a purchaser's acquisition of a substantial
portion of a company's capital stock and attempt to replace incumbent management
as well as the Board of Directors. Provisions in the Holding Company's
Certificate of Incorporation and Bylaws relating to the calling of a special
meeting of stockholders, advance director nomination and new business
provisions, removal of directors, staggered board of directors' terms and the
amendment of the Holding Company's Certificate of Incorporation and Bylaws, all
of which are discussed above, may make it difficult to gain control of the
Holding Company or replace all of incumbent management.
REGULATION OF THE HOLDING COMPANY
GENERAL. Upon consummation of the Reorganization, the Holding Company,
as the sole shareholder of the Bank, will become a bank holding company and
will register as such with the Federal Reserve. Bank holding companies are
subject to comprehensive regulation by the Federal Reserve under the Bank
Holding Company Act ("BHCA") and the regulations of the Federal Reserve. As a
bank holding company, the Holding Company will be required to file with the
Federal Reserve annual reports and such additional information as the Federal
Reserve may require and will be subject to regular examinations by the
Federal Reserve. The Federal Reserve also has extensive enforcement authority
over bank holding companies, including, among other things, the ability to
assess civil money penalties, to issue cease-and-desist or removal orders,
and to require that a holding company divest subsidiaries (including its bank
subsidiaries). In general, enforcement actions may be initiated for
violations of law and regulations and unsafe or unsound practices.
Under the BHCA, a bank holding company must obtain Federal Reserve
approval before: (1) acquiring, directly or indirectly, ownership or control
of any voting shares of another bank or bank holding company if, after such
acquisition, it would own or control more than 5% of such shares (unless it
already owns or controls the majority of such shares); (2) acquiring all or
substantially all of the assets of another bank or bank holding company; or
(3) merging or consolidating with another bank holding company.
Any direct or indirect acquisition by a bank holding company or its
subsidiaries of more than 5% of the voting shares of, or substantially all of
the assets of, any bank located outside of the state in which the operations of
the bank holding company's banking subsidiaries are principally conducted, may
not be
28
<PAGE>
approved by the Federal Reserve unless the laws of the state in which the
bank to be acquired is located specifically authorize such an acquisition.
The BHCA also prohibits a bank holding company, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company which is not a bank or bank holding company, or
from engaging directly or indirectly in activities other than those of banking,
managing or controlling banks, or providing services for its subsidiaries. The
principal exceptions to these prohibitions involve certain non-bank activities
which, by statute or by Federal Reserve regulation or order, have been
identified as activities closely related to the business of banking or managing
or controlling banks. The list of activities permitted by the Federal Reserve
includes, among other things, operating a savings institution, mortgage company,
finance company, credit card company or factoring company; performing certain
data processing operations; providing certain investment and financial advice;
underwriting and acting as an insurance agent for certain types of
credit-related insurance; leasing property on a full-payout, non-operating
basis; selling money orders, travelers' checks and United States Savings Bonds;
real estate and personal property appraising; providing tax planning and
preparation services; and, subject to certain limitations, providing securities
brokerage services for customers.
DIVIDENDS. The Federal Reserve has issued a policy statement on the payment
of cash dividends by bank holding companies, which expresses the Federal
Reserve's view that a bank holding company should pay cash dividends only to the
extent that the company's net income for the past year is sufficient to cover
both the cash dividends and a rate of earning retention that is consistent with
the company's capital needs, asset quality and overall financial condition. The
Federal Reserve also has indicated that it would be inappropriate for a company
experiencing serious financial problems to borrow funds to pay dividends.
Furthermore, under the prompt corrective action regulations adopted by the
Federal Reserve pursuant to the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), the Federal Reserve may prohibit a bank
holding company from paying any dividends if the holding company's bank
subsidiary is classified as "undercapitalized."
Bank holding companies are required to give the Federal Reserve prior
written notice of any purchase or redemption of their outstanding equity
securities if the gross consideration for the purchase or redemption, when
combined with the net consideration paid for all such purchases or redemptions
during the preceding 12 months, is equal to 10% or more of their consolidated
net worth. The Federal Reserve may disapprove such a purchase or redemption if
it determines that the proposal would constitute an unsafe or unsound practice
or would violate any law, regulation, Federal Reserve order, or any condition
imposed by, or written agreement with, the Federal Reserve.
CAPITAL REQUIREMENTS. The Federal Reserve has established capital
requirements for bank holding companies that generally parallel the capital
requirements for national banks under the Office of the Comptroller of the
Currency's regulations. The Federal Reserve regulations provide that capital
standards will generally be applied on a bank only (rather than a consolidated)
basis in the case of a bank holding company with less than $150 million in total
consolidated assets. If the Federal Reserve's capital guidelines were applied to
the Bank, assuming the consummation of the Reorganization, the Holding Company's
levels of consolidated regulatory capital as of March 31, 1997 would exceed the
Federal Reserve's minimum requirements, as follows:
29
<PAGE>
<TABLE>
<CAPTION>
AMOUNT PERCENT
--------- -----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Tier 1 Capital............................................................................................. $ 7,097 8.52%
Minimum Tier 1 (leverage) requirement...................................................................... 4,164 5.00
--------- -----
Excess..................................................................................................... $ 2,933 3.52%
--------- -----
Risk-based capital......................................................................................... 7,348 19.21
Minimum risk-based capital requirement..................................................................... 3,060 8.00
--------- -----
Excess..................................................................................................... $ 4,288 11.21%
--------- -----
</TABLE>
The Bank is currently required by Office and FDIC regulations to maintain
certain minimum amounts of regulatory capital. The Bank's capital ratios
presented below are calculated using the requirements that are effective as of
March 31, 1997.
<TABLE>
<CAPTION>
1997 MINIMUM
THE BANK REQUIREMENTS
----------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Tier I capital:
Common shareholder's equity used to
compute risk-based capital
Total Tier I capital........................................................................... $ 7,097 6.00%
Tier II capital:
Allowable allowance for loan losses(1)
Tier II capital additions...................................................................... 251 --
----------- -----
Total capital.................................................................................. 7,348 6.00
Risk adjusted assets............................................................................... 38,253 8.00
-----------
Total assets....................................................................................... $ 83,149
-----------
Risk-based capital ratios:
Tier I capital.................................................................................... 18.60% 8.00%
Total capital..................................................................................... 19.21 6.00
Tier I leverage ratio.............................................................................. 8.52 5.00
</TABLE>
- - - - ------------------------
(1) limited to 1.25% of risk adjusted assets
30
<PAGE>
The pro forma balance sheet of the Holding Company as of March 31, 1997
(assuming the consummation of the Reorganization) is as follows:
<TABLE>
<CAPTION>
AS OF MARCH 31,
1997
-------------------
(IN THOUSANDS)
<S> <C>
Cash and due from banks.................................................................................. $ 50
Investment in Pekin Savings, s.b......................................................................... 6,980
------
Total assets......................................................................................... $ 7,030
------
------
Liabilities.............................................................................................. --
Total liabilities.................................................................................... --
Capital.................................................................................................. 2
Net unrealized loss on securities........................................................................ (67)
Surplus.................................................................................................. 1,367
Other capital accounts................................................................................... 5,728
------
Total capital accounts............................................................................... $ 7,030
Total liabilities and capital accounts............................................................... $ 7,030
------
------
</TABLE>
ACCOUNTING TREATMENT
The Reorganization will be treated similar to a pooling of interests for
financial reporting and related purposes. Under the pooling-of-interests method
of accounting, the historical basis of the assets and liabilities of the Bank
and the Holding Company will be combined at the effective time of the
Reorganization and carried forward at their previously recorded amounts, and the
stockholders' equity accounts of the Bank and the Holding Company will be
combined. Income and other financial statements of the Holding Company issued
after the Reorganization will be restated retroactively to reflect the
consolidated operations of the Bank and the Holding Company as if the
Reorganization had taken place prior to the periods covered by such financial
statements.
LEGAL OPINION
The validity of the shares of the Holding Company's Common Stock issuable
upon completion of the Reorganization will be passed upon by Luse Lehman Gorman
Pomerenk & Schick, A Professional Corporation, Washington, D.C.
VOTE REQUIRED
Approval of the Plan of Reorganization requires the affirmative vote of at
least two-thirds of the total votes eligible to be cast at the Special Meeting.
Failure to vote is equivalent to voting against the Plan of Reorganization. The
Board of Directors recommends a vote "FOR" the approval of the Plan of
Reorganization.
This description of the proposed holding company for the Bank does not
purport to be complete, but is qualified in its entirety by the Plan of
Reorganization and Certificate of Incorporation of the Holding Company attached
as Exhibits A and B, respectively, to this Prospectus and Proxy Statement.
31
<PAGE>
PROPOSAL II--ADJOURNMENT OF THE MEETING
Approval of the Plan of Reorganization requires the affirmative vote of at
least two-thirds of the total votes eligible to be cast at the Special Meeting.
In the event there is an insufficient number of shares present in person or by
proxy at the Special Meeting to approve the Plan of Reorganization, the Board of
Directors intends to adjourn the Special Meeting to a later date. The place and
date to which the Special Meeting would be adjourned would be announced at the
Special Meeting, but would in no event be more than 30 days after the date of
the Special Meeting.
The effect of any such adjournment would be to permit the Bank to solicit
additional proxies for approval of the Plan of Reorganization. While such an
adjournment would not invalidate any proxies previously filed, including those
filed by stockholders voting against the subject proposals, it would give the
Bank the opportunity to solicit additional proxies in favor of the Plan of
Reorganization. Properly executed proxies will be voted in favor of any such
adjournment unless otherwise indicated thereon.
The Board of Directors recommends a vote "FOR" the approval of the
adjournment under the circumstances described herein. Approval of the
adjournment requires the affirmative vote of the holders of at least a majority
of the shares of Bank Common Stock present in person or by proxy at the Special
Meeting.
PROPOSAL III--CHANGE OF NAME
The Board of Directors of the Bank has approved an amendment to the
Articles of Incorporation of the Bank to change the name of the Bank from "Pekin
Savings, s.b." to "Pekin Savings Bank." The Board of Directors believes the
name change will enhance the identity of the Bank in its local community. The
proposed amendment is independent of the proposal to reorganize into the stock
holding company structure and, if approved by stockholders, the name change
would occur shortly after stockholder approval even if the Reorganization is not
approved by stockholders at the Special Meeting.
The amendment to the Articles of Incorporation must be approved by at least
a majority of the total votes of stockholders eligible to be cast at a legal
meeting. The amendment also requires approval of the Office.
The Board of Directors recommends a vote "FOR" the approval of the proposal
to change the name of the Bank.
MISCELLANEOUS
The Board of Directors is not aware of any business to come before the
Special Meeting other than those matters described above in this Prospectus and
Proxy Statement. However, if any other matters should properly come before the
Special Meeting, it is intended that proxies in the accompanying form will be
voted in respect thereof in accordance with the judgment of the person or
persons voting the proxies, including matters relating to the conduct of the
Special Meeting.
The cost of solicitation of proxies will be borne by the Bank. The Bank
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy material to the
beneficial owners of Bank Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Bank may solicit proxies
personally, by telegraph or telephone without additional compensation.
32
<PAGE>
The Bank's Financial Statements for the year ended September 30, 1996,
including the auditors' report, was mailed to all stockholders of record on or
about December 20, 1996. Any stockholder who has not received a copy of such
financial statements may obtain a copy by writing to the Secretary of the Bank.
Such financial statements are not to be treated as part of the proxy
solicitation material nor as having been incorporated herein by reference.
BY ORDER OF THE BOARD OF DIRECTORS
Arthur E. Krile, Jr.
President and Chief Executive Officer
Pekin, Illinois
, 1997
- - - - ---------------------
33
<PAGE>
- - - - -------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Summary Information on Proposed
Holding Company.................
Introduction......................
Revocability of Proxies...........
Voting Securities and Principal
Holders Thereof.................
Market Information................
Management........................
Proposal I--Proposed Formation of
Holding Company.................
Proposal II--Adjournment of the
Meeting.........................
Proposal III--Change of Name......
Miscellaneous.....................
_____ Shares
Common Stock
PEKIN SAVINGS, S.B.
PROGRESSIVE BANCORP, INC.
____________
PROSPECTUS AND
PROXY STATEMENT
____________
Dated _________, 1997
- - - - -------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------
<PAGE>
EXHIBIT A
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
Agreement and Plan of Reorganization, dated as of February 26, 1997 (this
"Agreement"), by and between Pekin Savings, s.b. ("Pekin Savings" or the
"Surviving Bank"), an Illinois-chartered savings bank, and Pekin Interim Savings
Bank ("Interim"), an Illinois-chartered interim savings bank which will be
organized for the sole purpose of consummating the reorganization provided for
herein, and Progressive Bancorp, Inc. ("Company"), a Delaware corporation.
WITNESSETH:
WHEREAS, the Board of Directors of Pekin Savings has determined that it is
in the best interests of Pekin Savings and its stockholders for Pekin Savings to
be reorganized into a holding company form of ownership; and
WHEREAS, Pekin Savings will cause the Company to be organized under
Delaware law as a wholly-owned subsidiary for the purpose of becoming the
holding company of Pekin Savings; and
WHEREAS, the formation of a holding company by Pekin Savings will be
facilitated by causing the Company to become the sole stockholder of a
newly-formed interim Illinois-chartered stock savings bank, and then merging the
interim savings bank with and into Pekin Savings, so that as part of the merger
all of the outstanding shares of common stock of Pekin Savings will be converted
automatically into and become shares of common stock of the Company, which would
then become the sole stockholder of Pekin Savings ("Merger"); and
WHEREAS, Interim is being organized by Pekin Savings as an interim
Illinois-chartered stock savings bank with the Company as its sole stockholder
in order to effect the Merger; and
WHEREAS, Pekin Savings and Interim (the "Constituent Banks") desire to
provide for the terms and conditions of the Merger.
NOW, THEREFORE, Pekin Savings, Interim and the Company hereby agree as
follows:
1. EFFECTIVE DATE. The Merger shall become effective as of the date of
the filing of the articles of merger relating to the Merger filed with the
Department of State of Illinois pursuant to Section 8005 of the Illinois Savings
Bank Act (the "Act"), or any successor thereto (the "Effective Date").
2. THE MERGER AND EFFECT THEREOF. Subject to the terms and conditions set
forth herein, including, without limitation, the prior approval of the Bureau of
Residential Finance of the Illinois Office of Banks and Real Estate (the
"Office") and the Board of Governors of the Federal Reserve System ("Federal
Reserve Board") and the expiration of all applicable waiting periods, Interim
shall merge with and into Pekin Savings, which shall be the Surviving Bank. Upon
consummation of the Merger, the Surviving Bank shall be considered the same
business and corporate entity as each of the Constituent Banks and thereupon and
thereafter all the property,
<PAGE>
rights, powers and franchises of each of the Constituent Banks shall vest in
the Surviving Bank and the Surviving Bank shall be subject to and be deemed
to have assumed all of the debts, liabilities, obligations and duties of each
of the Constituent Banks and shall have succeeded to all of each of their
relationships, fiduciary or otherwise, as fully and to the same extent as if
such property, rights, privileges, powers, franchises, debts, obligations,
duties and relationships had been originally acquired, incurred or entered
into by the Surviving Bank.
In addition, any reference to either of the Constituent Banks in any
contract, will or document, whether executed or taking effect before or after
the Effective Date, shall be considered a reference to the Surviving Bank if not
inconsistent with the other provisions of the contract, will or document; and
any pending action or other judicial proceeding to which either of the
Constituent Banks is a party shall not be deemed to have abated or to have been
discontinued by reason of the Merger, but may be prosecuted to final judgment,
order or decree in the same manner as if the Merger had not occurred or the
Surviving Bank may be substituted as a party to such action or proceeding, and
any judgment, order or decree may be rendered for or against it that might have
been rendered for or against either of the Constituent Banks if the Merger had
not occurred.
3. CONVERSION OF STOCK.
(a) On the Effective Date, (i) each share of common stock, par value $1.00
per share, of Pekin Savings ("Pekin Savings Common Stock") issued and
outstanding immediately prior to the Effective Date shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into one share of common stock, par value $.01 per share, of the Company
("Company Common Stock"), (ii) each share of common stock, par value $.01 per
share, of Interim ("Interim Common Stock") issued and outstanding immediately
prior to the Effective Date shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into one share of Pekin
Savings Common Stock, and (iii) each share of Company Common Stock issued and
outstanding immediately prior to the Effective Date shall, by virtue of the
Merger and without any action on the part of the holder thereof, be cancelled.
By voting in favor of this Agreement, the Company, as the sole stockholder of
Interim, shall have agreed (i) to issue shares of Company Common Stock in
accordance with the terms hereof and (ii) to cancel all previously issued and
outstanding shares of Company Common Stock upon the effectiveness of the Merger.
(b) On and after the Effective Date, there shall be no registrations of
transfers on the stock transfer books of Interim or Pekin Savings of shares of
Interim Common Stock or Pekin Savings Common Stock which were outstanding
immediately prior to the Effective Date.
4. EXCHANGE OF SHARES.
(a) At or after the Effective Date, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Pekin
Savings Common Stock, upon surrender of the same to an agent, duly appointed
by the Company ("Exchange Agent"), shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of full shares
of Company Common Stock for which the shares of Pekin Savings Common Stock
theretofore represented by
A-2
<PAGE>
the certificate or certificates so surrendered shall have been converted as
provided in Section 3 hereof. The Exchange Agent shall mail to each holder of
record of an outstanding certificate which immediately prior to the Effective
Date evidenced shares of Pekin Savings Common Stock, and which is to be
exchanged for Company Common Stock as provided in Section 3 hereof, a form of
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to such certificate shall pass, only upon delivery
of such certificate to the Exchange Agent) advising such holder of the terms
of the exchange effected by the Merger and of the procedure for surrendering
to the Exchange Agent such certificate in exchange for a certificate or
certificates evidencing Company Common Stock.
(b) After the Effective Date, certificates representing shares of Pekin
Savings Common Stock shall be treated as evidencing ownership of the number of
full shares of Company Common Stock into which the shares of Pekin Savings
Common Stock represented by such certificates shall have been converted by
virtue of the Merger, notwithstanding the failure on the part of the holder
thereof to surrender such certificates.
(c) If any certificate evidencing shares of Company Common Stock is to be
issued in a name other than that in which the certificate evidencing Pekin
Savings Common Stock surrendered in exchange therefor is registered, it shall be
a condition of the issuance thereof that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Exchange Agent any transfer or other tax
required by reason of the issuance of a certificate for shares of Company Common
Stock in any name other than that of the registered holder of the certificate
surrendered or otherwise establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(d) If, between the date hereof and the Effective Date, the shares of
Pekin Savings Common Stock shall be changed into a different number or class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within said period, the exchange ratio
specified in Section 3(a) hereof shall be adjusted accordingly.
5. DISSENTING SHARES. Subject to the provisions of Section 4001 of the
Act, or any successor thereto, holders of shares of Pekin Savings Common Stock
shall have dissenter or appraisal rights in connection with the Merger at set
forth in the Act.
6. NAME OF SURVIVING BANK. The name of the Surviving Bank shall be "Pekin
Savings Bank."
7. DIRECTORS OF THE SURVIVING BANK. Upon and after the Effective Date,
until changed in accordance with the Amended and Restated Articles of
Incorporation and Bylaws of the Surviving Bank and applicable law, the number of
directors of the Surviving Bank shall be seven. The names and addresses of those
persons who, upon and after the Effective Date, shall be directors of the
Surviving Bank are set forth in Schedule A hereto, which is hereby incorporated
herein by reference. Each such director shall serve for the term which expires
at the annual meeting
A-3
<PAGE>
of stockholders of the Surviving Bank in the year set forth after his or her
respective name in Schedule A, and until a successor is elected and qualified.
8. OFFICERS OF THE SURVIVING BANK. Upon and after the Effective Date,
until changed in accordance with the Amended and Restated Articles of
Incorporation and Bylaws of the Surviving Bank and applicable law, the officers
of Pekin Savings immediately prior to the Effective Date shall be the officers
of the Surviving Bank.
9. OFFICES. Upon the Effective Date, all offices of Pekin Savings and
Interim (which shall have no offices) shall be offices of the Surviving Bank. As
of the Effective Date, the home office of the Surviving Bank shall remain at
601-617 Court Street, Pekin, Illinois 61554 and the location of the other
offices of the Surviving Bank shall be as set forth in Schedule B hereto, which
is hereby incorporated herein by reference, except for the addition of offices
authorized or the deletion of offices closed subsequent to the date hereof and
the Effective Date.
10. ARTICLES OF INCORPORATION AND BYLAWS. On and after the Effective Date,
the Amended and Restated Articles of Incorporation and Bylaws of Pekin Savings
as in effect immediately prior to the Effective Date shall be the Amended and
Restated Articles of Incorporation and Bylaws of the Surviving Bank until
amended in accordance with the terms thereof and applicable law.
11. SAVINGS ACCOUNTS. Upon the Effective Date, all savings accounts of
Pekin Savings, without reissue, shall be and become savings accounts of the
Surviving Bank without change in their respective terms, including, without
limitation, maturity, minimum required balances or withdrawal value.
12. STOCK COMPENSATION PLANS. By voting in favor of this Agreement, the
Company shall have approved adoption of Pekin Savings' existing 1992 Stock
Option Plan (the "Plan") as a plan of the Company.
13. STOCKHOLDER APPROVAL. The affirmative vote of the holders of
two-thirds of the issued and outstanding Pekin Savings Common Stock shall be
required to approve this Agreement on behalf of Pekin Savings and the approval
of the Company, as the sole holder of Interim Common Stock, shall be required to
approve this Agreement on behalf of Interim.
14. REGISTRATION; OTHER APPROVALS. In addition to the approvals set forth
in Section 2 hereof, the parties' obligations to consummate the Merger shall be
subject to (i) the Company Common Stock to be issued hereunder in exchange for
Pekin Savings Common Stock being registered under the Securities Act of 1933 and
registered or qualified under applicable state securities laws, except in each
case to the extent that the Company relies on an applicable exemption therefrom,
and (ii) the receipt of all other approvals, consents or waivers as the parties
may deem necessary or advisable.
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<PAGE>
15. INCOME TAX MATTERS. The parties hereto shall have received an opinion
of counsel, satisfactory to them in form and substance, with respect to the
federal income tax consequences of this Agreement and the formation of a holding
company, as contemplated herein.
16. ABANDONMENT OF AGREEMENT. This Agreement may be abandoned by each of
Pekin Savings, Interim or the Company at any time before the Effective Date in
the event that (a) any action, suit, proceeding or claim has been instituted,
made or threatened relating to this Agreement which shall make consummation of
the transaction contemplated hereby inadvisable in the opinion of Pekin Savings,
Interim or the Company, or (b) for any other reason consummation of the
transaction contemplated hereby is inadvisable in the opinion of Pekin Savings,
Interim or the Company. Such abandonment shall be effected by written notice by
Pekin Savings, Interim or the Company to the others, authorized or approved by
the Board of Directors of the party giving such notice. Upon the giving of such
notice, this Agreement shall be terminated and there shall be no liability
hereunder or on account of such termination on the part of Pekin Savings,
Interim or the Company or the directors, officers, employees, agents or
stockholders of each of them. In the event of abandonment of this Agreement,
Pekin Savings shall pay the fees and expenses incurred by itself, Interim and
the Company in connection with this Agreement and the Merger.
17. AMENDMENTS. To the extent permitted by law, this Agreement may be
amended by a subsequent writing signed by the parties hereto upon the approval
of the Board of Directors of each of the parties hereto; provided, however that
the provisions of Section 3 hereto relating to the consideration to be exchanged
for shares of Pekin Savings Common Stock shall not be amended after the meeting
of stockholders of Pekin Savings at which this Agreement is considered so as to
decrease the amount of change the form of such consideration without the
approval of such stockholders.
18. SUCCESSORS. This Agreement shall be binding on the successors of Pekin
Savings, Interim and the Company.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts.
20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
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<PAGE>
IN WITNESS WHEREOF, Pekin Savings, Interim and the Company have caused this
Agreement to be executed by their duly author) the day and year first above
written.
PEKIN SAVINGS BANK
Attest:
/s/ E. Glen Rittenhouse By: /s/ Arthur E. Krile, Jr.
- - - - ---------------------------------- -------------------------------------
E. Glen Rittenhouse Arthur E. Krile, Jr.
Secretary President and Chief Executive Officer
PROGRESSIVE BANCORP, INC.
(in formation)
Attest:
/s/ E. Glen Rittenhouse By: /s/ Arthur E. Krile, Jr.
- - - - ---------------------------------- -------------------------------------
Glen Rittenhouse Arthur E. Krile, Jr.
Secretary President and Chief Executive Officer
PEKIN INTERIM SAVINGS BANK
(in formation)
Attest:
/s/ E. Glen Rittenhouse By: /s/ Arthur E. Krile, Jr.
- - - - ---------------------------------- -------------------------------------
E. Glen Rittenhouse Arthur E. Krile, Jr.
Secretary President and Chief Executive Officer
A-6
<PAGE>
<TABLE>
SCHEDULE A
DIRECTORS OF THE SURVIVING BANK
<CAPTION>
Name Residence Address Term Expires
- - - - --------------------------------------------------------------------------------
<S> <C> <C>
Patrick E. Oberle 44 Tanglewood 1999
Pekin, IL 61554
James S. Wolf 5 Valley High Street 1999
Pekin, IL 61554
Arthur E. Krile, Jr. 224 Cypress 1997
Pekin, IL 61554
E. Glen Rittenhouse 1804 Columbus Drive 1997
Pekin, IL 61554
Orville G. Deppert 910 Court Street 1998
Pekin, IL 61554
R.H. More 710 South 6th Street 1998
Pekin, IL 61554
John L. Steger #10 Cypress Point 1998
Pekin, IL 61554
</TABLE>
<PAGE>
SCHEDULE B
OFFICES OF THE SURVIVING BANK
HOME OFFICE
601-617 Court Street
Pekin, Illinois 61554
OTHER OFFICES
108 South Adams Street
Manito, Illinois 61546
<PAGE>
EXHIBIT B
<PAGE>
CERTIFICATE OF INCORPORATION
OF
PROGRESSIVE BANCORP, INC.
FIRST: The name of the Corporation is Progressive Bancorp, Inc.
(hereinafter sometimes referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of the registered agent
at that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: A. The total number of shares of all classes of stock which
the Corporation shall have authority to issue is three hundred thousand
(300,000) consisting of:
1. Fifty thousand (50,000) shares of Preferred Stock, par value
ten cents ($.10) per share (the "Preferred Stock"); and
2. Two hundred fifty thousand (250,000) shares of Common Stock,
par value one cent ($.01) per share (the "Common Stock").
B. The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares of Preferred
Stock in series, and by filing a certificate pursuant to the applicable law
of the State of Delaware (such certificate being hereinafter referred to as a
"Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation,
powers, preferences, and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof. The number of
authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote
of the holders of a majority of the Common Stock, without a vote of the
holders of the Preferred Stock, or of any series thereof, unless a vote of
any such holders is required pursuant to the terms of any Preferred Stock
Designation.
C. 1. Notwithstanding any other provision of this Certificate of
Incorporation, in no event shall any record owner of any outstanding
Common Stock which is beneficially owned, directly or indirectly, by a
person who, as of any record date for the determination of stockholders
entitled to vote on any matter, beneficially owns in excess of 10% of the
then-outstanding shares of Common Stock (the "Limit"), be entitled, or
permitted to any vote in respect of the shares held in excess of the
Limit. The number of votes which may be cast by any record owner by
virtue of the provisions hereof in respect of Common Stock beneficially
owned by such person beneficially owning shares in excess of the Limit
shall be a number equal to the total number of votes which a single
record owner of all Common Stock owned by such person would be entitled
to cast (subject to the provisions of this Article FOURTH), multiplied by
a fraction, the numerator of which is the number of shares of such class
or series which are both beneficially owned by such person and owned of
record by such record owner and the denominator of which is the total
number of shares of Common Stock beneficially owned by such person owning
shares in excess of the Limit.
<PAGE>
2. The following definitions shall apply to this Section C of
this Article FOURTH:
(a) "Affiliate" shall have the meaning ascribed to it in
Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, as in effect on the date of filing
of this Certificate of Incorporation.
(b) "Beneficial ownership" shall be determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, (or any successor rule or statutory
provision), or, if said Rule 13d-3 shall be rescinded and there shall
be no successor rule or provision thereto, pursuant to said Rule 13d-3
as in effect on the date of filing of this Certificate of
Incorporation; provided, however, that a person shall, in any event,
also be deemed the "beneficial owner" of any Common Stock:
(1) which such person or any of its affiliates
beneficially owns, directly or indirectly; or
(2) which such person or any of its affiliates has (i) the
right to acquire (whether such right is exercisable immediately
or only after the passage of time), pursuant to any agreement,
arrangement or understanding (but shall not be deemed to be the
beneficial owner of any voting shares solely by reason of an
agreement, contract, or other arrangement with this Corporation
to effect any transaction which is described in any one or more
of clauses 1 through 5 of Section A of Article EIGHTH), or upon
the exercise of conversion rights, exchange rights, warrants,
or options or otherwise, or (ii) sole or shared voting or
investment power with respect thereto pursuant to any agreement,
arrangement, understanding, relationship or otherwise (but
shall not be deemed to be the beneficial owner of any voting
shares solely by reason of a revocable proxy granted for a
particular meeting of stockholders, pursuant to a public
solicitation of proxies for such meeting, with respect to shares
of which neither such person nor any such Affiliate is otherwise
deemed the beneficial owner); or
(3) which is beneficially owned, directly or indirectly,
by any other person with which such first mentioned person or
any of its Affiliates acts as a partnership, limited partnership,
syndicate or other group pursuant to any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting
or disposing of any shares of capital stock of this Corporation;
and provided further, however, that (1) no Director or Officer of this
Corporation (or any Affiliate of any such Director or Officer) shall,
solely by reason of any or all of such Directors or Officers acting
in their capacities as such, be deemed, for any purposes hereof, to
beneficially own any Common Stock beneficially owned by any other
such Director or Officer (or any Affiliate thereof), and (2) neither
any employee stock ownership or similar plan of this Corporation or
any subsidiary of this Corporation, nor any trustee with respect
thereto or any Affiliate of such trustee (solely by reason of such
capacity of such trustee), shall be deemed, for any purposes hereof,
to beneficially own any Common Stock held under any such plan. For
purposes only of computing the percentage beneficial ownership of
Common Stock of a person, the outstanding Common Stock shall include
shares deemed owned by such person through application of this
subsection but shall not include any other Common Stock which may be
issuable by this Corporation pursuant to any agreement, or
B-2
<PAGE>
upon exercise of conversion rights, warrants or options, or
otherwise. For all other purposes, the outstanding Common Stock
shall include only Common Stock then outstanding and shall not
include any Common Stock which may be issuable by this Corporation
pursuant to any agreement, or upon the exercise of conversion
rights, warrants or options, or otherwise.
(c) The "Limit" shall mean 10% of the
then-outstanding shares of Common Stock.
(d) A "person" shall include an individual, firm,
a group acting in concert, a corporation, a
partnership, an association, a joint venture, a pool, a
joint stock company, a trust, an unincorporated
organization or similar company, a syndicate or any
other group formed for the purpose of acquiring,
holding or disposing of securities or any other entity.
3. The Board of Directors shall have the power to
construe and apply the provisions of this section and to
make all determinations necessary or desirable to implement
such provisions, including but not limited to matters with
respect to (i) the number of shares of Common Stock
beneficially owned by any person, (ii) whether a person is
an affiliate of another, (iii) whether a person has an
agreement, arrangement, or understanding with another as to
the matters referred to in the definition of beneficial
ownership, (iv) the application of any other definition or
operative provision of the section to the given facts, or
(v) any other matter relating to the applicability or effect
of this section.
4. The Board of Directors shall have the right to
demand that any person who is reasonably believed to
beneficially own Common Stock in excess of the Limit (or
holds of record Common Stock beneficially owned by any
person in excess of the Limit) supply the Corporation with
complete information as to (i) the record owner(s) of all
shares beneficially owned by such person who is reasonably
believed to own shares in excess of the Limit, and (ii) any
other factual matter relating to the applicability or effect
of this section as may reasonably be requested of such
person.
5. Except as otherwise provided by law or expressly
provided in this Section C, the presence, in person or by
proxy, of the holders of record of shares of capital stock
of the Corporation entitling the holders thereof to cast a
majority of the votes (after giving effect, if required, to
the provisions of this Section C) entitled to be cast by the
holders of shares of capital stock of the Corporation
entitled to vote shall constitute a quorum at all meetings
of the stockholders, and every reference in this Certificate
of Incorporation to a majority or other proportion of
capital stock (or the holders thereof) for purposes of
determining any quorum requirement or any requirement for
stockholder consent or approval shall be deemed to refer to
such majority or other proportion of the votes (or the
holders thereof) then entitled to be cast in respect of such
capital stock, after giving effect to this Section C.
6. Any constructions, applications, or determinations
made by the Board of Directors pursuant to this section in
good faith and on the basis of such information and
assistance as was then reasonably available for such purpose
shall be conclusive and binding upon the Corporation and its
stockholders.
7. In the event any provision (or portion thereof) of
this Section C shall be found to be invalid, prohibited or
unenforceable for any reason, the remaining provisions (or
portions
B-3
<PAGE>
thereof) of this Section shall remain in full force
and effect, and shall be construed as if such invalid,
prohibited or unenforceable provision had been stricken
herefrom or otherwise rendered inapplicable, it being the
intent of this Corporation and its stockholders that each
such remaining provision (or portion thereof ) of this
Section C remain, to the fullest extent permitted by law,
shall remain applicable and enforceable as to all
stockholders, including stockholders owning an amount of
stock over the Limit, notwithstanding any such finding.
FIFTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the
Corporation, and for further definition, limitation and
regulation of the powers of the Corporation and of its Directors
and stockholders:
A. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. In
addition to the powers and authority expressly conferred upon
them by statute or by this Certificate of Incorporation or the
Bylaws of the Corporation, the Directors are hereby empowered to
exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation.
B. The Directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide.
C. 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.
D. Special meetings of stockholders of the Corporation may
be called only by the Board of Directors pursuant to a resolution
adopted by a majority of the Whole Board or as otherwise provided
in the Bylaws. The term "Whole Board" shall mean the total
number of authorized directorships (whether or not there exist
any vacancies in previously authorized directorships at the time
any such resolution is presented to the Board for adoption).
SIXTH: A. The number of Directors shall be fixed from
time to time exclusively by the Board of Directors pursuant to a
resolution adopted by a majority of the Whole Board. The
Directors shall be divided into three classes, with the term of
office of the first class to expire at the first annual meeting
of stockholders, the term of office of the second class to expire
at the annual meeting of stockholders one year thereafter and the
term of office of the third class to expire at the annual meeting
of stockholders two years thereafter with each Director to hold
office until his or her successor shall have been duly elected
and qualified. At each annual meeting of stockholders following
such initial classification and election, Directors elected to
succeed those Directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting
of stockholders after their election with each Director to hold
office until his or her successor shall have been duly elected
and qualified.
B. Subject to the rights of holders of any series of
Preferred Stock outstanding, 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 may be filled only by a majority vote of the
Directors then in office, though less than a quorum, and
Directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the
class to which they have been chosen expires. No decrease in the
number of Directors constituting the Board of Directors shall
shorten the term of any incumbent Director.
B-4
<PAGE>
C. Advance notice of stockholder nominations for the
election of Directors and of business to be brought by
stockholders before any meeting of the stockholders of the
Corporation shall be given in the manner provided in the Bylaws
of the Corporation.
D. Subject to the rights of holders of any series of
Preferred Stock then outstanding, any Directors, 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 80 percent of the voting power of all of the
then-outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of Directors (after
giving effect to the provisions of Article FOURTH of this
Certificate of Incorporation ("Article FOURTH")), voting together
as a single class.
SEVENTH: The Board of Directors is expressly empowered to
adopt, amend or repeal Bylaws of the Corporation. Any adoption,
amendment or repeal of the Bylaws of the Corporation by the Board
of Directors shall require the approval of a majority of the
Whole Board. The stockholders shall also have power to adopt,
amend or repeal the Bylaws of the Corporation; provided, however,
that, in addition to any vote of the holders of any class or
series of stock of this Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders
of at least 80 percent of the voting power of all of the
then-outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of Directors (after
giving effect to the provisions of Article FOURTH), voting
together as a single class, shall be required to adopt, amend or
repeal any provisions of the Bylaws of the Corporation.
EIGHTH: A. In addition to any affirmative vote required
by law or this Certificate of Incorporation, and except as
otherwise expressly provided in this Article EIGHTH:
1. any merger or consolidation of the Corporation or
any Subsidiary (as hereinafter defined) with (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an
Interested Stockholder; or
2. 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 any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value (as hereinafter defined)
equaling or exceeding 25% or more of the combined assets of
the Corporation and its Subsidiaries; or
3. 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 (as hereinafter defined)
equaling or exceeding 25% of the combined Fair Market Value
of the outstanding common stock of the Corporation and its
Subsidiaries, except for any issuance or transfer pursuant
to an employee benefit plan of the Corporation or any
Subsidiary thereof (established with the approval of a
majority of the Disinterested Directors); or
4. 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
B-5
<PAGE>
5. 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 80%
of the voting power of the then-outstanding shares of stock of
the Corporation entitled to vote in the election of Directors
(the "Voting Stock") (after giving effect to the provisions of
Article FOURTH), 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 by any other provisions of this Certificate
of Incorporation or any Preferred Stock Designation or in any
agreement with any national securities exchange or otherwise.
The term "Business Combination" as used in this Article
EIGHTH shall mean any transaction which is referred to in any one
or more of paragraphs 1 through 5 of Section A of this Article
EIGHTH.
B. The provisions of Section A of this Article EIGHTH
shall not be applicable to any particular Business Combination,
and such Business Combination shall require only the affirmative
vote of the majority of the outstanding shares of capital stock
entitled to vote after giving effect to the provisions of Article
FOURTH, or such vote (if any), as is required by law or by this
Certificate of Incorporation, if, in the case of any Business
Combination that does not involve any cash or other consideration
being received by the stockholders of the Corporation solely in
their capacity as stockholders of the Corporation, the condition
specified in the following paragraph 1 is met or, in the case of
any other Business Combination, all of the conditions specified
in either of the following paragraphs 1 or 2 are met:
1. The Business Combination shall have been approved
by a majority of the Disinterested Directors (as hereinafter
defined).
2. All of the following conditions shall have been
met:
(a) 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 the holders of Common Stock
in such Business Combination shall at least be equal to
the higher of the following
(1) (if applicable) the Highest Per Share
Price (as hereinafter defined), including any
brokerage commissions, transfer taxes and
soliciting dealers' fees, paid by the Interested
Stockholder or any of its Affiliates for any
shares of Common Stock acquired by it (i) within
the two-year period immediately prior to the first
public announcement of the proposal of the
Business Combination (the "Announcement Date"), or
(ii) in the transaction in which it became an
Interested Stockholder, whichever is higher.
(2) 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 EIGHTH as the
"Determination Date"), whichever is higher.
B-6
<PAGE>
(b) 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
class of outstanding Voting Stock other than Common
Stock shall be at least equal to the highest of the
following (it being intended that the requirements of
this subparagraph (b) shall be required to be met with
respect to every such class of outstanding Voting
Stock, whether or not the Interested Stockholder has
previously acquired any shares of a particular class of
Voting Stock):
(1) (if applicable) the Highest Per Share
Price (as hereinafter defined), including any
brokerage commissions, transfer taxes and
soliciting dealers' fees, paid by the Interested
Stockholder for any shares of such class of Voting
Stock acquired by it (i) within the two-year
period immediately prior to the Announcement Date,
or (ii) in the transaction in which it became an
Interested Stockholder, whichever is higher;
(2) (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 Corporation; and
(3) the Fair Market Value per share of such
class of Voting Stock on the Announcement Date or
on the Determination Date, whichever is higher.
(c) 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 to be received per share by
holders of shares of 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 the Interested Stockholder. The
price determined in accordance with subparagraph B.2 of
this Article EIGHTH shall be subject to appropriate
adjustment in the event of any stock dividend, stock
split, combination of shares or similar event.
(d) After such Interested Stockholder has become
an Interested Stockholder and prior to the consummation
of such Business Combination: (1) except as approved
by a majority of the Disinterested Directors (as
hereinafter defined), there shall have been no failure
to declare and pay at the regular date therefor any
full quarterly dividends (whether or not cumulative) on
any outstanding stock having preference over the Common
Stock as to dividends or liquidation; (2) there shall
have been (i) 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 (ii) 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 which has the
effect of reducing the number of outstanding shares of
the Common Stock, unless the failure to so increase
such annual rate is approved by a majority of the
Disinterested Directors, and (3) neither such
Interested Stockholder or any of its Affiliates shall
have become the beneficial owner of any additional
shares of Voting Stock except as
B-7
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part of the transaction which results in such Interested
Stockholder becoming an Interested Stockholder.
(e) 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, directly or indirectly, by the
Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
(f) A proxy or information statement describing
the proposed Business Combination and complying with
the requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations
thereunder (or any subsequent provisions replacing such
Act, and the rules or regulations thereunder) shall be
mailed to stockholders of the Corporation 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).
C. For the purposes of this Article EIGHTH:
1. A "Person" shall include an individual, a group
acting in concert, a corporation, a partnership, an
association, a joint venture, a pool, a joint stock company,
a trust, an unincorporated organization or similar company,
a syndicate or any other group formed for the purpose of
acquiring, holding or disposing of securities or any other
entity.
2. "Interested Stockholder" shall mean any person
(other than the Corporation or any Holding Company or
Subsidiary thereof) who or which:
(a) is the beneficial owner, directly or
indirectly, of more than 5% of the outstanding Voting
Stock; or
(b) 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 5% or more of the voting power of the
then outstanding Voting Stock; or
(c) 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, as amended.
3. For purposes of this Article EIGHTH, "beneficial
ownership" shall be determined in the manner provided in
Section C of Article FOURTH hereof.
4. "Affiliate" and "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 amended, as in effect on the date
of filing of this Certificate of Incorporation.
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5. "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 2 of this Section C, 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.
6. "Disinterested Director" means any member of the
Board of Directors who is unaffiliated with the Interested
Stockholder and was a member of the Board of Directors prior
to the time that the Interested Stockholder became an
Interested Stockholder, and any Director who is thereafter
chosen to fill any vacancy of the Board of Directors or who
is elected and who, in either event, is unaffiliated with
the Interested Stockholder and in connection with his or her
initial assumption of office is recommended for appointment
or election by a majority of Disinterested Directors then on
the Board of Directors.
7. "Fair Market Value" means:
(a) in the case of stock, the highest closing
sales price of the stock during the 30-day period
immediately preceding the date in question of a share
of such stock on the National Association of Securities
Dealers Automated Quotation System or any system then
in use, or, if such stock is admitted to trading on a
principal United States securities exchange registered
under the Securities Exchange Act of 1934, as amended,
Fair Market Value shall be the highest sale price
reported during the 30-day period preceding the date in
question, 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, in each case with respect to any class of
stock, appropriately adjusted for any dividend or
distribution in shares of such stock or any stock split
or reclassification of outstanding shares of such stock
into a greater number of shares of such stock or any
combination or reclassification of outstanding shares
of such stock into a smaller number of shares of such
stock, and
(b) 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.
8. Reference to "Highest Per Share Price" shall in
each case with respect to any class of stock reflect an
appropriate adjustment for any dividend or distribution in
shares of such stock or any stock split or reclassification
of outstanding shares of such stock into a greater number of
shares of such stock or any combination or reclassification
of outstanding shares of such stock into a smaller number of
shares of such stock.
9. In the event of any Business Combination in which
the Corporation survives, the phrase "consideration other
than cash to be received" as used in Subparagraphs (a) and
(b) of Paragraph 2 of Section B of this Article EIGHTH 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.
D. A majority of the Directors of the Corporation shall
have the power and duty to determine for the purposes of this
Article EIGHTH, 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 have, or the
consideration to be
B-9
<PAGE>
received for the issuance or transfer of securities by the Corporation or any
Subsidiary in any Business Combination has, an aggregate Fair Market Value
equaling or exceeding 25% of the combined Fair Market Value of the common
stock of the Corporation and its Subsidiaries. A majority of the
Disinterested Directors shall have the further power to interpret all of the
terms and provisions of this Article EIGHTH.
E. Nothing contained in the Article EIGHTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
F. Notwithstanding any other provisions of this
Certificate of Incorporation or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of any particular class or series
of the Voting Stock required by law, this Certificate of
Incorporation or any Preferred Stock Designation, the affirmative
vote of the holders of at least 80 percent of the voting power of
all of the then-outstanding shares of the Voting Stock, voting
together as a single class, shall be required to alter, amend or
repeal this Article EIGHTH.
NINTH: The Board of Directors of the Corporation, when
evaluating any offer of another Person (as defined in Article
EIGHTH hereof) to (A) make a tender or exchange offer for any
equity security of the Corporation, (B) merge or consolidate the
Corporation with another corporation or entity or (C) purchase or
otherwise acquire all or substantially all of the properties and
assets of the Corporation, may, in connection with the exercise
of its judgment in determining what is in the best interest of
the Corporation and its stockholders, give due consideration to
all relevant factors, including, without limitation, those
factors that Directors of any subsidiary of the Corporation may
consider in evaluating any action that may result in a change or
potential change in the control of the subsidiary, and the social
and economic effect of acceptance of such offer: on the
Corporation's present and future customers and employees and
those of its Subsidiaries (as defined in Article EIGHTH hereof);
on the communities in which the Corporation and its Subsidiaries
operate or are located; on the ability of the Corporation to
fulfill its corporate objective as a savings bank holding company
under applicable laws and regulations; and on the ability of its
subsidiary savings bank to fulfill the objectives of a stock form
savings bank under applicable statutes and regulations.
TENTH: A. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a Director or an
Officer of the Corporation or is or was serving at the request of
the Corporation as a Director, Officer, employee or agent of
another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to an employee
benefit plan (hereinafter an "indemnitee"), whether the basis of
such proceeding is alleged action in an official capacity as a
Director, Officer, employee or agent or in any other capacity
while serving as a Director, Officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than
such law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided,
however, that, except as provided in Section C hereof with
respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection
with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation.
B-10
<PAGE>
B. The right to indemnification conferred in Section A of
this Article TENTH shall include the right to be paid by the
Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter and
"advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a
Director or Officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without
limitation, services to an employee benefit plan) shall be made
only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which
there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be
indemnified for such expenses under this Section or otherwise.
The rights to indemnification and to the advancement of expenses
conferred in Sections A and B of this Article TENTH shall be
contract rights and such rights shall continue as to an
indemnitee who has ceased to be a Director, Officer, employee or
agent and shall inure to the benefit of the indemnitee's heirs,
executors and administrators.
C. If a claim under Section A or B of this Article TENTH
is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the
case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim. If successful in whole or in part in
any such suit, or in a suit brought by the Corporation to recover
an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the
expenses of prosecuting or defending such suit. In (i) any suit
brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce
a right to an advancement of expenses) it shall be a defense
that, and (ii) in any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking
the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any
applicable standard for indemnification set forth in the Delaware
General Corporation Law. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee
is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or
its stockholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the
indemnitee has not met the applicable standard of conduct or, in
the case of such a suit brought by the indemnitee, be a defense
to such suit. In any suit brought by the indemnitee to enforce a
right to indemnification or to an advancement of expenses
hereunder, or by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or
to such advancement of expenses, under this Article TENTH or
otherwise, shall be on the Corporation.
D. The rights to indemnification and to the advancement of
expenses conferred in this Article TENTH shall not be exclusive of any
other right which any person may have or hereafter acquire under any
statute, the Corporation's Certificate of Incorporation, Bylaws,
agreement, vote of stockholders or Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense,
to protect itself and any Director, Officer, employee or agent of
the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability
or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
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<PAGE>
F. The Corporation may, to the extent authorized from time
to time by the Board of Directors, grant rights to
indemnification and to the advancement of expenses to any
employee or agent of the Corporation to the fullest extent of the
provisions of this Article TENTH with respect to the
indemnification and advancement of expenses of Directors and
Officers of the Corporation.
ELEVENTH: A Director of this Corporation shall not be
personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty 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 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.
TWELFTH: The Corporation reserves the right to amend or
repeal any provision contained in this Certificate of
Incorporation in the manner prescribed by the laws of the State
of Delaware and all rights conferred upon stockholders are
granted subject to this reservation; provided, however, that,
notwithstanding any other provision of this Certificate of
Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any vote of
the holders of any class or series of the stock of this
Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of at least 80
percent of the voting power of all of the then-outstanding shares
of the capital stock of the Corporation entitled to vote
generally in the election of Directors (after giving effect to
the provisions of Article FOURTH), voting together as a single
class, shall be required to amend or repeal this Article TWELFTH,
Section C of Article FOURTH, Sections C or D of Article FIFTH,
Article SIXTH, Article SEVENTH, or Article EIGHTH.
THIRTEENTH: The name and mailing address of the sole
incorporator are as follows:
Name
Mailing Address
Robert B. Pomerenk 5335 Wisconsin Avenue, N.W.
Suite 400
Washington, D.C. 20015
I, THE UNDERSIGNED, being the incorporator, for the purpose
of forming a corporation under the laws of the State of Delaware,
do make, file and record this Certificate of Incorporation, do
certify that the facts herein stated are true, and accordingly,
have hereto set my hand this __st day of July, 1997.
-----------------------------
Robert B. Pomerenk
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 4010 (a)(7) of the Illinois Savings Bank Act and Section 1075.465
of the regulations promulgated thereunder set forth circumstances under which
directors, officers, employees and agents may be insured or indemnified against
liability which they may incur in their capacities.
Article Tenth of the Holding Company's Certificate of Incorporation
provides that the Holding Company shall indemnify to the fullest extent
permissible under the Delaware General Corporation Law any individual who is or
was a director, officer, employee, or agent of the Corporation, and any
individual who serves or served at the Corporation's request as a director,
officer, partner, trustee, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, in any proceeding in
which the individual is made a party as a result of his service in such
capacity. An individual will not be indemnified if it is proved that the act or
omission at issue was material to the cause of action adjudicated in the subject
proceeding and that (i) it was committed in bad faith, or (ii) it was the result
of active and deliberate dishonesty, or (iii) the individual actually received
an improper personal benefit in money, property, or services, or (iv) in the
case of a criminal proceeding, the individual had reasonable cause to believe
that the act or omission was unlawful.
The Holding Company intends to purchase director and officer liability
insurance that insures directors and officers against certain liabilities in
connection with the performance of their duties as directors and officers, and
will provide for payment to the Holding Company of costs incurred by it in
indemnifying its directors.
Item 21. Exhibits and Financial Statement Schedules
The exhibits and financial statements filed as part of this Registration
Statement are as follows:
(a) Exhibits
The Index of Exhibits immediately precedes the attached Exhibits.
(b) Financial Statements
Not applicable.
(c) Report or Appraisal
Not applicable.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
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<PAGE>
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement; (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or most recent post effective amendment
thereof) which individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for purposes of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be a bona fide
offering thereof.
(b)(1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of, and
included in the registration statement when it became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Pekin, Illinois, on August 19, 1997.
PROGRESSIVE BANCORP, INC.
Date: August 19, 1997 By:
----------------------------------------
Arthur E. Krile, Jr.
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned Directors of the Holding Company severally constitute
and appoint Arthur E. Krile, Jr. with full power of substitution, our true and
lawful attorney and agent, to do any and all things and acts in our names in the
capacities indicated below which said Arthur E. Krile, Jr. may deem necessary or
advisable to enable the Holding Company to comply with the Securities Act of
1933, and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with the Registration Statement on Form S-4 relating
to the offering of the Holding Company Common Stock, including specifically, but
not limited to, power and authority to sign for us or any of us in our names in
the capacities indicated below the Registration Statement and any and all
amendments (including post-effective amendments) thereto; and we hereby ratify
and confirm all that said Bernard Janis shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
___________________________
Patrick E. Oberle Director August 19, 1997
___________________________
James S. Wolf Director August 19, 1997
___________________________
Arthur E. Krile, Jr. President, Chief Executive August 19, 1997
Officer and Director
___________________________
E. Glen Rittenhouse Senior Vice President, August 19, 1997
Secretary and Director
___________________________
Orville G. Deppert Chairman of the Board August 19, 1997
___________________________
R.H. More Vice Chairman of the Board August 19, 1997
___________________________
John L. Steger Director August 19, 1997
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document
------- -----------------------
2 Agreement and Plan of Reorganization (attached as Exhibit A
to the Prospectus and Proxy Statement filed as part of this
Registration Statement).
3.1 Articles of Incorporation of the Holding Company (attached
as Exhibit B to the Prospectus and Proxy Statement filed as
part of this Registration Statement).
3.2 Bylaws of the Holding Company
5.1 Opinion of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation regarding legality of securities.
5.2 Tax Opinion of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation
24.1 Consent of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation (contained in its opinion filed as
Exhibit 5.1).
99 Form of proxy to be mailed to shareholders of Pekin Savings,
s.b.
<PAGE>
EXHIBIT NO. 3.2
<PAGE>
PROGRESSIVE BANCORP, INC.
BYLAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of Directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix, which date
shall be within thirteen (13) months subsequent to the later of the date of
incorporation or the last annual meeting of stockholders.
Section 2. Special Meetings.
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of stockholders of the Corporation
may be called only by the Board of Directors pursuant to a resolution adopted by
a majority of the total number of Directors which the Corporation would have if
there were no vacancies on the Board of Directors (hereinafter the "Whole
Board").
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all of the
shares of the stock entitled to vote at the meeting, present in person or by
proxy (after giving effect to the provisions of Article FOURTH of the
Corporation's Certificate of Incorporation), shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law. Where a separate vote by a class or classes is
required, a majority of the represented by proxy (after giving effect to the
provisions of Article FOURTH of the Corporation's Certificate of Incorporation)
shall constitute a quorum entitled to take action with respect to that vote on
that matter.
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<PAGE>
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present in person or by prosy constituting a quorum, then except as otherwise
required by law, those present in person or by proxy at such adjourned meeting
shall constitute a quorum, and all matters shall be determined by a majority of
the votes cast at such meeting.
Section 5. Organization.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board of the Corporation or, in
his or her absence, such person as may be chosen by the holders of a majority of
the shares entitled to vote who are present, in person or by proxy, shall call
to order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman appoints.
Section 6. Conduct of Business.
(a) The chairman of any meeting of stockholders shall determine the
order of business and the procedures at the meeting, including such regulation
of the manner of voting and the conduct of discussion as seem to him or her in
order. The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be announced
at the meeting.
(b) At any annual meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting (i) by or at
the direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the business must
relate to a proper subject matter for stockholder action and the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered or mailed
to and received at the principal executive offices of the Corporation not less
than one hundred and twenty (120) calendar days in advance of the date of the
Corporation's proxy statement which was released to stockholders in connection
with the previous year's annual meeting of stockholders. A stockholder's notice
to the Secretary shall set forth as to each matter such stockholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the Corporation's capital stock that are beneficially
owned by such stockholder, and (iv) any material interest of such stockholder in
such business. Notwithstanding anything in these Bylaws to the contrary, no
business shall be brought before or conducted at an annual meeting except in
accordance with the provisions of this Section 6(b). The Officer of the
Corporation or other person presiding over the annual meeting shall, if the
facts so warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 6(b) and, if he should so determine, he shall so declare to the meeting
and any such business so determined to be not properly brought before the
meeting shall not be transacted.
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At any special meeting of the stockholders only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
(c) Only persons who are nominated in accordance with the procedures
set forth in these Bylaws shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders at which directors are to be elected
only (i) by or at the direction of the Board of Directors or (ii) by any
stockholder of the Corporation entitled to vote for the election of Directors at
the meeting who complies with the notice procedures set forth in this Section
6(c). Such nominations, other than those made, by or at the direction of the
Board of Directors, shall be made by timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered or
mailed to and received at the principal executive offices of the Corporation not
less than one hundred and twenty (120) calendar days in advance of the date of
the Corporation's proxy statement which was released to stockholders in
connection with the previous year's annual meeting of stockholders. Such
stockholder's notice shall set forth (i) as to each person whom such stockholder
proposes to nominate for election or re-election as a Director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); and (ii) as to the
stockholder giving the notice (x) the name and address, as they appear on the
Corporation's books, of such stockholder and (y) the class and number of shares
of the Corporation's capital stock that are beneficially owned by such
stockholder. At the request of the Board of Directors any person nominated by
the Board of Directors for election as a Director shall furnish to the Secretary
of the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a Director of the Corporation unless nominated in accordance
with the provisions of this Section 6(c). The Officer of the Corporation or
other person presiding at the meeting shall, if the facts so warrant, determine
that a nomination was not made in accordance with such provisions and, if he or
she shall so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting. Any facsimile
telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this paragraph may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
All voting, including on the election of Directors but excepting where
otherwise required by law or by the governing documents of the Corporation, may
be made by a voice vote; provided, however, that upon demand therefor by a
stockholder entitled to vote or his or her proxy, a stock vote shall be taken.
Every stock vote shall be taken by ballot, each of which shall state the name of
the stockholder or proxy voting and such other information as may be required
under the procedures established for the meeting. The Corporation shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act. If no inspector or alternate is able to act at
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a meeting of stockholders, the person presiding at the meeting shall appoint
one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by a
majority of the votes cast.
Section 8. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 9. Consent of Stockholders in Lieu of Meeting.
Subject to the rights of the holders of any class of series of preferred
stock of the Corporation, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special meeting
of stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
ARTICLE II - BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office.
The business and affairs of the Corporation shall be under the direction of
its Board of Directors. The number of Directors who shall constitute the Whole
Board shall be such number as the Board of Directors shall from time to time
have designated except in the absence of such designation shall be seven. The
Board of Directors shall annually elect a Chairman of the Board from among its
members who shall, when present, preside at its meetings.
The Directors, other than those who may be elected by the holders of any
class or series of Preferred Stock, shall be divided, with respect to the time
for which they severally hold office, into three classes, with the term of
office of the first class to expire at the first annual meeting of stockholders,
the term of office of the second class to expire at the annual meeting of
stockholders one year thereafter and the term of office of the third class to
expire at the annual meeting of stockholders two years thereafter, with each
Director to hold office until his or her successor shall have been duly elected
and qualified. At each annual meeting of stockholders, Directors elected to
succeed those Directors whose terms then expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders after
their
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election, with each Director to hold office until his or her successor shall
have been duly elected and qualified.
No person shall be eligible for nomination to the Board of Directors or be
qualified to be elected to or serve as a member of the Board of Directors unless
such person owns at least 100 shares of capital stock of the Corporation and,
except for new Directors who may be added to the Board of Directors from the
board of directors of another entity as a result of a merger or consolidation of
such entity with the Corporation, has been domiciled in the market area of Pekin
Savings, s.b. (as defined by the Community Reinvestment Act statement and policy
of Pekin Savings, s.b.), for at least twenty-four (24) months prior to such
person's name being submitted for nomination to the Board of Directors.
Section 2. Vacancies and Newly Created Directorships.
Subject to the rights of the holders of any class or series of Preferred
Stock, and unless the Board of Directors otherwise determines, 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 may be filled
only by a majority vote of the Directors then in office, though less than a
quorum, and Directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires and until such Director's successor shall have
been duly elected and qualified. No decrease in the number of authorized
directors constituting the Board shall shorten the term of any incumbent
Director.
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all Directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by one-third (1/3)
of the Directors then in office (rounded up to the nearest whole number), by the
Chairman of the Board or the President and shall be held at such place, on such
date, and at such time as they, or he or she, shall fix. Notice of the place,
date, and time of each such special meeting shall be given each Director by whom
it is not waived by mailing written notice not less than five (5) days before
the meeting or by telegraphing or telexing or by facsimile transmission of the
same not less than twenty-four (24) hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the Whole Board
shall constitute a quorum for all purposes. If a quorum shall fail to attend
any meeting, a majority of those present may adjourn the meeting to another
place, date, or time, without further notice or waiver thereof.
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Section 6. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the Directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 8. Powers.
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as
it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any Officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any Officer upon any
other person for the time being;
(5) To confer upon any Officer of the Corporation the power to
appoint, remove and suspend subordinate Officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for Directors, Officers, employees and agents
of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for Directors, Officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with
these Bylaws, for the management of the Corporation's business and affairs.
Section 9. Compensation of Directors.
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Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as Directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the Board of Directors,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for these committees and any others provided for herein,
elect a Director or Directors to serve as the member or members, designating, if
it desires, other Directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any committee so
designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger pursuant to Section 253 of the Delaware General
Corporation Law if the resolution which designates the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
Section 3. Nominating Committee
The Board of Directors may appoint a Nominating Committee of the Board,
consisting of not less than three (3) members. The Nominating Committee shall
have authority (a) to review any nominations for election to the Board of
Directors made by a stockholder of the Corporation pursuant to Section 6(c)(ii)
of Article I of these By-laws in order to determine compliance with such By-law
and (b) to recommend to the Whole Board nominees for election to the Board of
Directors to replace those Directors whose terms expire at the annual meeting of
stockholders next ensuing.
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ARTICLE IV - OFFICERS
Section 1. Generally.
(a) The Board of Directors as soon as may be practicable after the
annual meeting of stockholders shall choose a Chairman of the Board, a Chief
Executive Officer and President, one or more Vice Presidents, a Secretary and a
Treasurer and from time to time may choose such other officers as it may deem
proper. The Chairman of the Board shall be chosen from among the Directors.
Any number of offices may be held by the same person.
(b) The term of office of all Officers shall be until the next annual
election of Officers and until their respective successors are chosen but any
Officer may be removed from office at any time by the affirmative vote of a
majority of the authorized number of Directors then constituting the Board of
Directors.
(c) All Officers chosen by the Board of Directors shall have such
powers and duties as generally pertain to their respective Offices, subject to
the specific provisions of this ARTICLE IV. Such officers shall also have such
powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof.
Section 2. Chairman of the Board of Directors.
The Chairman of the Board shall, subject to the provisions of these Bylaws
and to the direction of the Board of Directors, serve in general executive
capacity and unless the Board has designated another person, when present, shall
preside at all meetings of the stockholders of the Corporation. The Chairman of
the Board shall perform all duties and have all powers which are commonly
incident to the office of Chairman of the Board or which are delegated to him or
her by the Board of Directors. He or she shall have power to sign all stock
certificates, contracts and other instruments of the Corporation which are
authorized.
Section 3. President and Chief Executive Officer.
The President and Chief Executive Officer (the "President") shall have
general responsibility for the management and control of the business and
affairs of the Corporation and shall perform all duties and have all powers
which are commonly incident to the offices of President and Chief Executive
Officer or which are delegated to him or her by the Board of Directors. Subject
to the direction of the Board of Directors, the President shall have power to
sign all stock certificates, contracts and other instruments of the Corporation
which are authorized and shall have general supervision of all of the other
Officers (other than the Chairman of the Board), employees and agents of the
Corporation.
Section 4. Vice President.
The Vice President or Vice Presidents shall perform the duties of the
President in his or her absence or during his or her disability to act. In
addition, the Vice Presidents shall perform the duties and exercise the powers
usually incident to their respective offices and/or such other duties and powers
as may be properly assigned to them by the Board of Directors, the Chairman of
the Board or the President. A vice President or Vice Presidents may be
designated as Executive Vice President or Senior Vice President.
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<PAGE>
Section 5. Secretary.
The Secretary or Assistant Secretary shall issue notices of meetings, shall
keep their minutes, shall have charge of the seal and the corporate books, shall
perform such other duties and exercise such other powers as are usually incident
to such office and/or such other duties and powers as are properly assigned
thereto by the Board of Directors, the Chairman of the Board or the President.
Subject to the direction of the Board of Directors, the Secretary shall have the
power to sign all stock certificates.
Section 6. Treasurer.
The Treasurer shall be the Comptroller of the Corporation and shall have
the responsibility for maintaining the financial records of the Corporation. He
or she shall make such disbursements of the funds of the Corporation as are
authorized and shall render from time to time an account of all such
transactions and of the financial condition of the Corporation. The Treasurer
shall also perform such other duties as the Board of Directors may from time to
time prescribe. Subject to the direction of the Board of Directors, the
Treasurer shall have the power to sign all stock certificates.
Section 7. Assistant Secretaries and Other Officers.
The Board of Directors may appoint one or more Assistant Secretaries and
such other Officers who shall have such powers and shall perform such duties as
are provided in these Bylaws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
Section 8. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President or any
Officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the Chairman of the Board or the President, and by
the Secretary or an Assistant Secretary, or any Treasurer or Assistant
Treasurer, certifying the number of shares owned by him or her. Any or all of
the signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these Bylaws,
an
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outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day nest preceding the day on which notice is given or,
if notice is waived, at the close of business on the next day preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment or rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, Director, Officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or by sending such notice by prepaid telegram or mailgram or other
courier. Any such notice shall be addressed to such stockholder, Director,
Officer, employee or agent at his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received, if hand
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delivered, or dispatched, if delivered through the mails or by telegram or
mailgram or other courier, shall be the time of the giving of the notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, Director, Officer,
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice required to be
given to such stockholder, Director, Officer, employee or agent. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
an assistant to the Treasurer.
Section 3. Reliance Upon Books, Reports and Records.
Each Director, each member of any committee designated by the Board of
Directors, and each Officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its Officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such Director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall end on September 30 of every
year.
Section 5. Time Periods.
In applying any provision of these Bylaws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
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ARTICLE VIII - AMENDMENTS
The Board of Directors may amend, alter or repeal these Bylaws at any
meeting of the Board, provided notice of the proposed change was given not less
than two days prior to the meeting. The stockholders shall also have power to
amend, alter or repeal these Bylaws at any meeting of stockholders provided
notice of the proposed change was given in the notice of the meeting; provided,
however, that, notwithstanding any other provisions of the Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the voting stock required by law, the Certificate of Incorporation,
any Preferred Stock Designation or these Bylaws, the affirmative votes of the
holders of at least 80% of the voting power of all the then-outstanding shares
of the Voting Stock, voting together as a single class, shall be required to
alter, amend or repeal any provisions of these Bylaws.
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EXHIBIT NO. 5.1
<PAGE>
(202) 274-2011
August 19, 1997
Board of Directors
Progressive Bancorp, Inc.
601-617 Court Street
Pekin, Illinois 61554
Re: Progressive Bancorp, Inc.
Registration Statement on Form S-4
Gentlemen:
We have served as special counsel for the Progressive Bancorp, Inc., a
Delaware corporation, in connection with the registration under the Securities
Act of 1933, of 168,172 shares of Common Stock, par value $0.01 per share.
Based upon the foregoing and having regard for such legal considerations
as we have deemed relevant, it is our opinion that:
(1) the shares of Common Stock have been duly authorized;
(2) upon issuance, sale and delivery of the shares as contemplated in the
Registration Statement, the shares will be legally issued, fully paid
and non-assessable.
We hereby consent to the reference to our firm under the heading "Proposal
I--Proposed Formation of Holding Company--Legal Opinion" in the Prospectus and
Proxy Statement in the Registration Statement (and all amendments thereto) and
to the filing of this opinion as Exhibit 5.1 thereto.
Very truly yours,
LUSE LEHMAN GORMAN POMERENK & SCHICK
A Professional Corporation
<PAGE>
EXHIBIT NO. 5.2
<PAGE>
(202) 274-2000
August __, 1997
Board of Directors
Pekin Savings Bank
601-617 Court Street
Pekin, Illinois 61554
Re: Federal Income Tax Opinion Relating to the Exchange of the
Common Stock of Pekin Savings Bank, for All the Common Stock
of a Newly Created under Internal Revenue Code Sections
368(a)(1)(A) and 368(a)(2)(E)
Gentlemen:
We are rendering this opinion to you in our capacity as special counsel
to Pekin Savings Bank (the "Bank") in connection with its proposed
reorganization into a holding company structure (the "Reorganization") by
creating Progressive Bancorp, Inc., a Delaware corporation (the "Holding
Company") which will be the stock holding company of the Bank.
For purposes of this opinion, we have examined such documents and
questions of law as we have considered necessary or appropriate, including,
but not limited to the Agreement and Plan of Reorganization adopted by the
Bank's Boards of Directors on February 26, 1997 (the "Plan of
Reorganization"); the Application FR Y-3 ("Application") together with
exhibits filed by the Holding Company with the Board of Governors of the
Federal Reserve System ("FRB"), in connection with the Reorganization; the
Charter and Bylaws of the Bank; the Certificate of Incorporation and Bylaws
of the Holding Company; the Affidavit of Representations dated ____________,
1997, provided to us by the Bank in connection with this opinion (the
"Affidavit"). In such examination, we have assumed, and have not
independently verified, the genuineness of all signatures on original
documents where due execution and delivery are requirements to the
effectiveness thereof. Terms used but not defined herein, whether
capitalized or not, shall have the same meaning as defined in the Plan.
<PAGE>
BACKGROUND
The Bank is an Illinois-chartered stock savings bank with savings
deposits insured by the Federal Deposit Insurance Corporation ("FDIC"). The
authorized capital stock of the Bank consists of ___________ shares of
common stock ("Bank Common Stock") with a par value of $1.00 per share, and
_________ shares of serial preferred stock. As of March 31, 1997, the Bank
had approximately 168,172 shares of Bank Common Stock issued and outstanding.
At such date, the Bank had no serial preferred stock issued and outstanding.
[The Bank Common Stock is listed on the Nasdaq National Market under the symbol
"____"]. As of September 30, 1996, the Bank had total assets of approximately
$83.3 million, total deposits of $67.3 million and stockholders' equity of
approximately $6.7 million.
The Bank Common Stock possesses voting rights, dividend rights, and the
residual equity of the Bank in the event of liquidation. Savings depositors
receive a fixed rate of return; in the event of liquidation they are only
entitled to receive the face amount of their accounts plus accrued interest.
The savings accounts do not possess voting rights. In accordance with the tax
law changes enacted in the Small Business Job Protection Act of 1996 (P.L.
104-188), for its 1996 fiscal year, the Bank will employ either the
experience method of providing for bad debt deductions as computed under Code
Section 585 or the specific-charge off method.
[The business of the Bank consists primarily of attracting savings
deposits from the general public in the Bank's market area and originating
mortgage loans for the purpose of constructing, financing, or refinancing
one-to-four family dwellings and other improved residential and commercial
properties located in the State of Florida.]
PROPOSED TRANSACTION
The Board of Directors of the Bank adopted the Plan of Reorganization on
February 26, 1997 pursuant to which the Bank will reorganize to form a
Delaware stock holding company and will become the wholly-owned subsidiary of
the Holding Company. Under the terms of the proposed reorganization, each
outstanding share of Bank Common Stock, par value $1.00 per share, will be
converted into one share of common stock of the Holding Company, par value
$.01 per share ("Common Stock"), and the holders of Bank Common Stock will
become the holders of all of the outstanding Common Stock of the Holding
Company (the "Reorganization"). The Holding Company was incorporated in
_______, 1997, solely for the purpose of becoming a savings and loan holding
company and has no prior operating history. Following the Reorganization, the
Bank will continue its operations at the same locations, with the same
management, and subject to all the rights, obligations and liabilities of the
Bank existing immediately prior to the Reorganization.
Reasons for the Holding Company Reorganization
The Board of Directors of the Bank believes that a stock holding company
structure will provide the Bank with greater operating flexibility than is
currently available under the existing
<PAGE>
mutual holding company structure. Establishing the Holding Company will
provide greater flexibility in structuring and completing the acquisition of
other financial institutions as well as the acquisition and formation of
companies engaged in lines of business which complement the Bank's business.
Currently, if the Bank wishes to acquire another financial institution and
hold it as a separate entity from the Bank, it would be difficult to do so in
a way that benefits minority stockholders and the Mutual Holding Company in
proportion to their respective ownership interests. In addition, the
Reorganization will enable the Holding Company to repurchase its outstanding
Common Stock as market conditions permit without causing a recapture into
income of all or a portion of the Bank's existing tax bad debt reserves.
The Reorganization will be structured as follows:
(i) The Bank will organize the Holding Company, a
Delaware-chartered stock holding company, which will issue
to the Bank ________ shares of Common Stock, consisting of
all the issued and outstanding stock of the Holding Company
for $______ per share. The Holding Company will thereby
become a wholly-owned subsidiary of the Bank.
(ii) The Holding Company will form an interim Illinois-chartered
stock savings bank ("Interim"), as a wholly-owned subsidiary
of the Holding Company solely to facilitate the
Reorganization.
(ii) Pursuant to the Plan of Reorganization and in accordance
with applicable law, Interim will be merged with and into
the Bank, with the Bank as the surviving entity. As a
result, the Bank will acquire all of the assets and assume
all of the liabilities of Interim. Upon completion of the
merger, the separate corporate existence of Interim will
cease.
(iii) As part of the merger, each share of the Bank Common Stock
held immediately prior to the effective date of the merger
by stockholders of the Bank shall automatically be converted
by operation of law into one share of Common Stock of the
Holding Company.
(iv) Upon the effective date of the merger, all of the previously
issued and outstanding shares of common stock of Holding
Company owned by the Bank will be cancelled. All of the
issued and outstanding shares of common stock of Interim
will automatically be converted by operation of law into an
equal number of issued and outstanding shares of Bank Common
Stock, which will be all of the issued and outstanding stock
of the Bank.
(v) All unexercised stock options to acquire the Bank Common
Stock existing prior to the merger shall upon the
consummation of the
<PAGE>
merger be and become stock options to acquire shares of
Common Stock of Holding Company. Further, the stock option
plan of the Bank shall become the stock option plan of the
Holding Company. Lastly, any stock option agreement of the
Bank shall become the stock option agreement of the
Holding Company.
(vi) As a result of the proposed transaction, all stockholders of
the Bank will become the stockholders of Holding Company,
and the Bank will become a wholly-owned subsidiary of
Holding Company.
(vii) After the Reorganization is consummated, the Bank and
Interim will constitute a single corporation and the
separate existence of Interim will cease by operation of
law. All assets and liabilities of Interim will be
transferred to and assumed by the Bank as of the date of the
Reorganization. The Bank will continue to operate as a
savings bank and retain its present name and Federal
charter. Directors of the Bank will continue as Directors of
the Bank after the Reorganization is consummated.
Consummation of the Reorganization requires that the Plan of Reorganization
receive the approval of at least a majority of the issued and outstanding shares
of Bank Common Stock and the approval of the Bureau of Residential Finance of
the Illinois Office of Banks and Real Estate, the FRB, and the FDIC upon
appropriate application for approval.
REPRESENTATIONS
The following statements and representations have been made by management
of the Bank regarding the treatment of the Reorganization as a merger under
Sections 368(a)(1)(A) and 368(a)(2)(E):
(a) The fair market value of Holding Company Common Stock to be received
by each Bank shareholder will be approximately equal to the fair
market value of the Bank Common Stock surrendered in the exchange.
(b) The management of the Bank has no knowledge of any plan or intention
on the part of its shareholders who own 5% or more of Bank Common
Stock, and to the best of the knowledge of management of the Bank,
there is no plan or intention on the part of the remaining
shareholders of the Bank to sell, exchange, or otherwise dispose of a
number of shares of Holding Company Stock received in the
Reorganization that would reduce the Bank shareholders' ownership of
Holding Company Common Stock to a number of shares having a value, as
of the date of the Reorganization, of less than 50% of the value of
all of the formerly outstanding Bank Common Stock as of the same date.
For purposes of this representation, shares of Bank Common Stock
exchanged for cash or other property or exchanged for cash in lieu of
fractional shares of Holding Company Common Stock will be treated as
<PAGE>
outstanding Bank Common Stock on the date of the transaction.
Moreover, shares of Bank Common Stock and shares of Holding Company
Common Stock held by Bank shareholders and otherwise sold, redeemed,
or disposed of prior or subsequent to the transaction as part of the
Agreement will be considered in making this representation.
(c) Following the Reorganization, the Bank will hold at least 90% of the
fair market value of its net assets and at least 70% of the fair
market value of its gross assets and at least 90% of the fair market
value of Interim's net assets and at least 70 percent of the fair
market value of Interim's gross assets held immediately prior to the
Reorganization. For purposes of this representation, amounts paid by
the Bank or Interim to shareholders who receive cash or other
property, amounts used by the Bank or Interim to pay reorganization
expenses, and all redemptions and distributions (except for regular,
normal dividends) made by the Bank will be included as assets of the
Bank or Interim, respectively, immediately prior to the
Reorganization.
(d) Prior to the transaction, Holding Company will be in control of
Interim within the meaning of Section 368(c).
(e) As of the date of the execution of the Plan of Reorganization, the
Bank has no plan or intention to issue additional shares of its stock
that would result in Holding Company losing control of the Bank within
the meaning of Section 368(c).
(f) As of the date of the Plan of Reorganization, Holding Company has no
plan or intention to reacquire any of its stock issued in the
transaction.
(g) Holding Company has no plan or intention to liquidate the Bank; to
merge the Bank with or into another corporation; to sell or otherwise
dispose of the stock of the Bank except for transfers of stock to
corporations controlled by Holding Company; or to cause the Bank to
sell or otherwise dispose of any of its assets or of any of the assets
acquired from Interim, except for dispositions made in the ordinary
course of business or transfers of assets to a corporation controlled
by the Bank.
(h) The liabilities of Interim, if any, assumed by the Bank and the
liabilities to which the transferred assets of Interim are subject
were incurred by Interim in the ordinary course of its business.
(I) Following the transaction, the Bank will continue its historic
business or use a significant portion of its historic business assets
in a business.
(j) Holding Company, Interim, the Bank, and the shareholders of the Bank
will pay their respective expenses, if any, incurred in connection
with the Reorganization. The Bank will pay or assume only those
expenses of Interim, if any, that are solely
<PAGE>
and directly related to the transaction in accordance with the
guidelines established in Rev.Rul. 73-54, 1973-1 C.B. 187.
(k) There is no intercorporate indebtedness existing between Holding
Company and the Bank or between Interim and the Bank that was issued,
acquired, or will be settled at a discount.
(l) In the Reorganization, shares of Bank stock representing control of
the Bank, as defined in Section 368(c), will be exchanged solely for
voting stock of Holding Company. For purposes of this representation,
shares of Bank stock exchanged for cash or other property originating
with Holding Company will be treated as outstanding Bank Common Stock
on the date of the Reorganization.
(m) At the time of the Reorganization, the Bank will not have outstanding
any warrants, options, convertible securities or any other type of
right pursuant to which any person could acquire stock in the Bank
that, if exercised or converted, would affect Holding Company's
acquisition or retention of control of the Bank, as defined in Section
368(c).
(n) Holding Company does not own, nor has it owned during the past five
years, any shares of the stock of the Bank, nor will Holding Company
acquire any such stock prior to the proposed transaction.
(o) No two parties to the transaction are investment companies as defined
in Section 368(a)(2)(F)(iii) and (iv).
(p) On the date of the Reorganization, the fair market value of the assets
of the Bank on a going concern basis will exceed the sum of its
liabilities, plus the amount of liabilities, if any, to which the
assets are subject.
(q) The Bank is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A).
(r) None of the compensation received by any of the shareholder-employees
of the Bank will be separate consideration for, or allocable to, any
of their shares of Bank Common Stock; none of the shares of Holding
Company Common Stock received by any shareholder-employees will be
separate consideration for, or allocable to, any employment agreement;
and the compensation paid to any shareholder-employees will be for
services actually rendered and will be commensurate with amounts paid
to third parties bargaining at arm's-length for similar services.
<PAGE>
OPINION
Based solely upon the terms of the proposed transaction described herein
and the representations set forth, it is our opinion that the following
federal income tax consequences will result from the Reorganization.
(1) Provided that the merger of Interim with and into the Bank qualifies
as a statutory merger under applicable law, and after the
Reorganization the Bank will hold substantially all of the assets of
Interim, and in the Reorganization, Bank shareholders exchange solely
for voting Holding Company Common Stock an amount of Bank Common Stock
constituting "control" of the Bank within the meaning of Section
368(c), the Reorganization will constitute a reorganization within the
meaning of Section 368(a)(1)(A). The Reorganization will not be
disqualified by reason of the fact that Common Stock of Holding
Company is used in the transaction (Section 368(a)(2)(E)). The Bank,
Holding Company and Interim will each be a party to the Reorganization
within the meaning of Section 368(b).
(2) Interim will not recognize any gain or loss on the transfer of its
assets to the Bank in exchange for Bank Common Stock and the
assumption by the Bank of the liabilities, if any, of Interim
(Sections 361(a) and 357(a)).
(3) The Bank will not recognize any gain or loss on the receipt of the
assets of Interim in exchange for Bank Common Stock (Section 1032(a)).
(4) The Bank's basis in the assets received from Interim in the exchange
will, in each case, be the same as the basis of such assets in the
hands of Interim immediately prior to the Reorganization (Section
362(b)).
(5) Holding Company will not recognize any gain or loss upon its receipt
of Bank Common Stock solely in exchange for Interim stock (Section
354(a)).
(6) The Bank's holding period for the assets received from Interim in the
exchange will, in each instance, include the period during which such
assets were held by Interim (Section 1223(2)).
(7) Bank shareholders will not recognize any gain or loss upon their
exchange of Bank Common Stock solely for shares of Holding Company
Common Stock (Section 354(a)).
(8) A Bank shareholder's basis in his or her Holding Company Common Stock
received in the exchange will be the same as the basis of the Bank
Common Stock surrendered in the exchange therefor (Section 358(a)).
(9) A Bank shareholder's holding period in his or her Holding Company
Common Stock received in the exchange will include the period during
which the Bank Common
<PAGE>
Stock surrendered was held, provided that the Bank Common Stock
surrendered is a capital asset in the hands of the Bank shareholder
on the date of the exchange (Section 1223(1)).
(10) Bank shareholders will not recognize any gain or loss as a result of
the conversion of their Bank stock options into options to purchase
stock of the Holding Company (Treasury Regulation Section
1.83-8(b)(6)).
SCOPE OF OPINION
Our opinion is limited to the federal income tax matters described above
and does not address any other federal income tax considerations or any
federal, state, local, foreign or other tax considerations. If any of the
information upon which we have relied is incorrect, or if changes in the
relevant facts occur after the date hereof, our opinion could be affected
thereby. Moreover, our opinion is based on the case law, Code, Treasury
Regulations thereunder and Internal Revenue Service rulings as they now
exist. These authorities are all subject to change, and such change may be
made with retroactive effect. We can give no assurance that, after such
change, our opinion would not be different. We undertake no responsibility to
update or supplement our opinion. This opinion is not binding on the
Internal Revenue Service and there can be no assurance, and none is hereby
given, that the Internal Revenue Service will not take a position contrary to
one or more of the positions reflected in the foregoing opinion, or that our
opinion will be upheld by the courts if challenged by the Internal Revenue
Service.
CONSENT
We hereby consent to the filing of this opinion as an exhibit to the
Application FR Y-3 filed on behalf of the Bank with the Board of Governors of
the Federal Reserve System, and to the references to us under the heading
"Proposal I - Proposed Formation of Stock Holding Company - Tax Consequences"
in the Proxy Statement constituting a part of such Application.
<PAGE>
USE OF OPINION
This opinion is rendered solely for the benefit of Pekin Savings Bank,
in connection with the proposed transaction and is not to be relied upon or
used for any other purpose without our prior written consent.
Very truly yours,
LUSE LEHMAN GORMAN POMERENK &
SCHICK, A Professional Corporation
By:
-------------------------------
Beverly J. White
<PAGE>
EXHIBIT NO. 99
<PAGE>
REVOCABLE PROXY
PEKIN SAVINGS, S.B.
SPECIAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Arthur E. Krile, Jr. with full powers of
substitution, as attorney and proxy for the undersigned, to vote all shares of
Bank Common Stock of Pekin Savings, s.b. which the undersigned is entitled to
vote at the Special Meeting of Stockholders, to be held at the Bank's main
office, 601-617 Court Street, Pekin, Illinois on ____________, 1997 at 1:30 p.m.
<TABLE>
<CAPTION>
ABSTAIN FOR AGAINST
-------- ---- --------
<S> <C> <C> <C>
1. The proposal to reorganize Pekin Savings,
s.b. into the holding company form of / / / / / /
ownership,including the approval of the
Agreement and Plan of Reorganization.
2. The approval of the adjournment of the
Meeting to a later date if there are
insufficient shares present at the Special / / / / / /
Meeting to approve the Agreement and
Plan of Reorganization.
3. The approval of the amendment to the
Articles of Incorporation of the Bank to / / / / / /
change the name of the Bank to "Pekin
Savings Bank."
</TABLE>
The Board of Directors recommends a vote "FOR" each of the listed propositions.
- - - - ------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE PERSON
NAMED IN THIS PROXY AT THE DIRECTION OF A MAJORITY OF THE BOARD OF DIRECTORS.
AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE MEETING.
- - - - ------------------------------------------------------------------------------
26
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Special Meeting
or at any adjournment thereof and after notification to the Secretary of the
Bank at the Special Meeting of the stockholder's decision to terminate this
proxy, then the power of said attorney and proxy shall be deemed terminated and
of no further force and effect. This proxy may also be revoked by executing a
later dated proxy or by sending a written notice of revocation to the Secretary
of the Bank before the proxy has been exercised.
The undersigned acknowledges receipt from the Bank prior to the execution of
this proxy of notice of the Special Meeting and a proxy statement dated
_________________, 1997.
Dated: _________________, 1997
_________________________ _________________________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
________________________ ________________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the envelope in which this card was
mailed. When signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If shares are held jointly, each holder should
sign.
- - - - -------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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27
