EXHIBIT 2
PREFERRED SAVINGS BANK
Chicago, Illinois
PLAN OF CONVERSION
From Mutual to Stock Form of Organization
I. GENERAL
On May 21, 1996, the Board of Directors of Preferred Savings Bank (the
"Bank") adopted a plan to change the Bank's charter from an Illinois Savings
Bank to a federally chartered savings bank. On the same date, the Board adopted
a Plan of Conversion whereby the Bank would convert from a mutual savings
institution to a stock savings institution to be known as "Preferred Savings
Bank." The Plan includes, as part of the conversion, the concurrent formation of
a holding company, to be named in the future. The Plan provides that
non-transferable subscription rights to purchase Holding Company Conversion
Stock will be offered first to Eligible Account Holders of record as of the
Eligibility Record Date, then to the Bank's Tax-Qualified Employee Plans, then
to Supplemental Eligible Account Holders of record as of the Supplemental
Eligibility Record Date, then to Other Members, and then to directors, officers
and employees. 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 certain members of the public in a Direct
Community Offering or a Public Offering, or both. The price of the Holding
Company Conversion Stock will be based upon an independent appraisal of the Bank
and will reflect its estimated pro forma market value, as converted. It is the
desire of the Board of Directors of the Bank to attract new capital to the Bank
in order to increase its capital, support future savings growth and increase the
amount of funds available for residential and other mortgage lending. The
Converted Bank is also expected to benefit from its management and other
personnel having a stock ownership in its business, since stock ownership is
viewed as an effective performance incentive and a means of attracting,
retaining and compensating management and other personnel. No change will be
made in the Board of Directors or management as a result of the Conversion.
It is contemplated that the Bank will convert its mutual charter from a
state charter to a federal charter prior to the approval of the conversion
application.
II. DEFINITIONS
Acting in Concert: The term "acting in concert" shall have the same
meaning given it in Section 574.2(c) of the Rules and Regulations of the OTS.
Actual Subscription Price: The price per share, determined as provided
in Section V of the Plan, at which Holding Company Conversion Stock will be sold
in the Subscription Offering.
Affiliate: An "affiliate" of, or a Person "affiliated" with, a
specified Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by or is under common control with,
the Person specified.
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 Bank 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 ten percent 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, and (iii) 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 Bank 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 Bank, to the extent provided in Section V hereof.
Bank: Preferred Savings Bank or such other name as the institution may
adopt.
Conversion: Change of the Bank's charter and bylaws to federal stock
charter and bylaws; sale by the Holding Company of Holding Company Conversion
Stock; and issuance and sale by the Converted Bank of Converted Bank Common
Stock to the Holding Company, all as provided for in the Plan.
Converted Bank: The federally chartered stock savings institution
resulting from the Conversion of the Bank in accordance with the Plan.
Deposit Account: Any withdrawable or repurchasable account or deposit
in the Bank.
Direct Community Offering: The offering to the general public of any
unsubscribed shares which may be effected as provided in Section V hereof.
Eligibility Record Date: The close of business on March 31, 1995.
Eligible Account Holder: Any Person holding a Qualifying Deposit in the
Bank on the Eligibility Record Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Holding Company: A corporation which upon completion of the Conversion
will own all of the outstanding common stock of the Converted Bank, and the name
of which will be selected in the future.
Holding Company Conversion Stock: Shares of common stock, par value
$.01 per share, to 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 Holding Company Conversion Stock shall refer to the number of
shares offered in the Subscription Offering.
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.
Maximum Subscription Price: The price per share of Holding Company
Conversion Stock to be paid initially by subscribers in the Subscription
Offering.
Member: Any Person or entity that qualifies as a member of the Bank
pursuant to its charter and bylaws.
Non-Tax-Qualified Employee Plan: Any defined benefit plan or defined
contribution plan of the Bank or the Holding Company, such as an employee stock
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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.
OTS: Office of Thrift Supervision, Department of the Treasury, and its
successors.
Officer: An executive officer of the Holding Company or the Bank,
including the Chairman of the Board, President, Executive Vice Presidents,
Senior Vice Presidents in charge of principal business functions, Secretary and
Treasurer.
Order Forms: Forms to be used in the Subscription Offering to exercise
Subscription Rights.
Other Members: Members of the Bank, other than Eligible Account
Holders, Tax-Qualified Employee Plans or Supplemental Eligible Account Holders,
as of the Voting Record Date.
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 Bank, including any amendment
approved as provided in this Plan.
Public Offering: The offering for sale to certain members of the public
of any shares of Holding Company Conversion Stock not subscribed for in the
Subscription Offering or the Direct Community Offering, if any.
Public Offering Price: The price per share at which any unsubscribed
shares of Holding Company Conversion Stock are initially offered for sale in the
Public Offering.
Qualifying Deposit: The aggregate balance of $50 or more of each
Deposit Account 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.
SAIF: Savings Association Insurance Fund.
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 Holding Company
Conversion Stock for subscription and purchase pursuant to Section V of the
Plan.
Subscription Rights: Non-transferable, non-negotiable, personal rights
of the Bank's Eligible Account Holders, Tax-Qualified Employee Plans,
Supplemental Eligible Account Holders, Other Members, and directors, Officers
and employees to subscribe for shares of Holding Company Conversion Stock in the
Subscription Offering.
Supplemental Eligibility Record Date: The last day of the calendar
quarter preceding approval of the Plan by the OTS.
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Supplemental Eligible Account Holder: Any person holding a Qualifying
Deposit in the Bank (other than an officer or director and their associates) on
the Supplemental Eligibility Record Date.
Tax-Qualified Employee Plans: Any defined benefit plan or defined
contribution plan of the Bank 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 sell
Holding Company Conversion Stock in the Public Offering.
Voting Record Date: The date set by the Board of Directors in
accordance with federal regulations for determining Members eligible to vote at
the Special Meeting.
III. STEPS PRIOR TO SUBMISSION OF PLAN OF CONVERSION TO THE MEMBERS FOR
APPROVAL
Prior to submission of the Plan of Conversion to its Members for
approval, the Bank must receive from the OTS approval of the Application for
Approval of Conversion to convert to the federal stock form of organization. The
following steps must be taken prior to such regulatory approval:
A. The Board of Directors shall adopt the Plan by not less than a two-thirds
vote.
B. The Bank shall notify its Members of the adoption of the Plan by publishing a
statement in a newspaper having a general circulation in each community in
which the Bank maintains an office.
C. Copies of the Plan adopted by the Board of Directors shall be made available
for inspection at each office of the Bank.
D. The Bank 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 to be prepared and filed with the SEC.
E. Upon receipt of notice from the OTS to do so, the Bank 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 Bank maintains an
office.
IV. CONVERSION PROCEDURE
Following approval of the application 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 Bank will take all other necessary steps
pursuant to applicable laws and regulations to convert to a federal stock
savings institution as part of a concurrent holding company formation pursuant
to the terms of the Plan.
The Holding Company Conversion Stock will be offered for sale in the
Subscription Offering at the Maximum Subscription Price to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders,
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Other Members and directors, Officers and employees of the Bank, prior to or
within 45 days after the date of the Special Meeting. The Bank may, either
concurrently with, at any time during, or promptly after the Subscription
Offering, also offer the Holding Company Conversion Stock to and accept
subscriptions from other Persons in a Direct Community Offering; provided that
the Bank's Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental
Eligible Account Holders, Other Members and directors, Officers and employees
shall have the priority rights to subscribe for Holding Company Conversion Stock
set forth in Section V of this Plan. However, the Holding Company and the Bank
may delay commencing the Subscription Offering beyond such 45-day period in the
event there exist 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 and Direct Community Offering
will be not less than 20 days nor more than 45 days unless extended by the Bank.
Upon completion of the Subscription Offering and the Direct Community Offering,
if any, any unsubscribed shares of Holding Company Conversion Stock will, if
feasible, be sold to the Underwriters for resale to the general public in the
Public Offering. If for any reason the Public Offering of all shares not sold in
the Subscription Offering and Direct Community Offering cannot be effected, the
Holding Company and the Bank will use their best efforts to obtain other
purchasers, subject to OTS approval. Completion of the sale of all shares of
Holding Company Conversion Stock not sold in the Subscription Offering and
Direct 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 Bank with the approval of the OTS. The Holding Company and the
Bank may jointly seek one or more extensions of such 45-day period if necessary
to complete the sale of all shares of Holding Company 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 Holding Company Conversion Stock is required within
24 months after the date of the Special Meeting.
V. STOCK OFFERING
A. Total Number of Shares and Purchase Price of Conversion Stock
The total number of shares of Holding Company 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 Bank prior to the commencement
of the Subscription Offering, subject to adjustment if necessitated by
market or financial conditions prior to consummation of the Conversion. The
total number of shares of Holding Company Conversion Stock shall also be
subject to increase in connection with any oversubscriptions in the
Subscription Offering or Direct Community Offering.
The aggregate price for which all shares of Holding Company 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
Converted Bank. Such appraisal shall be performed in accordance with OTS
guidelines and will be updated as appropriate under or required by
applicable regulations.
The appraisal will be made by an independent investment banking or
financial consulting firm experienced in the area of thrift institution
appraisals. The appraisal will include, among other things, an analysis of
the historical and pro forma operating results and net worth of the
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Converted Bank and a comparison of the Holding Company, the Converted Bank
and the Conversion Stock with comparable thrift institutions and holding
companies and their respective outstanding capital stocks.
Based upon the independent appraisal, the Boards of Directors of the
Holding Company and the Bank will jointly fix the Maximum Subscription
Price.
If, following completion of the Subscription Offering and Direct
Community Offering, a Public Offering is effected, the Actual Subscription
Price for each share of Holding Company Conversion Stock will be the same
as the Public Offering Price at which unsubscribed shares of Holding
Company Conversion Stock are initially offered for sale by the Underwriters
in the Public Offering. The Public Offering Price will be a price
negotiated by the Holding Company and the Bank with the Underwriters, not
in excess of the Maximum Subscription Price. The price paid by the
Underwriters for each unsubscribed share will be the Public Offering Price
less a negotiated underwriting discount.
If, upon completion of the Subscription Offering and Direct Community
Offering, all of the Holding Company Conversion Stock is subscribed for or
only a limited number of shares remain unsubscribed for, or if a Public
Offering otherwise cannot be effected, the Actual Subscription Price for
each share of Holding Company Conversion Stock will be determined by
dividing the estimated appraised aggregate pro forma market value of the
Holding Company and the Converted Bank, based on the independent appraisal
as updated upon completion of the Subscription Offering or other sale of
all of the Holding Company Conversion Stock, by the total number of shares
of Holding Company Conversion Stock to be issued and sold by the Holding
Company upon Conversion. Such appraisal will then be expressed in terms of
a specific aggregate dollar amount rather than as a range.
B. Subscription Rights
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, Other Members and
directors, Officers and employees of the Bank as set forth below.
1. Preference Category No. 1: Eligible Account Holders
Each Eligible Account Holder shall receive non-transferable
Subscription Rights to subscribe for shares of Holding Company
Conversion Stock in an amount equal to the greater of $150,000, or
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 of which the numerator 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 in the converting
Bank in each case on the Eligibility Record Date.
If sufficient shares are not available to cover all of the orders in
this priority category, 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 that his Qualifying Deposit bears
to the total Qualifying Deposits of all subscribing Eligible Account
Holders whose subscriptions remain unsatisfied.
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Non-transferable Subscription Rights to purchase Holding Company
Conversion Stock received by directors and Officers of the Bank and
their Associates, based on their increased deposits in the Bank 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
Each Tax-Qualified Employee Plan shall be entitled to receive
non-transferable Subscription Rights to purchase up to 10% of the shares
of Holding Company 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
Holding Company Conversion Stock. 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 Holding Company 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 Holders
Each Supplemental Eligible Account Holder shall receive
non-transferable Subscription Rights to subscribe for shares of Holding
Company Conversion Stock in an amount equal to the greater of $150,000,
or 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 of which the numerator 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 Bank 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
purchase, to the extent possible, 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 that his Qualifying Deposit bears to the total
Qualifying Deposits of all subscribing Supplemental Eligible Account
Holders whose subscriptions remain unsatisfied.
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4. Preference Category No. 4: Other Members
Each Other Member shall receive non-transferable Subscription Rights
to subscribe for shares of Holding Company 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 $150,000, or one-tenth of one percent
(.10%) of the total offering of shares of common stock in the
Conversion, to the extent that Holding Company 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
each subscribing Other Member pro rata in the same proportion that
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 Bank's mutual charter and bylaws in effect on the date of
approval by members of this Plan of Conversion.
5. Preference Category No. 5: Directors, Officers and Employees
Each director, Officer and employee of the Bank as of the date of
the commencement of the Subscription Offering shall be entitled to
receive non-transferable Subscription Rights to purchase shares of the
Holding Company Conversion Stock to the extent that shares are available
after satisfying subscriptions under Category Nos. 1 through 4 above.
The shares which may be purchased under this Category are subject to the
following conditions:
a. The total number of shares which may be purchased under this
Category may not exceed 25% of the number of shares of Holding
Company Conversion Stock.
b. The maximum amount of shares which may be purchased under this
Category by any Person is $150,000 of Holding Company Conversion
Stock. In the event of an oversubscription for shares under the
provisions of this subparagraph, the shares available shall be
allocated pro rata among all subscribers in this Category.
C. Public Offering and Direct Community Offering
1. Any shares of Holding Company Conversion Stock not subscribed for in the
Subscription Offering may be offered for sale in a Direct Community
Offering. This may involve an offering of all unsubscribed shares
directly to the general public. The Direct Community Offering, if any,
shall be for a period of not less than 20 days nor more than 45 days
unless extended by the Holding Company and the Bank, and shall commence
concurrently with, during or promptly after the Subscription Offering.
The purchase price per share to the general public in a Direct Community
Offering shall be the same as the Actual Subscription Price. The Holding
Company and the Bank may use an investment banking firm or firms on a
best efforts basis to sell the unsubscribed shares in the Subscription
and Direct Community Offering. The Holding Company and the Bank may pay
a commission or other fee to such investment banking firm or firms
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as to the shares sold by such firm or firms in the Subscription and
Direct Community Offering and may also reimburse such firm or firms for
expenses incurred in connection with the sale. The Holding Company
Conversion Stock will be offered and sold in the Direct Community
Offering, in accordance with OTS regulations, so as to achieve the
widest distribution of the Holding Company 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 $150,000 of Holding
Company Conversion Stock in the Direct Community Offering. Further, the
Bank may limit total subscriptions under this Section V.C.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 Holding
Company Conversion Stock. Finally, the Bank may reserve shares offered
in the Direct Community Offering for sales to institutional investors.
In the event of an oversubscription for shares in the Direct Community
Offering, shares may be allocated (to the extent shares remain
available) first to cover any reservation of shares for a public
offering or institutional orders, next to cover orders of natural
persons residing in Cook County, Illinois then to cover the orders of
any other person subscribing for shares in the Direct Community Offering
so that each such person may receive 1,000 shares, and thereafter, on a
pro rata basis to such persons based on the amount of their respective
subscriptions.
The Bank and the Holding Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any Person under this
Section V.C. Further, the Bank and the Holding Company may, at their
sole discretion, elect to forego a Direct Community Offering and instead
effect a Public Offering as described below.
2. Any shares of Holding Company Conversion Stock not sold in the
Subscription Offering or in the Direct Community Offering, if any, may
then be sold to selected members of the public at the Public Offering
Price in the Public Offering. The Holding Company Common Stock, will be
offered and sold in the Public Offering, if any, in accordance with OTS
regulations so as to achieve the widest distribution of the Holding
Company Common Stock. It is expected that the Public Offering will
commence as soon as practicable after termination of the Subscription
Offering and the Direct Community Offering, if any. 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 IV hereof. No person by himself or herself, or with an Associate
or group of persons acting in concert, may subscribe for or purchase
more than $150,000 of Holding Company Conversion Stock in the Public
Offering, if any. The Public Offering Price and the underwriting
discount shall be determined as provided in Section V.A hereof and set
forth in the underwriting agreement between the Holding Company, the
Bank 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 Holding
Company Conversion Stock cannot be effected and any shares remain unsold
after the Subscription Offering and the Direct Community Offering, if
any, the Boards of Directors of the Holding Company and the Bank 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.
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D. Additional Limitations Upon Purchases of Shares of Holding Company Conversion
Stock
The following additional limitations shall be imposed on all purchases
of Holding Company Conversion Stock in the Conversion:
1. No Person, by himself or herself, or with an Associate or group of
Persons acting in concert, may subscribe for or purchase in the
Conversion more than $900,000 of Holding Company Conversion Stock. 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 35% of the
Holding Company 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 Holding Company Conversion Stock that
may be purchased by any Person in the Conversion is 25 shares, provided
sufficient shares are available (provided that the aggregate price for
any minimum share purchase shall not exceed $500).
4. The Boards of Directors of the Holding Company and the Bank may, in
their sole discretion, increase the maximum purchase limitation referred
to in subparagraph 1. herein up to 9.99%, provided that orders for
shares exceeding 5% of the shares being offered in the Conversion shall
not exceed, in the aggregate, 10% of the shares being offered in the
Conversion. Requests to purchase additional shares of Holding Company
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 V.
Depending upon market and financial conditions, the Boards of Directors of
the Holding Company and the Bank, 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 V, the directors of the Holding Company and
the Bank 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.
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E. Restrictions and Other Characteristics of Holding Company Conversion Stock
Being Sold
1. Transferability. Holding Company Conversion Stock purchased by Persons
other than directors and Officers of the Holding Company or the Bank
will be transferable without restriction. Shares purchased by directors
or Officers shall 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 Bank 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 Bank's or the Holding
Company's equity securities are subject to the prior approval of the
OTS.
The certificates representing shares of Holding Company 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 Bank directors and
Officers as may be then applicable to such restricted stock.
No director or Officer of the Holding Company or of the Bank, 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
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. This limitation shall not apply to
purchases of Holding Company Common Stock made and held by any
tax-qualified or non-tax qualified employee stock benefit plan which may
be attributed to an Officer or director of the Bank or the Holding
Company.
2. Repurchase and Dividend Rights. For a period of three years following
Conversion, the Converted Bank shall not repurchase any shares of its
capital stock, except in the case of an offer to repurchase on a pro
rata basis made to all holders of capital stock of the Converted Bank.
Any such offer shall be subject to the prior approval of the OTS. A
repurchase of qualifying shares of a director shall not be deemed to be
a repurchase for purposes of this Section V.E.2.
Present regulations also provide that the Converted Bank 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
Converted Bank below the amount required for the liquidation account to
be established pursuant to Section XIII hereof, and (ii) except in
compliance with requirements of Section 563.134 of the Rules and
Regulations of the OTS.
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The above limitations are subject to Section 563b.3 (g)(3) of the Rules
and Regulations of the OTS, which generally provides that the Converted
Bank may repurchase its capital stock provided (i) no repurchases occur
within one year following conversion, (ii) repurchases during the second
and third year after conversion are part of an open market stock
repurchase program that does not allow for a repurchase of more than 5%
of the Bank's outstanding capital stock during a twelve-month period
without OTS approval, (iii) the repurchases do not cause the Bank to
become undercapitalized, and (iv) the Bank provides notice to the OTS at
least 10 days prior to the commencement of a repurchase program and the
OTS does not object. In addition, the above limitations shall not
preclude payments of dividends or repurchases of capital stock by the
Converted Bank in the event applicable federal regulatory limitations
are liberalized or waived by the OTS subsequent to OTS approval of the
Plan.
3. Voting Rights. After Conversion, holders of deposit accounts will not
have voting rights in the Bank or the Holding Company. Exclusive voting
rights as to the Bank will be vested in the Holding Company, as the sole
stockholder of the Bank. Voting rights as to the Holding Company will be
held exclusively by its stockholders.
F. 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, Other Member, and
director, Officer and employee at their last known address as shown on
the records of the Bank. However, the Bank may, and if the Subscription
Offering commences after the Special Meeting the Bank shall, furnish a
subscription prospectus and Order Form only to Eligible Account Holders,
Tax-Qualified Employee Plans, Supplemental Eligible Account Holders,
Other Members, and directors, Officers and employees who have returned
to the Bank 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
Bank 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 Converted Bank and the
shares of Holding Company 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 Holding Company Conversion Stock.
3. The Order Forms (or accompanying instructions) used for the Subscription
Offering will contain, among other things, the following:
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(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, Other
Members, and directors, Officers and employees;
(ii) A specified expiration date by which Order Forms must be returned to
and actually received by the Bank 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 Bank;
(iii) The Maximum Subscription 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
Holding Company 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;
(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 acknowledgement 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 Bank, and that the Subscription Rights may be exercised only
by delivering the Order Form, properly completed and executed, to
the Bank or its representative by the expiration date, together with
required payment of the Maximum Subscription Price for all shares of
Holding Company Conversion Stock subscribed for;
(x) A statement that the Subscription Rights are non-transferable and
that all shares of Holding Company 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 Bank or its representative, a
subscription may not be modified, withdrawn or canceled without the
consent of the Bank.
G. Method of Payment
Payment for all shares of Holding Company Conversion Stock subscribed
for, computed on the basis of the Maximum Subscription Price, 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 Bank (including a certificate of deposit), the subscriber may
authorize the Bank to charge the subscriber's account.
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If a subscriber authorizes the Bank to charge his or her account, the
funds will continue to earn interest, but may not be used by the subscriber
until all Holding Company Conversion Stock has been sold or the Plan of
Conversion is terminated, whichever is earlier. The Bank 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 connection with the purchase of Holding Company Conversion Stock
under the Plan of Conversion. Interest will also be paid, at not less than
the then- current passbook rate, on all orders paid in cash, by check or
money order, 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 Bank in an escrow or other account established specifically for this
purpose.
In the event of an unfilled amount of any subscription order, the
Converted Bank will make an appropriate refund or cancel an appropriate
portion of the related withdrawal authorization, after consummation of the
Conversion, including any difference between the Maximum Subscription Price
and the Actual Subscription Price (unless subscribers are afforded the
right to apply such difference to the purchase of additional whole shares).
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 Bank.
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 Holding Company Conversion Stock
subscribed for upon consummation of the Conversion. In the event that,
after the completion of the Subscription Offering, the amount 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 amount 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.
H. Undelivered, Defective or Late Order Forms; Insufficient Payment
The Boards of Directors of the Holding Company and the Bank 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 Bank 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 Holding Company
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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); or (v) are submitted by or
on behalf of a Person whose representations the Boards of Directors of the
Holding Company and the Bank 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 Bank 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 Bank may specify. The
interpretation of the Holding Company and the Bank of the terms and
conditions of this Plan and of the proper completion of the Order Form will
be final, subject to the authority of the OTS.
I. Member in Non-Qualified States or in Foreign Countries
The Holding Company and the Bank will make reasonable efforts to comply
with the securities laws of all states in the United States in which
Persons entitled to subscribe for Holding Company 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 Bank 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 Bank 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.
VI. FEDERAL STOCK CHARTER AND BYLAWS
A. As part of the Conversion, the Bank will take all appropriate steps to
amend its charter to read in the form of federal stock savings bank
charter as prescribed by the OTS. The name of the Bank, as converted,
will be "Preferred Savings Bank." A copy of the proposed stock charter
is available upon request. By their approval of the Plan, the Members of
the Bank will thereby approve and adopt such charter.
B. The Bank will also take appropriate steps to amend its bylaws to read in
the form prescribed by the OTS for a federal stock savings bank. A copy
of the proposed federal stock bylaws is available upon request.
C. The effective date of the adoption of the Bank's federal stock charter
and bylaws shall be the date of the issuance and sale of the Holding
Company Conversion Stock as specified by the OTS.
VII. HOLDING COMPANY CERTIFICATE OF INCORPORATION
A copy of the proposed certificate of incorporation of the Holding Company
will be made available from the Bank upon request.
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VIII. DIRECTORS OF THE CONVERTED BANK
Each Person serving as a member of the Board of Directors of the Bank at
the time of the Conversion will thereupon become a director of the Converted
Bank.
IX. STOCK OPTION AND INCENTIVE PLAN AND MANAGEMENT RETENTION PLAN
In order to provide an incentive for directors, Officers and employees of
the Holding Company and its subsidiaries (including the Bank), the Board of
Directors of the Holding Company intends to adopt, subject to shareholder
approval, a stock option and incentive plan and a management retention plan as
soon as permitted by applicable regulation.
X. CONTRIBUTIONS TO TAX-QUALIFIED EMPLOYEE PLANS
The Converted Bank 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 Holding Company Conversion
Stock, or the repayment of debt incurred for such an acquisition, do not cause
the Converted Bank to fail to meet its regulatory capital requirements.
XI. SECURITIES REGISTRATION AND MARKET MAKING
Promptly following the Conversion, the Holding Company will register its
stock with the SEC pursuant to the Exchange Act. In connection with the
registration, the Holding Company will undertake not to deregister such 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 National Association of
Securities Dealers, Inc. Automated Quotations System or to be listed on a
national or regional securities exchange.
XII. STATUS OF SAVINGS ACCOUNTS AND LOANS SUBSEQUENT TO CONVERSION
Each Deposit Account holder shall retain, without payment, a withdrawable
Deposit Account or Accounts in the Converted Bank, equal in amount to the
withdrawable value of such account holder's Deposit Account or Accounts prior to
Conversion. All Deposit Accounts will continue to be insured by the SAIF 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 Bank at the time of the Conversion. All loans shall
retain the same status after Conversion as these loans had prior to Conversion.
XIII. LIQUIDATION ACCOUNT
For purposes of granting to Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain Deposit Accounts at the
Converted Bank a priority in the event of a complete liquidation of the
Converted Bank, the Converted Bank will, at the time of Conversion, establish a
liquidation account in an amount equal to the net worth of the Bank 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 Converted Bank; provided, however,
16
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 and/or Supplemental Eligible Account Holder shall be determined
by multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of the Qualifying Deposit in the Deposit
Account on the Eligibility Record Date and/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 Bank. For Deposit Accounts in existence at both dates,
separate subaccounts shall be determined on the basis of the Qualifying Deposits
in such Deposit Accounts on such record dates. 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 Bank (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 SAIF, shall be considered
to be a complete liquidation. In such transactions, the liquidation account
shall be assumed by the surviving institution.
XIV. RESTRICTIONS ON ACQUISITION OF CONVERTED BANK
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 Converted Bank or the Holding Company. In addition, consistent
with the regulations of the OTS, the charter of the Converted Bank 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 Bank'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 Bank by a corporation
whose ownership is or will be substantially the same as the ownership of the
17
Bank, 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.
XV. AMENDMENT OR TERMINATION OF 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 Bank. After
submission of the Plan and proxy materials to the Members, the Plan may be
amended by a two-thirds vote of the respective Boards of Directors of the
Holding Company and the Bank only with the concurrence of the OTS. In the event
that the Bank determines that for tax purposes or otherwise it is in the best
interest of the Bank to convert from a federal mutual to a federal stock
institution without the concurrent formation of a holding company, the Plan may
be substantively amended, with OTS approval, in such respects as the Board of
Directors of the Bank deems appropriate to reflect such change from a holding
company conversion to a direct conversion. In the event the Plan is so amended,
common stock of the Bank will be substituted for Holding Company Conversion
Stock in the Subscription and Direct Community Offerings, and subscribers will
be resolicited as described in Section V hereof. Any amendments to the Plan
(including amendments to reflect the elimination of the concurrent holding
company formation) 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-thirds vote of the Bank'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 Bank 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 Bank is
required in order for the Bank to terminate the Plan prior to the end of such
24-month period.
XVI. EXPENSES OF THE CONVERSION
The Holding Company and the Bank shall use their best efforts to assure
that expenses incurred by them in connection with the Conversion shall be
reasonable.
XVII. TAX RULING
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 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 Bank.
XVIII. EXTENSION OF CREDIT FOR PURCHASE OF STOCK
The Bank may not knowingly loan funds or otherwise extend credit to any
Person to purchase in the Conversion shares of Holding Company Conversion Stock.
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