UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14a-6(e)(2))
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[ ] Soliciting Material Pursuant to Section 240.14a-12
CFS Bancorp, Inc.
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CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
(CFS LOGO)
CFS BANCORP, INC.
707 RIDGE ROAD
MUNSTER, INDIANA 46321
(219) 836-5500
March 25, 2005
Dear Shareholder:
You are cordially invited to attend the seventh Annual Meeting of
Shareholders of CFS Bancorp, Inc. The meeting will be held at the Center for
Visual and Performing Arts located at 1040 Ridge Road, Munster, Indiana on
Tuesday, April 26, 2005 at 10:00 a.m. Central Time. The matters to be considered
by shareholders at the Annual Meeting are described in the accompanying
materials.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to mark, sign, and date your proxy card today and
return it in the envelope provided, even if you plan to attend the Annual
Meeting. This will not prevent you from voting in person but will ensure that
your vote is counted if you are unable to attend.
Your continued support of and interest in CFS Bancorp, Inc. are sincerely
appreciated.
Best regards,
/s/ Thomas F. Prisby
Thomas F. Prisby
Chairman of the Board and
Chief Executive Officer
CFS BANCORP, INC.
707 RIDGE ROAD
MUNSTER, INDIANA 46321
(219) 836-5500
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 2005
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NOTICE IS HEREBY GIVEN that the 2005 Annual Meeting of Shareholders
("Annual Meeting") of CFS Bancorp, Inc. ("Company") will be held at the Center
for Visual and Performing Arts located at 1040 Ridge Road, Munster, Indiana on
Tuesday, April 26, 2005 at 10:00 a.m. Central Time for the following purposes,
all of which are more completely set forth in the accompanying Proxy Statement:
(1) To elect three directors for three-year terms expiring in 2008,
and until their successors are elected and qualified;
(2) To approve the proposal to reincorporate the Company in the State
of Indiana; and
(3) To transact such other business as may properly come before the
meeting or at any adjournment thereof. Management is not aware of any other
such business.
The Board of Directors fixed March 4, 2005 as the Voting Record Date for
the determination of shareholders entitled to notice of and to vote at the
Annual Meeting and at any adjournment thereof. Only those shareholders of record
as of the close of business on that date will be entitled to vote at the Annual
Meeting or at any such adjournment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MONICA F. SULLIVAN
Monica F. Sullivan
Vice President - Corporate Secretary
Munster, Indiana
March 25, 2005
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU
PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU
MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN
WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF. HOWEVER, IF YOU
ARE A SHAREHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL
NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO VOTE IN PERSON
AT THE ANNUAL MEETING.
CFS BANCORP, INC.
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 2005
This Proxy Statement is furnished to holders of common stock, $0.01 par
value per share ("Common Stock"), of CFS Bancorp, Inc. ("Company"), the parent
holding company of Citizens Financial Services, FSB ("Bank"). The Company
acquired all of the Bank's common stock issued in connection with the conversion
of the Bank from the mutual to stock form and the related public offering of the
Common Stock in July 1998 ("Conversion"). Proxies are being solicited on behalf
of the Board of Directors of the Company to be used at the Annual Meeting of
Shareholders ("Annual Meeting") to be held at the Center for Visual and
Performing Arts located at 1040 Ridge Road, Munster, Indiana on Tuesday, April
26, 2005 at 10:00 a.m. Central Time and at any adjournment thereof for the
purposes set forth in the Notice of Annual Meeting of Shareholders. A copy of
the Company's 2004 Annual Report on Form 10-K, including audited consolidated
financial statements, as of and for the year ended December 31, 2004 accompanies
this Proxy Statement along with a Proxy Card. Said Annual Report on Form 10-K is
not a part of the proxy solicitation materials. This Proxy Statement and the
accompanying materials are first being mailed to shareholders on or about March
25, 2005.
The cost of the solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending the proxy
materials to the beneficial owners of the Common Stock. The Company has retained
Georgeson Shareholder Communications, Inc. to assist with the solicitation of
proxies for a fee not to exceed $5,500, plus reimbursement for out-of-pocket
expenses. In addition to solicitations by mail, directors, officers and
employees of the Company may solicit proxies personally or by telephone without
additional compensation.
Proxies solicited by this Proxy Statement will be returned to the proxy
solicitor or the transfer agent and will be tabulated by the inspector of
elections designated by the Board, who will not be employed by or act as a
director of the Company or any of its affiliates.
If you are a registered shareholder, you may vote by mail, telephone, or
electronically through the Internet, by following the instructions on the Proxy
Card.
The proxy solicited hereby, if properly signed and returned to the Company
and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted "FOR" the election of the Board of Directors'
nominees to the Board of Directors, "FOR" the proposal to reincorporate the
Company in the State of Indiana, and otherwise at the discretion of the proxy
holder. Any shareholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of the Company (Monica
F. Sullivan, Vice President - Corporate Secretary, CFS Bancorp, Inc., 707 Ridge
Road, Munster, Indiana 46321) written notice thereof; (ii) submitting a
duly-executed proxy bearing a later date; or (iii) appearing at the Annual
Meeting and giving the Secretary notice of his or her intention to vote in
person. However, if you are a shareholder whose shares are not registered in
your own name, you will need additional documentation from your record holder to
vote personally at the meeting. Proxies solicited hereby may be exercised only
at the Annual Meeting and at any adjournment thereof and will not be used for
any other meeting.
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VOTING
Only shareholders of record at the close of business on March 4, 2005
("Voting Record Date") will be entitled to vote at the Annual Meeting. On the
Voting Record Date, there were 12,380,542 shares of Common Stock outstanding,
and the Company had no other class of equity securities outstanding. Each share
of Common Stock is entitled to one vote at the Annual Meeting on all matters
properly presented at the meeting. A quorum at the Annual Meeting shall consist
of shareholders representing, either in person or by proxy, a majority of the
shares of the Company entitled to vote at the Annual Meeting.
Directors are elected by a plurality of the votes cast with a quorum
present. The affirmative vote of a majority of the outstanding shares of the
Company's Common Stock is required to approve the proposal to reincorporate the
Company in the State of Indiana. Abstentions are considered in determining the
presence of a quorum and will not affect the plurality vote required for the
election of directors.
Under rules governing broker/dealers, the election of directors is
considered a "discretionary" item upon which brokerage firms may vote in their
discretion on behalf of their clients if such clients have not furnished voting
instructions. However, the proposal to reincorporate the Company is considered a
"non-discretionary" item upon which brokerage firms may not vote in their
discretion absent the receipt of voting instructions from their client and for
which there will be "broker non-votes." Because of the required vote,
abstentions and broker non-votes will have the same affect as a vote against the
proposal to reincorporate.
3
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR,
CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company provides that the Board of
Directors shall be divided into three classes as nearly equal in number as the
then total number of directors constituting the Board of Directors permits. The
directors shall be elected by the shareholders of the Company for staggered
terms and until their successors are elected and qualified.
At the Annual Meeting, shareholders of the Company will be asked to elect
one class of directors, consisting of three directors, for three-year terms
expiring in 2008, and until their successors are elected and qualified.
No director, executive officer or nominee for director is related to any
other director or executive officer of the Company by blood, marriage or
adoption. Each of the nominees currently serves as director of the Company and
the Bank.
Pursuant to NASDAQ Rule 4350(c), the Board has affirmatively determined
that a majority of the Company's directors are independent directors as defined
by NASDAQ Rule 4200. The Company's independent directors are Sally A. Abbott,
Gregory W. Blaine, Thomas J. Burns, Gene Diamond, Frank D. Lester, Robert R.
Ross, Joyce M. Simon and Charles R. Webb.
Unless otherwise directed, each proxy executed and returned by a
shareholder will be voted for the election of the nominees for director listed
below. If any person named as a nominee should be unable or unwilling to stand
for election at the time of the Annual Meeting, the proxies will nominate and
vote for any replacement nominee or nominees recommended by the Board of
Directors. At this time, the Board of Directors knows of no reason why any of
the nominees listed below may not be able to serve as a director if elected.
The following table presents information concerning the nominees for
director of the Company and each director whose term continues, including tenure
as a director. Ages are reflected as of March 4, 2005. No director of the
Company or the Bank serves on the Board of Directors of any other
publicly-traded corporation, bank, savings institution, or financial holding
company.
Pursuant to the Company's Bylaws, Ms. Abbott and Mr. Burns are no longer
eligible for nomination due to the fact they have attained age 70. Accordingly,
Ms. Abbott's and Mr. Burns' terms as directors of the Company will end on the
date of the Annual Meeting. Mr. Burns' term as a director of the Bank ends in
2005. Ms. Abbott's term as a director of the Bank ends in 2006. The Board wishes
to thank them for their service.
4
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERMS EXPIRING IN 2008
<Table>
<Caption>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AGE THE PAST FIVE YEARS SINCE
- ---- --- --------------------------- --------
Gregory W. Blaine.................... 56 Director of the Bank and the Company since 1998
1998; consultant to and former Chairman and
Chief Executive Officer of TN Technologies;
Mr. Blaine served in various capacities with
True North Communications, Inc., the parent of
TN Technologies, from 1979 to 1998, including
director of Global Operating Systems, and as a
member of the Board of Directors of True North
Communication from 1990 to 1997.
Robert R. Ross....................... 60 Director of the Bank and the Company since 2004
2004; retired from PricewaterhouseCoopers, LLP
in 2003 as a Senior Audit Partner; Mr. Ross
began his career with PricewaterhouseCoopers
in 1968 and held various roles of increasing
responsibility on behalf of a variety of
national and multi-national private and
publicly-held clients.
Joyce M. Simon....................... 58 Director of the Bank and the Company since 2004
2004; Chief Financial Officer of the John G.
Shedd Aquarium since 1992. Previously, Ms.
Simon was a partner with the accounting firm
of Ernst & Young LLP.
</Table>
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE ABOVE-NAMED NOMINEES.
5
DIRECTORS WHOSE TERMS ARE CONTINUING
DIRECTORS WITH A TERM EXPIRING IN 2006
<Table>
<Caption>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AGE THE PAST FIVE YEARS SINCE
- ---- --- --------------------------- --------
Gene Diamond......................... 52 Director of the Bank since 1994 and the 1998
Company since 1998; appointed in 2004 as
Regional Chief Executive Officer, after
serving one year as Regional Chief Operating
Officer, for the Sisters of St. Francis of
Perpetual Adoration, where he is responsible
for the hospital group consisting of St.
Margaret Mercy Healthcare Centers located in
Hammond and Dyer, Indiana, St. Anthony Medical
Centers in Crown Point, Indiana and St.
Anthony Memorial Health Centers of Michigan
City, Indiana; previously served as Chief
Executive Officer of St. Margaret Mercy
Healthcare Centers from 1993 to 2003.
Charles R. Webb...................... 63 Director of the Bank and the Company since 2002
2002; currently retired; Mr. Webb was the
founder and Chief Executive Officer of Charles
Webb & Co., from 1989 to 1996, when the
company was acquired by Keefe, Bruyette &
Woods, Inc., where Mr. Webb served as
Executive Vice President until his retirement
in 2000.
</Table>
DIRECTORS WITH A TERM EXPIRING IN 2007
<Table>
<Caption>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AGE THE PAST FIVE YEARS SINCE
- ---- --- --------------------------- --------
Frank D. Lester...................... 64 Director of the Bank since 2000 and the 2001
Company since 2001; President of Union Tank
Car, Chicago, Illinois since 1999; previously
President of Procor, Inc., Toronto, Canada
from 1994 to 1999.
Thomas F. Prisby..................... 63 Chairman of the Board and Chief Executive 1998
Officer of the Company since 1998 and of the
Bank since 1996; previously, Mr. Prisby served
as the President and Chief Operating Officer
of the Bank from 1989 to 1996. Mr. Prisby
joined the Bank in 1982 as Executive Vice
President and has served as a director of the
Bank since 1996.
</Table>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Set forth below is information with respect to the principal occupations
during the last five years for the executive officers of the Company and the
Bank who do not serve as a director of the Company. All executive officers are
elected annually by the Board of Directors and serve until their successors are
elected and qualified. As of the date hereof, no executive officer set forth
below is related to any director or other executive officer of the Company by
blood, marriage or adoption, and there are no arrangements or understandings
between a director of the Company and any other person pursuant to which such
person was elected an executive officer.
Charles V. Cole. Age 43. Mr. Cole joined the Company and the Bank in 2003,
and currently serves as Executive Vice President and Chief Financial Officer of
the Company and the Bank. Prior to joining the Company, he served as Senior Vice
President and Chief Financial Officer at Advance Bancorp in Lansing, Illinois,
from 1999 to 2003. Mr. Cole began his career with Advance Bancorp in 1991 as
controller of South Chicago Bank and was promoted to Vice President and Chief
Financial Officer of Advance Bancorp in 1995.
6
Thomas L. Darovic. Age 54. Mr. Darovic has served as Executive Vice
President of Retail Operations for the Bank since 2003. Mr. Darovic joined the
Bank in 2002 as Vice President and was elected to Senior Vice President that
same year. Prior to his employment with the Bank, Mr. Darovic served as Vice
President of Retail Operations and Administrative Services for Superior Bank
FSB, Hinsdale, Illinois, beginning in 1993.
Zoran Koricanac. Age 47. Mr. Koricanac joined the Bank in 2003 and
currently serves as Senior Vice President - Commercial Lending. Previously, Mr.
Koricanac served as Senior Lending Officer for Advance Bank, Lansing, Illinois,
from 1999 to 2003. Prior to that, Mr. Koricanac served as the Senior Manager for
Loan Management Services at the accounting firm of Crowe Chizek and Company LLC
in Oak Brook, Illinois, beginning in 1992.
Jeffrey C. Stur. Age 56. Mr. Stur has served as Senior Vice
President - Credit Administration for the Bank since 2003. Previously, Mr. Stur
served as Senior Vice President - Lending beginning in 1995. Mr. Stur has held
various roles of increasing responsibility since his employment with the Bank
began in 1972.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), requires the officers, directors, and persons who own more than 10% of
the Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors and greater than
10% shareholders are required by regulation to furnish the Company with copies
of all Section 16(a) forms they file. The Company knows of no person who owns
10% or more of the Company's Common Stock, except for the CFS Bancorp, Inc.
Employee Stock Ownership Plan Trust, which owns 10.1% of the shares outstanding
of the Common Stock of the Company.
Based solely on review of the copies of such forms furnished to the
Company, or written representations from its officers and directors, the Company
believes that during, and with respect to, fiscal year 2004, the Company's
officers and directors complied in all respects with the reporting requirements
promulgated under Section 16(a) of the Exchange Act, except for the delinquent
filing on Form 4 made on August 30, 2004 by Mr. Thomas F. Prisby to report a
sale of 1,000 shares on July 1, 2004 by an adult daughter who resides with him.
ATTENDANCE OF THE BOARD AT ANNUAL MEETINGS
Although the Company does not have a formal policy regarding director
attendance at annual meetings of shareholders, the Company typically schedules a
Board Meeting in conjunction with the annual meeting of shareholders and expects
that its directors will attend. All of the directors attended the Annual Meeting
of Shareholders held in April 2004.
MEETINGS OF THE BOARD OF THE COMPANY
During the fiscal year ended December 31, 2004, the Board of Directors of
the Company met ten times. No director of the Company attended fewer than 75% of
the aggregate of the total number of Board meetings held during the period for
which he or she has been a director and the total number of meetings held by all
committees of the Board on which he or she served during the periods for which
he or she served.
BOARD COMMITTEE REPORTS, POLICIES AND PROCEDURES
COMMITTEES
The Board of Directors of the Company has established an Audit Committee, a
Compensation Committee, and a Nominating Committee, among others. The current
charters for the Audit Committee, the Compensation Committee, and the Nominating
Committee are available on the Company's website (www.cfsbancorp.com). The
following are reports for 2004 from these Committees.
7
REPORT OF THE 2004 AUDIT COMMITTEE
The Audit Committee is composed solely of independent members, as defined
by the listing standards of the NASDAQ Stock Market and regulations of the SEC,
of the Board of Directors of the Company. All members of the Audit Committee are
required to be financially literate, and at least one member must have
accounting or related financial management experience. Mr. Ross has been
identified by the Board as an "audit committee financial expert" as defined by
rules promulgated by the SEC pursuant to the provisions of Section 407 of the
Sarbanes-Oxley Act of 2002. The Audit Committee: 1) reviews with management, the
internal auditor and the independent auditors the systems of internal control;
2) monitors the Company's adherence in accounting and financial reporting to
generally accepted accounting principles; and 3) reviews the records and affairs
of the Company and its financial condition. The Company has adopted an Audit
Committee Charter, which was last amended on March 18, 2004. The most recent
version of the Audit Committee Charter was attached as Appendix A to last year's
proxy statement and may be viewed on the Company's website (www.cfsbancorp.com).
The current members of the Audit Committee are Mr. Blaine, who is Chairman, Mr.
Ross, and Ms. Simon. The Audit Committee met four times in fiscal 2004.
The Audit Committee of the Board is responsible for providing independent,
objective oversight of the Company's accounting and financial reporting
functions. Management is responsible for the Company's internal controls and
financial reporting process. The Company's independent auditors are responsible
for performing an independent audit of the Company's consolidated financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and to issue a report thereon, and attesting to
management's evaluation regarding internal controls pursuant to Section 404 of
the Sarbanes-Oxley Act of 2002.
The Audit Committee has reviewed and discussed the Company's audited
financial statements with management. In addition, in compliance with applicable
provisions of the Audit Committee Charter, the Audit Committee has discussed
with the Company's independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 "Communication with Audit Committees."
The Audit Committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1 and
has discussed with the auditors their independence. Based on the review and
discussions referred to above in this report, the Audit Committee recommended to
the Board of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004
for filing with the SEC.
Respectfully submitted,
Gregory W. Blaine (Chairman)
Robert R. Ross
Joyce M. Simon
AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY
Under the Sarbanes-Oxley Act of 2002, the Audit Committee is responsible
for the appointment, compensation and oversight of the work of the Company's
independent auditor. As part of this responsibility, the Audit Committee is
required to pre-approve the audit and non-audit services performed by the
independent auditor in order to assure that they do not impair the auditor's
independence from the Company. Accordingly, the Audit Committee has adopted and
the Board of Directors has ratified an Audit and Non-Audit Services Pre-Approval
Policy ("Pre-Approval Policy") for the Company which sets forth the procedures
and the conditions pursuant to which services proposed to be performed by the
independent auditor may be pre-approved.
As set forth in the Pre-Approval Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee if it is to be provided by the independent auditor. Any proposed
services exceeding pre-approved cost levels or budgeted amounts will also
require specific pre-approval by the Audit Committee.
8
For both types of pre-approval, the Audit Committee will consider whether
such services are consistent with the SEC's rules on auditor independence. The
Audit Committee will also consider whether the independent auditor is best
positioned to provide the most effective and efficient service, for reasons such
as its familiarity with the Company's business, employees, culture, accounting
systems, risk profile and other factors, and whether the service is likely to
enhance the Company's ability to manage or control risk or improve audit
quality. All such factors will be considered as a whole, and no one factor
should necessarily be considered determinative. The Audit Committee will also
take into account the relationship between fees for audit and non-audit services
in deciding whether to pre-approve any such services and may determine, for each
fiscal year, the appropriate ratio between the total amount of fees for audit,
audit-related and tax services and the total amount of fees for certain
permissible non-audit services classified as all other services. The Audit
Committee will annually review and pre-approve the services that may be provided
by the independent auditor without obtaining specific pre-approval from the
Audit Committee. The Audit Committee may add to or remove from the list of
general pre-approved services from time to time, based on subsequent
determinations.
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Company's
financial statements or that are traditionally performed by the independent
auditor. Because the Audit Committee believes that the provision of
audit-related services does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence, the Audit Committee may
grant general pre-approval to audit-related services.
The Audit Committee believes that the independent auditor can provide tax
services to the Company such as tax compliance, tax planning and tax advice
without impairing the auditor's independence, and the SEC has stated that the
independent auditor may provide such services. Hence, the Audit Committee
believes it may grant general pre-approval to those tax services that have
historically been provided by the auditor, that the Audit Committee has reviewed
and believes would not impair the independence of the auditor, and that are
consistent with the SEC's rules on auditor independence. The Audit Committee
will not permit the retention of the independent auditor in connection with a
transaction initially recommended by the independent auditor, the sole business
purpose of which may be tax avoidance and the tax treatment of which may not be
supported in the Internal Revenue Code and related regulations.
The Audit Committee believes, based on the SEC's rules prohibiting the
independent auditor from providing specific non-audit services, that certain
other types of non-audit services are permitted. Accordingly, the Audit
Committee believes it may grant general pre-approval to those permissible
non-audit services classified as all other services that it believes are routine
and recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence. In no event, however,
will the Audit Committee approve the use of the independent auditor to provide
those non-audit services that have been expressly prohibited by relevant SEC
rules.
Requests or applications to provide services that require specific approval
by the Audit Committee will be submitted to the Audit Committee by both the
independent auditor and the internal auditor and must include a statement as to
whether, in their view, the request or application is consistent with the SEC's
rules on auditor independence.
As provided in the Sarbanes-Oxley Act of 2002 and the SEC's rules
promulgated pursuant thereto, the Audit Committee may delegate either type of
pre-approval authority to one or more of its members. The member to whom such
authority is delegated must report, for informational purposes only, any
pre-approval decisions to the Audit Committee at its next scheduled meeting. The
Audit Committee has delegated its pre-approval authority to the Chairman of the
Committee.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is comprised of at least three directors, each
of whom is independent as defined with listing standards of the NASDAQ National
Stock Market. Members of the Compensation Committee are considered independent
if they have no relationship to the Company that may interfere with the exercise
of their independence from management and the Company. The Company has adopted a
9
Compensation Committee Charter which can be viewed on the Company's website
(www.cfsbancorp.com). Under the Compensation Committee Charter, members are
required to be financially literate, and at least one member must have
large-company experience in the areas of human resources and compensation
management. During fiscal 2004, the members of the Compensation Committee were
Mr. Diamond, who was Chairman, and Messrs. Blaine and Burns. No member of the
Compensation Committee is a current officer or employee of the Company, the Bank
or any of its subsidiaries, or engaged in certain transactions with the Company
or its subsidiaries required to be disclosed by the SEC's regulations. The
Compensation Committee met ten times in 2004.
The Compensation Committee has been established by the Board of Directors
in order to assist in the development and oversight of human resource policies,
compensation policies, incentive plans, stock benefit programs and other
employee compensation and benefits issues. The Compensation Committee also
establishes policies regarding compensation and benefits programs for the
Company's employees and, pursuant to such policies, determines the compensation
of and benefits to the Company's executive officers.
The Compensation Committee members recognize that the Company must attract,
retain and motivate employees and managers to achieve performance goals that
reward them for outstanding performance while serving the financial interests of
the Company and its shareholders. In determining executive compensation levels,
the Compensation Committee seeks to establish salary and bonus levels which will
attract and retain qualified executives when considered with other components of
the Company's compensation structure. The Committee also considers specific
annual performance criteria and looks to create compensation plans that reward
executive officers for continuous improvement in those areas which contribute to
increases in shareholder value. The level of any salary increase is based upon
an executive's job performance over the year in conjunction with the Company's
goals of profitability, growth, and customer satisfaction. Economic conditions
and peer group compensation surveys provide additional information to support
the compensation planning process.
The Company believes it must compensate its employees and executives fairly
and competitively in the markets in which it competes. The competitive market
for the Company's employees and executives is primarily banks and thrifts of a
similar asset size located throughout the midwestern United States.
The Company's compensation philosophy is to provide its executives,
including the Chairman and Chief Executive Officer, with conservatively
competitive base salaries combined with performance-based annual and long-term
incentives that provide an appropriate balance and focus between near-term and
long-term objectives of the Company. The compensation model for executives of
the Company targets total compensation to be competitive (at least the 50th
percentile) when measured against a range of selected comparable companies,
including financial institutions in the Company's asset size range. Executive
compensation is primarily comprised of base salary, incentive compensation, and
stock benefit plan awards.
In considering the compensation levels for executive officers of the
Company and the Bank, the Compensation Committee reviewed total compensation
levels of employees and executives in comparable positions at selected similar
institutions and recommended to the Board of Directors base and total
compensation amounts based on such reviews. To assist the Compensation
Committee, independent compensation consultants were retained for the year ended
December 31, 2004 to prepare a compensation analysis and compile recent
compensation data from various sources.
In particular, the compensation for the Company's Chief Executive Officer,
Thomas F. Prisby, for the year ended December 31, 2004 was deemed appropriate
and equitable based on:
- the Bank's continued progress towards its long-term strategic plan of
transforming its asset mix and business model from that of a traditional
thrift to that of a community bank;
- the Bank's maintenance of capital at levels in excess of regulatory
requirements combined with its continuing application of sound lending
policies;
- the selection, recruitment and continued development of the executive
staff of the Bank;
10
- the Bank's successful opening of two new branches and the continued
viability of the Bank's branching strategy;
- the Bank's continued success in its tax expense reduction efforts; and
- the Bank's progress in the growth in commercial lending, business banking
and core deposit accounts.
While each of the factors described above was considered by the
Compensation Committee, such factors were not assigned a specific weight.
The Compensation Committee is also responsible for administering awards
granted pursuant to the Company's 1998 and 2003 Stock Option Plans. Under these
Stock Option Plans, the Compensation Committee determines which officers, key
employees and non-employee directors will be granted options, whether such
options will be granted as incentive or compensatory options (in case of options
to employees), the number of shares subject to each option, the exercise price
of each option and whether such options may be exercised by delivering other
shares of Common Stock.
Awards to the Company's executive officers are reviewed by the Company's
compensation consultants and other professionals as to propriety and
reasonableness as compared to historical levels of grants within the financial
services industry. During fiscal 2004, two individuals were granted aggregate
options on 17,845 shares, 206,600 options were exercised, and 7,350 options were
cancelled, leaving a total of 17,900 shares remaining available for issuance
under the 1998 Stock Option Plan as of year end.
During fiscal 2004, 31 individuals were granted aggregate options on
205,405 shares, 18,550 shares were cancelled, leaving a total of 212,945 shares
remaining available for issuance under the 2003 Stock Option Plan as of year
end.
Officers, key employees and directors of the Company who are selected by
the Compensation Committee are eligible to receive benefits under the 1998
Recognition and Retention Plan ("Recognition Plan"). During fiscal 2004, two
individuals were awarded an aggregate 1,050 shares of restricted stock under the
Recognition Plan, leaving no shares remaining available for grant under the
Recognition Plan.
Base pay levels for Messrs. Thomas Prisby, Cole, Darovic and Koricanac were
increased 3.5%, 3.5%. 27.2% and 11.1%, respectively, in 2004. Mr. Stur's base
pay level was not adjusted in 2004. Messrs. Prisby, Cole, Darovic, Koricanac and
Stur were granted options on 25,000, 15,000, 17,500, 15,000 and 6,000 shares of
Common Stock, respectively, in fiscal 2004.
In addition to base pay, the Bank's officers and other selected employees
are considered for incentive bonus payments based upon, among other factors, the
performance of the Company and the performance of the individual and his or her
business unit in light of certain incentive compensation thresholds that are
established by the Compensation Committee on an annual basis. No incentive bonus
compensation was awarded to the Chief Executive Officer by the Compensation
Committee for the year ended December 31, 2004. There were 21 other managerial
officers who received incentive bonus compensation awards based on business unit
and individual performance whose awards ranged from 3.3% to 15.0% of their
respective base salaries.
Respectfully submitted,
Gene Diamond (Chairman)
Gregory W. Blaine
Thomas J. Burns
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Determinations regarding compensation of the Company's and Bank's employees
are made by the Compensation Committee of the Board of Directors, who are all
independent directors. Additionally, there were no Compensation Committee
interlocks during 2004, which generally means that no executive officer of
11
the Company served as a director or member of the Compensation Committee of
another entity, one of whose executive officers served as a director or member
of the Company's Compensation Committee.
REPORT OF THE NOMINATING COMMITTEE
The Nominating Committee is comprised solely of independent members of the
Board of Directors of the Company as defined by the listing standards of the
NASDAQ National Stock Market. The Company has adopted a Nominating Committee
Charter which can be viewed on the Company's website (www.cfsbancorp.com).
Members of the Nominating Committee are Mr. Webb, who is Chairman, Messrs.
Burns, Diamond, and Lester, and Ms. Abbott. The Nominating Committee met two
times in fiscal 2004. All nominations for directors of the Company were made by
the Nominating Committee.
Unless an unexpected vacancy or an immediate and pressing need dictates
otherwise, it is the preference of the Company to recruit new directors from the
Bank's Board, if available. The Company believes this allows the members of the
Committee, all of whom are members of the Bank's Board, the opportunity to
observe and evaluate the effectiveness, commitment and contribution of the
individual for an extended period of time prior to nominating them for election
to the Company's Board.
The Nominating Committee for the Bank and the Company operate as a joint
committee. Generally, the process for selecting and nominating new candidates
is:
- The Chairman and Chief Executive Officer or members of the Nominating
Committee or the Board identifies the need to add new Board Members for
the Bank or the Company;
- The Chairman and Chief Executive Officer initiates the search, working
with staff support and seeking input from the Nominating Committee;
- The Nominating Committee determines if any Board members have
relationships with preferred candidates and can initiate contacts;
- The Nominating Committee evaluates prospective nominees and identifies
candidates that will satisfy specific criteria and otherwise qualify for
membership on the Board;
- The Chairman of the Nominating Committee keeps the Board informed on the
progress of the search;
- The Nominating Committee meets to consider and select the final
candidates; and
- The Nominating Committee recommends the slate of candidates to the Board.
Given the nature of the Company and the Bank's business, as well as the
need to have a sufficient number of experienced and knowledgeable independent
directors on the Board who can serve on the Company's various committees, the
Nominating Committee seeks to recruit and retain directors with significant
executive and/or financial experience.
The Nominating Committee seeks a diverse group of candidates who possess
the background, skills and expertise to make a significant contribution to the
Board, to the Company and its shareholders. Desired qualities to be considered
include:
Experience (in one or more of the following):
- high-level leadership experience in business or administrative
activities;
- breadth of knowledge about issues affecting the Company; and
- ability and willingness to contribute special competencies to the Board.
Personal attributes:
- personal integrity;
- loyalty to the Company and concern for its success and welfare;
- willingness to apply sound and independent business judgment;
12
- awareness of a Director's vital part in the Company's good corporate
citizenship and the corporate image;
- commitment to investing time necessary to prepare for and attend Board
meetings and consultation on Company matters; and
- willingness to assume broad, fiduciary responsibility.
Qualified candidates for membership on the Company's Board of Directors
will be considered without regard to race, color, religion, sex, ancestry,
national origin or disability. The Nominating Committee will review the
qualifications and backgrounds of the Directors, as well as the overall
composition of the Board, and recommend to the Board the slate of Directors to
be nominated for election at the annual meeting of shareholders. The Chairman of
the Board, acting on behalf of the full Board, will extend the formal invitation
to become a nominee of the Board of Directors.
Nominations to the Board may also be submitted to the Nominating Committee
by the Company's shareholders in accordance with the Company's Bylaws. Any such
nominations, together with the required biographical and other information,
should be submitted to the Chairman of the Nominating Committee, c/o Monica
Sullivan, Vice President -- Corporate Secretary, 707 Ridge Road, Munster,
Indiana 46321. The Committee may also consider recommendations from shareholders
regarding possible candidates for director.
The Company believes its Board works best when it operates in a spirit of
collegiality, mutual respect and trust. Consequently, unsolicited
recommendations regarding potential director candidates may be subject to
additional scrutiny by the Nominating Committee. Reliable references will be
required for all prospective members of the Bank's or the Company's Board. The
Committee will take special care to insure that suggested candidates do not
possess undisclosed motives for seeking the nomination, conflicting loyalties to
special interest groups, or a desire to represent a distinct subset of the
Company's shareholders.
Pursuant to the Nominating Committee's Charter, the Chairman of the
Nominating Committee also serves as the Company's independent Lead Director. The
Nominating Committee Charter provides that the Lead Director shall be available
to consult with the Chairman about concerns of the Board of Directors; including
Board meeting agendas, the adequacy of information provided to the Board, and
the effectiveness of the Board Meeting process. The Lead Director shall also
preside at no less than two executive sessions of the Board, without the
Chairman being present, each year.
Respectfully submitted,
Charles R. Webb (Chairman)
Thomas J. Burns
Gene Diamond
Frank D. Lester
Sally A. Abbott
SHAREHOLDER NOMINATIONS
Article IV, Section 4.15 of the Company's current Bylaws governs
nominations for election to the Board of Directors and requires all such
nominations, other than those made by the Board of Directors or a committee
appointed by the Board, to be made at a meeting of shareholders called for the
election of directors, and only by a shareholder who has complied with the
notice provisions in that section. Similar provisions are included in Article V,
Section 14 of the proposed New Bylaws which will take effect at the effective
time of the proposed Reincorporation. Shareholder nominations must be made
pursuant to timely notice in writing to the Secretary of the Company (Monica F.
Sullivan, Vice President -- Corporate Secretary, CFS Bancorp, Inc., 707 Ridge
Road, Munster, Indiana 46321). Generally, to be timely, a shareholder's notice
must be delivered to, or mailed, postage prepaid, to the principal executive
offices of the Company no later than 120 days prior to the anniversary date of
the mailing of proxy materials by the Company in connection with the immediately
preceding annual meeting of shareholders of the Company. Each written notice of
a shareholder nomination is required to include certain information specified in
the Company's Bylaws. Any
13
such nomination by a shareholder with respect to the Annual Meeting must have
been delivered or received no later than the close of business on November 26,
2004. No such nominations by shareholders were received.
COMMUNICATIONS TO THE BOARD
Shareholders may correspond with the Chairman of the Board or, in the
alternative, with the Lead Director or any other member of the Company's Board
of Directors by writing to his or her attention in care of the Corporate
Secretary, (Monica F. Sullivan, Vice President -- Corporate Secretary, CFS
Bancorp, Inc., 707 Ridge Road, Munster, Indiana 46321). All correspondence
addressed in this manner will remain sealed and will only be opened by the
person to whom it is addressed.
Employees and others who wish to contact a member of the Company's Board or
the Audit Committee to report complaints or concerns with respect to accounting,
internal accounting controls or auditing matters, may do so anonymously by
directing correspondence to the attention of the member, in care of the Internal
Auditor (Carol A. Romes, Senior Vice President, Internal Auditor, CFS Bancorp,
Inc., 707 Ridge Road, Munster, Indiana 46321).
14
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of certain information concerning
the compensation paid by the Bank for services rendered in all capacities during
the fiscal years ended December 31, 2004, 2003 and 2002 to the Chairman and
Chief Executive Officer and the five highest paid executive officers of the Bank
and its subsidiaries, whose salary plus bonus during fiscal 2004 exceeded
$100,000. The named executive officers did not receive separate compensation
from the Company.
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------- -----------------------------------------
AWARDS PAYOUTS
OTHER ----------------------------- -----------
ANNUAL SECURITIES
NAME AND COMPENSATION RESTRICTED UNDERLYING LTIP
PRINCIPAL POSITION YEAR SALARY BONUS(1) (2)(3) STOCK(4) OPTIONS PAYOUTS
- --------------------------------------------------------------------------------
Thomas F. Prisby 2004 $341,804 -- -- $ 7,686 25,000 --
Chairman and Chief 2003 $334,256 $50,266 -- $56,760 35,000 --
Executive Officer 2002 $329,932 $51,238 $26,861 -- 20,000 --
- ---------------------------------------------------------------------------------------------------------------------------
James W. Prisby 2004 $216,525 -- -- $ 7,686 22,500(8) --
Former President and Chief 2003 $304,460 $43,421 -- $56,760 30,000 --
Operating Officer(7) 2002 $300,527 $46,665 $ 2,619 -- 20,000 --
- ---------------------------------------------------------------------------------------------------------------------------
Charles V. Cole 2004 $149,732 $25,263 -- -- 15,000 --
Executive Vice President 2003 $ 27,002 $12,808 -- -- 15,000 --
and Chief Financial 2002 -- -- -- -- -- --
Officer
- ---------------------------------------------------------------------------------------------------------------------------
Thomas L. Darovic 2004 $141,860 $24,204 -- -- 17,500 --
Executive Vice
President -- 2003 $111,300 $22,798 -- $70,950 15,000 --
Retail Operations 2002 $ 65,769 $ 6,110 -- -- 20,000 --
- ---------------------------------------------------------------------------------------------------------------------------
Zoran Koricanac 2004 $126,845 $17,124 -- -- 15,000 --
Sr. Vice President -- 2003 $ 49,289 $ 5,077 -- -- 10,000 --
Commercial Lending 2002 -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Jeffrey C. Stur 2004 $111,816 $ 7,976 -- -- 6,000 --
Sr. Vice President -- 2003 $111,800 $18,362 -- -- 10,000 --
Credit Administration 2002 $110,650 $12,226 -- -- 5,000 --
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<Caption>
- ---------------------------- ------------------
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION (5)(6)
- ----------------------------
Thomas F. Prisby $ 6,150
Chairman and Chief $ 84,837
Executive Officer $ 98,725
- -------------------------------------------------------------------
James W. Prisby $1,006,150(9)
Former President and Chief $ 76,755
Operating Officer(7) $ 80,966
- --------------------------------------------------------------------------------------
Charles V. Cole $ 790
Executive Vice President --
and Chief Financial --
Officer
- ---------------------------------------------------------------------------------------------------------
Thomas L. Darovic $ 4,891
Executive Vice
President -- $ 24,541
Retail Operations --
- ---------------------------------------------------------------------------------------------------------------------------
Zoran Koricanac $ 1,363
Sr. Vice President -- --
Commercial Lending --
- ---------------------------------------------------------------------------------------------------------------------------
Jeffrey C. Stur $ 3,909
Sr. Vice President -- $ 29,828
Credit Administration $ 30,134
- ----------------------------
- ----------------------------
</Table>
- ---------------
(1) Represents cash bonuses earned during the fiscal year which may have been
paid in part or will be paid in the following year.
(2) Does not include amounts attributable to miscellaneous benefits received by
the named executive officers. In the opinion of management of the Company,
the costs to the Bank of providing such benefits to each of the named
executive officers during the fiscal year ended December 31, 2004 did not
exceed the lesser of $50,000 or 10% of the total of annual salary and bonus
reported for each individual.
(3) Reflects the amount equal to the difference between the benefits that would
be payable under the Bank's retirement plans for that fiscal year, but for
the limitation set forth in the Internal Revenue Code of 1986, as amended
("Code"), with respect to includable compensation and the maximum benefit
payable under the Bank's retirement plans. Includable compensation does not
include Recognition Plan benefits.
(4) Reflects market value on date of award of restricted stock pursuant to the
Recognition Plan to Messrs. Thomas and James Prisby in 2004.
(5) For fiscal 2004, consists of the Bank's contributions to the Bank's 401(k)
profit sharing plan of $6,150, $6,150, $790, $4,891, $1,363, and $3,909 for
the accounts of Messrs. Thomas Prisby, James Prisby, Cole, Darovic,
Koricanac and Stur, respectively. Allocations to be made for 2004 pursuant
to the Company's Employee Stock Ownership Plan ("ESOP"); and pursuant to the
excess benefit plan for amounts not permitted under the ESOP due to limits
under the Code ("ESOP SERP") were not determined in time for inclusion in
this Proxy Statement.
15
(6) For fiscal 2003, reflects $41,328, $41,328, $22,064, and $26,107 allocated
to Messrs. Thomas Prisby, James Prisby, Darovic and Stur pursuant to the
ESOP, which amounts were not available in time for inclusion in last year's
proxy statement. Also includes $37,509 and $29,427 allocated to Messrs.
Thomas Prisby and James Prisby pursuant to the ESOP SERP for 2003, which
amounts were not available in time for inclusion in last year's proxy
statement.
(7) Mr. James Prisby resigned from his position as an officer and as a director
of the Bank and Company on August 20, 2004.
(8) The option awards granted to Mr. James Prisby in 2004 expired unvested and
unexercised upon his resignation.
(9) Includes, with respect to Mr. James Prisby, a severance payment of $1.0
million, of which $400,000 was paid in January of 2005.
COMPENSATION PURSUANT TO STOCK OPTIONS
The following table sets forth certain information concerning grants of
stock options awarded to the named executive officers during the fiscal year
ended December 31, 2004.
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR GRANT DATE
INDIVIDUAL GRANTS VALUE
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL EXERCISE
OPTIONS OPTIONS GRANTED PRICE EXPIRATION GRANT DATE
NAME GRANTED(1) TO EMPLOYEES (2) DATE PRESENT VALUE(3)
- --------------------------------------------------------------------------------------------------------------------
Thomas F. Prisby 25,000 13.8% $14.64 4/7/2014 $81,750
- --------------------------------------------------------------------------------------------------------------------
Charles V. Cole 15,000 8.3% $14.64 4/7/2014 $49,050
- --------------------------------------------------------------------------------------------------------------------
Thomas L. Darovic 17,500 9.7% $14.64 4/7/2014 $57,225
- --------------------------------------------------------------------------------------------------------------------
Zoran Koricanac 15,000 8.3% $14.64 4/7/2014 $49,050
- --------------------------------------------------------------------------------------------------------------------
Jeffrey C. Stur 6,000 3.3% $14.64 4/7/2014 $19,620
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</Table>
- ---------------
(1) Consists of stock options exercisable at the rate of 20% per year from the
date of grant.
(2) In all cases, the exercise price was based on the fair market value of a
share of Common Stock on the date of grant.
(3) The fair value of the options granted was estimated to be $3.27 per option
using the Black-Scholes Pricing Model. Under this analysis, the risk-free
interest rate was assumed to be 3.9%, the expected volatility to be 27.4%,
the expected dividend yield to be 3.3%, and the expected life of the options
to be 6 years.
16
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
The following table sets forth certain information concerning exercises of
stock options by the named executive officers during the fiscal year ended
December 31, 2004 and options held by the named executive officers at December
31, 2004.
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER OF SHARES VALUE NUMBER OF UNEXERCISED OPTIONS
ACQUIRED UPON REALIZED AT YEAR END
EXERCISE OF UPON -------------------------------------
NAME OPTIONS EXERCISE(1) EXERCISABLE UNEXERCISABLE
--------------------------------------------------------------------------------
Thomas F. Prisby 5,000 $24,700 249,000 86,000
- -------------------------------------------------------------------------------------------------
Charles V. Cole -- -- 3,000 27,000
- -------------------------------------------------------------------------------------------------
Thomas L. Darovic -- -- 11,000 41,500
- -------------------------------------------------------------------------------------------------
Zoran Koricanac -- -- 2,000 23,000
- -------------------------------------------------------------------------------------------------
Jeffrey C. Stur -- -- 39,000 22,000
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
<Caption>
- --------------------- -------------------------------------
------------- --------------------------------------------------------------------------------
VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT YEAR END(2)
------------------------------
NAME EXERCISABLE UNEXERCISABLE
------------- --------------------------------------------------------------------------------
Thomas F. Prisby $1,023,130 $99,870
- --------------------------------------------------------------------------------
Charles V. Cole -- --
- -------------------------------------------------------------------------------------------------
Thomas L. Darovic $ 6,580 $11,970
- -------------------------------------------------------------------------------------------------
Zoran Koricanac $ 340 $ 1,360
- -------------------------------------------------------------------------------------------------
Jeffrey C. Stur $ 150,310 $22,490
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</Table>
- ---------------
(1) Based on per share market price on date of exercise.
(2) Based on a per share market price of $14.27 at December 31, 2004.
EMPLOYMENT AGREEMENTS
In 2003, the Company and the Bank ("Employers") entered into new employment
agreements with each of Messrs. Thomas Prisby, Cole and Darovic ("Executives").
The agreement with Mr. Thomas Prisby superseded his existing employment
agreement. The Employers agreed to employ Mr. Thomas Prisby for a term of three
years and Messrs. Darovic and Cole, each for a term of one year, in each case,
in their current respective positions. The terms of the agreements with the
Executives are at their current salary levels. The employment agreements are
reviewed annually by the Employer's respective Board of Directors. The term of
each of the Executives' employment agreement with the Company is extended daily
for a successive additional one-day period unless the Company provides notice,
not less than 60 days prior to such date of its intent, not to extend the
employment term; however, the term of each Executive's agreement with the Bank
may only be extended by the Bank one time per year for an additional year.
Each of the employment agreements is terminable with or without cause by
the Employers. The Executives have no right to compensation or other benefits
pursuant to the employment agreements for any period after voluntary termination
or termination by the Employers for cause, disability, retirement or death. In
the event that (i) the Executive terminates his employment because of failure to
comply with any material provision of the employment agreement by the Employers
or the Employers change the Executive's title or duties or (ii) the employment
agreement is terminated by the Employers other than for cause, disability,
retirement or death or by the Executive as a result of certain adverse actions
which are taken with respect to the Executive's employment following a change in
control of the Company, as defined, the Executive will be entitled to a cash
severance amount. In the case of Mr. Thomas Prisby, the cash severance amount
would be equal to three times his average annual compensation, as defined. The
agreements also provide that in the event that any of the payments to be made
thereunder or otherwise upon termination of employment are deemed to constitute
"excess parachute payments" within the meaning of Section 280G of the Code and
such payments will cause the Executive to incur an excise tax under the Code,
the Company shall pay the Executive an amount such that after the payment of all
federal, state and local income taxes and any additional excise tax, the
Executive will be fully reimbursed for the amount of such excise tax. In the
case of Messrs. Darovic and Cole, the cash severance amount would be equal to
100% of the salary and bonus they received for the previous year.
In December 2004, the Company and the Bank each entered into an agreement
with Mr. Koricanac. The two agreements with Mr. Koricanac do not have a
specified term and are not intended to be construed as a contract for employment
for a specific term except upon the occurrence of a "Trigger Event," which is
defined
17
in the agreements as the execution of a definitive agreement which is intended
to result in a "Change in Control" of the Company and which has been publicly
announced on a Form 8-K by the Company ("Trigger Date"), the term of the
agreements become one year. The term of the agreement with the Company will be
extended daily by a period of one day starting on the Trigger Date unless the
Company provides notice, not less than 60 days prior to such date of its intent,
not to extend the employment term whereas the term of the Executive's agreement
with the Bank may be extended by the Bank each year for an additional year upon
the anniversary of the Trigger Date unless the Bank provides written notice not
less than 60 days prior to the end of the term.
Each of Mr. Koricanac's agreements is terminable with or without cause by
the Employers. The Executive has no right to compensation or other benefits
pursuant to the agreements for any period after voluntary termination or
termination by the Employers for cause, disability, retirement or death. In the
event that (i) the Executive terminates his employment because of failure to
comply with any material provision of the agreement by the Employers, which
breach is not cured or (ii) the agreement is terminated by the Employers other
than for cause, disability, retirement or death or by the Executive as a result
of certain adverse actions which are taken with respect to the Executive's
employment following a "Change in Control" of the Company, as defined, the
Executive will be entitled to a cash severance amount equal to 100% of the
salary and cash bonus he earned for the previous year.
A Change in Control is generally defined in the employment agreements to
include any change in control of the Company required to be reported under the
federal securities laws, as well as (i) the acquisition by any person of 20% or
more of the Company's outstanding voting securities and (ii) a change in a
majority of the directors of the Company during any three-year period without
the approval of at least two-thirds of the persons who were directors of the
Company at the beginning of such period.
Although the above-described employment agreements could increase the cost
of any acquisition of control of the Company, management of the Company does not
believe that the terms thereof would have a significant anti-takeover effect.
The Company and/or Bank may determine to enter into similar employment
agreements with other officers of the Company and/or Bank in the future.
Mr. James Prisby resigned from his position as Vice Chairman, President and
Chief Operating Officer, as well as a member of the Board of Directors of the
Company and Bank effective August 20, 2004. The Company and the Bank entered
into a Severance Agreement and Release, dated August 20, 2004, with Mr. James
Prisby ("Severance Agreement"). Under the terms of the Severance Agreement, Mr.
James Prisby released the Company and the Bank from all liability arising from
his employment, including under the terms of his employment agreements with the
Company and the Bank in return for cash severance payments aggregating $1.0
million and certain vested rights under Company benefit plans.
DIRECTORS' COMPENSATION
Members of the Board do not receive an annual retainer. Members of the
Company's Board of Directors receive $500 per Board meeting attended. Members of
the Bank's Board of Directors receive $1,700 per Board meeting attended. Board
members also receive $450 per Compensation Committee meeting attended and the
Chairman receives an additional $100 per meeting attended; $200 per Executive
Committee meeting attended; $500 per Audit Committee meeting attended and the
appointed Chairman being paid an additional $200; and $200 per Nominating
Committee meeting attended. Members of the Board are also compensated for
transportation costs to attend Board meetings. Members may also receive fees of
$125 per hour for attending study sessions related to their Board activities.
Messrs. Thomas Prisby and Cole were not compensated for attending Company or
Bank Board meetings (as applicable), or for attending Company or Bank Committee
meetings. Board fees are subject to periodic adjustment by the Board of
Directors. There were two meetings of the Executive Committee in 2004.
All members of the Company's Board of Directors also serve as members of
the Bank's Board of Directors. Mr. John Stephens was elected to the Bank's
Advisory Board following his retirement from the Bank and the Company in January
2004 and also serves on the Bank's Loan Committee.
18
RETIREMENT PLAN
The Bank maintains a non-contributory, tax-qualified defined benefit
pension plan ("Retirement Plan") for eligible employees. All salaried employees
age 21 or older who have completed at least one year of service are eligible to
participate in the Retirement Plan. The Retirement Plan provides a benefit for
each participant, including executive officers named in the Summary Compensation
Table, equal to 1.5% of the participant's final average compensation (highest
average annual compensation during 60 consecutive calendar months) multiplied by
the participant's years (and any fraction thereof) of eligible employment. A
participant is fully vested in his or her benefit under the Retirement Plan
after five years of service. The Retirement Plan is funded by the Bank on an
actuarial basis, and all assets are held in trust by the Retirement Plan
trustee.
The Retirement Plan benefits were frozen effective March 1, 2003. Although
no further benefits will accrue while the freeze remains in place, the freeze
does not reduce the benefits accrued to that date.
The following table illustrates the annual benefit payable upon normal
retirement at age 65 at various levels of compensation and years of service
under the Retirement Plan.
<Table>
<Caption>
YEARS OF SERVICE(1)(2)
-----------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- ------- ------- ------- -------
$80,000...................................... $18,000 $24,000 $30,000 $36,000 $42,000
100,000...................................... 22,500 30,000 37,500 45,000 52,500
120,000...................................... 27,000 36,000 45,000 54,000 63,000
140,000...................................... 31,500 42,000 52,500 63,000 73,500
160,000...................................... 36,000 48,000 60,000 72,000 84,000
180,000...................................... 40,500 54,000 67,500 81,000 94,500
200,000...................................... 45,000 60,000 75,000 90,000 105,000
</Table>
- ---------------
(1) The annual retirement benefits shown in the table are single life annuity
amounts with no offset for Social Security benefits. There are no other
offsets to benefits.
(2) For the fiscal year of the Retirement Plan beginning on July 1, 2004, the
average final compensation used to compute benefits under the Retirement
Plan did not exceed $172,000 in accordance with the Code (as adjusted for
subsequent years pursuant to Code provisions). Benefits in excess of the
limitation were provided through cash payments made annually to each officer
affected by such limitation. For the fiscal year of the Retirement Plan
beginning on July 1, 2004, the maximum annual benefit payable under the
Retirement Plan was $200,000 (as adjusted for subsequent years pursuant to
Code provisions). The maximum years of service credited for benefit purposes
is not limited.
The following table sets forth the years of credited service and the
average annual earnings (as defined above) determined as of June 30, 2004, the
end of the plan year, for each of the executive officers named in the Summary
Compensation Table. Messrs. Cole, Darovic and Koricanac are not participants in
the defined benefit plan.
<Table>
<Caption>
YEARS OF AVERAGE ANNUAL
CREDITED SERVICE EARNINGS(1)
---------------- --------------
Thomas F. Prisby......................................... 19 $172,000
Jeffrey C. Stur.......................................... 29 $121,051
</Table>
- ---------------
(1) Reflects effect of limitation of the amount of compensation that may be used
in calculating benefits under the provisions of the Code.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
The Company has a supplemental executive retirement plan to provide for
supplemental benefits to certain employees whose benefits under the ESOP are
reduced by limitations imposed by the Internal Revenue Code. The supplemental
benefits equal the amount of additional benefits the participants would
19
receive if there were no income limitations imposed by the Internal Revenue
Code. From time to time, the Bank's Board of Directors will designate which
employees may participate in these additional supplemental executive retirement
plans. The Company has established grantor trusts with an independent financial
institution in connection with the plans to satisfy its obligations under the
plans. The assets of the grantor trusts are subject to the claims of the
Company's general creditors in the event of insolvency. The grantor trustee must
invest substantially all their assets in the Company's common stock.
Currently trusts are in place for Messrs. Thomas Prisby and James Prisby,
as well as for Ms. Abbott. There were no payments or contributions made for
fiscal 2004 with respect to the Retirement Plan. Contributions to the ESOP SERP
may be made on behalf of Mr. Thomas Prisby for fiscal 2004; however, the amount
of his individual contribution had not been determined in time for inclusion in
this Proxy Statement.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Section 402 of the Sarbanes-Oxley Act of 2002, which became law on July 30,
2003, amended Section 13 of the Securities Exchange Act of 1934 to prohibit
public companies from making or arranging many types of personal loans, directly
or indirectly, to their directors and executive officers. Section 402, however,
exempts loans made or maintained by FDIC-insured banks and thrifts if the loans
are otherwise permitted under existing insider-lending restrictions applicable
to banks.
In accordance with applicable federal laws and regulations, the Bank offers
mortgage loans to its directors, officers and employees, as well as members of
their immediate families for the financing of their primary residences and
certain other loans. These loans are generally made on substantially the same
terms as those prevailing at the time for comparable transactions with
non-affiliated persons. It is the belief of management that these loans neither
involve more than the normal risk of collectibility nor present other
unfavorable features.
Section 22(h) of the Federal Reserve Act generally provides that any credit
extended by a savings institution, such as the Bank, to its executive officers,
directors and, to the extent otherwise permitted, principal shareholder(s), or
any related interest of the foregoing, must be on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions by the savings institution with non-affiliated parties
unless the loans are made pursuant to a benefit or compensation program that (i)
is widely available to employees of the institution, (ii) does not give
preference to any director, executive officer or principal shareholder, or
certain affiliated interests of either, over other employees of the savings
institution, and (iii) does not involve more than the normal risk of repayment
or present other unfavorable features.
The Company is unaware of any related party transactions other than loans
described above.
20
PERFORMANCE GRAPH
The following graph demonstrates comparison of the cumulative total returns
for the Company's Common Stock, the Standard & Poor's 500 Index ("S&P 500") and
the NASDAQ Bank Index from the close of trading on December 31, 1999, to the
close of trading on December 31, 2004.
TOTAL RETURN PERFORMANCE
(LINE GRAPH)
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------
Index 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
- -------------------------------------------------------------------------------------------------------------------------
CFS Bancorp, Inc. 100.00 119.36 165.05 169.11 180.42 179.45
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 100.00 90.90 80.09 62.39 80.29 89.02
- -------------------------------------------------------------------------------------------------------------------------
NASDAQ Bank Index 100.00 117.74 132.50 141.71 188.54 214.31
- -------------------------------------------------------------------------------------------------------------------------
</Table>
21
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table includes, as of the Voting Record Date, certain
information as to the Common Stock beneficially owned by (i) the only persons or
entities, including any "group" as that term is used in Section 13(d)(3) of the
Exchange Act, who or which were known to the Company to be the beneficial owners
of more than 5% of the issued and outstanding Common Stock, (ii) the directors
and director nominees of the Company, (iii) certain executive officers of the
Company, and (iv) all directors, director nominees and executive officers of the
Company as a group.
<Table>
<Caption>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP AS OF PERCENT OF
OR NUMBER OF PERSONS IN GROUP MARCH 4, 2005(1) COMMON STOCK(2)
- ----------------------------- ----------------- ---------------
CFS Bancorp, Inc. ......................................... 1,248,523(3) 10.1%
Employee Stock Ownership Plan Trust
c/o First Banker's Trust Company
Dimensional Fund Advisors, Inc. ........................... 769,506 6.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Directors and Director Nominees:
Sally A. Abbott............................................ 43,502(4)(5) *
Gregory W. Blaine.......................................... 42,150(6) *
Thomas J. Burns............................................ 37,817(7) *
Gene Diamond............................................... 62,237(8) *
Frank D. Lester............................................ 17,000(9) *
Thomas F. Prisby........................................... 455,950(4)(10) 3.7%
Robert R. Ross............................................. 5,273(11) *
Joyce M. Simon............................................. 3,400(12) *
Charles R. Webb............................................ 12,900(13) *
Other Named Executive Officers:
Charles V. Cole............................................ 6,000(14) *
Thomas L. Darovic.......................................... 23,630(15) *
Zoran Koricanac............................................ 5,000(16) *
Jeffrey C. Stur............................................ 87,250(17) *
All directors, director nominees and executive officers of
the Company as a group (thirteen persons)................ 802,109(18) 6.4%
</Table>
- ---------------
* Represents less than 1% of the outstanding stock.
(1) Based upon filings made pursuant to the Exchange Act and information
furnished by the respective individuals. Under regulations promulgated
pursuant to the Exchange Act, shares of Common Stock are deemed to be
beneficially owned by a person if he or she directly or indirectly has or
shares (i) voting power, which includes the power to vote or to direct the
voting of the shares, or (ii) investment power, which includes the power to
dispose or to direct the disposition of the shares. Unless otherwise
indicated, the named beneficial owner has sole voting and dispositive power
with respect to the shares.
(2) Percentages are calculated on the basis of the amount of outstanding shares
plus all options exercisable within 60 days of the Voting Record Date for
each individual and for all directors and executive officers as a group.
(Footnotes continued on following page)
22
(3) The Employee Stock Ownership Plan Trust exists by virtues of an agreement
between the Company and First Banker's Trust Company, who acts as trustee
of the ESOP ("Trustees"). Under the terms of the ESOP, the allocated shares
held in the ESOP will be voted in accordance with the instructions of the
participating employees. Unallocated shares held in the ESOP will generally
be voted in the same ratio on any matter as those allocated shares for
which instructions are given, subject in each case to the fiduciary duties
of the ESOP Trustees and applicable law. Any allocated shares which either
abstain on the proposal or are not voted will be disregarded in determining
the percentage of stock voted for and against each proposal by the
participants and beneficiaries. As of December 31, 2004, 652,576 shares
held by the ESOP had been allocated to the accounts of participating
employees. The amount of Common Stock beneficially owned by directors who
serve as Trustees of the ESOP and by all directors and executive officers
as a group does not include the unallocated shares held by the ESOP.
(4) Includes, with respect to Ms. Abbott and Mr. Thomas Prisby, 10,662 and
61,151 shares, respectively, held by trusts established by the Company to
fund its obligations with respect to deferred supplemental retirement
benefits. Ms. Abbott and Mr. Thomas Prisby each disclaim beneficial
ownership of such shares except to the extent of their personal pecuniary
interests therein.
(5) Includes 18,600 shares subject to stock options exercisable within 60 days
of the Voting Record Date and 14,240 shares held in an individual
retirement plan for Ms. Abbott.
(6) Includes 18,600 shares subject to stock options exercisable within 60 days
of the Voting Record Date and 50 shares held by Mr. Blaine's children
living at his home.
(7) Includes 18,600 shares subject to stock options exercisable within 60 days
of the Voting Record Date, 2,217 shares held in an individual retirement
plan for Mr. Burns, and 1,000 shares owned by Mr. Burns' spouse.
(8) Includes 42,000 shares held jointly with Mr. Diamond's spouse, 18,600
shares subject to stock options exercisable within 60 days of the Voting
Record Date, 1,237 shares held in an individual retirement plan for Mr.
Diamond, and 3,000 shares in a private foundation established by Mr.
Diamond. Mr. Diamond disclaims beneficial ownership of the shares owned by
the private foundation.
(9) Includes 12,000 shares subject to stock options exercisable within 60 days
of the Voting Record Date and 3,200 shares held in the Recognition Plan
allocated to Mr. Lester.
(10) Includes 265,380 shares subject to stock options exercisable within 60 days
of the Voting Record Date, 3,725 shares held in the Recognition Plan
allocated to Mr. Thomas Prisby, 14,401 shares allocated to Mr. Thomas
Prisby pursuant to the ESOP, 15,235 shares held in the Bank's 401(k) profit
sharing plan, 64,150 shares held in a trust of which Mr. Thomas Prisby is
the trustee and sole beneficiary, 7,590 shares in an individual retirement
account, 27,269 shares held in a trust for Mr. Thomas Prisby's spouse,
45,400 shares owned by an adult child living with Mr. Thomas Prisby, and
2,000 shares owned by a private charitable foundation established by Mr.
Thomas Prisby in 2002. Mr. Thomas Prisby disclaims beneficial ownership of
the shares owned by his adult child and the private foundation.
(11) Includes 2,400 shares subject to stock options exercisable by Mr. Ross
within 60 days of the Voting Record Date.
(12) Includes 2,400 shares subject to stock options exercisable by Ms. Simon
within 60 days of the Voting Record Date.
(13) Includes 6,200 shares subject to stock options exercisable by Mr. Webb
within 60 days of the Voting Record Date, 3,200 shares held in the
Recognition Plan allocated to Mr. Webb, and 700 shares owned by Mr. Webb's
spouse.
(14) Includes 6,000 shares subject to stock options exercisable by Mr. Cole
within 60 days of the Voting Record Date.
(15) Includes 17,500 shares subject to stock options exercisable by Mr. Darovic
within 60 days of the Voting Record Date, 4,000 shares held in the
Recognition Plan allocated to Mr. Darovic, and 1,491 shares allocated to
Mr. Darovic pursuant to the ESOP.
(Footnotes continued on following page)
23
(16) Includes 5,000 shares subject to stock options exercisable by Mr. Koricanac
within 60 days of the Voting Record Date.
(17) Includes 44,200 shares subject to stock options exercisable by Mr. Stur
within 60 days of the Voting Record Date, 9,837 shares allocated to Mr.
Stur pursuant to the ESOP, and 5,000 shares jointly owned with Mr. Stur's
spouse.
(18) Includes 10,125 shares held by the Recognition Plan, which may be voted by
the above-named directors and executive officers pending vesting and
distribution, 25,729 shares allocated to the named executive officers
pursuant to the ESOP, and 435,480 shares which may be acquired by the named
directors and officers upon the exercise of stock options which are
currently or shall first become exercisable within 60 days of the Voting
Record Date.
PROSOSAL TO REINCORPORATE COMPANY IN THE STATE OF INDIANA
GENERAL
On February 22, 2005, the Company's Board of Directors approved a proposal
("Reincorporation Proposal") to change the Company's state of incorporation from
Delaware to Indiana. This change ("Reincorporation") will be accomplished
through a merger of the Company into CFS Bancorp Indiana, Inc. ("CFS Indiana"),
a wholly owned subsidiary of the Company which was recently formed as an Indiana
corporation and the vehicle to effect the Reincorporation. The name of the
surviving corporation following the merger will be CFS Bancorp, Inc. and
references hereinafter to the Company will, where appropriate, mean the
surviving corporation. The Reincorporation will be effected pursuant to the
terms of an Agreement and Plan of Merger between the Company and CFS Indiana. A
copy of the proposed Form of Agreement and Plan of Merger ("Merger Agreement")
is attached as Appendix A to this Proxy Statement.
As a Delaware corporation, the Company is governed by the Delaware General
Corporation Law ("DGCL") and the terms of its Certificate of Incorporation
("Present Charter") and its Bylaws ("Present Bylaws"). Following the
Reincorporation, the Company will be governed by the Indiana Business
Corporation Law ("IBCL") and the Articles of Incorporation ("New Articles") and
Bylaws ("New Bylaws"), which are attached hereto as Appendices B and C,
respectively. Because there are differences between the DGCL and the IBCL and
corresponding differences between the Present Charter and Present Bylaws as
compared to the New Articles and New Bylaws, the Reincorporation will result in
some differences in the rights of shareholders. These differences are discussed
below.
PRINCIPAL REASON FOR THE REINCORPORATION
The Company presently has its executive offices and significant operations
in Indiana. As a Delaware corporation, the Company is subject to taxation in
Delaware. Under Delaware's system of taxation, franchise taxes are assessed
against the Company based, in part, on the number of shares authorized. This
formula of taxation has resulted in increased tax costs to the Company since its
initial public offering in 1998. Indiana has no comparable franchise tax system.
If the Company had been an Indiana corporation, it would have saved
approximately $160,000 in taxes during the fiscal year ended December 31, 2004.
Management believes that the Reincorporation will permit the Company to realize
a substantial reduction in state franchise tax expense in future years.
MANNER OF EFFECTING THE REINCORPORATION
The following summary does not purport to be a complete description of the
Reincorporation Proposal and is qualified in its entirety by reference to the
Merger Agreement.
The Reincorporation will be effected by merging the Company with and into
CFS Indiana ("Merger") pursuant to the terms of the Merger Agreement. At the
Effective Time (as defined in the Merger Agreement), the separate corporate
existence of the Delaware corporation will cease; CFS Indiana will succeed to
all the business, properties, assets and liabilities of the Delaware corporation
and its name will be
24
changed to "CFS Bancorp, Inc." The directors, officers and employees of the
Company will become the directors, officers and employees of the surviving
corporation. Shares of the Delaware corporation's ("Delaware Shares") Common
Stock issued and outstanding immediately prior to the Effective Time will, by
virtue of the Merger, be converted into an equal number of fully paid and
nonassessable shares of CFS Indiana's Common Stock ("Indiana Shares"). Indiana
Shares will have the same terms as the Delaware Shares, subject to the
differences arising by virtue of the differences between the IBCL and the DGCL
and differences between the Present Charter and Present Bylaws as compared to
the New Articles and New Bylaws.
From and after the Effective Time, each holder of a certificate
representing shares of the Company's Common Stock ("Delaware Certificate") shall
be deemed for all purposes to be the holder of the Indiana Shares into which the
shares represented by his or her Delaware Certificate have been converted. Such
certificates shall continue to represent Indiana Shares and need not be
surrendered for exchange. While it is not necessary for shareholders to
surrender their Delaware Certificates for certificates representing Indiana
Shares, following the Effective Time each holder of a Delaware Certificate
outstanding immediately prior to the Effective Time will be entitled to
surrender his or her Delaware Certificate for cancellation and in exchange for a
new certificate representing the same number of Indiana Shares.
Approval of the Reincorporation Proposal will not result in any change in
the name, business, management, location of the principal executive offices or
other facilities, capitalization, assets or liabilities of the Company. The
Indiana Shares will continue to be traded without interruption on the NASDAQ
Stock Market. The Company's various stock option plans, as well as prior stock
option agreements between the Company and its various directors and officers,
will be continued by the surviving corporation and each outstanding option
issued pursuant to such plan and/or agreements will be converted into an option
for Indiana Shares equal to the number of shares of the Company's Common Stock
related to each such option immediately prior to the Effective Time, at the same
price per share and upon the same terms and subject to the same conditions as
are in effect immediately prior to the Effective Time. The Company's other
employee benefit plans and arrangements will also be continued by the surviving
corporation upon the same terms and subject to the same conditions.
It is anticipated that the Merger will become effective before the end of
the second quarter of 2005. However, the Merger Agreement provides that the
Merger may be abandoned by the Board of Directors of the Company prior to the
Effective Time either before or after shareholder approval.
Appraisal rights will not be available to holders of the Company's Common
Stock in connection with the Reincorporation Proposal.
ANTITAKEOVER EFFECTS OF THE REINCORPORATION PROPOSAL
Certain provisions of the IBCL, specifically the Constituent Interests
Provision and the Control Share Acquisitions Provisions as described in
"Comparison of Rights of Shareholders," below, have no comparable provisions
under Delaware law. These statutory provisions and certain provisions of the New
Articles and New Bylaws, specifically the provisions regarding restrictions on
the acquisition of stock and the supermajority vote required for certain
business combinations, some of which are carried over from the Present Articles
and Present Bylaws, may have the effect of discouraging an unsolicited attempt
by another person or entity to acquire control of the Company. Such provisions
may make tender offers, and certain other transactions, more difficult or more
costly and could discourage or limit shareholder participation in such types of
transactions, whether or not such transactions were favored by the majority of
the shareholders. As of this date, the Board of Directors is unaware of any
specific effort to accumulate the Company's Common Stock or to obtain control of
the Company by means of a merger, tender offer or otherwise.
COMPARISON OF RIGHTS OF SHAREHOLDERS
The DGCL differs from the IBCL in many respects. The material differences
of these statutes are discussed below. Because of these statutory differences,
certain changes from the Present Charter and Present Bylaws have been made to
the New Articles and New Bylaws. The material differences between the Present
Charter and Present Bylaws as compared to the New Articles and New Bylaws are
also discussed below.
25
Capital Stock. The Reincorporation will not affect the capital stock of
the Company except to the extent that the rights of shareholders will be
governed by Indiana law rather than Delaware law. The number of authorized
shares will remain at 100,000,000; consisting of 85,000,000 shares of Common
Stock, par value $0.01 per share, and 15,000,000 shares of Preferred Stock, par
value $0.01 per share.
After the Reincorporation, holders of the Company's Common Stock will
continue to be entitled to one vote per share on all matters submitted to a vote
of the shareholders, including the election of directors. The holders of the
Company's Common Stock will be entitled to such dividends as may be declared
from time to time by the Board of Directors from funds legally available
therefor, and will be entitled to receive, pro rata, all assets available for
distribution to such holders upon liquidation. No shares of the Company's Common
Stock have any preemptive, redemption or conversion rights, or the benefits of
any sinking fund. All of the shares issued by the surviving corporation in the
Reincorporation will be validly issued, fully paid and nonassessable.
Both the DGCL and the IBCL permit the certificate or articles of
incorporation to allow the board of directors to issue and fix the dividend,
voting and redemption rights, liquidation preferences and other rights,
privileges and restrictions of one or more series of preferred stock without
further shareholder action. The Company's Preferred Stock may be issued from
time to time in one or more series with such relative dividend, voting and other
rights, privileges and restrictions as the Board of Directors may determine. The
ability of the Board of Directors to issue Preferred Stock and determine its
relative dividend, voting and other rights without further shareholder action
will not be affected by the Reincorporation. The issuance of Preferred Stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting power
of the holders of Common Stock and, under certain circumstances, make it more
difficult for a third party to gain control of the Company, discourage bids for
the Company's Common Stock at a premium or otherwise affect the market price of
the Company's Common Stock.
Size and Classification of the Board of Directors. Section 141(b) of the
DGCL provides that the board of directors of a Delaware corporation shall
consist of one or more members. The number of directors shall be fixed by, or in
the manner provided in, the bylaws unless the certificate of incorporation fixes
the number of directors, in which case a change in the number of directors shall
be made only by amendment of the certificate. Section 23-1-33-3 of the IBCL
provides that the board of directors of an Indiana corporation must consist of
one or more individuals, with the number specified in or fixed in accordance
with the articles of incorporation or bylaws.
Pursuant to Section 141(d) of the DGCL, the directors may, by the
certificate of incorporation, by an initial bylaw or by a bylaw adopted by a
vote of the shareholders, be divided into one, two or three classes. Section
23-1-33-6 of the IBCL provides that the articles of incorporation, or, if the
articles of incorporation so authorize, the bylaws, may provide for staggering
the terms of directors by dividing the total number of directors into either two
or three classes.
The Company's Board of Directors is currently composed of nine members,
which number may be changed by the Board of Directors, provided that the number
of directors will not be less than five or more than twenty. The Board of
Directors of the Company following the Reincorporation will have the same number
of directors and composition as the Company's current Board of Directors. The
Present Charter, the Present Bylaws, the New Articles and the New Bylaws provide
for staggered terms for directors in three classes.
Removal of Directors. Section 141(k) of the DGCL provides that any
director or the entire board of directors may generally be removed with or
without cause by a majority shareholder vote.
Under Section 23-1-33-8 of the IBCL, directors may be removed in any manner
provided in the articles of incorporation. In addition, unless the articles of
incorporation provide otherwise, the shareholders or directors may remove one or
more directors with or without cause. A director may be removed by the
shareholders, if they are otherwise authorized to do so, only at a meeting
called for that purpose and such purpose must be stated in the notice of the
meeting. A director elected by a voting group of shareholders may be removed
only by that voting group.
26
The Present Charter permits directors to be removed from office only with
cause and by an affirmative vote of not less than an 80% of the shareholders
eligible to vote at a special meeting called for that purpose. The New Articles
retain this same provision.
Newly Created Directorships and Vacancies. Under Section 223 of the DGCL,
unless the certificate of incorporation or the bylaws of a corporation provide
otherwise, a majority vote of the directors then in office may fill vacancies
and newly created directorships, even if the number of current directors is less
than a quorum or only one director remains. If the directors filling a vacancy
on the board constitute less than a majority of the whole board (as measured
before an increase in the size of the board), the Delaware Court of Chancery
may, upon application of shareholders holding at least 10% of the outstanding
voting shares, summarily order an election to fill the vacancy or replace
directors chosen by the directors then in office. Unless otherwise provided in
the certificate of incorporation or bylaws, when one or more directors resign
effective at a future date, a majority of directors then in office, including
those who have so resigned, may vote to fill the vacancy.
Under Section 23-1-33-9 of the IBCL, unless the articles of incorporation
provide otherwise, if a vacancy occurs on the board of directors, including a
vacancy resulting from an increase in the number of directors, the remaining
directors, even if less than a quorum, may fill the vacancy by majority vote. If
the vacant office was held by a director elected by a voting group of
shareholders, only the holders of shares of that voting group may vote to fill
the vacancy if it is filled by shareholders. A vacancy that will occur at a
specific later date by reason of resignation of a director effective at a later
date may be filled before the vacancy occurs, but the new director may not take
office until the vacancy occurs.
The Present Charter permits vacancies and newly created directorships to be
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. The New Articles provide that any
vacancy occurring on the Board of Directors, from whatever cause, will be filled
by a majority vote of the remaining directors, although less than a quorum;
provided that if the vacancy or vacancies leave the board of directors with no
members or the remaining directors cannot agree or determine not to fill the
vacancy, the shareholders may fill such vacancy by a majority vote at a special
meeting called for that purpose or at the next annual meeting of shareholders.
The Present Bylaws provide that no person shall be eligible for nomination
or election as a director who has attained or will attain age 70 in that
calendar year. The New Bylaws contain the same provision.
Quorum and Vote Required to Take Action. Section 141(b) of the DGCL
provides that a majority of the total number of directors shall constitute a
quorum for the transaction of business unless the certificate of incorporation
or bylaws of the incorporation require a greater number. In addition, unless the
certificate of incorporation provides otherwise, the bylaws may provide for a
quorum of less than a majority, which in no case shall be less than one-third of
the total number of directors. The board of directors shall act by the vote of a
majority of the directors present at a meeting at which a quorum is present,
unless the certificate of incorporation or the bylaws require the vote of a
greater number.
Under Section 23-1-34-5 of the IBCL, unless the articles of incorporation
or bylaws require a greater number, a majority of the fixed or prescribed number
of directors constitutes a quorum. Additionally, the articles of incorporation
or bylaws may authorize a quorum of no fewer than one-third of the fixed or
prescribed number of directors. If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present is the act of the board
of directors unless the articles of incorporation or bylaws provide otherwise.
The Present Bylaws provide that a majority of the total number of directors
constitutes a quorum for the transaction of business and that, unless otherwise
provided by law, the certificate of incorporation, the Bylaws or any contract or
agreement to which the Company is a party, the act of a majority of the
directors present at any meeting at which there is quorum is the act of the
Board of Directors. The New Bylaws retain this same provision.
Limitation on Directors' Liability. Section 102(b)(7) of the DGCL allows a
corporation, through its certificate of incorporation, to limit or eliminate the
personal liability of directors to the corporation and its
27
shareholders for damages for breach of fiduciary duty. However, this provision
excludes any limitation on liability for: (i) any breach of the director's duty
of loyalty to the corporation or its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) willful or negligent violation of the laws governing the payment of
dividends or the purchase or redemption of stock; or (iv) any transaction from
which the director derives an improper personal benefit.
Section 23-1-35-1 of the IBCL provides that a director is not liable for
any action taken as a director, or any failure to act, unless the director has
breached or failed to perform the duties of the director's office in compliance
with Section 23-1-35-1 and the breach or failure to perform constitutes willful
misconduct or recklessness. Subject to this standard, a director who votes or
assents to distributions in violation of Section 23-1-28-3 of the IBCL or the
articles of incorporation is personally liable to the corporation for the amount
of the illegal distribution and is entitled to contribution from the other
directors who voted for or assented to such distribution and the shareholders
who received the distribution.
The Present Charter contains a provision limiting director liability as
permitted by Section 102(b) of the DGCL. The New Articles contain a provision
which outlines the necessary factors for compliance with Section 23-1-35-1 of
the IBCL.
Indemnification of Directors and Officers. Section 145 of the DGCL
provides that a corporation may indemnify any person made a party or threatened
to be made a party to any type of proceeding (other than certain actions by or
in right of the corporation) because he or she is or was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with such proceeding if such person acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the corporation; or in a criminal proceeding, if he or
she had no reasonable cause to believe his or her conduct was unlawful. Expenses
incurred by an officer or director (or other employees or agents as deemed
appropriate by the board of directors) in defending a civil, criminal or
administrative proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
such person to repay such amount if it is ultimately determined that such person
is not entitled to be indemnified by the corporation. To indemnify a party, the
corporation must determine that the party met the applicable standards of
conduct.
Section 23-1-37-8 and Section 23-1-37-13 of the IBCL provide that a
corporation may indemnify any individual made a party to a proceeding (including
a proceeding by or in the right of the corporation) because the individual is or
was a director, officer, employee or agent of the corporation against liability
incurred in the proceeding if the individual acted in good faith and reasonably
believed (i) in the case of conduct in the individual's official capacity with
the corporation, that the individual's conduct was in the corporation's best
interests and (ii) in all other cases, that the individual's conduct was at
least not opposed to the corporation's best interests. In the case of any
criminal proceeding, the individual must have had either reasonable cause to
believe the conduct was lawful or no reasonable cause to believe that it was
unlawful. In addition, Section 23-1-37-9 and Section 23-1-37-13 provide that a
corporation, unless limited by its articles of incorporation, must indemnify a
director or officer who was wholly successful in the defense of any proceeding
to which the director or officer was a party because the director or officer is
or was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The provisions concerning indemnification in the New Articles are
substantially identical to the IBCL provisions and are nonexclusive. The Present
Charter provides for mandatory indemnification to the fullest extent permitted
by Delaware law. The New Articles provide that the Board of Directors may
approve indemnification to the fullest extent permitted by applicable law in
effect at such time.
Dividends. Subject to any restrictions in a corporation's certificate of
incorporation, Section 170 of the DGCL allows the board of directors of a
Delaware corporation to declare and pay dividends out of surplus or, if there is
no surplus, out of its net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year.
28
Section 23-1-28-1 of the IBCL allows a board of directors to make
distributions to shareholders, unless otherwise provided in the articles of
incorporation. However, pursuant to Section 23-1-28-3 of the IBCL, no
distribution may be made if, after giving effect to the distribution the
corporation would be unable to pay its debts as they become due in the ordinary
course of business or the corporation's assets would be less than the sum of its
liabilities plus, except as otherwise specifically allowed by the articles of
incorporation, the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the rights of preferential
shareholders whose rights are superior to those receiving the distribution.
Action by Shareholders through Written Consent. Under Section 228(a) of
the DGCL, unless otherwise provided in a corporation's certificate of
incorporation, any action required to be taken at an annual or special meeting
of the shareholders may be taken in the absence of a meeting, without prior
written notice and without a vote. Such action may be taken by the written
consent of shareholders in lieu of a meeting setting forth the action so taken
and signed by the holders of outstanding stock representing the number of shares
necessary to take such action at a meeting at which all shares entitled to vote
were present and voted. Article 8 of the Present Charter permits shareholder
action only at any duly called annual or special meeting and does not permit
action by written consent of shareholders.
Under Section 23-1-29-4 of the IBCL, any action required or permitted to be
taken at a meeting of shareholders may be taken without a meeting if a written
consent thereto is signed by all of the shareholders entitled to vote on the
action.
Special Meetings of Shareholders. Under Section 211(d) of the DGCL,
special meetings of shareholders may be called by the board of directors and by
such other person or persons as may be authorized to do so by the corporation's
certificate of incorporation or bylaws.
Section 23-1-29-2 of the IBCL provides that a corporation with more than 50
shareholders must hold a special meeting of shareholders on demand of its board
of directors or the person or persons specifically authorized to do so by the
articles of incorporation or bylaws.
Under the Present Bylaws, Special Meetings of the shareholders may only be
called by the Board of Directors, through the affirmative vote of at least
three-fourth's of directors then in office. The New Bylaws contain the same
provision.
Cumulative Voting. Both Section 214 of the DGCL and Section 23-1-30-9 of
the IBCL allow a corporation to provide for cumulative voting in the certificate
of incorporation or the articles of incorporation. Neither the Present Charter
nor the New Articles provide for cumulative voting.
Necessary Vote to Effect Merger (Not Involving Interested Shareholder). The
DGCL requires a majority vote of the shares outstanding and entitled to vote in
order to effectuate a merger between two Delaware corporations (Section 251(c))
or between a Delaware corporation and a corporation organized under the laws of
another state (a "foreign corporation") (Section 252(c)). However, unless
required by the certificate of incorporation, Sections 25(f) and 252(e) do not
require a vote of the shareholders of a constituent corporation surviving the
merger if: (i) the merger agreement does not amend that corporation's
certificate of incorporation; (ii) each share of that corporation's stock
outstanding before the effective date of the merger is identical to an
outstanding or treasury share of the surviving corporation after the merger; and
(iii) in the event the merger plan provides for the issuance of common stock or
securities convertible into common stock by the surviving corporation, the
common stock issued and the common stock issuable upon conversion of the issued
securities do not exceed 20% of the shares outstanding immediately before the
effective date of the merger.
Section 23-1-40-3 of the IBCL requires a majority vote of the shares
entitled to vote in order to effectuate a merger or share exchange. However, the
vote of the shareholders of the surviving corporation on a plan of merger is not
required if: (i) the articles of incorporation of the surviving corporation will
not differ from its articles before the merger; (ii) each shareholder of the
surviving corporation whose shares were outstanding immediately before the
effective date of the merger will hold the same proportionate number of shares
relative to the number of shares held by all such shareholders (except for
shares of the surviving corporation received solely as a result of the
shareholder's proportionate shareholdings in the other corporations party to the
29
merger), with identical designations, preferences, limitations and relative
rights, immediately after the merger; (iii) the number of voting shares
outstanding immediately after the merger, plus the number of voting shares
issuable as a result of the merger (either by the conversion of securities
issued pursuant to the merger or the exercise of rights and warrants issued
pursuant to the merger), will not exceed by more than 20% the total number of
voting shares of the surviving corporation outstanding immediately before the
merger; and (iv) the number of participating shares outstanding immediately
after the merger, plus the number of participating shares issuable as a result
of the merger (either by the conversion of securities issued pursuant to the
merger or the exercise of rights and warrants issued pursuant to the merger),
will not exceed by more than 20% the total number of participating shares of the
surviving corporation outstanding immediately before the merger.
Business Combinations Involving Interested Shareholders. Section 203 of
the DGCL provides that, with certain exceptions, a Delaware corporation may not
engage in any of a broad range of business combinations, such as mergers,
consolidations and sales of assets, with an "interested shareholder" for a
period of three years from the date that such person became an interested
shareholder unless: (i) the transaction that results in the person's becoming an
interested shareholder or the business combination is approved by the board of
directors of the corporation before the person becomes an interested
shareholder; (ii) upon consummation of the transaction which results in the
shareholder becoming an interested shareholder, the interested shareholder owns
85% or more of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding shares owned by persons who are directors and
also officers and shares owned by certain employee stock plans; or (iii) on or
after the date the person becomes an interested shareholder, the business
combination is approved by the corporation's board of directors and by holders
of at least two-thirds of the corporation's outstanding voting stock, excluding
shares owned by the interested shareholder, at a meeting of shareholders. Under
Section 203, an "interested shareholder" is defined as any person, other than
the corporation and any direct or indirect majority-owned subsidiary, that is
the owner of 15% or more of the outstanding voting stock of the corporation or
an affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation or any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested shareholder. Section 203 does
not apply to a corporation that so provides in an amendment to its certificate
of incorporation or bylaws passed by a majority of its outstanding shares at any
time. Such shareholder action does not become effective for 12 months following
its adoption and would not apply to persons who were already interested
shareholders at the time of the amendment.
Sections 23-1-43-1 to 23-1-43-23 of the IBCL restrict the ability of a
"resident domestic corporation" to engage in any business combination with an
"interested shareholder" for five years after the interested shareholder's date
of acquiring shares unless the business combination or the purchase of shares by
the interested shareholder on the interested shareholder's share acquisition
date is approved by the board of directors of the resident domestic corporation
before that date. If the combination was not previously approved, the interested
shareholder may effect a combination after the five-year period only if such
shareholder receives approval from a majority of the disinterested shares or the
offer meets certain fair price criteria. For purposes of the above provisions,
"resident domestic corporation" means an Indiana corporation that has 100 or
more shareholders. "Interested shareholder" means any person, other than the
resident domestic corporation or its subsidiaries, who is (i) the beneficial
owner, directly or indirectly, of 10% or more of the voting power of the
outstanding voting shares of the resident domestic corporation or (ii) an
affiliate or associate of the resident domestic corporation and at any time
within the five-year period immediately before the date in question was the
beneficial owner of 10% or more of the voting power of the then outstanding
shares of the resident domestic corporation. The above provisions do not apply
to corporations that so elect in its original articles of incorporation or in an
amendment to its articles of incorporation approved by a majority of the
disinterested shares. Such an amendment, however, would not become effective for
18 months after its passage and would apply only to stock acquisitions occurring
after its effective date.
The Present Charter does not exclude the Company from restrictions imposed
under Section 203 of the DGCL. The New Articles elect not to be governed by
Section 23-1-42 of the IBCL. However, the Present Charter and the New Articles
contain provisions that prohibits any person as defined therein to directly or
indirectly acquire beneficial ownership of more than 10% of the outstanding
shares of the Company except for:
30
(1) underwriters with a view to public resale; (2) tax-qualified benefit plans
of the Company; or (3) approved in advance by the affirmative vote of two-thirds
of the entire Board of Directors. For the purposes of the restrictions on
acquisitions, the term "interested shareholder" does not include the CFS
Bancorp, Inc. Employee Stock Ownership Plan.
Control Share Acquisitions. Pursuant to Sections 23-1-42-1 to 23-1-42-11
of the IBCL ("Control Share Acquisition Provisions"), an acquiring person who
makes a "control share acquisition" in an "issuing public corporation" may not
exercise voting rights on any "control shares" unless such voting rights are
conferred by a majority vote of the disinterested shareholders of the issuing
corporation at a special meeting of such shareholders held upon the request and
at the expense of the acquiring person. Unless otherwise provided in a
corporation's articles of incorporation or bylaws before a control share
acquisition has occurred, in the event that control shares acquired in a control
share acquisition are accorded full voting rights and the acquiring person
acquires control shares with a majority or more of all voting power, all
shareholders of the issuing corporation have dissenters' rights to receive the
fair value of their shares. Under the IBCL, "control shares" means shares
acquired by a person that, when added to all other shares of the issuing public
corporation owned by that person or in respect of which that person may exercise
or direct the exercise of voting power, would otherwise entitle that person to
exercise voting power of the issuing public corporation in the election of
directors within any of the following ranges: (i) one-fifth or more but less
than one-third; (ii) one-third or more but less than a majority; or (iii) a
majority or more. "Control share acquisition" means, subject to certain
exceptions, the acquisition, directly or indirectly, by any person of ownership
of, or the power to direct the exercise of voting power with respect to, issued
and outstanding control shares. Shares acquired within 90 days or pursuant to a
plan to make a control share acquisition are considered to have been acquired in
the same acquisition. "Issuing public corporation" means a corporation which is
organized in Indiana, has 100 or more shareholders, has its principal place of
business, its principal office or substantial assets within Indiana and has
either: (i) more than 10% of its shareholders resident in Indiana; (ii) more
than 10% of its shares owned by Indiana residents; or (iii) 10,000 shareholders
resident in Indiana. The above provisions do not apply if, before a control
share acquisition is made, the corporation's articles of incorporation or bylaws
(including board adopted bylaws) provide that they do not apply.
There is no corresponding provision under the DGCL.
The New Articles will exclude the Company, following the Reincorporation,
from the restrictions imposed by the Control Share Acquisition Provisions of the
IBCL.
Constituent Interests. Section 23-1-35-1 of the IBCL ("Constituent
Interest Provision") provides that the board of directors, in discharging its
duties, may consider, in its discretion, both the long-term and short-term best
interests of the corporation, taking into account, and weighing as the directors
deem appropriate, the effects of an action on the corporation's shareholders,
employees, suppliers and customers and the communities in which offices or other
facilities of the corporation are located and any other factors the directors
consider pertinent. Section 23-1-35-1 specifically provides that certain
judicial decisions in Delaware and other jurisdictions, which might be looked
upon for guidance in interpreting Indiana law, including decisions that propose
a higher or different degree of scrutiny in response to a proposed acquisition
of the corporation, are inconsistent with the proper application of that
section.
There is no corresponding provision in the DGCL. The New Articles
incorporate these terms.
Procedures to Regulate Changes in Control. Section 23-1-22-4 of the IBCL
provides that, in addition to any other provision authorized by any other
section of the IBCL or contained in the articles of incorporation or the bylaws,
a corporation may establish one or more procedures to regulate transactions that
would, when consummated, result in a change of "control" of the corporation.
Such a procedure may be established in the original articles of incorporation or
bylaws, by an amendment to the articles of incorporation or, notwithstanding the
fact that a vote of the shareholders would otherwise be required by any other
provision of the IBCL or the articles of incorporation, by an amendment to the
bylaws. For the purposes of Section 23-1-22-4, "control" means, for any
corporation that has 100 or more shareholders, the beneficial ownership, or the
direct or indirect power to direct the voting, of not less than 10% of the
voting shares of a corporation's outstanding voting shares.
31
There is no corresponding provision under the DGCL.
Appraisal Rights; Dissenters Rights. Both Section 262 of the DGCL and
Section 23-1-44-8 of the IBCL provide that shareholders have the right, in some
circumstances, to dissent from certain corporate reorganizations and to instead
demand payment of the fair value of their shares. Under Section 262 of the DGCL,
unless a corporation's certificate of incorporation provides otherwise,
dissenters do not have the rights of appraisal with respect to: (i) a merger or
consolidation by a corporation, the shares of which are either listed on a
national securities exchange or held by more than 2,000 shareholders, if the
shareholders receive (a) shares in the surviving corporation, (b) shares of
another corporation that are publicly listed or held by more than 2,000
shareholders, (c) cash in lieu of fractional shares described in (a) and (b) of
this paragraph, or (d) any combination of the above; or (ii) shareholders of a
corporation surviving a merger if no vote of the shareholders of the surviving
corporation is required to approve the merger. Under Section 23-1-44-8 of the
IBCL, dissenters do not have rights of appraisal with respect to shares of any
class or series of stock registered on a national securities exchange or traded
on the National Association of Securities Dealers, Inc. Automated Quotation
System Over-the-Counter Markets-National Market Issues or a similar market or
unless the articles of incorporation, bylaws or resolution of the board of
directors provide that non-voting shares are entitled to dissent, if they were
not entitled to vote on the corporate reorganization.
Redeemable Shares. Section 151(b) of the DGCL provides that the
certificate of incorporation or a resolution of the board of directors providing
for the issuance of a class of stock may make such class of stock subject to
redemption at the option of the corporation or the shareholders, or upon the
happening of a specified event, as long as immediately following any such
redemption the corporation has at least one share of at least one series of
stock with full voting powers.
Section 23-1-25-1 of the IBCL provides that the articles of incorporation
of a corporation may authorize one or more classes of shares that are redeemable
or convertible as specified in the articles of incorporation at the option of
the corporation, the shareholder or another person or upon the occurrence of a
designated event.
Rights, Warrants or Options. Under Section 157 of the DGCL, rights or
options to purchase shares of any class of stock may be authorized by a
corporation's board of directors subject to the provisions of the certificate of
incorporation. The terms of such rights or options must be fixed and stated in
the certificate of incorporation or in a resolution or resolutions adopted by
the board of directors.
Under Section 23-1-26-5 of the IBCL, a corporation, acting through its
board of directors, may create or issue rights, options or warrants for the
purchase of shares or other securities of the corporation or any successor in
interest of the corporation. The board of directors shall determine the terms
upon which the rights, options or warrants are issued, their form and content,
and the consideration for which the shares or other securities are to be issued.
Preemptive Rights. Under Section 102(b)(3) of the DGCL and Section
23-1-27-1 of the IBCL, absent an express provision in a corporation's
certificate of incorporation or articles of incorporation, a shareholder does
not, by operation of law, possess preemptive rights to subscribe to an
additional issue of stock. Neither the Present Charter nor the New Articles
provide for preemptive rights.
Amendment of Certificate or Articles of Incorporation and Bylaws. Section
242 of the DGCL and Sections 23-1-38-7 of the IBCL permit a corporation to amend
its certificate of incorporation or articles of incorporation in any respect,
provided the amendment contains only provisions that would be lawful in an
original certificate of incorporation or articles of incorporation filed at the
time of amendment. To amend a certificate of incorporation or the articles of
incorporation, the board must adopt a resolution presenting the proposed
amendment. In addition, under the DGCL, a majority of the shares entitled to
vote, as well as a majority of shares of each class entitled to vote, must
approve the amendment to make it effective. Under the IBCL, an amendment to the
articles of incorporation of an Indiana corporation generally may be adopted if
the votes cast favoring the amendment exceed the votes cast opposing the
amendment, except that any amendment that would create dissenters' rights must
be approved by a majority of the votes entitled to be cast. Under the DGCL and
the IBCL, when the substantial rights of a class of shares will be affected by
an amendment, the holders of those shares are entitled to vote as a class even
if the shares are non-voting shares.
32
When one or more series in a class of shares, and not the entire class, will be
adversely affected by an amendment, the affected series may vote as a class.
Under Section 242(b)(2) of the DGCL, the right to vote as a class may be
limited in certain circumstances. Any provision in the certificate of
incorporation which requires a greater vote than required by law cannot be
amended or repealed except by such greater vote. Section 242(c) of the DGCL
provides that, in its resolution proposing an amendment, the board may insert a
provision allowing the board to abandon the amendment, without concurrence by
shareholders, after the amendment has received shareholder approval but before
its filing with the Secretary of State.
Section 109 of the DGCL provides that the power to amend the bylaws rests
with the shareholders entitled to vote, although the certificate of
incorporation may confer the power to amend the bylaws upon the board of
directors. Section 109 further provides that the fact that the certificate of
incorporation confers such power upon the board of directors neither limits nor
divests the shareholders of the power to amend the bylaws. Section 23-1-39-1 of
the IBCL, on the other hand, provides that, unless the articles of incorporation
provide otherwise, only the board of directors of a corporation may amend the
bylaws. The New Articles do not provide otherwise.
The Present Charter provides that the Company reserves the right to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by law, and all rights
conferred upon stockholders herein are granted subject to this reservation, but
that amendment, addition, alteration, change or repeal of this Certificate of
Incorporation shall be made unless it is first approved by the Board of
Directors pursuant to a resolution adopted by the affirmative vote of a majority
of the directors then in office, and is thereafter approved by the holders of at
least 80% of shares entitled to vote, voting together as a single class, as well
as such additional vote of the Preferred Stock as may be required by the
provisions of any series thereof. The Present Charter further provides that any
amendment to the Charter recommended for adoption by at least two-thirds of the
entire Board of Directors (including any vacancies) shall, to the extent the
General Corporation Law of the State of Delaware requires stockholder approval
of such amendment, require the affirmative vote of a majority of the shares
entitled to vote, voting together as a single class, as well as such additional
vote of the Preferred Stock as may be required by the provisions of any series
thereof.
The Present Bylaws provide that the Board of Directors or stockholders may
adopt, alter, amend or repeal the Bylaws of the Corporation. Such action by the
Board of Directors requires the affirmative vote of a majority of the directors
then in office. Such action by the stockholders requires the affirmative vote of
at least a majority of the shares entitled to vote on the action, as well as
such additional vote of the Preferred Stock as may be required by the provisions
of any series thereof provided, however, that the affirmative vote of at least
80% of the shares entitled to vote, voting together as a single class, as well
as such additional vote of the Preferred Stock as may be required by the
provisions of any series thereof, shall be required to amend, alter, change or
repeal any provision of, or adopt any provision inconsistent with Sections 2.4,
2.14, 4.1, 4.2, 4.3, 4.4, 4.5 and 4.15 and Article VI of the Bylaws.
Under the New Articles, the Board of Directors by a majority vote of the
actual number of directors elected and qualified from time to time shall have
the power, without the assent or vote of the shareholders, to make, alter, amend
or repeal the Bylaws of the Corporation.
Inspection of Books and Records. Section 220 of the DGCL entitles any
shareholder of record of a corporation, in person or by an agent, upon written
demand under oath stating the purpose thereof, to inspect during usual business
hours, for any proper purpose, the corporation's stock ledger, a list of its
shareholders and its other books and records, and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a shareholder.
Section 23-1-52-2 of the IBCL entitles any shareholder of a corporation to
inspect and copy, during regular business hours, certain enumerated corporate
records if the shareholder gives the corporation at least five days' advance
written notice. Certain records may be inspected only if: (i) the shareholder's
demand is made in good faith and for a proper purpose, (ii) the shareholder
describes with reasonable particularity the
33
shareholder's purpose, and (iii) the records to be inspected are directly
connected with the shareholder's purpose.
Advance Notice Provisions. The Present Bylaws establish an advance notice
procedure for shareholders to make nominations of candidates for election as
directors. The Present Bylaws provide that only persons who are nominated by, or
at the direction of, the Board of Directors, by any nominating committee
appointed by the Board of Directors or by a shareholder who has given timely
written notice to the Secretary of the Company prior to the meeting at which
directors are to be elected, will be eligible for election as directors of the
Company. Under the Present Bylaws, for notice of shareholder nominations to be
made at a meeting to be timely, such notice must be received by the Company 120
days prior to the anniversary of the previous annual meeting.
The New Bylaws contain a similar advance notice procedure for shareholders
to make nominations of candidates for election as directors or to bring other
business before an annual meeting of shareholders of the Company. Under the New
Bylaws, the shareholders shall conduct only such business as has been properly
brought before the annual meeting. To be properly brought before the annual
meeting, business must be specified in the notice of the meeting given by or at
the direction of the Board of Directors, otherwise brought before the meeting by
or at the direction of the Board or properly brought before a meeting by a
shareholder of record who is entitled to vote at the meeting and who has given
timely written notice to the Secretary of the Company at the principal executive
offices. The New Bylaws also provide that nominations of persons for election as
directors may be made by the Board of Directors or by any shareholder of record
who is entitled to vote in the election and who gives timely written notice of
such shareholder's intent to make a nomination.
Under both the Present Bylaws and the New Bylaws, a shareholder's advance
notice must also contain certain additional information specified therein.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes the material U.S. federal
income tax consequences of the Merger applicable to stockholders of the Company
who hold their stock as a capital asset. However, it is not a complete
description of all the tax consequences of the Merger. In addition, no assurance
can be given that the Internal Revenue Service will agree with the analysis
described below. The summary may not apply to shareholders in special
situations, such as dealers or traders in securities, financial institutions,
tax-exempt organizations, insurance companies, persons holding stock of the
Company as part of a hedging, integrated, conversion or constructive sale
transaction or a straddle, non-U.S. persons, persons whose functional currency
is not the U.S. dollar and stockholders of the Company who acquired their stock
pursuant to the exercise of employee stock options or otherwise as compensation.
In addition, no information is provided herein with respect to the tax
consequences of the Merger under state, local or foreign laws. Consequently,
each stockholder of the Company is advised to consult a tax advisor as to the
specific tax consequences of the Merger to such stockholder.
CFS Bancorp, Inc. believes that the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended ("Code"), and that the Company and CFS Bancorp, Inc. will each be a
party to the reorganization under Section 368(b) of the Code. In such case: (i)
no gain or loss will be recognized by the Company or CFS Bancorp, Inc. as a
result of the Merger; (ii) no gain or loss will be recognized by the
shareholders of CFS Bancorp, Inc. upon the conversion of their shares in the
Company into CFS Bancorp, Inc. Shares; (iii) the aggregate tax basis of such a
stockholder's Indiana Shares will be the same as the aggregate tax basis of the
shares of the Company deemed exchanged therefor; and (iv) the holding period of
such a stockholder's Indiana Shares will include the holding period of the
shares of the Company deemed exchanged therefor.
34
AUDITOR FEES AND EXPENSES
AUDIT FEES
The aggregate amount of fees billed by Crowe Chizek and Company LLC for its
audit of the Company's annual financial statements for the fiscal year ended
December 31, 2004 to date is $179,450. The auditor estimates an additional
$10,174 in fees will be incurred in completing the audit. This amount includes
fees related to the auditor's review of the Company's unaudited interim
financial statements that were included in reports filed by the Company under
the Exchange Act during 2004. During 2004, Ernst & Young LLP also billed the
Company $20,000 for fees related to the auditor's review of the Company's
unaudited financial statements that were included in reports filed by the
Company under the Exchange Act in 2004. The aggregate amount of fees billed by
Ernst & Young LLP for its audit of the Company's financial statements for the
fiscal year ended December 31, 2003 was $175,000. This amount includes fees
related to the auditor's review of the Company's unaudited financial statements
that were included in reports filed by the Company under the Exchange Act in
2003. Crowe Chizek and Company LLC also performed services related to the
attestation of management's assessment of internal controls pursuant to Section
404 of the Sarbanes-Oxley Act of 2002. Costs to date for this attestation work
equal $146,681. The auditor estimates that an additional $14,012 in fees will be
incurred to complete this work in 2005. All fees paid to Crowe Chizek and
Company LLC were approved in advance by the Audit Committee.
AUDIT-RELATED FEES
Ernst and Young LLP performed audit-related services during the 2004 and
2003 fiscal years related to the Company's benefit plans. The fees paid to Ernst
& Young LLP were $25,000 and $24,250 for the audit of these benefit plans during
2004 and 2003. Crowe Chizek and Company LLC provided audit-related services
related to the production of templates for use in the Company's internal control
attestation efforts and review of other accounting issues. Total fees paid to
Crowe Chizek and Company LLC in 2004 for such services were $24,705.
TAX SERVICES
The aggregate fees billed by Crowe Chizek and Company LLC for preparing
federal, state and local income tax returns and for other tax-related services
which include tax compliance, advice and planning during fiscal year 2004 were
$9,275. The aggregate fees for Ernst & Young LLP for preparing federal, state
and local income tax returns and for other tax-related services which include
tax compliance, advice and planning during fiscal years 2004 and 2003 were
$59,010 and $58,250, respectively.
ALL OTHER FEES
There were no other fees billed by Crowe Chizek and Company LLC or Ernst &
Young LLP during fiscal years 2004 and 2003, respectively.
PROHIBITED SERVICES
The Company did not engage or pay any fees to its independent auditors with
respect to the provision of any prohibited service, as defined under rules
adopted by the SEC during fiscal 2004 or 2003. Prohibited services include
bookkeeping services, financial information design and implementation, appraisal
or valuation services, actuarial services, internal auditing, outsourcing agent
functions, human resource services, investment banking or advisory services,
legal services, and expert services unrelated to the audit.
On May 24, 2004, the Audit Committee of the Company's Board of Directors
notified Crowe Chizek and Company LLC that they had been engaged to serve as the
Company's independent public accountants and notified Ernst & Young LLP that
they had been dismissed as the Company's independent public accountants. The
appointment of Crowe Chizek and Company LLC and the dismissal of Ernst & Young
LLP were effected by the Audit Committee.
35
Ernst & Young LLP performed audits of the Company's consolidated financial
statements for the years ended December 31, 2003 and 2002. Ernst & Young LLP's
reports did not contain an adverse opinion or a disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope, or accounting
principles. During the two years ended December 31, 2003, and from December 31,
2003 through the effective date of Ernst & Young LLP's termination, there were
no disagreements between the Company and Ernst & Young LLP on any matter of
accounting principles or practice, financial statement disclosure, or auditing
scope or procedure, which disagreements would have caused Ernst & Young LLP to
make reference to the subject matter of such disagreements in connection with
its report. None of the "reportable events" described in Item 304(a)(1)(v) of
Regulation S-K promulgated by the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Exchange Act of 1934, as amended, have occurred
during the two years ended December 31, 2003, or through the effective date of
Ernst & Young LLP's termination.
During the two years ended December 31, 2003, and from December 31, 2003
until the engagement of Crowe Chizek and Company LLC as the Company's
independent accountant, neither the Company nor anyone on its behalf consulted
Crowe Chizek and Company LLC with respect to any accounting or auditing issues
involving the Company. In particular, there was no discussion with the Company
regarding the application of accounting principles to a specified transaction,
the type of audit opinion that might be rendered on the financial statements, or
any matter that was either the subject of a disagreement with Ernst & Young LLP
on accounting principles or practices, financial statement disclosure or
auditing scope or procedures, which, if not resolved to the satisfaction of
Ernst & Young LLP, would have caused Ernst & Young LLP to make reference to the
matter in their report, or a "reportable event" as described in Item
304(a)(1)(v) of the Regulations S-K promulgated by the SEC.
Crowe Chizek and Company LLC will have one or more representatives at the
Annual Meeting who will have the opportunity to make a statement, if they so
desire, and will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any proposal which a shareholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of shareholders of
the Company which is scheduled to be held in April 2006 must be received by the
Corporate Secretary at the principal executive offices of the Company, 707 Ridge
Road, Munster, Indiana 46321, no later than November 25, 2005. If such proposal
is in compliance with all of the requirements of Rule 14a-8 under the 1934 Act,
it will be included in the Proxy Statement and set forth on the form of proxy
issued for such annual meeting of shareholders. It is urged that any such
proposals be sent certified mail, return receipt requested.
Shareholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the 1934 Act may be
brought before the next Annual Meeting pursuant to Section 12 of Article IV of
the New Bylaws or, if the Reincorporation is not completed, Section 2.14 of the
Company's Present Bylaws. Any such proposal must also be received no later than
November 25, 2005.
ANNUAL REPORTS
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K ACCOMPANIES THIS PROXY
STATEMENT. SUCH ANNUAL REPORT IS NOT A PART OF THE PROXY SOLICITATION MATERIALS.
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY SHAREHOLDER
WITHOUT CHARGE AN ADDITIONAL COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
(WITHOUT EXHIBITS) FOR FISCAL 2004 REQUIRED TO BE FILED UNDER THE 1934 ACT. UPON
REQUEST AND THE PAYMENT OF $0.10 (TEN CENTS) PER PAGE, COPIES OF ANY EXHIBIT TO
THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL ALSO BE PROVIDED. ANY SUCH WRITTEN
REQUEST SHOULD BE DIRECTED TO THE COMPANY AT 707 RIDGE ROAD, MUNSTER, INDIANA
46321, ATTENTION: MONICA F. SULLIVAN, VICE PRESIDENT -- CORPORATE SECRETARY. THE
ANNUAL REPORT ON FORM 10-K IS ALSO AVAILABLE VIA A LINK ON THE COMPANY'S WEBSITE
(WWW.CFSBANCORP.COM).
36
OTHER MATTERS
The Board of Directors knows of no additional information that will be
presented for consideration at the Annual Meeting other than the matters
described above in this Proxy Statement. However, if any other matters should
properly come before the meeting, it is intended that the proxies solicited
hereby will be voted with respect to those other matters in accordance with the
judgment of the persons voting the proxies.
By Order of the Board of Directors
/s/ MONICA F. SULLIVAN
Monica F. Sullivan
Vice President -- Corporate Secretary
March 25, 2005
37
APPENDIX A
FORM OF
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made and entered into
this day of , 2005 by and between CFS Bancorp, Inc. ("CFS
Delaware"), a Delaware corporation and CFS Bancorp Indiana, Inc. ("CFS Indiana"
or the "Surviving Corporation"), an Indiana corporation.
WITNESSETH:
WHEREAS, CFS Indiana is an Indiana corporation with its principal place of
business in Munster, Indiana and a wholly-owned subsidiary of CFS Delaware;
WHEREAS, CFS Delaware is a corporation incorporated under the laws of the
state of Delaware with its principal place of business in Munster, Indiana and a
savings and loan holding company;
WHEREAS, CFS Indiana and CFS Delaware desire to effect a transaction
whereby CFS Delaware will merge with and into and under the Articles of
Incorporation of CFS Indiana (the "Merger") and CFS Indiana will survive the
Merger and shall continue its existence under the laws of the State of Indiana;
WHEREAS, the Board of Directors of CFS Indiana has determined that it is
advisable and in the best interest of CFS Indiana to engage in the transactions
contemplated by this Agreement and has unanimously approved this Agreement and
has recommended its approval to CFS Delaware as the sole shareholder of CFS
Indiana; and
WHEREAS, the Board of Directors of CFS Delaware has determined that it is
advisable and in the best interest of CFS Delaware to engage in the transactions
contemplated by this Agreement and has unanimously approved this Agreement and
has recommended its approval to the shareholders of CFS Delaware.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
obligations herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, CFS Indiana and CFS
Delaware hereby make this Agreement and prescribe the terms and conditions of
the merger of CFS Delaware with and into CFS Indiana and the mode of carrying
the transaction into effect as follows:
ARTICLE I
THE MERGER
Upon the terms and subject to the conditions of this Agreement, at the
Effective Time (as defined herein), CFS Delaware shall be merged with and into
and under the Articles of Incorporation of CFS Indiana (the "Merger"). CFS
Indiana shall be the surviving corporation in the Merger (the "Surviving
Corporation") and shall continue its corporate existence under the laws of the
State of Indiana. At the Effective Time, the separate corporate existence of CFS
Delaware shall cease.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 Name and Offices. Upon and following the Effective Time of
the Merger, the name of the Surviving Corporation shall be CFS Bancorp, Inc.,
and the business of the Surviving Corporation shall be the same business
conducted by CFS Delaware immediately prior to the Effective Time. The principal
office of the Surviving Corporation shall be located at 707 Ridge Road, Munster,
Indiana until such time as the Board of Directors designates otherwise.
SECTION 2.2 Directors of the Surviving Corporation. At the Effective
Time, each person who was a director of CFS Delaware immediately prior to the
Effective Time shall become a director of the Surviving
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Corporation and each such person shall serve as a director of the Surviving
Corporation for the balance of the term for which such person was elected as a
director of CFS Delaware and until his or her successor is duly elected and
qualified in the manner provided in the Bylaws or the Articles of Incorporation
of the Surviving Corporation or as otherwise provided by law or until his or her
earlier death, resignation or removal in the manner provided in the Bylaws or
the Articles of Incorporation of the Surviving Corporation or as otherwise
provided by law.
SECTION 2.3 Officers of the Surviving Corporation. At the Effective Time,
each person who was an officer of CFS Delaware immediately prior to the
Effective Time shall become an officer of the Surviving Corporation with each
such person to hold the same office in the Surviving Corporation, in accordance
with the Bylaws thereof, as he or she held in CFS Delaware immediately prior to
the Effective Time until his or her successor is duly elected and qualified in
the manner provided in the Bylaws or the Articles of Incorporation of the
Surviving Corporation or as otherwise provided by law or until his or her
earlier death, resignation or removal in the manner provided in the Bylaws or
the Articles of Incorporation of the Surviving Corporation or as otherwise
provided by law.
SECTION 2.4 Articles of Incorporation and Bylaws.
(a) Articles of Incorporation. The Articles of Incorporation of CFS
Indiana in existence at the Effective Time shall remain the Articles of
Incorporation of the Surviving Corporation following the Effective Time, until
such Articles of Incorporation shall be amended or repealed as provided therein
or by applicable law.
(b) Bylaws. The Bylaws of the Surviving Corporation of CFS Indiana in
existence at the Effective Time shall remain the Bylaws of the Surviving
Corporation following the Effective Time, until such Bylaws shall be amended or
repealed as provided therein or by applicable law.
SECTION 2.5 Effect of the Merger. The effect of the Merger upon
consummation shall be as set forth in the Indiana Business Corporation Law, as
amended.
ARTICLE III
CAPITAL
SECTION 3.1 Manner of Conversion of Shares. Upon and by virtue of the
Merger becoming effective at the Effective Time,
(a) Each share of common stock of CFS Delaware issued and outstanding
immediately prior to the Effective Time shall be converted into one fully paid
and nonassessable share of common stock of CFS Indiana by virtue of the Merger
without any action on the part of the holder thereof; and
(b) Each share of common stock of CFS Indiana issued and outstanding
immediately prior to the Effective Time shall be redeemed, cancelled and retired
and shall cease to exist by virtue of the Merger without any action on the part
of the holder thereof.
SECTION 3.2 Effect of Conversion. At and after the Effective Time, each
share certificate which immediately prior to the Effective Time represented
outstanding shares of common stock of CFS Delaware ("Delaware Certificate")
shall be deemed for all purposes to evidence ownership of, and to represent, the
number of shares of common stock of CFS Indiana into which the shares of common
stock of CFS Delaware represented by such certificate immediately prior to the
Effective Time have been converted pursuant to Section 3.1 hereof. The
registered owner of any Delaware Certificate outstanding immediately prior to
the Effective Time, as such owner appears in the books and records of CFS
Delaware or its transfer agent immediately prior to the Effective Time, shall,
until such certificate is surrendered for transfer or exchange, have and be
entitled to exercise any voting and other rights with respect to and to receive
any dividends or other distributions on the shares of common stock of CFS
Indiana into which the shares represented by any such certificate have been
converted pursuant to Section 3.1 hereof.
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SECTION 3.3 Exchange of Certificate. Each holder of a Delaware
Certificate shall, upon the surrender of such certificate to the Surviving
Corporation or its transfer agent for cancellation after the Effective Time, be
entitled to receive from the Surviving Corporation or its transfer agent a
certificate representing the number of shares of common stock of CFS Indiana
into which the shares of common stock of CFS Delaware represented by such
certificate have been converted pursuant to Section 3.1 hereof.
SECTION 3.4 Stock Options and Incentive Plans. By virtue of the Merger
and without any action on the part of the holder, each right or option to
purchase shares common stock of CFS Delaware granted under CFS Delaware's 1998
Stock Option Plan and 2003 Stock Option Plan (collectively, the "Plans") or
otherwise as to which CFS Delaware or any of its affiliates has assumed or
incurred obligations (hereinafter collectively referred to as the "Options")
which is outstanding immediately prior to the Effective Time shall be converted
into and become a right or option to purchase the same number of shares of
common stock of CFS Indiana at the same option price per share and upon the same
terms and subject to the same conditions as are in effect at the Effective Time.
The Surviving Corporation shall reserve for purposes of the Options a number of
shares of stock, equal to the number of shares of common stock reserved by CFS
Delaware for issuance under the Options as of the Effective Time. As of the
Effective Time, CFS Indiana hereby assumes CFS Delaware's Plans and Options and
all obligations of CFS Delaware under the Options and under such Plans.
SECTION 3.5 Other Employee Benefit Plans. Upon the Effective Time, CFS
Indiana will assume all obligations of CFS Delaware under any and all employee
benefit plans in effect as of the Effective Time or with respect to which
employee rights or accrued benefits are outstanding as of the Effective Time.
ARTICLE IV
CONDITIONS PRECEDENT
The obligation of CFS Indiana and CFS Delaware to consummate the Merger
contemplated by this Agreement is subject to the receipt of all required
approvals of the stockholders of CFS Delaware and the sole shareholder of CFS
Indiana and the receipt of all appropriate orders, consents, approvals and
clearances from all necessary regulatory agencies and governmental authorities
whose orders, consents, approvals or clearances are required by law for
consummation of the Merger.
ARTICLE V
EFFECTIVE TIME
Subject to the terms and upon satisfaction of all requirements of law and
the conditions specified in this Agreement, the Merger shall become effective on
the date and at the time specified in the Articles of Merger filed with the
Indiana Secretary of State.
ARTICLE VI
TERMINATION
SECTION 6.1 Manner of Termination. Notwithstanding approval of this
Agreement by the stockholders of CFS Delaware and the sole shareholder of CFS
Indiana, this Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Effective Time if the Board of
Directors of CFS Indiana and CFS Delaware mutually agree in writing to terminate
this Agreement.
SECTION 6.2 Effect of Termination. Upon termination by written notice,
this Agreement shall be of no further force or effect, and there shall be no
further obligations or liabilities by reason of this Agreement or the
termination thereof on the part of any party hereto or their respective
directors, officers, employees, agents and shareholders, except for payment of
their respective expenses.
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ARTICLE VII
MISCELLANEOUS
SECTION 7.1 Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
SECTION 7.2 Notices. Any notices, request or instruction to be given
hereunder to any party hereto shall be in writing and delivered by hand to the
other party hereto and marked to the attention of the Chairman of the Board or
President of such party.
SECTION 7.3 Amendments; Waivers. No amendments of this Agreement shall be
binding unless executed in writing by all parties hereto. Any waiver of any
provision of this Agreement shall be in writing, and no waiver of any provision
shall be deemed a waiver of any other provision or constitute a continuing
waiver.
SECTION 7.4 Severability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision or
provisions had ever been contained herein.
SECTION 7.5 Governing Law. This Agreement has been executed and delivered
in the State of Indiana and shall be construed and governed in accordance with
the laws of the State of Indiana, without reference to the conflict or choice of
law principles thereof.
SECTION 7.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument.
* * *
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APPENDIX B
ARTICLES OF INCORPORATION
OF
CFS BANCORP, INC.
ARTICLE I
NAME
The name of the Corporation is CFS Bancorp, Inc.
ARTICLE II
RESIDENT AGENT AND PRINCIPAL OFFICE
SECTION 2.1 Resident Agent. The name and address of the Corporation's
Resident Agent for service of process is Brian L. Goins, Senior Vice
President -- Corporate Counsel, 707 Ridge Road, Munster, Indiana 46321.
SECTION 2.2 Principal Office. The post office address of the principal
office of the Corporation is 707 Ridge Road, Munster, Indiana 46321.
ARTICLE III
AUTHORIZED SHARES
SECTION 3.1 Authorized Classes and Number of Shares. The total number of
shares which the Corporation has authority to issue shall be 100,000,000 shares,
consisting of 85,000,000 shares of common stock, $.01 par value per share (the
"Common Stock"), and 15,000,000 shares of preferred stock, $.01 par value (the
"Preferred Stock").
SECTION 3.2 General Terms of All Shares. The Corporation shall have the
power to acquire (by purchase, redemption, or otherwise), hold, own, pledge,
sell, transfer, assign, reissue, cancel, or otherwise dispose of the shares of
the Corporation in the manner and to the extent now or hereafter permitted by
the laws of the State of Indiana (but such power shall not imply an obligation
on the part of the owner or holder of any share to sell or otherwise transfer
such share to the Corporation), including the power to purchase, redeem, or
otherwise acquire the Corporation's own shares, directly or indirectly, and
without pro rata treatment of the owners or holders of any class or series of
shares, unless, after giving effect thereto, the Corporation would not be able
to pay its debts as they become due in the usual course of business or the
Corporation's total assets would be less than its total liabilities (and without
regard to any amounts that would be needed, if the Corporation were to be
dissolved at the time of the purchase, redemption, or other acquisition, to
satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those of the holders of the shares of the
Corporation being purchased, redeemed, or otherwise acquired, unless otherwise
expressly provided with respect to a series of Preferred Stock in the provisions
of these Articles of Incorporation adopted by the Board of Directors pursuant to
Section 3.5 hereof describing the terms of such series). Shares of the
Corporation purchased, redeemed, or otherwise acquired by it shall constitute
authorized but unissued shares, unless prior to any such purchase, redemption,
or other acquisition, or within thirty (30) days thereafter, the Board of
Directors adopts a resolution providing that such shares constitute authorized
and issued but not outstanding shares.
The Board of Directors of the Corporation may dispose of, issue, and sell
shares in accordance with, and in such amounts as may be permitted by, the laws
of the State of Indiana and the provisions of these Articles of Incorporation
and for such consideration, at such price or prices, at such time or times and
upon such terms and conditions (including the privilege of selectively
repurchasing the same) as the Board of Directors of the
B-1
Corporation shall determine, without the authorization or approval by any
shareholders of the Corporation. Shares may be disposed of, issued, and sold to
such persons, firms, or corporations as the Board of Directors may determine.
The Corporation shall have the power to declare and pay dividends or other
distributions upon the issued and outstanding shares of the Corporation, subject
to the limitation that a dividend or other distribution may not be made if,
after giving it effect, the Corporation would not be able to pay its debts as
they become due in the usual course of business or the Corporation's total
assets would be less than its total liabilities (and without regard to any
amounts that would be needed, if the Corporation were to be dissolved at the
time of the dividend or other distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
of the holders of shares receiving the dividend or other distribution, unless
otherwise expressly provided with respect to a series of Preferred Stock in the
provisions of these Articles of Incorporation adopted by the Board of Directors
pursuant to Section 3.5 hereof describing the terms of such series). Except as
otherwise provided in Section 3.4, the Corporation shall have the power to issue
shares of one class or series as a share dividend or other distribution in
respect of that class or series or one or more other classes or series.
SECTION 3.3 Voting Rights of Shares.
(a) Common Stock. Except as otherwise provided by the Indiana Business
Corporation Law (the "Corporation Law") and subject to such shareholder
disclosure and recognition procedures (which may include voting prohibition
sanctions) as the Corporation may by action of its Board of Directors establish,
shares of Common Stock have unlimited voting rights. Shares of Common Stock
shall, when validly issued by the Corporation, entitle the holder thereof to one
(1) vote per share on all matters submitted to a vote of the shareholders of the
Corporation. Shares of Common Stock shall not have cumulative voting rights.
(b) Preferred Stock. Except as required by the Corporation Law or by the
provisions of these Articles of Incorporation adopted by the Board of Directors
pursuant to Section 3.5 hereof describing the terms of the Preferred Stock or a
series thereof, the holders of Preferred Stock shall have no voting rights or
powers. Shares of Preferred Stock shall, when validly issued by the Corporation,
entitle the record holder thereof to vote as and on such matters, but only as
and on such matters, as the holders thereof are entitled to vote under the
Corporation Law or under the provisions of these Articles of Incorporation
adopted by the Board of Directors pursuant to Section 3.5 hereof describing the
terms of the Preferred Stock or a series thereof (which provisions may provide
for special, conditional, limited, or unlimited voting rights, including
multiple or fractional votes per share, or for no right to vote, except to the
extent required by the Corporation Law) and subject to such shareholder
disclosure and recognition procedures (which may include voting prohibition
sanctions) as the Corporation may by action of the Board of Directors establish.
SECTION 3.4 Other Terms of Common Stock.
(a) Distributions.
(1) Shares of Common Stock shall be equal in every respect insofar as
their relationship to the Corporation is concerned, but such equality of
rights shall not imply equality of treatment as to redemption or other
acquisition of shares by the Corporation.
(2) Subject to the rights of the holders of any outstanding Preferred
Stock issued under Section 3.5 hereof, the holders of Common Stock shall be
entitled to share ratably in such dividends or other distributions (other
than purchases, redemptions, or other acquisitions of shares by the
Corporation), if any, as are declared and paid from time to time at the
discretion of the Board of Directors.
(3) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntarily or involuntarily, after payment shall have
been made to the holders of the Preferred Stock of the full amount to which
they shall be entitled under this Article III, the holders of Common Stock
shall be entitled, to the exclusion of the holders of the Preferred Stock
of any and all series, to share, ratably according to the number of shares
held by them, in all remaining assets of the Corporation available for
distribution to its shareholders.
B-2
SECTION 3.5 Other Terms of Preferred Stock.
(a) Preferred Stock may be issued from time to time in one or more series,
each such series to have such distinctive designation and such preferences,
limitations, and relative voting and other rights as shall be set forth in these
Articles of Incorporation. Subject to the requirements of the Corporation Law
and subject to all other provisions of these Articles of Incorporation, the
Board of Directors of the Corporation may create one or more series of Preferred
Stock and may determine the preferences, limitations, and relative voting and
other rights of one or more series of Preferred Stock before the issuance of any
shares of that series by the adoption of an amendment to these Articles of
Incorporation that specifies the terms of the series of Preferred Stock. All
shares of a series of Preferred Stock must have preferences, limitations, and
relative voting and other rights identical with those of other shares of the
same series and, if the description of the series set forth in these Articles of
Incorporation so provides, no series of Preferred Stock need have preferences,
limitations, or relative voting or other rights identical with those of any
other series of Preferred Stock.
Before issuing any shares of a series of Preferred Stock, the Board of
Directors shall adopt an amendment to these Articles of Incorporation, which
shall be effective without any shareholder approval or other action, that sets
forth the preferences, limitations, and relative voting and other rights of the
series, and authority is hereby expressly vested in the Board of Directors, by
such amendment:
(1) To fix the distinctive designation of such series and the number
of shares which shall constitute such series, which number may be increased
or decreased (but not below the number of shares thereof then outstanding)
from time to time by action of the Board of Directors;
(2) To fix the voting rights of such series, which may consist of
special, conditional, limited, or unlimited voting rights, including
multiple or fractional votes per share, or no right to vote (except to the
extent required by the Corporation Law);
(3) To fix the dividend or distribution rights of such series and the
manner of calculating the amount and time for payment of dividends or
distributions, including, but not limited to:
(A) the dividend rate, if any, of such series;
(B) any limitations, restrictions, or conditions on the payment of
dividends or other distributions, including whether dividends or other
distributions shall be noncumulative or cumulative or partially
cumulative and, if so, from which date or dates;
(C) the relative rights of priority, if any, of payment of
dividends or other distributions on shares of that series in relation to
Common Stock and shares of any other series of Preferred Stock; and
(D) the form of dividends or other distributions, which may be
payable at the option of the Corporation, the shareholder, or another
person (and in such case to prescribe the terms and conditions of
exercising such option), or upon the occurrence of a designated event in
cash, indebtedness, stock or other securities or other property, or in
any combination thereof,
and to make provisions, in the case of dividends or other
distributions payable in stock or other securities, for adjustment of the
dividend or distribution rate in such events as the Board of Directors
shall determine;
(4) To fix the price or prices at which, and the terms and conditions
on which, the shares of such series may be redeemed or converted, which may
be
(A) at the option of the Corporation, the shareholder, or another
person or upon the occurrence of a designated event;
(B) for cash, indebtedness, securities, or other property or any
combination thereof; and
(C) in a designated amount or in an amount determined in accordance
with a designated formula or by reference to extrinsic data or events;
B-3
(5) To fix the amount or amounts payable upon the shares of such
series in the event of any liquidation, dissolution, or winding up of the
Corporation and the relative rights of priority, if any, of payment upon
shares of such series in relation to Common Stock and shares of any other
series of special shares; and to determine whether or not any such
preferential rights upon dissolution need be considered in determining
whether or not the Corporation may make dividends, repurchases, or other
distributions;
(6) To determine whether or not the shares of such series shall be
entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of such series and, if so entitled, the amount of such fund and
the manner of its application;
(7) To determine whether or not the issue of any additional shares of
such series or of any other series in addition to such series shall be
subject to restrictions in addition to restrictions, if any, on the issue
of additional shares imposed in the provisions of these Articles of
Incorporation fixing the terms of any outstanding series of Preferred Stock
theretofore issued pursuant to this Section 3.5 and, if subject to
additional restrictions, the extent of such additional restrictions; and
(8) Generally to fix the other preferences or rights, and any
qualifications, limitations, or restrictions of such preferences or rights,
of such series to the full extent permitted by the Corporation Law;
provided, however, that no such preferences, rights, qualifications,
limitations, or restrictions shall be in conflict with these Articles of
Incorporation or any amendment hereof.
(b) Shares of Preferred Stock of any series that have been redeemed
(whether through the operation of a sinking fund or otherwise) or purchased by
the Corporation, or which, if convertible, have been converted into shares of
the Corporation of any other class or series, may be reissued as a part of such
series or of any other series of Preferred Stock, subject to such limitations
(if any) as may be fixed by the Board of Directors with respect to such series
of Preferred Stock in accordance with subsection (a) of this Section 3.5.
SECTION 3.6 Preemptive Rights. No holder of the capital stock of the
Corporation shall be entitled as such, as a matter of right, to subscribe for or
purchase any part of any new or additional issue of stock of any class
whatsoever of the Corporation, or of securities convertible into stock of any
class whatsoever, whether now or hereafter authorized, or whether issued for
cash or other consideration or by way of a dividend.
ARTICLE IV
DIRECTORS
SECTION 4.1 Number of Directors. The number of directors shall be set by
the Bylaws of the Corporation.
SECTION 4.2 Removal of Directors. Any director may be removed from office
with cause by the affirmative vote of the holders of not less than 80% of the
outstanding shares of capital stock of the Corporation entitled to vote on
election of directors at a meeting of shareholders called for that purpose.
Cause for such removal shall be construed to exist only if:
1. The director whose removal is proposed has been either declared
incompetent by an order of a court, convicted, or where a director has been
granted immunity to testify where another has been convicted, of a felony
by court of competent jurisdiction and such conviction is no longer subject
to direct appeal; or
2. Such director has been adjudicated by court of competent
jurisdiction, which adjudication is no longer subject to appeal, to be have
acted willfully or recklessly in the performance of his or her duties as a
director of the Corporation.
At least thirty (30) days prior to such meeting of stockholders, written
notice shall be sent to the director whose removal will be considered at the
meeting. Such removal must be brought within one (1) year of the time within
which such conviction or adjudication is no longer subject to direct appeal.
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SECTION 4.3 Terms of Directors. The Board of Directors shall be divided
into three classes, designated as Class 1, Class 2, and Class 3, as nearly equal
in number as possible, with the term of office of one class expiring each year.
Additional directorships resulting from an increase in number of directors shall
be apportioned among the classes as equally as possible.
The initial term of office of directors of Class 1 shall expire at the
first Annual Meeting of Shareholders after the effective date of these Articles
of Incorporation, but not until their successors shall be elected and qualified,
that of Class 2 shall expire at the second Annual Meeting of Shareholders after
the effective date of these Articles of Incorporation, but not until their
successors shall be elected and qualified, and that of Class 3 shall expire at
the third Annual Meeting of Shareholders after the effective date of these
Articles of Incorporation, but not until their successors shall be elected and
qualified. Subject to the foregoing, at each annual meeting of shareholders the
successors to the class of directors whose term shall then expire shall be
elected to hold office for a term expiring at the third succeeding annual
meeting and until their successors shall be elected and qualified.
ARTICLE V
INCORPORATOR(S)
The name and post office address of the incorporator of the Corporation is:
<Table>
<Caption>
NUMBER AND STREET OR
NAME BUILDING CITY STATE ZIP
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Larry C. Tomlin........................... One Indiana Square Indianapolis Indiana 46204
</Table>
ARTICLE VI
PROVISIONS FOR REGULATION OF BUSINESS
AND CONDUCT OF AFFAIRS OF CORPORATION
SECTION 6.1 Bylaws of the Corporation. The Board of Directors by a
majority vote of the actual number of directors elected and qualified from time
to time shall have the power, without the assent or vote of the shareholders, to
make, alter, amend or repeal the Bylaws of the Corporation.
SECTION 6.2 Indemnification of Directors and Officers.
(a) Definitions. For purposes of this Section, the following terms shall
have the following meanings:
(1) "Liabilities" and "Expenses" shall mean monetary obligations
incurred by or on behalf of a director or officer in connection with the
investigation, defense or appeal of a Proceeding or in satisfying a claim
thereunder and shall include, but shall not be limited to, attorneys' fees,
paralegal fees, court costs, filing fees, fees and costs incurred in
arbitration, mediation or other forms of alternative dispute resolution,
costs of investigations, experts (including, without limitation,
accounting, criminal and forensic experts) and disbursements, amounts of
judgments, fines or penalties, excise taxes assessed with respect to an
employee benefit plan, and amounts paid in settlement by or on behalf of a
director or officer.
(2) "Other Enterprise" shall mean any corporation, partnership,
limited liability company, limited liability partnership, joint venture,
trust, employee benefit plan or other enterprise, whether for profit or
not, for which a director or officer is or was serving, at the request of
the Corporation, as a director, officer, partner, trustee, employee,
manager, member or agent. The phrase "at the request of the Corporation"
shall include a request made by resolution of the Board of Directors or by
action of any corporate officer to any director or other officer of the
Corporation.
(3) "Proceeding" shall mean any claim, action, suit or proceeding
(whether brought against, by or in the right of the Corporation or Other
Enterprise or otherwise), civil, criminal, administrative or investigative,
whether formal or informal, including arbitration, mediation or other forms
of alternative
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dispute resolution and whether actual or threatened or in connection with
an appeal relating thereto, in which a director or officer may become
involved, as a party or otherwise, (i) by reason of his being or having
been a director or officer of the Corporation (and, if applicable, an
officer, employee or agent of the Corporation) or a director, officer,
partner, trustee, employee, manager, member, or agent of an Other
Enterprise or arising out of his status as such, or (ii) by reason of any
past or future action taken or not taken by a director or officer in any
such capacity, whether or not he continues to be such at the time he incurs
Liabilities and Expenses under the Proceeding.
(4) "Standard of Conduct" shall mean that a director or officer, based
on facts then known to the director or officer, discharged the duties as a
director or officer, including duties as a member of a committee, in good
faith in what he reasonably believed to be in or not opposed to the best
interests of the Corporation or Other Enterprise, as the case may be, and,
in addition, in any criminal Proceeding had reasonable cause to believe his
conduct was lawful or had no reasonable cause to believe that his conduct
was unlawful. The termination of any Proceeding, by judgment, order,
settlement (whether with or without court approval) or conviction or upon a
plea of guilty, shall not create a presumption that the director or officer
did not meet the Standard of Conduct. The termination of any Proceeding by
a consent decree or upon a plea of nolo contendere, or its equivalent,
shall create the presumption that the director or officer met the Standard
of Conduct.
(b) Indemnification. If a director or officer is made a party to or
threatened to be made a party to, or is involved as witness or otherwise in any
Proceeding, the Corporation shall indemnify the director or officer against
Liabilities and Expenses incurred by him in connection with such Proceeding in
the following circumstances:
(1) If a director or officer has been wholly successful on the merits
or otherwise with respect to any such Proceeding, he shall be entitled to
indemnification for Liabilities and Expenses as a matter of right. If a
Proceeding is terminated against the director or officer by consent decree
or upon a plea of nolo contendere, or its equivalent, the director or
officer shall not be deemed to have been "wholly successful" with respect
to such Proceeding.
(2) In all other situations, a director or officer shall be entitled
to indemnification for Liabilities and Expenses as a matter of right unless
(i) the director or officer has breached or failed to perform his duties,
or conduct his relationship, with respect to the Corporation or Other
Enterprise as a director or officer in compliance with the Standard of
Conduct and (ii) with respect to any action or failure to act by the
director or officer which is at issue in such Proceeding, such action or
failure to act constituted willful misconduct or recklessness. To be
entitled to indemnification pursuant to this Subparagraph b(2), the
director or officer must notify the Corporation of the commencement of the
Proceeding in accordance with Paragraph (e) and request indemnification. A
review of the request for indemnification and the facts and circumstances
underlying the Proceeding shall be made in accordance with one of the
procedures described below; and the director or officer shall be entitled
to indemnification as a matter of right unless, in accordance with such
procedure, it is determined beyond a reasonable doubt that (i) the director
or officer breached or failed to perform the duties of the office in
compliance with the Standard of Conduct, and (ii) the breach or failure to
perform constituted willful misconduct or recklessness. Any one of the
following procedures may be used to make the review and determination of a
director's or officer's request for indemnification under this Subparagraph
b(2):
(A) by the Board of Directors by a majority vote of a quorum
consisting of directors who are not parties to, or who have been wholly
successful with respect to, such Proceeding;
(B) if a quorum cannot be obtained under (A) above, by a majority
vote of a committee duly designated by the Board of Directors (in the
designation of which, directors who are parties to such Proceeding may
participate), consisting solely of two or more directors who are not
parties to, or who have been wholly successful with respect to, such
Proceeding;
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(C) by independent legal counsel selected by a majority vote of the
full Board of Directors (in which selection, directors who are parties
to such Proceeding may participate) and which may be outside counsel
regularly employed by the Corporation;
(D) by a committee consisting of three (3) or more disinterested
persons selected by a majority vote of the full Board of Directors (in
which selection, directors who are parties to such Proceeding may
participate).
Any determination made in accordance with the above procedures shall be
binding on the Corporation and the director or officer.
(3) If several claims, issues or matters of action are involved, a
director or officer may be entitled to indemnification as to some matters
even though he is not entitled to indemnification as to other matters.
(4) The indemnification herein provided shall be applicable to
Proceedings made or commenced after the adoption of this Section, whether
arising from acts or omissions to act which occurred before or after the
adoption of this Section.
(c) Prepaid Liabilities and Expenses. The Liabilities and Expenses which
are incurred or are payable by a director or officer in connection with any
Proceeding may be paid by the Corporation in advance, promptly after submission
of proper evidence thereof to the Corporation, with the understanding and
agreement between such director or officer and the Corporation, that, in the
event it shall ultimately be determined as provided herein that the director or
officer was not entitled to be indemnified, or was not entitled to be fully
indemnified, the director or officer shall repay to the Corporation such amount,
or the appropriate portion thereof, so paid or advanced.
(d) Exceptions to Indemnification. Notwithstanding any other provisions of
this Section to the contrary, the Corporation shall not indemnify a director or
officer:
(1) for any Liabilities or Expenses incurred in a suit against a
director or officer for an accounting of profits allegedly made from the
purchase or sale of securities of the Corporation brought pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934 and any
amendments thereto or the provisions of any similar federal, state or local
statutory law;
(2) for any Liabilities and Expenses for which payment is actually
made to or on behalf of a director or officer under any valid and
collectible insurance policy, except in respect of any excess beyond the
amount of payment under such insurance policy or policies; or
(3) for any Liabilities or Expenses incurred in a suit or claim
against the director or officer arising out of or based upon actions
attributable to the director or officer in which the director or officer
gained any personal profit or advantage to which he was not legally
entitled.
(e) Notification and Defense of Proceeding. Promptly after receipt by a
director or officer of notice of the commencement of any Proceeding, the
director or officer will, if a request for indemnification in respect thereof is
to be made against the Corporation under this Section, notify the Corporation of
the commencement thereof; but the failure to so notify the Corporation will not
relieve it from any obligation which it may
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have to the director or officer under this Section or otherwise. With respect to
any such Proceeding as to which the director or officer notifies the Corporation
of the commencement thereof:
(1) the Corporation will be entitled to participate therein at its own
expense; and
(2) except as otherwise provided below, to the extent that it may so
desire, the Corporation, jointly with any other indemnifying party
similarly notified, will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to the director or officer. After notice
from the Corporation to the director or officer of its election to assume
the defense of the director or officer in the Proceeding, the Corporation
will not be liable to the director or officer under this Section for any
legal or other Expenses subsequently incurred by the director or officer in
connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. The director or officer shall
have the right to employ counsel in such Proceeding, but the Expenses of
such counsel incurred after notice from the Corporation of its assumption
of the defense thereof shall be at the expense of the director or officer
unless:
(A) the employment of counsel by the director or officer has been
authorized by the Corporation;
(B) the director or officer shall have reasonably concluded that
there may be a conflict of interest between the Corporation and the
director or officer in the conduct of the defense of such Proceeding; or
(C) the Corporation shall not in fact have employed counsel to
assume the defense of such Proceeding;
in each of which cases the Expenses of counsel employed by the director or
officer shall be paid by the Corporation. The Corporation shall not be
entitled to assume the defense of any Proceeding brought by or in the right
of the Corporation or as to which the director or officer shall have made
the conclusion provided for in (B) above; and
(3) The Corporation shall not be liable to indemnify a director or
officer under this Section for any amounts paid in settlement of any
Proceeding without the Corporation's prior written consent. The Corporation
shall not settle any action or claim in any manner which would impose any
penalty or limitation on a director or officer without the director or
officer's prior written consent. Neither the Corporation nor a director or
officer will unreasonably withhold its or his consent to any proposed
settlement.
(f) Enforcement. Any indemnification under the Section shall be made
promptly upon the director or officer being wholly successful on the merits or
otherwise with respect to any Proceeding or upon the determination in accordance
with subparagraph 2(b) of this Section that the director or officer is entitled
to indemnification. Any advancement of Expenses under this Section shall be made
promptly after receipt by the Corporation of a written request from the person
seeking advancement of Expenses including such person's undertaking to repay all
amounts so advanced (as required by subparagraph 3 of this Section). Any right
of a director or officer to indemnification or advancement of Expenses as
granted by this Section may be enforceable by such director or officer in any
court of competent jurisdiction if the Corporation denies such request, in whole
or in part, or if no disposition thereof is made within thirty (30) days after
receipt by the Corporation of request therefor.
(g) Other Rights and Remedies. The rights of indemnification provided
under this Section are not exhaustive and shall be in addition to any rights to
which a director or officer may otherwise be entitled by contract or as a matter
of law. Irrespective of the provisions of this Section, the Corporation may, at
any time and from time to time, indemnify directors, officers, employees and
other persons to the full extent permitted by the provisions of the Indiana
Business Corporation Law, or any successor law, as then in effect, whether with
regard to past or future matters.
(h) Continuation of Indemnity. All obligations of the Corporation under
this Section shall survive the termination of a director's or officer's service
in any capacity covered by this Section.
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(i) Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is was or has agreed to become a director or officer or
any person who is or was serving or has agreed to serve at the request of the
Corporation as a director, officer, partner, trustee or agent of an Other
Enterprise against any liability asserted against such person and incurred by
such person in any capacity or arising out of his status as such, whether or not
the Corporation would have the power to indemnify such person against such
liability under the provisions of applicable statutes, this Section or
otherwise.
(j) Contractual Rights and Applicability. It is the intent of the
subparagraph to empower the Corporation to provide indemnification and
advancement of Expenses to the fullest extent allowed by law. Except as
otherwise expressly provided herein, indemnification shall be provided without
regard to the legal or equitable theory of the Proceeding, including but not
limited to criminal claims, conspiracy claims, joint, several, comparative or
sole negligence, breach of contract or warranty, strict liability, breach of
fiduciary duty, mismanagement, corporate waste, or violation of federal or state
securities law or any other law, regulation or policy. The right to be
indemnified or be reimbursed or advanced Expenses pursuant hereto (i) is a
contract right based upon good and valuable consideration, pursuant to which the
person entitled thereto may bring suit as if the provisions thereof were set
forth in a separate written contract between the person and the Corporation,
(ii) is intended to be retroactive and shall be available with respect to events
occurring prior to the adoption hereof, (iii) shall continue to exist after the
rescission or restrictive modification hereof with respect to events occurring
prior thereto, and (iv) shall inure to the benefit of the heirs and personal
representatives of any present or former director, or officer.
If any portion of this Section shall be invalidated on any ground by any
court of competent jurisdiction, or in any arbitration proceeding, then the
Corporation shall nevertheless indemnify each person entitled to indemnification
or advancement of Expenses under this Section as to all Liabilities and Expenses
actually and reasonably incurred or suffered by such person and for which
indemnification is available to such person pursuant to this Section to the full
extent permitted by any applicable portion of this Section that shall not have
been invalidated and to the fullest extent permitted by applicable law.
(k) Indemnification of Employees and Agents of the Corporation. The
Corporation may, to the extent authorized by the Board of Directors from time to
time, grant rights to indemnification and advancement of Expenses to employees
and agents of the Corporation to the full extent of the provisions of this
Section with respect to the indemnification, of, and advancement of Expenses to,
directors, or officers of the Corporation.
SECTION 6.3 Voting Rights On Certain Business Combinations. The
affirmative vote of the holders of not less than 80% of the outstanding common
stock of the Corporation shall be required to approve any merger or
consolidation of the Corporation with or into any other corporation, any sale,
lease, exchange, or other disposition of any material part of the assets of the
Corporation or of any subsidiary thereof to or with any other corporation,
person, or other entity, or any liquidation or dissolution of the Corporation or
any material subsidiary thereof or adoption of any plan with respect thereto
(hereinafter referred to as a "Business Combination"), which is not recommended
by the vote of two-thirds of the Corporation's directors. All other Business
Combinations will require the affirmative vote of a majority of the outstanding
common stock of the Corporation.
SECTION 6.4 Consideration of Non-Financial Factors. In connection with
the exercise of its judgment in determining what is in the best interest of the
Corporation and its stockholders when evaluating a Business Combination or a
tender or exchange offer, the board of directors of the Corporation shall, in
addition to considering the adequacy of the amount to be paid in connection with
any such transactions, consider all of the following factors and any other
factors which it deems relevant:
(i) The social and economic effects of the transaction on the
Corporation and its subsidiaries, employees, depositors, loan and other
customers, creditors and other elements of the communities in which the
Corporation and its subsidiaries operate or are located;
(ii) The business and financial condition and earnings prospects of
the acquiring person or persons, including, but not limited to, debt
service and other existing or likely financial obligations of the acquiring
person or persons, and the possible effect of such conditions upon the
Corporation and its subsidiaries and
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the other elements of the communities in which the Corporation and its
subsidiaries operate or are located; and
(iii) The competence, experience, and integrity of the acquiring
person or persons and its or their management.
ARTICLE VII
RESTRICTIONS ON OFFERS AND ACQUISITIONS
OF THE CORPORATION'S EQUITY SECURITIES
SECTION 7.1 Definitions.
(a) Acquire. The term "Acquire" includes every type of acquisition,
whether effected by purchase, exchange, operation of law or otherwise.
(b) Acting in Concert. The term "Acting in Concert" means (i) knowing
participation in a joint activity or conscious parallel action towards a common
goal whether or not pursuant to an express agreement, or (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.
(c) Affiliate. An "Affiliate" of, or a Person "affiliated with," a
specified Person, means 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.
(d) Associate. The term "Associate" used to indicate a relationship with
any Person means:
(1) Any corporation or organization (other than the Corporation or a
Subsidiary of the Corporation), or any subsidiary or parent thereof, of
which such Person is a director, officer or partner or is, directly or
indirectly, the Beneficial Owner of 10% or more of any class of equity
securities;
(2) Any trust or other estate in which such Person has a 10% or
greater beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity, provided, however, such term shall not
include any employee stock benefit plan of the Corporation or a Subsidiary
of the Corporation in which such Person has a 10% or greater beneficial
interest or serves as a trustee or in a similar fiduciary capacity;
(3) 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 Corporation or a Subsidiary of the Corporation (or any
subsidiary or parent thereof); or
(4) Any investment company registered under the Investment Company Act
of 1940 for which such Person or any Affiliate or Associate of such Person
serves as investment advisor.
(e) Beneficial Owner (including Beneficially Owned). A Person shall be
considered the "Beneficial Owner" of any shares of stock (whether or not owned
of record):
(1) With respect to which such Person or any Affiliate or Associate of
such Person directly or indirectly has or shares (A) voting power,
including the power to vote or to direct the voting of such shares of
stock, and/or (B) investment power, including the power to dispose of or to
direct the disposition of such shares of stock;
(2) Which such Person or any Affiliate or Associate of such Person has
(A) the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, and/or (B) the right to vote pursuant to
any agreement, arrangement or understanding (whether such right is
exercisable immediately or only after the passage of time); or
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(3) Which are Beneficially Owned within the meaning of (1) or (2) of
this Article VII, Section 7.1(e) by any other Person with which such
first-mentioned Person or any of its Affiliates or Associates either (A)
has any agreement, arrangement or understanding, written or oral, with
respect to acquiring, holding, voting or disposing of any shares of stock
of the Corporation or any Subsidiary of the Corporation or acquiring,
holding or disposing of all or substantially all, or any Substantial Part,
of the assets or business of the Corporation or a Subsidiary of the
Corporation, or (B) is Acting in Concert. For the purpose only of
determining whether a Person is the Beneficial Owner of a percentage
specified in this Article VII of the outstanding Voting Shares, such shares
shall be deemed to include any Voting Shares which may be issuable pursuant
to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants, options or otherwise and
which are deemed to be Beneficially Owned by such Person pursuant to the
foregoing provisions of this Article VII, Section 7.1(e), but shall not
include any other Voting Shares which may be issuable in such manner.
(f) Offer. The term "Offer" shall mean every offer to buy or acquire,
solicitation of an offer to sell, tender offer or request or invitation for
tender of, a security or interest in a security for value; provided that the
term "Offer" shall not include (i) inquiries directed solely to the management
of the Corporation and not intended to be communicated to stockholders which are
designed to elicit an indication of management's receptivity to the basic
structure of a potential acquisition with respect to the amount of cash and or
securities, manner of acquisition and formula for determining price, or (ii)
non-binding expressions of understanding or letters of intent with the
management of the Corporation regarding the basic structure of a potential
acquisition with respect to the amount of cash and or securities, manner of
acquisition and formula for determining price.
(g) Person. The term "Person" shall mean any individual, partnership,
corporation, limited liability company, association, trust, group or other
entity. When two or more Persons act as a partnership, limited partnership,
syndicate, association or other group for the purpose of acquiring, holding or
disposing of shares of stock, such partnership, syndicate, associate or group
shall be deemed a "Person."
(h) Substantial Part. The term "Substantial Part" as used with reference
to the assets of the Corporation or of any Subsidiary means assets having a
value of more than 10% of the total consolidated assets of the Corporation and
its Subsidiaries as of the end of the Corporation's most recent fiscal year
ending prior to the time the determination is being made.
(i) Subsidiary. "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by the Person in
question.
(j) Voting Shares. "Voting Shares" shall mean shares of the Corporation
entitled to vote generally in an election of directors.
(k) Certain Determinations With Respect to Article VII. A majority of the
directors shall have the power to determine for the purposes of this Article
VII, on the basis of information known to them and acting in good faith: (i) the
number of Voting Shares of which any Person is the Beneficial Owner, (ii)
whether a Person is an Affiliate or Associate of another Person, (iii) whether a
Person has an agreement, arrangement or understanding with another as to the
matters referred to in the definition of "Beneficial Owner" as hereinabove
defined, and (iv) such other matters with respect to which a determination is
required under this Article VII. Any such determinations made by the Board of
Directors of the Corporation pursuant to this Article VII shall be conclusive
and binding upon the Corporation and its stockholders. In order to carry out its
responsibilities under this Article VII, the Board of Directors shall have the
right to demand that any person who is reasonably believed to be the Beneficial
Owner of Excess Shares shall supply the Corporation with complete information as
to (x) the record owners of all shares of equity securities Beneficially Owned
by such Person and (y) any other factual matter relating to the applicability or
effect of this Article VII as may be reasonably requested by the Board of
Directors.
(1) Directors, Officers or Employees. Directors, officers or employees
of the Corporation or any Subsidiary thereof shall not be deemed to be a
group with respect to their individual acquisitions of any class of equity
securities of the Corporation solely as a result of their capacities as
such.
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SECTION 7.2 Restrictions. No Person shall directly or indirectly Offer to
Acquire or Acquire the Beneficial Ownership of (i) more than 10% of the issued
and outstanding shares of any class of an equity security of the Corporation, or
(ii) any securities convertible into, or exercisable for, any equity securities
of the Corporation if, assuming conversion or exercise by such Person of all
securities of which such Person is the Beneficial Owner which are convertible
into, or exercisable for, such equity securities (but of no securities
convertible into, or exercisable for, such equity securities of which such
Person is not the Beneficial Owner), such Person would be the Beneficial Owner
of more than 10% of any class of an equity security of the Corporation.
SECTION 7.3 Exclusions. The foregoing restrictions shall not apply to (i)
any Offer with a view toward public resale made exclusively to the Corporation
by underwriters or a selling group acting on its behalf, (ii) any tax-qualified
employee benefit plan or arrangement established by the Corporation and any
trustee of such a plan or arrangement, and (iii) any other Offer or acquisition
approved in advance by the affirmative vote of two-thirds of the Corporation's
entire Board of Directors (including any vacancies).
SECTION 7.4 Remedies. In the event that shares are Acquired in violation
of this Article VII, all shares Beneficially Owned by any Person in excess of
10% shall be considered "Excess Shares" and (i) 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 matters submitted to stockholders for a vote, (ii)
the Corporation is authorized to refuse to recognize a transfer or attempted
transfer of any shares of the Corporation's equity securities to any Person who
is the Beneficial Owner, or as the result of such transfer would become the
Beneficial Owner, of Excess Shares and (iii) the Board of Directors may cause
such Excess Shares to be transferred to an independent trustee for sale on the
open market or otherwise, with the expenses of such trustee to be paid out of
the proceeds of the sale.
For purposes of ensuring compliance with Article VII, Section 7.2, in the
event any partnership, corporation, limited liability company, association or
trust is deemed to Beneficially Own more than 5% of any class of the
Corporation's stock, either by itself or together with one or more other Persons
who is an Affiliate of or Acting in Concert with such entity or who is a member
of any group with such entity with respect to the Corporation's stock, then the
Corporation shall be entitled upon written request to such entity to receive
information regarding the name and address of, and the class and number of
shares of Corporation stock which are Beneficially Owned by, each partner in
such partnership, each director, executive officer and stockholder in such
corporation, each member in such limited liability company or association, and
each trustee and beneficiary of such trust, and in each case each Person
controlling such entity and each partner, director, executive officer,
stockholder, member or trustee of any entity which is ultimately in control of
such partnership, corporation, limited liability company, association or trust.
SECTION 7.5 Severability. In the event any provision (or portion thereof)
of this Article VII shall be found to be invalid, prohibited or unenforceable
for any reason, the remaining provisions (or portions thereof) of this Article
VII shall remain in full force and effect, and shall be construed as if such
invalid, prohibited or unenforceable provision had been stricken herefrom or
otherwise rendered inapplicable, it being the intent of this Corporation and its
stockholders that each such remaining provision (or portion thereof) of this
Article VII remain, to the fullest extent permitted by law, applicable and
enforceable as to all stockholders.
ARTICLE VIII
MISCELLANEOUS
The Corporation elects not to have the provisions of IC sec. 23-1-43 apply
to it.
IN WITNESS WHEREOF, the undersigned, as the Incorporator of CFS Bancorp,
Inc., has hereby executed these Articles of Incorporation as of this 3rd day of
March, 2005.
By: /s/ LARRY C. TOMLIN, ESQ.
------------------------------------
Larry C. Tomlin, Esq., Incorporator
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APPENDIX C
BYLAWS
OF
CFS BANCORP, INC.
ARTICLE I
SECTION 1. Name. The name of the corporation is CFS Bancorp, Inc. (the
"Corporation").
SECTION 2. Registered Office and Registered Agent. The street address of
the Registered Office of the Corporation is 707 Ridge Road, Munster, Indiana
46321 and the name of its Registered Agent at that office is Citizens Financial
Services, FSB.
SECTION 3. Seal. Unless otherwise required by law, the Corporation shall
not be required to use a seal. If the Board of Directors of the Corporation
determines that the Corporation shall use a seal, the seal shall be in such form
and bear such inscription as may be adopted by resolution of the Board of
Directors, or by usage of the officers on behalf of the Corporation.
SECTION 4. Certain References. All references in these Bylaws to the
Indiana Business Corporation Law (the "Act") shall mean and include the
provisions of Indiana Business Corporation Law in effect on the date that these
Bylaws are adopted by the Board of Directors of the Corporation and as such law
thereafter may be amended and be in effect from time to time, and including any
successor to such law. All references in these Bylaws to the Articles of
Incorporation of the Corporation shall mean and include the Articles of
Incorporation in effect on the date that these Bylaws are adopted by the Board
of Directors of the Corporation and as such Articles of Incorporation thereafter
may be amended and be in effect from time to time.
ARTICLE II
FISCAL YEAR
The fiscal year of the Corporation shall begin each year on the first day
of January and end on the last day of December of the same year.
ARTICLE III
CAPITAL STOCK
SECTION 1. Number of Shares and Classes of Capital Stock. The total
number of shares and classes of capital stock which the Corporation shall have
authority to issue shall be as set forth in the Corporation's Articles of
Incorporation from time to time.
SECTION 2. Consideration for Shares. The shares of capital stock of the
Corporation shall be issued or sold in such manner and for such amount of
consideration, received or to be received, as may be fixed from time to time by
the Board of Directors. Upon payment of the consideration fixed by the Board of
Directors, such shares of stock shall be fully paid and nonassessable.
SECTION 3. Payment for Shares. The consideration determined by the Board
of Directors to be required for the issuance of shares of capital stock of the
Corporation may consist of any tangible or intangible property or benefit to the
Corporation, including cash, promissory notes, services performed, contracts for
services to be performed or other securities of the Corporation.
If the Board of Directors authorizes the issuance of shares for promissory
notes or for promises to render services in the future, the Corporation shall
report in writing to the shareholders the number of shares authorized to be so
issued with or before the notice of the next shareholders meeting.
The Corporation may place in escrow shares issued for a contract for future
services or benefits or a promissory note, or make other arrangements to
restrict the transfer of the shares, and may credit distributions
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in respect of the shares against their purchase price, until the services are
performed, the note is paid, or the benefits received. If the services are not
performed, the note is not paid or the benefits are not received, the shares
escrowed or restricted and the distributions credited may be cancelled in whole
or in part.
When payment of the consideration for which a share was authorized to be
issued shall have been received by the Corporation, such share shall be declared
and taken to be fully paid and not liable to any further call or assessment, and
the holder thereof shall not be liable for any further payments thereon. In the
absence of actual fraud in the transaction, the judgment of the Board of
Directors as to the value of such property, labor or services received as
consideration, or the value placed by the Board of Directors upon the corporate
assets in the event of a share dividend, shall be conclusive.
SECTION 4. Certificates for Shares. The Board of Directors may authorize
the issuance of stock certificates to each holder of capital stock of the
Corporation. If the Board of Directors determines to issue stock certificates,
such stock certificates shall be signed by the Chairman of the Board, President
or Vice President and the Secretary of the Corporation. The stock certificates
shall state the number of shares represented by such certificate and that such
shares are fully paid and nonassessable, provided, that if such shares are not
fully paid, the certificates shall be legibly stamped to indicate which has been
paid, and as further payments are made, the certificate shall be stamped
accordingly.
SECTION 5. Transfer of Shares. The Corporation may impose restrictions on
the transfer or registration of transfer of capital stock of the Corporation by
means of these Bylaws, the Articles of Incorporation or an agreement with
shareholders. Shareholders may agree between or among themselves to impose
restrictions on the transfer or registration of transfer of shares. A
restriction which is authorized by the Act is valid and enforceable against the
holder or a transferee of the holder of the Corporation's stock certificate.
SECTION 6. Registered Shareholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its shareholder records
as the owner of shares of capital stock of the Corporation to receive dividends
and distributions, to vote as such owner, to hold liable for calls and
assessments and to treat as owner of such shares in all other respects, and
shall not be bound to recognize any equitable or other claims to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Indiana. Shareholders shall be responsible for notifying in
writing any officer of the Corporation of any changes in their addresses from
time to time, and failure to do so shall relieve the Corporation and its
shareholders, directors, officers, employees and agents of liability for failure
to direct notices, dividends, distributions and other documents or property to
an address other than the one appearing upon the records of the Corporation.
SECTION 7. Lost, Stolen or Destroyed Certificates. The Corporation may
issue a new certificate of stock in place of any certificate previously issued
by it which is alleged to have been lost, stolen or destroyed, and the
Corporation may require the owner of the lost, stolen or destroyed certificate,
or his legal representative, to give the Corporation a bond sufficient to
indemnify it against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
SECTION 8. Fractional Shares or Scrip. The Corporation may (a) issue
fractions of a share which shall entitle the holder to exercise voting rights,
to receive dividends thereon and to participate in any of the assets of the
Corporation in the event of liquidation; (b) arrange for the disposition of
fractional interests by those entitled thereto; (c) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
shares are determined; or (d) issue scrip in registered or bearer form which
shall entitle the holder to receive a certificate for a full share upon the
surrender of such scrip aggregating a full share.
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ARTICLE IV
MEETINGS OF SHAREHOLDERS
SECTION 1. Place of Meeting. Meetings of shareholders of the Corporation
shall be held at such place, within or outside the State of Indiana, as may from
time to time be designated by the Board of Directors, or as may be specified in
the notices or waivers of notice of such meetings.
SECTION 2. Annual Meeting. The annual meeting of shareholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on such day and at such time as
determined by the Board of Directors and stated in the notice of such.
SECTION 3. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by the Act or by the
Articles of Incorporation, may be called only by the Board of Directors pursuant
to a resolution approved by the affirmative vote of at least three-fourths of
the Directors then in office.
SECTION 4. Organization. Each meeting of the shareholders shall be
presided over by the Chairman of the Board, or in his absence by the President,
or in their absences, any other individual selected by the Board of Directors.
The Secretary, or in his absence a temporary Secretary, shall act as secretary
of each meeting of the shareholders. In the absence of the Secretary and any
temporary Secretary, the chairman of the meeting may appoint any person present
to act as secretary of the meeting. The chairman of any meeting of the
shareholders shall announce the date and time of the opening and the closing of
the polls for each matter upon which the shareholders will vote at a meeting
and, unless prescribed by law or regulation or unless the Board of Directors has
otherwise determined, shall determine the order of the business and the
procedure at the meeting, including such regulation of the manner of voting and
the conduct of discussions as seem to him in order.
SECTION 5. Notice of Meetings. A written or printed notice, stating the
date, time and place of the meeting, and in case of a special meeting, or when
required by any provision of the Act or of the Articles of Incorporation or
these Bylaws, the purpose or purposes for which the meeting is called, shall be
delivered or mailed by the Secretary, or by the officers or persons calling the
meeting, to each shareholder of record entitled by the Articles of Incorporation
and by the Act to vote at such meeting, at such address as appears upon the
records of the Corporation, at least ten (10) days and not more than sixty (60)
days before the date of the meeting. Notice of any such meeting may be waived in
writing by any shareholder before or after the date and time of the meeting, if
the waiver sets forth in reasonable detail the purpose or purposes for which the
meeting is called and the time and place thereof. Attendance at any such meeting
in person, or by proxy, shall constitute a waiver of notice of such meeting.
Each shareholder who has in the manner above provided waived notice of a
shareholders meeting, who personally attends a shareholders meeting or who is
represented at a shareholders meeting by a proxy authorized to appear by an
instrument of proxy, shall be conclusively presumed to have been given due
notice of such meeting. Notice of any adjourned meeting of shareholders shall
not be required to be given if the date, time and place thereof are announced at
the meeting at which the adjournment is taken, except as may be expressly
required by the Act.
SECTION 6. Addresses of Shareholders. The address of any shareholder
appearing on the shareholder records of the Corporation shall be deemed to be
the latest address of such shareholder for the class of stock held by such
shareholder.
SECTION 7. Voting at Meetings.
(a) Quorum. The holders of record of at least a majority of the issued and
outstanding capital stock of the Corporation entitled to vote at such meeting,
present in person or by proxy, shall constitute a quorum at all meetings of
shareholders for the transaction of business, except where otherwise provided by
the Act, the Articles of Incorporation or these Bylaws. In the absence of a
quorum, any officer entitled to preside at, or act as secretary of, such meeting
shall have the power to adjourn the meeting from time to time until a quorum
shall be constituted. At any such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at the
original meeting, but only those shareholders entitled to
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vote at the original meeting shall be entitled to vote at any adjournment or
adjournments thereof unless a new record date is fixed by the Board of Directors
for the adjourned meeting.
(b) Voting Rights. Except as otherwise provided by the Act or by the
provisions of the Articles of Incorporation, each shareholder shall have the
right at every meeting of shareholders to one (1) vote on all matters coming
before the meeting (including, without limitation, the election of directors)
for each share of stock of the Corporation having voting power registered in his
or her name on the records of the Corporation on the date for the determination
of shareholders entitled to vote. At any meeting of shareholders, every
shareholder having the right to vote shall be entitled to vote in person, or by
proxy executed in writing by the shareholder or a duly authorized
attorney-in-fact and bearing a date not more than eleven (11) months prior to
its execution, unless a longer time is expressly provided therein or by law.
(c) Required Vote. In all matters other than the election of directors,
the affirmative vote of the majority of shares present in person or represented
by proxy at the meeting and entitled to vote on the subject matter shall be the
act of the shareholders. Directors shall be elected by a plurality of the votes
of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. If, at any meeting of the
shareholders, due to a vacancy or vacancies or otherwise, directors of more than
one class of the Board of Directors are to be elected, each class of directors
to be elected at the meeting shall be elected in a separate election by a
plurality vote.
(d) Validity of a Vote, Consent, Waiver or Proxy Appointment. If the name
on a vote, consent, waiver or proxy appointment corresponds to the name of a
shareholder, the Corporation if acting in good faith may accept the vote,
consent, waiver or proxy appointment and give it effect as the act of the
shareholder. The Corporation may reject a vote, consent, waiver or proxy
appointment if the authorized tabulation officer, acting in good faith, has a
reasonable basis for doubt about the validity of the signature or the
signatory's authority. If so accepted or rejected, the Corporation, its
directors and officers and the tabulation officer are not liable in damages to
the shareholder for any consequences of the rejection. Any of the Corporation's
actions based on an acceptance or rejection of a vote, consent, waiver or proxy
appointment under this Section is valid unless a court of competent jurisdiction
determines otherwise.
SECTION 8. Voting List. The Secretary of the Corporation shall make
before each meeting of shareholders a complete list of the shareholders entitled
by the Articles of Incorporation to vote at such meeting, arranged in
alphabetical order, with the address and number of shares so entitled to vote
held by each shareholder. Such list shall be produced and kept open at the time
and place of the meeting of shareholders and be subject to the inspection of any
shareholder during the holding of such meeting.
SECTION 9. Fixing of Record Date to Determine Shareholders Entitled to
Vote. The Board of Directors may prescribe a period not exceeding sixty (60)
days prior to each meeting of shareholders, during which no transfer of stock on
the books or records of the Corporation may be made; or, in lieu of prohibiting
the transfer of stock may fix a date and time not more than sixty (60) days
prior to the holding of any meeting of shareholders as the time as of which
shareholders entitled to notice of, and to vote at, such meeting shall be
determined, and all persons who are holders of record of voting stock at such
time, and no others, shall be entitled to notice of, and to vote at, such
meeting. Any determination of shareholders entitled to notice of or to vote at a
shareholders meeting is effective for any adjournment of the meeting unless the
Board of Directors fixes a new record date, which is only required if the
meeting is adjourned to a date more than one hundred twenty (120) days after the
date fixed for the original meeting.
SECTION 10. Voting of Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, whether fiduciaries,
members of a partnership, joint tenants, tenants in common, tenants by the
entirety or otherwise, or if two or more persons have the same fiduciary
relationship respecting the same shares, unless the Secretary of the Corporation
is given written notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein it is
so provided, at any meeting of the shareholders of the Corporation any one or
more of such shareholders may cast, in person or by proxy, all votes to which
such ownership is entitled. In the event an attempt is made to cast conflicting
votes, in person or by proxy, by the several persons in whose names shares of
stock stand, the vote or votes to which those persons are entitled shall be cast
as directed by a majority of those holding such
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stock and present in person or by proxy at such meeting, but no votes shall be
cast for such stock if a majority cannot agree.
SECTION 11. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by an officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy, but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name. Shares standing in the name of a receiver
may be voted by such receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer thereof into his
name if authority to do so is contained in an appropriate order of the court or
other public authority by which such receiver was appointed. A shareholder whose
shares are pledged shall be entitled to vote such shares until the shares have
been transferred into the name of the pledgee, and thereafter the pledge shall
be entitled to vote the shares so transferred.
SECTION 12. Proposals. At an annual meeting of the shareholders, only
such business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, or (b) otherwise properly brought
before the meeting by a shareholder. For business to be properly brought before
an annual meeting by a shareholder, the shareholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely a
shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not later than 120 days prior to
the anniversary date of the mailing of proxy materials by the Corporation in
connection with the immediately preceding annual meeting of shareholders of the
Corporation. A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the annual meeting (a) a
description of the business desired to be brought before the annual meeting, (b)
the name and address, as they appear on the Corporation's books, of the
shareholder proposing such business, (c) the class and number of shares of
Corporation stock which are Beneficially Owned (as defined in Article VII,
Section 7.1(e) of the Corporation's Articles of Incorporation) by the
shareholder submitting the notice, by any Person who is Acting in Concert with
or who is an Affiliate or Associate of such shareholder (as such capitalized
terms are defined in Article VII, Section 7.1 of the Corporation's Articles of
Incorporation), by any Person who is a member of any group with such shareholder
with respect to the Corporation stock or who is known by such shareholder to be
supporting such proposal on the date the notice is given to the Corporation, and
by each Person who is in control of, is controlled by or is under common control
with any of the foregoing Persons (if any of the foregoing Persons is a
partnership, corporation, limited liability company, association or trust,
information shall be provided regarding the name and address of, and the class
and number of shares of Corporation stock which are Beneficially Owned by, each
partner in such partnership, each director, executive officer and shareholder in
such corporation, each member in such limited liability company or association,
and each trustee and beneficiary of such trust, and in each case each Person
controlling such entity and each partner, director, executive officer,
shareholder, member or trustee of any entity which is ultimately in control of
such partnership, corporation, limited liability company, association or trust),
(d) the identification of any person retained or to be compensated by the
shareholder submitting the proposal, or any person acting on his or her behalf,
to make solicitations or recommendations to shareholders for the purpose of
assisting in the passage of such proposal and a brief description of the terms
of such employment, retainer or arrangement for compensation, and (e) any
material interest of the shareholder in such business. The chairman of an annual
meeting shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting in accordance with the
provisions of this Article IV, Section 12, and if he should so determine, he
shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted. This provision is not a limitation
on any other applicable laws and regulations.
SECTION 13. Inspectors. For each meeting of shareholders, the Board of
Directors shall appoint one or more inspectors of election, who shall make a
written report of such meeting. If for any meeting the inspector(s) appointed by
the Board of Directors shall be unable to act or the Board of Directors shall
fail to
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appoint any inspector, one or more inspectors shall be appointed at the meeting
by the chairman thereof. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his ability. An
inspector or inspectors shall (i) ascertain the number of shares outstanding and
the voting power of each, (ii) determine the shares represented at a meeting and
the validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors and (v) certify their
determination of the number of shares represented at the meeting and their count
of all votes and ballots. The date and time of the opening and the closing of
the polls for each matter upon which the shareholders will vote at a meeting
shall be announced at the meeting by the chairman thereof. An inspector or
inspectors shall not accept a ballot, proxy or vote, nor any revocations thereof
or changes thereto, after the closing of the polls (unless a court of competent
jurisdiction upon application by a shareholder shall determine otherwise) and
may appoint or retain other persons or entities to assist them in the
performance of their duties. Inspectors need not be shareholders and may not be
nominees for election as directors.
ARTICLE V
BOARD OF DIRECTORS
SECTION 1. Election, Number; Term of Office; Qualifications. One (1)
class of directors shall be elected at each annual meeting of shareholders by
the holders of the shares of capital stock entitled by the Articles of
Incorporation to elect directors.
The number of directors of the Corporation to be elected by the holders of
the shares of capital stock entitled by the Articles of Incorporation to elect
directors shall be seven (7) unless changed by resolution of the Board of
Directors.
Directors of the Corporation shall serve staggered terms in accordance with
the Articles of Incorporation of the Corporation. All directors, except in the
case of earlier resignation, removal or death, shall hold office until the third
succeeding annual meeting of shareholders following their election and until
their respective successors are duly elected and qualified. A director of the
Corporation is not required to be a shareholder of the Corporation in order to
be qualified to serve as a director. No person shall be eligible for nomination
or election as a director who has attained or will attain the age of 70 in the
calendar year of such nomination or election.
SECTION 2. Vacancies. Any vacancy occurring in the Board of Directors
shall be filled in the manner provided in the Company's Articles of
Incorporation.
SECTION 3. Annual Meeting of Directors. The Board of Directors shall meet
each year, either within or outside the State of Indiana, immediately after the
annual meeting of the shareholders, at the same place where such meeting of the
shareholders has been held for the purpose of organization, election of officers
and consideration of any other business that may properly come before the
meeting. No notice of any kind to either old or new members of the Board of
Directors for such annual meeting shall be necessary.
SECTION 4. Regular Meetings. Regular meetings of the Board of Directors,
if any, shall be held at such times and places, either within or outside the
State of Indiana, as may be fixed by the directors. Such regular meetings of the
Board of Directors may be held without notice or upon such notice as may be
fixed by the directors.
SECTION 5. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, President or by a majority of the
authorized number of Directors. Notice of the date, time and place, either
within or outside the State of Indiana, of a special meeting shall be personally
delivered, telephoned, telegraphed, telexed, faxed or otherwise electronically
delivered to each director at least twenty-four (24) hours prior to the time of
the meeting, or sent by overnight courier or postage prepaid mail to each
director at his usual place of business or residence at least five (5) days
hours prior to the time of the meeting. Directors, in lieu of such notice, may
sign a written waiver of notice either before the time of the meeting, at
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the meeting or after the meeting. Attendance by a director in person at any such
special meeting shall constitute a waiver of notice unless the director at the
beginning of the meeting (or promptly upon the director's arrival) objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
SECTION 6. Conference Telephone Meetings. A member of the Board of
Directors may participate in a meeting of the Board by means of a conference
telephone or similar communications equipment by which all persons participating
in the meeting can communicate with each other, and participation by these means
constitutes presence in person at the meeting.
SECTION 7. Quorum. A majority of the entire Board of Directors shall be
necessary to constitute a quorum for the transaction of any business of the
Corporation, and the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
A director, who is present at a meeting of the Board of Directors or a committee
of the Board of Directors, at which action on any corporate matter is taken,
shall be conclusively presumed to have assented to the action taken, unless (a)
he or she objects at the beginning of the meeting (or promptly upon his or her
arrival) to holding the meeting or transacting business at the meeting, (b) his
or her dissent or abstention from the action taken is entered in the minutes of
the meeting, or (c) he or she delivers written notice of his or her dissent or
abstention to the presiding officer of the meeting before its adjournment or to
the Secretary of the Corporation immediately after adjournment of the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
SECTION 8. Consent to Action by Directors. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if one (1) or more written
consents describing the action taken are signed by all members of the Board of
Directors or such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board of Directors or committee or
filed with the corporate records reflecting the action taken. Action taken under
this Section is effective when the last director signs the consent, unless the
consent specifies a different, prior or subsequent effective date.
SECTION 9. Resignations. Any director may resign at any time by giving
written notice to the Board of Directors, to the President or to the Secretary
of the Corporation. Any such resignation shall take effect upon receipt of such
notice or at any later time specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 10. Dividends and Distributions. The Board of Directors shall
have the power, subject to any restrictions and limitations contained in the Act
or in the Articles of Incorporation, to declare and pay dividends and
distributions upon the outstanding capital stock of the Corporation to its
shareholders as and when they deem expedient.
SECTION 11. Fixing of Record Date to Determine Shareholders Entitled to
Receive Corporate Benefits. The Board of Directors may fix a record date,
declaration date and payment date with respect to any dividend or distribution
to the Corporation's shareholders. If no record date is fixed for the
determination of shareholders entitled to receive payment of a dividend or
distribution, the end of the day on which the resolution of the Board of
Directors declaring such dividend or distribution is adopted shall be the record
date for such determination.
SECTION 12. Committees. The Board of Directors may, by resolution adopted
by the unanimous vote of all of the directors elected and qualified from time to
time and then in office, designate from among its members an executive committee
and/or one or more other committees, each of which, to the extent provided in
the resolution, the Articles of Incorporation or these Bylaws, may exercise all
of the authority of the Board of Directors of the Corporation. However, no such
committee has the authority to (a) authorize distributions (except a committee
may authorize or approve a reacquisition of shares if done according to a
formula or method, or within a range, prescribed by the Board of Directors), (b)
approve or propose to shareholders
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action that the Act requires to be approved by shareholders, (c) fill vacancies
on the Board of Directors or any of its committees, (d) amend the Articles of
Incorporation, (e) adopt, amend or repeal the Bylaws, (f) approve a plan of
merger not requiring shareholder approval, or (g) authorize or approve the
issuance or sale or a contract for sale of shares of capital stock of the
Corporation, or determine the designation and relative rights, preferences and
limitations of a class or series of shares, except the Board of Directors may
authorize a committee to take the action described in this subsection within
limits prescribed by the Board of Directors. No member of any such committee
shall continue to be a member thereof after he ceases to be a director of the
Corporation.
SECTION 13. Remuneration. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors, a stated
salary as director and/or such other compensation as may be fixed by the Board
of Directors. Members of special or standing committees may be allowed like
compensation for serving on committees of the Board of Directors. No such
payments shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
SECTION 14. Nominations of Directors. Subject to the rights of holders of
any class or series of stock having a preference over the common stock as to
dividends or upon liquidation, nominations for the election of directors may be
made by the Board of Directors or committee appointed by the Board of Directors
or by any shareholder entitled to vote generally in an election of directors.
However, any shareholder entitled to vote generally in an election of directors
may nominate one or more persons for election as directors at a meeting only if
written notice of such shareholder's intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid to the Secretary of the Corporation, which notice is
delivered to or received by the Secretary not later than (i) 120 days prior to
the anniversary date of the mailing of proxy materials by the Corporation in
connection with the immediately preceding annual meeting of shareholders of the
Corporation and (ii) with respect to an election to be held at a special meeting
of shareholders for the election of directors, the close of business on the
tenth day following the date on which notice of such meeting is first given to
shareholders. Each such notice shall set forth: (a) the name, age, business
address and residence address of the shareholder who intends to make the
nomination and of the person or persons to be nominated; (b) the principal
occupation or employment of the shareholder submitting the notice and of each
person being nominated; (c) the class and number of shares of Corporation stock
which are Beneficially Owned (as defined in Article VII, Section 7.1(e) of the
Corporation's Articles of Incorporation) by the shareholder submitting the
notice, by any Person who is Acting in Concert with or who is an Affiliate or
Associate of such shareholder (as such capitalized terms are defined in Article
VII, Section 7.1 of the Corporation's Articles of Incorporation), by any Person
who is a member of any group with such shareholder with respect to the
Corporation stock or who is known by such shareholder to be supporting such
nominee(s) on the date the notice is given to the Corporation, by each person
being nominated, and by each Person who is in control of, is controlled by or is
under common control with any of the foregoing Persons (if any of the foregoing
Persons is a partnership, corporation, limited liability company, association or
trust, information shall be provided regarding the name and address of, and the
class and number of shares of Corporation stock which are Beneficially Owned by,
each partner in such partnership, each director, executive officer and
shareholder in such corporation, each member in such limited liability company
or association, and each trustee and beneficiary of such trust, and in each case
each Person controlling such entity and each partner, director, executive
officer, shareholder, member or trustee of any entity which is ultimately in
control of such partnership, corporation, limited liability company, association
or trust); (d) a representation that the shareholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (e) a description of all arrangements or understandings between
the shareholder and each nominee and any arrangements or understandings between
the shareholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the shareholder; (f) such other information regarding the shareholder
submitting the notice and each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission; and (g) the consent of each nominee
to serve as a
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director of the Corporation if so elected. The presiding officer of the meeting
may refuse to acknowledge the nomination of any person not made in compliance
with the foregoing procedures.
ARTICLE VI
OFFICERS
SECTION 1. Principal Officers. The principal officers of the Corporation
shall be a Chairman of the Board, President, a Vice President and a Secretary.
The Corporation may also have, at the discretion of the Board of Directors, such
other subordinate officers, none of whom shall be principal officers of the
Corporation, as may be appointed in accordance with the provisions of these
Bylaws. The same individual may hold more than one office at any time, and a
single individual may hold all of the offices at any time except the offices of
President and Secretary.
SECTION 2. Election and Term of Office. The principal officers of the
Corporation shall be chosen annually by the Board of Directors at the annual
meeting thereof. Each such officer shall hold office until his or her successor
shall have been duly elected and qualified, or until his or her earlier death,
resignation or removal from office.
SECTION 3. Removal of Principal Officers. Any principal officer may be
removed, either with or without cause, at any time, by resolution adopted by the
unanimous vote of the actual number of directors elected and qualified from time
to time and then in office.
SECTION 4. Subordinate Officers. In addition to the principal officers
enumerated in Section 1 of this Article VI, the Corporation may have one or more
Assistant Secretaries and such other officers, employees and agents as the Board
of Directors may deem necessary, each of whom shall hold office for such period,
may be removed with or without cause and have such authority and perform such
duties as the Board of Directors or any principal officer of the Corporation may
from time to time determine. The Board of Directors may delegate to any
principal officer the power to appoint and to remove any such subordinate
officers, employees or agents.
SECTION 5. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors, to the President or to the Secretary
of the Corporation. Any such resignation shall take effect upon receipt of such
notice or at any later time specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 6. Vacancies. Any vacancy in any office for any cause may be
filled for the unexpired portion of the term by the Board of Directors at any
regular or special meeting.
SECTION 7. Chairman of the Board. The Chairman of the Board, who shall be
chosen from among the Directors, shall be the Chief Executive Officer of the
Corporation and as such shall have general responsibility for the affairs of the
Corporation, subject to the control of the Board of Directors. Subject to the
control and direction of the Board of Directors, the Chairman and Chief
Executive Officer may enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation. In general, he shall
perform all duties and have all the powers incident to the office of Chief
Executive Officer and all such other duties and powers as, from time to time,
may be assigned to him by the Board of Directors.
SECTION 8. President. The President, unless otherwise determined by the
Board of Directors, shall, in the absence or disability of the Chairman of the
Board, perform the duties and exercise the powers of the Chairman of the Board.
Subject to the control and direction of the Board of Directors, the President
may enter into any agreement and may execute and deliver any agreement,
instrument or document in the name and on behalf of the Corporation. In general,
he or she shall perform all duties and have all the powers incident to the
office of President and all such other duties and powers as, from time to time,
may be assigned to him or her by the Board of Directors.
SECTION 9. Vice President. The Vice President, unless otherwise
determined by the Board of Directors, shall, in the absence or disability of the
President, perform the duties and exercise the powers of the
C-9
President. In general, he or she shall perform such other duties and have such
other powers as are incident to the office of Vice President, as the case may
be, and such other duties as may, from time to time, be assigned by the Board of
Directors.
SECTION 10. Secretary. The Secretary shall prepare and shall keep or
cause to be kept in the books provided for that purpose the minutes of the
meetings of the shareholders and of the Board of Directors; shall duly give and
serve all notices required to be given in accordance with the provisions of
these Bylaws and by the Act; shall be custodian of the records and of the seal
(if one is required) of the Corporation and see that the seal is affixed to all
documents, the execution of which on behalf of the Corporation under its seal is
required by law or the Board of Directors; shall authenticate records of the
Corporation; and, in general, shall perform all duties incident to the office of
Secretary and such other duties as may, from time to time, be assigned to him or
her by the Board of Directors.
SECTION 11. Salaries. The salaries of the principal officers of the
Corporation shall be fixed from time to time by the Board of Directors, and the
salaries of any subordinate officers may be fixed by the President.
SECTION 12. Voting Corporation's Securities. Unless otherwise ordered by
the Board of Directors, the President is appointed attorney and agent of the
Corporation and shall have full power and authority in the name and on behalf of
the Corporation, to attend, to act and to vote all partnership and ownership
interests, stock or other securities entitled to be voted at any meetings of
partners, limited liability companies or security holders of any partnerships,
corporations, limited liability companies or other entities in which the
Corporation may hold partnership or ownership interests, stock or other
securities, in person or by proxy, as a partner, owner, shareholder or
otherwise, and at such meetings shall possess and may exercise any and all
rights and powers incident to the ownership of such partnership or ownership
interests, stock or other securities, and which as the owner thereof might have
possessed and exercised if present, and to consent in writing to any action by
any such other partnership, limited liability company, corporation or entity.
The President is authorized to vote such interests, stock and other securities
by written consent in lieu of a meeting. The Board of Directors by resolution
from time to time may confer like powers upon any other person or persons.
SECTION 13. Bonds. The Board of Directors may, by resolution, require any
and all of the officers to give bonds to the Corporation, with sufficient surety
or sureties, conditions for the faithful performance of the duties of their
respective offices, and to comply with such other conditions as may from time to
time be required by the Board of Directors.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
SECTION 1. Indemnification. The Corporation shall provide indemnification
to its directors, officers, employees, agents and former directors, officers,
employees and agents and to others in accordance with the Corporation's Articles
of Incorporation.
ARTICLE VIII
AMENDMENTS
SECTION 1. Amendments. The power to make, alter, amend or repeal these
Bylaws is vested in the Board of Directors, but the unanimous affirmative vote
of all of the directors elected and qualified from time to time and then in
office shall be necessary to effect any alteration, amendment or repeal of these
Bylaws.
SECTION 2. Emergency Bylaws. The Board of Directors may adopt emergency
Bylaws, subject to repeal or change by action of the shareholders, which shall
be operative during any national or local emergency.
C-10
ARTICLE IX
ELECTION NOT TO BE SUBJECT TO THE CONTROL SHARE ACQUISITION STATUTE
The Corporation elects not to have the provisions of IC sec. 23-1-42 apply
to it.
* * *
C-11
[CFS BANCORP, INC. LOGO]
CORDIALLY INVITES YOU TO ATTEND THE
ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, APRIL 26, 2005, 10:00 A.M. CENTRAL TIME
CENTER FOR VISUAL AND PERFORMING ARTS
1040 RIDGE ROAD, MUNSTER, INDIANA
See the reverse side of this sheet for instructions.
COMPLETE BOTH SIDES OF PROXY CARD,
DETACH AND RETURN IN THE ENCLOSED ENVELOPE TO:
Illinois Stock Transfer Co.
209 West Jackson Boulevard, Suite 903
Chicago, Illinois 60606
DETACH ATTENDANCE CARD HERE AND MAIL WITH
DETACH PROXY CARD HERE PROXY CARD
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF THE PROXY CARD IS RETURNED AND
PROPERLY SIGNED AND NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF THE BOARD OF DIRECTORS' NOMINEES TO THE BOARD OF DIRECTORS, FOR
THE PROPOSAL TO REINCORPORATE THE COMPANY IN THE STATE OF INDIANA, AND OTHERWISE
AT THE DISCRETION OF THE PROXY HOLDERS. IF YOU DO NOT RETURN THIS CARD, YOUR
SHARES WILL NOT BE VOTED. YOU MAY REVOKE THIS PROXY ANY TIME PRIOR TO THE TIME
IT IS VOTED AT THE ANNUAL MEETING.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting. As of March 25, 2005, the Board
of Directors knows of no other business to be presented at the Annual Meeting.
The undersigned hereby acknowledges receipt of the Notice of the Annual Meeting
of Shareholders of CFS Bancorp, Inc. called for April 26, 2005, the accompanying
Proxy Statement, and the accompanying Annual Report on Form 10-K prior to the
signing of this Proxy.
Dated: ______________________
VOTER CONTROL NUMBER
ABOVE NAME HERE Signature:______________________
Signature:______________________
PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME(S) APPEARS ON THIS PROXY. WHEN
SHARES OF THE COMPANY ARE HELD BY JOINT TENANTS, BOTH TENANTS SHOULD SIGN. WHEN
SIGNING THE PROXY AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, OR GUARDIAN,
PLEASE GIVE THE FULL TITLE OF SUCH. IF THE SHARES ARE OWNED BY A CORPORATION,
PLEASE SIGN THE PROXY USING THE FULL CORPORATE NAME, BY THE PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP OR OTHER ENTITY OWNS THE SHARES, PLEASE
HAVE AN AUTHORIZED PERSON SIGN ON BEHALF OF THE PARTNERSHIP OR OTHER ENTITY.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
CFS BANCORP, INC.
If you plan to personally attend the Annual Meeting of Shareholders on April 26,
2005, please check the box and list the names of attendees below.
Return this stub in the enclosed envelope with your completed proxy card.
I/We plan to attend the Annual Meeting. [ ]
Names of persons attending:
___________________________________
___________________________________
TO VOTE BY MAIL
To vote by mail, complete both sides, sign and date the proxy card below. Detach
the card below and return it in the envelope provided.
TO VOTE BY TELEPHONE
Your telephone vote is quick, confidential and immediate. Just follow these
easy steps:
1. Read the accompanying Proxy Statement.
2. Using a Touch-Tone telephone, call Toll Free 1-800-555-8140 and follow
the instructions.
3. When asked for your Voter Control Number, enter the number printed just
above your name on the front of the proxy card below.
Please note that all votes cast by telephone must be COMPLETED and SUBMITTED
prior to Monday, April 25, 2005 at 11:59 PM Central Time.
Your telephone vote authorizes the named proxies to vote your shares to the
same extent as if you marked, signed, dated and returned the proxy card.
If You Vote By TELEPHONE, Please Do Not Return Your Proxy Card By Mail.
TO VOTE BY INTERNET
Your Internet vote is quick, confidential and immediate. Just follow these
easy steps:
1. Read the accompanying Proxy Statement.
2. Visit our Internet voting site at http://www.eproxyvote.com/ist-cfscm/
and follow the instructions on the screen.
3. When prompted for your Voter Control Number, enter the number printed
just above your name on the front of the proxy card below.
Please note that all votes cast by Internet must be COMPLETED and SUBMITTED
prior to Monday, April 25, 2005 at 11:59 PM Central Time.
Your Internet vote authorizes the named proxies to vote your shares to the
same extent as if you marked, signed, dated and returned the proxy card.
THIS IS A "SECURED" WEB PAGE SITE. YOUR SOFTWARE AND/OR INTERNET PROVIDER
MUST BE "ENABLED" TO ACCESS THIS SITE.
PLEASE CALL YOUR SOFTWARE OR INTERNET PROVIDER FOR FURTHER INFORMATION.
If You Vote By INTERNET, Please Do Not Return Your Proxy Card By Mail.
CFS BANCORP, INC. REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CFS BANCORP, INC.
FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 26, 2005 AND
AT ANY ADJOURNMENT THEREOF.
The undersigned hereby appoints the Board of Directors of CFS Bancorp, Inc.
("The Company") or any successors thereto, as proxies, with full power of
substitution, to represent and vote, as designated below, all shares of common
stock of the Company held of record by the undersigned on March 4, 2005 at the
Annual Meeting of Shareholders to be held at the Center for Visual and
Performing Arts, located at 1040 Ridge Road, Munster, Indiana, on Tuesday, April
26, 2005 at 10:00 a.m. Central Time and at any adjournment thereof.
1. Election of Directors
Nominees for three-year terms expiring in 2008 and until their successors are
elected and qualified:
01 Gregory W. Blaine 02 Robert R. Ross 03 Joyce M. Simon
[ ] FOR ALL [ ] WITHHOLD ALL [ ] FOR ALL EXCEPT
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE OF THE NOMINEES,
MARK "FOR ALL EXCEPT" AND WRITE THE NAME OF SUCH NOMINEE(S) IN THE SPACE
PROVIDED BELOW.)
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES LISTED ABOVE.
2. PROPOSAL to reincorporate the Company in the State of Indiana.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE REINCORPORATION OF
THE COMPANY IN THE STATE OF INDIANA.
(to be signed on the other side)
March 25, 2005
Dear Plan Participant,
As described in the attached materials, your voting instructions as a
stockholder of CFS Bancorp, Inc. (the "Company") are being solicited in
connection with the proposals to be considered at the Company's upcoming Annual
Meeting of Stockholders to be held on April 26, 2005. We hope you will take
advantage of the opportunity to direct the manner in which shares of Common
Stock of the Company allocated to your account(s) as a participant in the
Company's employee benefit plans will be voted.
Enclosed with this letter is a copy of the Company's latest Corporate
Report, Annual Report on Form 10-K, Proxy Statement describing the matters to be
voted upon, voting instruction ballot(s) that will permit you to vote the shares
allocated to your account(s), and a return envelope. You will receive separate
voting instruction ballots for each Plan in which you participate. After you
have reviewed the enclosed materials, we urge you to vote the shares allocated
to you in the Plan(s) by marking, dating, signing and returning the enclosed
voting instruction ballot(s) to the tabulator in the accompanying envelope. Your
instructions must be received by the tabulator on or before noon on April 25,
2005. Please return a ballot for each plan in which you participate. The
tabulator will keep your vote confidential.
We urge each of you to vote, as a means of participating in the
governance of the affairs of the Company. If your voting instructions are not
received, the shares allocated to your account(s) pursuant to the Plan(s) will
not be voted. While we hope that you will vote in the manner recommended by the
Board of Directors, the most important thing is that you vote in whatever manner
you deem appropriate. Please take a moment to do so.
Please note that the enclosed material relates only to those shares
which have been allocated to your account under the Company's Plans. You may
receive other voting material for shares otherwise owned by you individually and
not under the Plans.
Best regards,
CFS BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
VOTING INSTRUCTION BALLOT FOR THE
CITIZENS FINANCIAL SERVICES, FSB
EMPLOYEES' SAVINGS & PROFIT SHARING PLAN (401(k) PLAN)
Participant:<<Name>>
<<SSNo>>
Number of Shares:<<Shares>>
The undersigned hereby instructs the Trustee of the Citizens Financial Services,
FSB Employees' Savings & Profit Sharing Plan ("Plan") to vote, as designated
below, all the shares of Common Stock of CFS Bancorp, Inc. ("Company") that were
allocated to my account pursuant to the Plan as of March 4, 2005 upon the
following proposals to be presented at the Annual Meeting of Stockholders of the
Company on April 26, 2005 and at any adjournment thereof.
1. Election of Directors
Nominees for three year terms expiring in 2008 or until their successors are
elected and qualified:
Gregory W. Blaine Robert R. Ross Joyce M. Simon
[ ] FOR ALL [ ] WITHHOLD ALL [ ] FOR ALL EXCEPT
INSTRUCTIONS: To withhold authority to vote for one or more of the nominees,
mark "For All Except" and write the name of such nominee(s) in the space
provided below.
---------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES
LISTED ABOVE.
2. PROPOSAL to reincorporate the Company in the State of Indiana.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO
REINCORPORATE THE COMPANY IN THE STATE OF INDIANA.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting. As of March 25, 2005, the Board
of Directors knows of no other business to be presented at the Annual Meeting.
SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF DIRECTORS. THE COMPANY'S BOARD
OF DIRECTORS RECOMMENDS YOU VOTE FOR THE ELECTION OF THE NOMINATED DIRECTORS AND
FOR THE PROPOSAL TO REINCORPORATE THE COMPANY IN THE STATE OF INDIANA.
Dated , 2005
- -------------------------------------- ------------
Signature
IF YOU RETURN THIS CARD PROPERLY SIGNED BUT DO NOT OTHERWISE SPECIFY, YOUR
SHARES WILL BE VOTED FOR THE NOMINEES SPECIFIED ABOVE. IF YOU DO NOT RETURN THIS
CARD, YOUR SHARES WILL NOT BE VOTED.
CFS BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
VOTING INSTRUCTION BALLOT FOR THE
CFS BANCORP, INC. ESOP
Participant:<<Name>>
<<SSNo>>
Number of Shares:<<Shares>>
The undersigned hereby instructs the Trustee of the CFS Bancorp, Inc. Employee
Stock Ownership Plan ("Plan") to vote, as designated below, all the shares of
Common Stock of CFS Bancorp, Inc. ("Company") that were allocated to my account
pursuant to the Plan as of March 4, 2005 upon the following proposals to be
presented at the Annual Meeting of Stockholders of the Company on April 26, 2005
and at any adjournment thereof.
1. Election of Directors
Nominees for three year terms expiring in 2008 or until their successors are
elected and qualified:
Gregory W. Blaine Robert R. Ross Joyce M. Simon
[ ] FOR ALL [ ] WITHHOLD ALL [ ] FOR ALL EXCEPT
INSTRUCTIONS: To withhold authority to vote for one or more of the nominees,
mark "For All Except" and write the name of such nominee(s) in the space
provided below.
----------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES
LISTED ABOVE.
2. PROPOSAL to reincorporate the Company in the State of Indiana.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO
REINCORPORATE THE COMPANY IN THE STATE OF INDIANA.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting. As of March 25, 2005, the Board
of Directors knows of no other business to be presented at the Annual Meeting.
SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF DIRECTORS. THE COMPANY'S BOARD
OF DIRECTORS RECOMMENDS YOU VOTE FOR THE ELECTION OF THE NOMINATED DIRECTORS AND
FOR THE PROPOSAL TO REINCORPORATE THE COMPANY IN THE STATE OF INDIANA.
Dated , 2005
- ---------------------------------- -------------
Signature
IF YOU RETURN THIS CARD PROPERLY SIGNED BUT DO NOT OTHERWISE SPECIFY, YOUR
SHARES WILL BE VOTED FOR THE NOMINEES SPECIFIED ABOVE. IF YOU DO NOT RETURN THIS
CARD, YOUR SHARES WILL NOT BE VOTED.
CFS BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
VOTING INSTRUCTION BALLOT FOR THE
1998 RECOGNITION AND RETENTION PLAN
Participant:<<Name>>
<<SSNo>>
Number of Shares:<<Shares>>
The undersigned hereby instructs the Trustee of the 1998 Recognition and
Retention Plan ("RRP") of CFS Bancorp, Inc. to vote, as designated below, all
the shares of Common Stock of CFS Bancorp, Inc. ("Company") that were allocated
to my account pursuant to the RRP as of March 4, 2005 upon the following
proposals to be presented at the Annual Meeting of Stockholders of the Company
on April 26, 2005 and at any adjournment thereof.
1. Election of Directors
Nominees for three year terms expiring in 2008 or until their successors are
elected and qualified:
Gregory W. Blaine Robert R. Ross Joyce M. Simon
[ ] FOR ALL [ ] WITHHOLD ALL [ ] FOR ALL EXCEPT
INSTRUCTIONS: To withhold authority to vote for one or more of the nominees,
mark "For All Except" and write the name of such nominee(s) in the space
provided below.
----------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES
LISTED ABOVE.
2. PROPOSAL to reincorporate the Company in the State of Indiana.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO
REINCORPORATE THE COMPANY IN THE STATE OF INDIANA.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting. As of March 25, 2005, the Board
of Directors knows of no other business to be presented at the Annual Meeting.
SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF DIRECTORS. THE COMPANY'S BOARD
OF DIRECTORS RECOMMENDS YOU VOTE FOR THE ELECTION OF THE NOMINATED DIRECTORS AND
FOR THE PROPOSAL TO REINCORPORATE THE COMPANY IN THE STATE OF INDIANA.
Dated , 2005
- ---------------------------------- -------------
Signature
IF YOU RETURN THIS CARD PROPERLY SIGNED BUT DO NOT OTHERWISE SPECIFY, YOUR
SHARES WILL BE VOTED FOR THE NOMINEES SPECIFIED ABOVE. IF YOU DO NOT RETURN THIS
CARD, YOUR SHARES WILL NOT BE VOTED.