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Exhibit 2
CHESTERFIELD FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHICAGO
Chicago, Illinois
PLAN OF CONVERSION
From Mutual to Stock Form of Organization
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1. General
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This Plan of Conversion provides for the conversion of Chesterfield
Federal Savings and Loan Association of Chicago (the "Association") from a
federally chartered mutual savings and loan association to a federally chartered
stock savings association pursuant to the Rules and Regulations of the OTS. As
part of the Conversion, the plan provides for the concurrent formation of a
holding company (the "Holding Company") that will own 100% of the common stock
of the Association. The Board of Directors has considered the alternatives
available to the Association with respect to its corporate structure, and has
determined that a mutual-to-stock conversion as described in this Plan will be
in the best interests of the Association and its customers. Restructuring the
Association into the capital stock form of organization will increase its
capital base and enhance the Association's ability to expand its franchise and
the range of products and services it offers. The stock form of organization
will also enable the Association to adopt stock option and other stock benefit
plans that will make the Association more competitive in providing incentive
compensation to management and employees. Stock ownership is viewed as an
effective performance incentive and as a means of attracting, retaining and
compensating management and other key personnel. The stock holding company form
of organization will also offer the Association greater organizational and
operating flexibility, including the expanded powers available to holding
companies under the recently enacted financial modernization legislation.
The Plan provides that non-transferable subscription rights to purchase
Conversion Stock will be offered first to Eligible Account Holders of record as
of the Eligibility Record Date, then to the Association's Tax-Qualified Employee
Plans, then to Supplemental Eligible Account Holders of record as of the
Supplemental Eligibility Record Date, and then to Other Members. Concurrently
with, at any time during, or promptly after the Subscription Offering, and on a
lowest priority basis, an opportunity to subscribe may also be offered to the
general public in a Community Offering with a preference given to natural
persons who reside in the Association's Local Community. The price of the
Conversion Stock will be based upon an independent appraisal of the Association
and will reflect its estimated pro forma market value, as converted. No change
will be made in the Board of Directors or management as a result of the
Conversion.
2. Definitions
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Acting in Concert: the term "acting in concert" means (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; (ii) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise; or
(iii) a person or company which acts in concert with another person or company
("other party") shall also be deemed to be acting in concert with any person or
company who is also acting in concert with that other party, except that any
Tax-Qualified Employee Plan will not be deemed to be acting in concert with its
trustee or a person who serves in a similar capacity solely for the purpose of
determining whether stock held by the trustee and stock held by the plan will be
aggregated.
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Associate: The term "associate," when used to indicate a relationship
with any Person, means (i) any corporation or organization (other than the
Holding Company, the Association or a majority-owned subsidiary of the Holding
Company) of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities, (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity, (iii) any Person whose Deposit Account is
registered to the same address, and (iv) any relative or spouse of such Person,
or any relative of such spouse, who has the same home as such Person or who is a
director or officer of the Holding Company or the Association or any subsidiary
of the Holding Company; provided, however, that any Tax-Qualified or
Non-Tax-Qualified Employee Plan shall not be deemed to be an associate of any
director or officer of the Holding Company or the Association, to the extent
provided in Section 5 hereof.
Association: Chesterfield Federal Savings and Loan Association of
Chicago, or such other name as the institution may adopt, in its pre-Conversion
mutual form or post-Conversion stock form, as indicated by the context in which
it is used.
Community Offering: The offering to the general public of any
unsubscribed shares, which may be effected as provided in Section 5 hereof. The
Community Offering may include a Syndicated Community Offering managed by one or
more investment banking firms.
Conversion: The change of the Association's charter and bylaws to a
Federal stock charter and bylaws, the sale by the Holding Company of Conversion
Stock, and the issuance and sale by the Association of common stock to the
Holding Company, all as provided for in this Plan.
Conversion Stock: Shares of common stock that will be issued and sold by
the Holding Company as a part of the Conversion; provided, however, that for
purposes of calculating Subscription Rights and maximum purchase limitations
under the Plan, references to the number of shares of Conversion Stock shall
refer to the number of shares offered in the Subscription Offering.
Deposit Account: Any savings account as defined in Section 561.42 of the
Rules and Regulations of the OTS, withdrawable accounts, including certificates
of deposit, and demand accounts in the Association, which are defined in Section
561.16.
Eligibility Record Date: The close of business on June 30, 1999.
Eligible Account Holder: Any Person holding a Qualifying Deposit in the
Association on the Eligibility Record Date.
Estimated Price Range: The range of the minimum and maximum aggregate
values of the Conversion Stock determined by the Board of Directors of the
Association. The Estimated Price Range will be within the estimated pro forma
market value of the Conversion Stock as determined by the Independent Appraiser
prior to the Subscription Offering as updated from time to time thereafter.
Exchange Act: The Securities Exchange Act of 1934, as amended.
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Holding Company: Chesterfield Financial Corp., a Delaware or other state
corporation, which upon completion of the Conversion will own all of the
outstanding common stock of the Association.
Independent Appraiser: An appraiser retained by the Association to
prepare an appraisal of the pro forma market value of the Conversion Stock.
Local Community: The Illinois counties of Cook and Will.
Market Maker: A dealer (i.e., any Person who engages directly or
indirectly as agent, broker or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system; or (ii) furnishes bona fide competitive bid and offer quotations on
request; and (iii) is ready, willing, and able to effect transactions in
reasonable quantities at his quoted prices with other brokers or dealers.
Member: Any Person or entity that qualifies as a member of the
Association pursuant to its charter and bylaws.
Non-Tax-Qualified Employee Plan: Any defined benefit plan or defined
contribution plan of the Association or the Holding Company, such as an employee
stock ownership plan, stock bonus plan, profit-sharing plan or other plan, which
with its related trust does not meet the requirements to be "qualified" under
Section 401 of the Internal Revenue Code.
Officer: An executive officer of the Holding Company or the Association,
including the Chairman of the Board, President, Executive Vice Presidents,
Senior Vice Presidents in charge of principal business functions, Secretary and
Treasurer.
Order Form: Any form to be used in the Subscription Offering and in the
Community Offering or the Syndicated Community Offering to purchase Conversion
Stock.
Other Member: Any person who is a Member of the Association, other than
Eligible Account Holders, Tax-Qualified Employee Plans or Supplemental Eligible
Account Holders, as of the Voting Record Date.
OTS: The Office of Thrift Supervision, Department of the Treasury.
Person: An individual, a corporation, a partnership, an association, a
joint-stock company, a trust, any unincorporated organization, or a government
or political subdivision thereof.
Plan: This Plan of Conversion of the Association, including any
amendment approved as provided in this Plan.
Public Offering: The offering for sale by the Underwriters to the
general public of any shares of Conversion Stock not subscribed for in the
Subscription Offering or the Community Offering.
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Purchase Price: The price per share, determined as provided in Section 5
of the Plan, at which the Conversion Stock will be sold in accordance with the
terms hereof.
Qualifying Deposit: The aggregate balance of each Deposit Account of $50
or more in the Association of an Eligible Account Holder as of the Eligibility
Record Date or of a Supplemental Eligible Account Holder as of the Supplemental
Eligibility Record Date. Deposit Accounts with balances of less than $50 shall
not constitute a Qualifying Deposit.
SEC: Securities and Exchange Commission.
Special Meeting: The Special Meeting of Members called for the purpose
of considering and voting upon the Plan of Conversion.
Subscription Offering: The offering of shares of Conversion Stock for
subscription and purchase pursuant to Section 5 of the Plan.
Subscription Rights: Non-transferable, non-negotiable, personal rights
of the Association's Eligible Account Holders, Tax-Qualified Employee Plans,
Supplemental Eligible Account Holders, and Other Members, or trusts of any such
persons including individual retirement accounts and Keogh accounts, to
subscribe for shares of Conversion Stock in the Subscription Offering.
Supplemental Eligibility Record Date: The close of business on the last
day of the calendar quarter preceding approval of the Plan by the OTS.
Supplemental Eligible Account Holder: Any person holding a Qualifying
Deposit (other than an officer or director and their associates) on the
Supplemental Eligibility Record Date.
Syndicated Community Offering: The offering of Conversion Stock,
following or concurrently with the Community Offering, through a syndicate of
broker-dealers.
Tax-Qualified Employee Plans: Any defined benefit plan or defined
contribution plan of the Association or the Holding Company, such as an employee
stock ownership plan, stock bonus plan, profit-sharing plan or other plan, which
with its related trust meets the requirements to be "qualified" under Section
401 of the Internal Revenue Code.
Underwriters: The investment banking firm or firms agreeing to purchase
Conversion Stock in order to offer and sell such Conversion Stock in the Public
Offering.
Voting Record Date: The close of business on the date set by the Board
of Directors in accordance with federal regulations for determining Members
eligible to vote at the Special Meeting.
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3. Steps Prior to Submission of Plan of Conversion to the Members For
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Approval
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Prior to submission of the Plan of Conversion to Members for approval,
the OTS must approve the Association's Application for Approval of Conversion to
convert to the federal stock form of organization. The following steps are
required to be taken prior to such regulatory approval:
A. The Plan must be approved by not less than a two-thirds vote of
the Board of Directors.
B. The Association will notify Members of the adoption of the Plan
by publishing a statement in a newspaper having a general
circulation in each community in which the Association maintains
an office.
C. Copies of the Plan adopted by the Board of Directors will be made
available for inspection at each office of the Association.
D. The Association will promptly cause an Application for Approval
of Conversion on Form AC to be prepared and filed with the OTS,
an Application on Form H-(e)1 (or other applicable form) to be
prepared and filed with the OTS and a Registration Statement on
Form S-1 (or other applicable form) to be prepared and filed with
the SEC.
E. Upon receipt of notice from the OTS to do so, the Association
shall notify its Members that it has filed the Application for
Approval of Conversion by posting notice in each of its offices
and by publishing notice in a newspaper having general
circulation in each community in which the Association maintains
an office.
4. Conversion Procedures and Member Approval
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Following approval of the Application for Approval of Conversion by the
OTS, the Plan will be submitted to a vote of the Members at the Special Meeting.
If the Plan is approved by Members holding a majority of the total number of
votes entitled to be cast at the Special Meeting, the Association will take all
other necessary steps pursuant to applicable laws and regulations to convert to
a federal stock savings association as part of a concurrent holding company
formation pursuant to the terms of the Plan.
The Conversion Stock will be offered for sale in the Subscription
Offering to Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental
Eligible Account Holders and Other Members in the priorities set forth in
Section 5.C of this Plan, prior to or within 45 days after the date of the
Special Meeting. The Subscription Offering may begin as early as the mailing of
the proxy statement for the Special Meeting. The Bank may, either concurrently
with, at any time during, or promptly after the Subscription Offering, also
offer the Conversion Stock to and accept orders from other Persons in a
Community Offering with a preference given to natural persons residing in the
Local Community; provided that the Association's Eligible Account Holders,
Tax-Qualified Employee Plans, Supplemental Eligible Account Holders, and Other
Members shall have the priority rights to subscribe for Conversion Stock set
forth in
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Section 5 of this Plan. The Holding Company and the Association may delay
commencing the Subscription Offering beyond such 45-day period in the event
there exists unforeseen material adverse market or financial conditions. If the
Subscription Offering commences prior to the Special Meeting, subscriptions will
be accepted subject to the approval of the Plan at the Special Meeting.
The period for the Subscription Offering will be not less than 20 days
nor more than 45 days and the period for the Community Offering will be not more
than 45 days, unless extended by the Association. If, upon completion of the
Subscription Offering and any Community Offering, any shares of Conversion Stock
remain available for sale, such shares will, if feasible, be offered for sale in
a Syndicated Community Offering or sold to the Underwriters for resale to the
general public in the Public Offering. If for any reason the Syndicated
Community Offering or Public Offering of all shares not sold in the Subscription
Offering and Community Offering cannot be effected, the Holding Company and the
Association will use their best efforts to obtain other purchasers, subject to
OTS approval. Completion of the sale of all shares of Conversion Stock not sold
in the Subscription Offering and Community Offering is required within 45 days
after termination of the Subscription Offering, subject to extension of such
45-day period by the Holding Company and the Association with the approval of
the OTS. The Holding Company and the Association may jointly seek one or more
extensions of such 45-day period if necessary to complete the sale of all shares
of Conversion Stock. In connection with such extensions, subscribers and other
purchasers will be permitted to increase, decrease or rescind their
subscriptions or purchase orders to the extent required by the OTS in approving
the extensions. Completion of the sale of all shares of Conversion Stock is
required within 24 months after the date of the Special Meeting. The Association
may elect to pay fees on a per share basis to brokers who assist Persons in
determining to purchase Conversion Stock in the Community Offering and
Syndicated Community Offering.
5. Stock Offering
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A. Total Number of Shares and Purchase Price of Conversion Stock
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The total number of shares of Conversion Stock to be issued and sold in
the Conversion will be determined jointly by the Boards of Directors of the
Holding Company and the Association prior to the commencement of the
Subscription Offering, subject to adjustment if necessitated by market or
financial conditions prior to consummation of the Conversion. In particular, the
total number of shares may be increased by up to 15% of the number of shares
offered in the Subscription and Community Offering if the Estimated Price Range
is increased subsequent to the commencement of the Subscription and Community
Offering to reflect changes in market and financial conditions.
All shares of Conversion Stock offered for sale in the Subscription
Offering, Community Offering, Syndicated Community Offering or Public Offering
will be sold at a uniform price per share referred to in this Plan as the
Purchase Price. The aggregate price for which all shares of Conversion Stock
will be sold will be based on an independent appraisal of the estimated total
pro forma market value of the Holding Company and the Association. The appraisal
will be performed in accordance with OTS guidelines and will be made by an
Independent Appraiser experienced in the area of thrift institution appraisals.
The appraisal will include, among other
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things, an analysis of the historical and pro forma operating results and net
worth of the Association and a comparison of the Holding Company, the
Association and the Conversion Stock with comparable thrift institutions and
holding companies and their respective outstanding capital stock.
Prior to the commencement of the Subscription and Community Offerings,
an Estimated Price Range will be established, which range will vary within 15%
above to 15% below the midpoint of such range. The number of shares of
Conversion Stock to be issued and the Purchase Price per share may be increased
or decreased by the Association. In the event that the aggregate Purchase Price
of the Conversion Stock to be issued in the Conversion is below the minimum of
the Estimated Price Range, or materially above the maximum of the Estimated
Price Range, resolicitation of purchasers may be required provided that up to a
15% increase above the maximum of the Estimated Price Range will not be deemed
material so as to require a resolicitation. Up to a 15% increase in the number
of shares to be issued which is supported by an appropriate change in the
estimated pro forma market value of the Association or the Holding Company will
not be deemed to be material so as to require a resolicitation of subscriptions.
In the event that the aggregate Purchase Price of the Conversion Stock is below
the minimum of the Estimated Price Range or in excess of 15% above the maximum
of the Estimated Price Range, and a resolicitation is required, such
resolicitation shall be effected in such manner and within such time as the
Association shall establish, with the approval of the OTS, if required. Based
upon the independent appraisal, the Boards of Directors of the Holding Company
and the Association will jointly fix the Purchase Price. The Purchase Price for
each share of Conversion Stock will be determined by dividing the estimated
appraised aggregate pro forma market value of the Holding Company and the
Association, based on the independent appraisal, by the total number of shares
of Conversion Stock to be issued and sold by the Holding Company upon
Conversion. If, following completion of the Subscription Offering and any
Community Offering or Syndicated Community Offering, a Public Offering is
effected, the Purchase Price for each share of Conversion Stock in the Public
Offering will be the same as the Purchase Price in the Subscription and
Community Offering. The price paid by the Underwriters for each share of
Conversion Stock will be the Purchase Price less a negotiated underwriting
discount.
Notwithstanding the foregoing, no sale of Conversion Stock may be
consummated unless, prior to such consummation, the Independent Appraiser
confirms to the Association, the Holding Company and to the OTS that, to the
best knowledge of the Independent Appraiser, nothing of a material nature has
occurred which, taking into account all relevant factors, would cause the
Independent Appraiser to conclude that the aggregate value of the Conversion
Stock at the Purchase Price is incompatible with its estimate of the aggregate
consolidated pro forma market value of the Holding Company and the Association.
If such confirmation is not received, the Association may cancel the
Subscription and Community Offerings and/or any Syndicated Community Offering or
Public Offering, extend the Conversion, establish a new Estimated Price Range,
extend, reopen or hold new Subscription, Community or Syndicated Community
Offerings, or take such other action as the OTS may permit.
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B. Purchase by the Holding Company of the Stock of the Association
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Upon the consummation of the sale of all of the Conversion Stock, the
Holding Company will purchase from the Association all of the capital stock of
the Association to be issued by the Association in the Conversion in exchange
for the Conversion proceeds that are not permitted to be retained by the Holding
Company.
The Holding Company will apply to the OTS to retain up to 50% of the
proceeds of the Conversion. The Conversion proceeds will provide economic
strength to the Holding Company and the Association for the future in a highly
competitive and regulated environment and would facilitate expansion through
acquisitions, diversification into other related businesses and for other
business and investment purposes, including the payment of dividends and future
repurchases of Conversion Stock.
C. Subscription Rights
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Non-transferable Subscription Rights to purchase shares will be issued
without payment therefor to Eligible Account Holders, Tax-Qualified Employee
Plans, Supplemental Eligible Account Holders, and Other Members as set forth
below.
1. Preference Category No. 1: Eligible Account Holders
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Each Eligible Account Holder shall receive non-transferable
Subscription Rights to subscribe for shares of Conversion Stock in an
amount equal to the greater of $300,000, one-tenth of one percent (.10%)
of the total offering of shares, or 15 times the product (rounded down
to the next whole number) obtained by multiplying the total number of
shares of common stock to be issued by a fraction, the numerator of
which is the amount of the Qualifying Deposit of the Eligible Account
Holder and the denominator is the total amount of Qualifying Deposits of
all Eligible Account Holders as of the Eligibility Record Date. If
sufficient shares are not available, shares shall be allocated first to
permit each subscribing Eligible Account Holder to purchase to the
extent possible 100 shares, and thereafter among each subscribing
Eligible Account Holder pro rata in the same proportion as his
Qualifying Deposit bears to the total Qualifying Deposits of all
subscribing Eligible Account Holders whose subscriptions remain
unsatisfied.
Non-transferable Subscription Rights to purchase Conversion Stock
received by directors and Officers of the Association and their
Associates, based on their increased deposits in the Association in the
one-year period preceding the Eligibility Record Date, shall be
subordinated to all other subscriptions involving the exercise of
non-transferable Subscription Rights of Eligible Account Holders.
2. Preference Category No. 2: Tax-Qualified Employee Plans
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Each Tax-Qualified Employee Plan shall be entitled to receive
non-transferable Subscription Rights to purchase up to 10% of the shares
of Conversion Stock, provided that singly or in the aggregate such plans
(other than that portion of such plans which is self-directed) shall not
purchase more than 10% of the shares of the Conversion Stock.
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Subscription Rights received pursuant to this Category shall be
subordinated to all rights received by Eligible Account Holders to
purchase shares pursuant to Category No. 1; provided, however, that
notwithstanding any other provision of this Plan to the contrary, the
Tax-Qualified Employee Plans shall have a first priority Subscription
Right to the extent that the total number of shares of Conversion Stock
sold in the Conversion exceeds the maximum of the appraisal range as set
forth in the subscription prospectus.
3. Preference Category No. 3: Supplemental Eligible Account
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Holders
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Each Supplemental Eligible Account Holder shall receive non-
transferable Subscription Rights to subscribe for shares of Conversion
Stock in an amount equal to the greater of $300,000, one-tenth of one
percent (.10%) of the total offering of shares, or 15 times the product
(rounded down to the next whole number) obtained by multiplying the
total number of shares of common stock to be issued by a fraction, the
numerator of which is the amount of the qualifying deposit of the
Supplemental Eligible Account Holder and the denominator is the total
amount of qualifying deposits of all Supplemental Eligible Account
Holders in the converting Association, in each case on the Supplemental
Eligibility Record Date.
Subscription Rights received pursuant to this category shall be
subordinated to all Subscription Rights received by Eligible Account
Holders and Tax-Qualified Employee Plans pursuant to Category Nos. 1 and
2 above.
Any non-transferable Subscription Rights to purchase shares
received by an Eligible Account Holder in accordance with Category No. 1
shall reduce to the extent thereof the Subscription Rights to be
distributed to such person pursuant to this Category.
In the event of an oversubscription for shares under the
provisions of this subparagraph, the shares available shall be allocated
first to permit each subscribing Supplemental Eligible Account Holder,
to the extent possible, to purchase a number of shares sufficient to
make his total allocation (including the number of shares, if any,
allocated in accordance with Category No. 1) equal to 100 shares, and
thereafter among each subscribing Supplemental Eligible Account Holder
pro rata in the same proportion as his Qualifying Deposit bears to the
total Qualifying Deposits of all subscribing Supplemental Eligible
Account Holders whose subscriptions remain unsatisfied.
4. Preference Category No. 4: Other Members
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Each Other Member shall receive non-transferable Subscription
Rights to subscribe for shares of Conversion Stock remaining after
satisfying the subscriptions provided for under Category Nos. 1 through
3 above, subject to the following conditions:
a. Each Other Member shall be entitled to subscribe for
an amount of shares equal to the greater of $300,000, or one-
tenth of one percent (.10%) of the total offering of shares, to
the extent that Conversion Stock is available.
b. In the event of an oversubscription for shares under
the provisions of this subparagraph, the shares available shall
be allocated among the subscribing
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Other Members pro rata in the same proportion as his number of
votes on the Voting Record Date bears to the total number of
votes on the Voting Record Date of all subscribing Other Members
on such date. Such number of votes shall be determined based on
the Association's mutual charter and bylaws in effect on the date
of approval by members of this Plan of Conversion.
D. Community Offering, Syndicated Offering and Public Offering
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1. Any shares of Conversion Stock not subscribed for in the
Subscription Offering may be offered for sale in a Community Offering
and/or a Syndicated Community Offering. This will involve an offering of
all unsubscribed shares directly to the general public with a preference
to those natural persons residing in the Local Community. Any Community
Offering or a Syndicated Community Offering, shall be for a period of
not more than 45 days unless extended by the Holding Company and the
Association, and shall commence concurrently with, during or promptly
after the Subscription Offering. Each share of Conversion Stock will be
offered for sale at the Purchase Price in the Community Offering or any
Syndicated Community Offering. The Holding Company and the Association
may use an investment banking firm or firms on a best efforts basis to
sell the unsubscribed shares in a Community Offering or Syndicated
Community Offering. The Holding Company and the Association may pay a
commission or other fee to such investment banking firm or firms as to
the shares sold by such firm or firms in the Subscription and Community
Offerings or any Syndicated Community Offering, and may also reimburse
such firm or firms for expenses incurred in connection with the sale.
The Conversion Stock will be offered and sold in the Community Offering
and any Syndicated Community Offering in accordance with OTS
regulations, so as to achieve the widest distribution of the Conversion
Stock. No person, by himself or herself, or with an Associate or group
of Persons acting in concert, may subscribe for or purchase more than
$300,000 of Conversion Stock offered in the Community Offering and any
Syndicated Community Offering. Further, the Association may limit total
subscriptions under this Section 5.D.1 so as to assure that the number
of shares available for the Public Offering may be up to a specified
percentage of the number of shares of Conversion Stock.
In the event orders for Conversion Stock in the Community
Offering or Syndicated Community Offering exceed the number of shares
available for sale, shares may be allocated (to the extent shares remain
available) first, to cover orders of natural persons residing in the
Local Community, and thereafter, on a pro rata basis, to such persons
based on the amount of their respective orders.
The Association and the Holding Company, in their sole
discretion, may reject orders, in whole or in part, received from any
Person under this Section 5.D.
2. Any shares of Conversion Stock not sold in the Subscription
Offering, the Community Offering or any Syndicated Community Offering,
if any, shall then be sold to the Underwriters for resale to the general
public in the Public Offering. It is expected that the Public Offering
will commence as soon as practicable after termination of the
Subscription Offering and any Community Offering or Syndicated Community
Offering.
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The Public Offering shall be completed within 45 days after the
termination of the Subscription Offering, unless such period is extended
as provided in Section 5 hereof. Each share of Conversion Stock will be
offered for sale in the Public Offering at the Purchase Price less any
underwriting discount as provided in Section 5.A hereof, and set forth
in the underwriting agreement between the Holding Company, the
Association and the Underwriters. Such underwriting agreement shall be
filed with the OTS and the SEC.
3. If for any reason a Public Offering of unsubscribed shares
of Conversion Stock cannot be effected and any shares remain unsold
after the Subscription Offering and any Community Offering/Syndicated
Community Offering, the Boards of Directors of the Holding Company and
the Association will seek to make other arrangements for the sale of the
remaining shares. Such other arrangements will be subject to the
approval of the OTS and to compliance with applicable securities laws.
E. Additional Limitations Upon Purchases of Shares of Conversion Stock
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The following additional limitations shall be imposed on all purchases
of Conversion Stock in the Conversion:
1. The maximum purchase of Conversion Stock in the subscription
offering by any person or group of persons through a single account is
$300,000. No Person, by himself or herself, or with an Associate or
group of Persons acting in concert, may purchase more than $400,000 of
Conversion Stock, except for the Tax-Qualified Employee Plans which may
subscribe for up to 10% of the Conversion Stock issued in the
Conversion. For purposes of this paragraph, an Associate of a Person
does not include a Tax-Qualified or Non-Tax Qualified Employee Plan in
which the person has a substantial beneficial interest or serves as a
trustee or in a similar fiduciary capacity. Moreover, for purposes of
this paragraph, shares held by one or more Tax-Qualified or Non-Tax
Qualified Employee Plans attributed to a Person shall not be aggregated
with shares purchased directly by or otherwise attributable to that
Person.
2. Directors and Officers and their Associates may not purchase
in all categories in the Conversion an aggregate of more than 29.0% of
the Conversion Stock. For purposes of this paragraph, an Associate of a
Person does not include any Tax-Qualified Employee Plan. Moreover, any
shares attributable to the Officers and directors and their Associates,
but held by one or more Tax-Qualified Employee Plans shall not be
included in calculating the number of shares which may be purchased
under the limitation in this paragraph.
3. The minimum number of shares of Conversion Stock that may be
purchased by any Person in the Conversion is 25 shares, provided
sufficient shares are available.
4. The Boards of Directors of the Holding Company and the
Association may, in their sole discretion, increase the maximum purchase
limitation referred to in subparagraph 1 above up to 9.99%, provided
that orders for shares exceeding 5% of the shares being offered in the
Subscription Offering shall not exceed, in the aggregate, 10%
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of the shares being offered in the Subscription Offering. Requests to
purchase additional shares of Conversion Stock under this provision will
be allocated by the Boards of Directors on a pro rata basis giving
priority in accordance with the priority rights set forth in this
Section 5.
Depending upon market and financial conditions, the Boards of Directors
of the Holding Company and the Association, with the approval of the OTS and
without further approval of the Members, may increase or decrease any of the
above purchase limitations.
For purposes of this Section 5, the directors of the Holding Company and
the Association shall not be deemed to be Associates or a group acting in
concert solely as a result of their serving in such capacities.
Each Person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the above purchase
limitations.
F. Restrictions and Other Characteristics of Conversion Stock Being Sold
---------------------------------------------------------------------
1. Transferability. Shares purchased by directors or Officers may not
---------------
be sold or otherwise disposed of for value for a period of one year from
the date of Conversion, except for any disposition of such shares (i)
following the death of the original purchaser, or (ii) resulting from an
exchange of securities in a merger or acquisition approved by the
applicable regulatory authorities. Any transfers that could result in a
change of control of the Association or the Holding Company or result in
the ownership by any Person or group acting in concert of more than 10%
of any class of the Association's or the Holding Company's equity
securities are subject to the prior approval of the OTS.
The certificates representing shares of Conversion Stock issued to
directors and Officers shall bear a legend giving appropriate notice of
the one-year holding period restriction. Appropriate instructions shall
be given to the transfer agent for such stock with respect to the
applicable restrictions relating to the transfer of restricted stock.
Any shares of common stock of the Holding Company subsequently issued as
a stock dividend, stock split, or otherwise, with respect to any such
restricted stock, shall be subject to the same holding period
restrictions for Holding Company or Association directors and Officers
as may be then applicable to such restricted stock.
No director or Officer of the Holding Company or of the Association,
or Associate of such a director or Officer, shall purchase any
outstanding shares of capital stock of the Holding Company for a period
of three years following the Conversion without the prior written
approval of the OTS, except through a broker or dealer registered with
the SEC or in a "negotiated transaction" involving more than one percent
of the then-outstanding shares of common stock of the Holding Company.
As used herein, the term "negotiated transaction" means a transaction in
which the securities are offered and the terms and arrangements relating
to any sale are arrived at through direct communications between the
seller or any Person acting on its behalf and the purchaser or his
investment representative. The term "investment representative" shall
mean a
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professional investment advisor acting as agent for the purchaser and
independent of the seller and not acting on behalf of the seller in
connection with the transaction.
2. Stock Repurchase and Dividend Rights. Section 563b.3(g)(3) of the
------------------------------------
Rules and Regulations of the OTS prohibits the Holding Company from
repurchasing its capital stock within one year following the Conversion,
except that open market stock repurchases of up to 5% of its outstanding
capital stock may be permitted if extraordinary circumstances exist. The
Holding Company must establish, to the satisfaction of the OTS,
compelling and valid business purpose for any repurchases within one
year of the Conversion, and provide notice to the OTS at least 10 days
prior to the commencement of a repurchase program. The OTS will not
object to a repurchase program if (i) it does not adversely affect the
Association's financial condition, (ii) the Association demonstrates
extraordinary circumstances and a compelling and valid business purpose
for the repurchase program consistent with the Association's business
plan, and (iii) the repurchase program is not contrary to other
applicable regulations. The foregoing stock repurchase restrictions also
shall not apply to an offer to repurchase the Holding Company's capital
stock on a pro rata basis made to all holders of capital stock of the
Holding Company. Any such offer shall be subject to the prior non-
objection of the OTS. A repurchase of qualifying shares of a director
also shall not be deemed to be a repurchase for purposes of this Section
5.F.2.
OTS regulations also provide that the Association may not declare or
pay a cash dividend on or repurchase any of its stock (i) if the result
thereof would be to reduce the regulatory capital of the Association
below the amount required for the liquidation account to be established
pursuant to Section 13 hereof, and (ii) except in compliance with
requirements of Section 563.134 of the Rules and Regulations of the OTS.
3. Voting Rights. After Conversion, holders of deposit accounts will
-------------
not have voting rights in the Association or the Holding Company.
Exclusive voting rights as to the Association will be vested in the
Holding Company, as the sole stockholder of the Association. Voting
rights as to the Holding Company will be held exclusively by its
stockholders.
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G. Exercise of Subscription Rights; Order Forms
--------------------------------------------
1. If the Subscription Offering occurs concurrently with the
solicitation of proxies for the Special Meeting, the subscription
prospectus and Order Form may be sent to each Eligible Account Holder,
Tax-Qualified Employee Plan, Supplemental Eligible Account Holder, and
Other Member, at their last known address as shown on the records of the
Association. However, the Association may, and if the Subscription
Offering commences after the Special Meeting the Association shall,
furnish a subscription prospectus and Order Form only to Eligible
Account Holders, Tax-Qualified Employee Plans, Supplemental Eligible
Account Holders, and Other Members who have returned to the Association
by a specified date prior to the commencement of the Subscription
Offering a post card or other written communication requesting a
subscription prospectus and Order Form. In such event, the Association
shall provide a postage-paid post card for this purpose and make
appropriate disclosure in its proxy statement for the solicitation of
proxies to be voted at the Special Meeting and/or letter sent in lieu of
the proxy statement to those Eligible Account Holders, Tax-Qualified
Employee Plans or Supplemental Eligible Account Holders who are not
Members on the Voting Record Date.
2. Each Order Form will be preceded or accompanied by a
subscription prospectus describing the Holding Company and the
Association and the shares of Conversion Stock being offered for
subscription and containing all other information required by the OTS or
the SEC or necessary to enable Persons to make informed investment
decisions regarding the purchase of Conversion Stock.
3. The Order Forms (or accompanying instructions) used for
the Subscription Offering and any Community/Syndicated Offering will
contain, among other things, the following:
(i) A clear and intelligible explanation of the
Subscription Rights granted under the Plan to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental Eligible
Account Holders, and Other Members;
(ii) A specified expiration date by which Order
Forms must be returned to and actually received by the
Association or its representative for purposes of exercising
Subscription Rights, which date will be not less than 20 days
after the Order Forms are mailed by the Association;
(iii) The Purchase Price to be paid for each share
subscribed for when the Order Form is returned;
(iv) A statement that 25 shares is the minimum
number of shares of Conversion Stock that may be subscribed
for under the Plan;
(v) A specifically designated blank space for
indicating the number of shares being subscribed for;
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(vi) A set of detailed instructions as to how to complete the
Order Form including a statement as to the available alternative methods
of payment for the shares being subscribed for;
(vii) Specifically designated blank spaces for dating and
signing the Order Form;
(viii) An acknowledgment that the subscriber has received the
subscription prospectus;
(ix) A statement of the consequences of failing to properly
complete and return the Order Form, including a statement that the
Subscription Rights will expire on the expiration date specified on the
Order Form unless such expiration date is extended by the Holding
Company and the Association, and that the Subscription Rights may be
exercised only by delivering the Order Form, properly completed and
executed, to the Association or its representative by the expiration
date, together with required payment of the Purchase Price for all
shares of Conversion Stock subscribed for;
(x) A statement that the Subscription Rights are non-
transferable and that all shares of Conversion Stock subscribed for upon
exercise of Subscription Rights must be purchased on behalf of the
Person exercising the Subscription Rights for his own account; and
(xi) A statement that, after receipt by the Association or its
representative, an order may not be modified, withdrawn or canceled
without the consent of the Association.
H. Method of Payment
-----------------
Full payment for all shares of Conversion Stock at the Purchase Price
per share must accompany all completed Order Forms. Payment may be made in cash
(if presented in Person), by check, or, if the subscriber has a Deposit Account
in the Association (including a certificate of deposit), the subscriber may
authorize the Association to charge the subscriber's account. Payment may not be
made by wire transfer or any other electronic transfer of funds.
If a subscriber authorizes the Association to charge his or her account,
the funds will continue to earn interest, but may not be used by the subscriber
until all Conversion Stock has been sold or the Plan is terminated, whichever is
earlier. The Association will allow subscribers to purchase shares by
withdrawing funds from certificate accounts without the assessment of early
withdrawal penalties with the exception of prepaid interest in the form of
promotional gifts. In the case of early withdrawal of only a portion of such
account, the certificate evidencing such account shall be canceled if the
remaining balance of the account is less than the applicable minimum balance
requirement, in which event the remaining balance will earn interest at the
passbook rate. This waiver of the early withdrawal penalty is applicable only to
withdrawals made in
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<PAGE>
connection with the purchase of Conversion Stock under the Plan. Interest
will also be paid, at not less than the then-current passbook rate, on all
orders paid in cash, by check or money lorder, from the date payment is
received until consummation of the Conversion. Payments made in cash, by
check or money order will be placed by the Association in an escrow or
other account established specifically for this purpose.
In the event of an unfilled amount of any order, the Association will
make an appropriate refund or cancel an appropriate portion of the related
withdrawal authorization, after consummation of the Conversion. If for any
reason the Conversion is not consummated, purchasers will have refunded to
them all payments made and all withdrawal authorizations will be canceled
in the case of subscription payments authorized from accounts at the
Association.
If any Tax-Qualified Employee Plans or Non-Tax-Qualified Employee
Plans subscribe for shares during the Subscription Offering, such plans
will not be required to pay for the shares subscribed for at the time they
subscribe, but may pay for such shares of Conversion Stock subscribed for
upon consummation of the Conversion. In the event that, after the
completion of the Subscription Offering, the number of shares to be issued
is increased above the maximum of the appraisal range included in the
Prospectus, the Tax-Qualified and Non-Tax Qualified Employee Plans shall be
entitled to increase their subscriptions by a percentage equal to the
percentage increase in the number of shares to be issued above the maximum
of the appraisal range, provided that such subscriptions shall continue to
be subject to applicable purchase limits and stock allocation procedures.
I. Undelivered, Defective or Late Order Forms; Insufficient Payment
----------------------------------------------------------------
The Boards of Directors of the Holding Company and the Association
shall have the absolute right, in their sole discretion, to reject any
Order Form, including but not limited to, any Order Forms which (i) are not
delivered or are returned by the United States Postal Service (or the
addressee cannot be located); (ii) are not received back by the Association
or its representative, or are received after the termination date specified
thereon; (iii) are defectively completed or executed; (iv) are not
accompanied by the total required payment for the shares of Conversion
Stock subscribed for (including cases in which the subscribers' Deposit
Accounts or certificate accounts are insufficient to cover the authorized
withdrawal for the required payment); (v) are photocopies or facsimiles of
the printed Order Forms mailed to each Person; or (vi) are submitted by or
on behalf of a Person whose representations the Boards of Directors of the
Holding Company and the Association believe to be false or who they
otherwise believe, either alone or acting in concert with others, is
violating, evading or circumventing, or intends to violate, evade or
circumvent, the terms and conditions of this Plan. In such event, the
Subscription Rights of the Person to whom such rights have been granted
will not be honored and will be treated as though such Person failed to
return the completed Order Form within the time period specified therein.
The Association may, but will not be required to, waive any irregularity
relating to any Order Form or require submission of corrected Order Forms
or the remittance of full payment for subscribed shares by such date as the
Association may specify. The interpretation of the Holding Company and the
Association of the terms and
16
<PAGE>
conditions of this Plan and of the proper completion of the Order Form will
be final, subject to the authority of the OTS.
J. Transfer of Subscriptions Prohibited
------------------------------------
Subscription Rights are nontransferable, and it is a violation of
Federal law to either transfer or attempt to transfer Subscription Rights.
Persons who transfer or attempt to transfer their Subscription Rights may
be prosecuted and will risk forfeiture of such Subscription Rights.
K. Member in Non-Qualified States or in Foreign Countries
------------------------------------------------------
The Holding Company and the Association will make reasonable efforts
to comply with the securities laws of all states in the United States in
which Persons entitled to subscribe for Conversion Stock pursuant to the
Plan reside. However, no shares will be offered or sold under the Plan of
Conversion to any such Person who (1) resides in a foreign country or (2)
resides in a state of the United States in which a small number of Persons
otherwise eligible to subscribe for shares under the Plan of Conversion
reside or as to which the Holding Company and the Association determine
that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise, including, but not limited
to, a requirement that the Holding Company or the Association or any of
their officers, directors or employees register, under the securities laws
of such state, as a broker, dealer, salesman or agent. No payments will be
made in lieu of the granting of Subscription Rights to any such Person.
6. Federal Stock Charter and Bylaws
--------------------------------
A. As part of the Conversion, the Association will take all appropriate
steps to amend its charter to read in the form of federal stock savings
association charter as prescribed by the OTS. A copy of the proposed stock
charter is available upon request. By their approval of the Plan, the Members of
the Association will thereby approve and adopt such charter.
B. The Association will also take appropriate steps to amend its bylaws
to read in the form prescribed by the OTS for a federal stock savings
institution. A copy of the proposed federal stock bylaws is available upon
request.
C. The effective date of the adoption of the Association's federal stock
charter and bylaws shall be the date of the issuance and sale of the Conversion
Stock as specified by the OTS.
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7. Holding Company Certificate of Incorporation
--------------------------------------------
A copy of the proposed certificate of incorporation or charter of the Holding
Company will be made available from the Association upon request.
8. Directors of the Association
----------------------------
Each Person serving as a member of the Board of Directors of the
Association at the time of the Conversion will thereupon become a director of
the Association after the Conversion.
9. Stock Benefit Plans
-------------------
In order to provide an incentive for directors, Officers and employees of the
Holding Company and its subsidiaries (including the Association), the Board of
Directors of the Holding Company intends to adopt, subject to shareholder
approval, a stock option and incentive plan and a stock recognition and
retention plan following completion of the Conversion.
10. Contributions to Tax-Qualified Employee Plans
---------------------------------------------
The Association and the Holding Company may in their discretion make
scheduled contributions to any Tax-Qualified Employee Plans, provided that any
such contributions which are for the acquisition of Conversion Stock, or the
repayment of debt incurred for such an acquisition, do not cause the Association
to fail to meet its regulatory capital requirements.
11. Securities Registration and Market Making
-----------------------------------------
Promptly following the Conversion, the Holding Company will register its
common stock with the SEC pursuant to the Exchange Act. In connection with the
registration, the Holding Company will undertake not to deregister such common
stock, without the approval of the OTS, for a period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist two
or more Market Makers to establish and maintain a market for its common stock
promptly following Conversion. The Holding Company will also use its best
efforts to cause its common stock to be quoted on the Nasdaq System or to be
listed on a national or regional securities exchange.
12. Status of Deposit Accounts and Loans Subsequent to Conversion
-------------------------------------------------------------
Each Deposit Account holder shall retain, without payment, a withdrawable
Deposit Account or Accounts in the Association, equal in amount to the
withdrawable value of such account holder's Deposit Account or Accounts prior to
the Conversion. All Deposit Accounts will continue to be insured by the Federal
Deposit Insurance Corporation up to the applicable limits of insurance coverage,
and shall be subject to the same terms and conditions (except as to voting and
liquidation rights) as such Deposit Account in the Association at the time of
the Conversion. All loans shall retain the same status after Conversion as these
loans had prior to Conversion.
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13. Liquidation Account
-------------------
For purposes of granting to Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain Deposit Accounts at the
Association a priority in the event of a complete liquidation of the
Association, the Association will, at the time of Conversion, establish a
liquidation account in an amount equal to the net worth of the Association as
shown on its latest statement of financial condition contained in the final
offering circular used in connection with the Conversion. The creation and
maintenance of the liquidation account will not operate to restrict the use or
application of any of the regulatory capital accounts of the Association;
provided, however, that such regulatory capital accounts will not be voluntarily
reduced below the required dollar amount of the liquidation account. Each
Eligible Account Holder and Supplemental Eligible Account Holder shall, with
respect to the Deposit Account held, have a related inchoate interest in a
portion of the liquidation account balance ("subaccount balance").
The initial subaccount balance of a Deposit Account held by an Eligible
Account Holder or Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the liquidation account by a fraction, the
numerator of which is the amount of the Qualifying Deposit in the Deposit
Account on the Eligibility Record Date or the Supplemental Eligibility Record
Date and the denominator is the total amount of the Qualifying Deposits of all
Eligible Account Holders and Supplemental Eligible Account Holders on such
record dates in the Association. Such initial subaccount balance shall not be
increased, and it shall be subject to downward adjustment as provided below.
If the deposit balance in any Deposit Account of an Eligible Account Holder
or Supplemental Eligible Account Holder at the close of business on any annual
closing date subsequent to the record date is less than the lesser of (i) the
deposit balance in such Deposit Account at the close of business on any other
annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date or (ii) the amount of the Qualifying
Deposit in such Deposit Account on the Eligibility Record Date or Supplemental
Eligibility Record Date, the subaccount balance shall be reduced in an amount
proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, the subaccount balance shall not be subsequently increased,
notwithstanding any increase in the deposit balance of the related Deposit
Account. If all funds in such Deposit Account are withdrawn, the related
subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Association (and only in such
event), each Eligible Account Holder and Supplemental Eligible Account Holder
shall be entitled to receive a liquidation distribution from the liquidation
account in the amount of the then-current adjusted subaccount balances for
Deposit Accounts then held before any liquidation distribution may be made to
stockholders. No merger, consolidation, bulk purchase of assets with assumptions
of Deposit Accounts and other liabilities, or similar transactions with another
institution the accounts of which are insured by the Federal Deposit Insurance
Corporation, shall be considered to be a complete liquidation. In such
transactions, the liquidation account shall be assumed by the surviving
institution.
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14. Restrictions on Acquisition of the Association
----------------------------------------------
Regulations of the OTS limit acquisitions, and offers to acquire, direct
or indirect beneficial ownership of more than 10% of any class of an equity
security of the Association or the Holding Company. In addition, consistent with
the regulations of the OTS, the charter of the Association shall provide that
for a period of five years following completion of the Conversion: (i) no Person
(i.e., no individual, group acting in concert, corporation, partnership,
association, joint stock company, trust, or unincorporated organization or
similar company, syndicate, or any other group formed for the purpose of
acquiring, holding or disposing of securities of an insured institution) shall
directly or indirectly offer to acquire or acquire beneficial ownership of more
than 10% of any class of the Association's equity securities. Shares
beneficially owned in violation of this charter provision shall not be counted
as shares entitled to vote and shall not be voted by any Person or counted as
voting shares in connection with any matter submitted to the shareholders for a
vote. This limitation shall not apply to any offer to acquire or acquisition of
beneficial ownership of more than 10% of the common stock of the Association by
a corporation whose ownership is or will be substantially the same as the
ownership of the Association, provided that the offer or acquisition is made
more than one year following the date of completion of the Conversion; (ii)
shareholders shall not be permitted to cumulate their votes for elections of
directors; and (iii) special meetings of the shareholders relating to changes in
control or amendment of the charter may only be called by the Board of
Directors.
15. Amendment or Termination of the Plan
------------------------------------
If necessary or desirable, the Plan may be amended at any time prior to
submission of the Plan and proxy materials to the Members by a two-thirds vote
of the respective Boards of Directors of the Holding Company and the
Association. After submission of the Plan and proxy materials to the Members,
the Plan may be amended by a two-third vote of the respective Boards of
Directors of the Holding Company and the Association only with the concurrence
of the OTS. Any amendments to the Plan made after approval by the Members with
the concurrence of the OTS shall not necessitate further approval by the Members
unless otherwise required.
The Plan may be terminated by a two-third vote of the Association's Board of
Directors at any time prior to the Special Meeting of Members, and at any time
following such Special Meeting with the concurrence of the OTS. In its
discretion, the Board of Directors of the Association may modify or terminate
the Plan upon the order or with the approval of the OTS and without further
approval by Members. The Plan shall terminate if the sale of all shares of
Conversion Stock is not completed within 24 months of the date of the Special
Meeting. A specific resolution approved by a majority of the Board of Directors
of the Association is required in order for the Association to terminate the
Plan prior to the end of such 24-month period.
16. Expenses of the Conversion
--------------------------
The Holding Company and the Association shall use their best efforts to
assure that expenses incurred by them in connection with the Conversion shall be
reasonable.
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17. Tax Matters
-----------
Consummation of the Conversion is expressly conditioned upon prior receipt
of either a ruling of the United States Internal Revenue Service or an opinion
of tax counsel or other tax advisor with respect to federal taxation, and either
a ruling of the Illinois taxation authorities or an opinion of tax counsel or
other tax advisor with respect to Illinois taxation, to the effect that
consummation of the transactions contemplated herein will not be taxable to the
Holding Company or the Association.
18. Extension of Credit for Purchase of Common Stock
------------------------------------------------
The Association may not knowingly loan funds or otherwise extend credit
to any Person to purchase in the Conversion shares of Conversion Stock.
Adopted on October 17, 2000.
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