Douglas Savings Bank
Arlington Heights, Illinois
AMENDED PLAN OF CONVERSION
From Mutual to Stock Form of Organization
I. GENERAL
The Board of Directors of Douglas Savings Bank (the "Bank") has adopted
a plan to convert the Bank's mutual charter from an Illinois to a federal
charter. On February 4, 1998, the Board of Directors of the Bank adopted a Plan
of Conversion whereby the Bank would convert from a mutual savings institution.
The Plan includes, as part of the conversion, the concurrent formation of a
holding company, to be named in the future. The Plan provides that
non-transferable subscription rights to purchase Holding Company Conversion
Stock will be offered first to Eligible Account Holders of record as of the
Eligibility Record Date, then to the Bank's Tax-Qualified Employee Plans, then
to Supplemental Eligible Account Holders of record as of the Supplemental
Eligibility Record Date, then to Other Members, and then to directors, officers
and employees. Concurrently with, at any time during, or promptly after the
Subscription Offering, and on a lowest priority basis, an opportunity to
subscribe may also be offered to the general public in a Direct Community
Offering, a Public Offering or both. The price of the Holding Company Conversion
Stock will be based upon an independent appraisal of the Bank and will reflect
its estimated pro forma market value, as converted. It is the desire of the
Board of Directors of the Bank to attract new capital to the Bank in order to
increase its capital, support future savings growth and increase the amount of
funds available for residential and other mortgage lending. The Converted Bank
is also expected to benefit from its management and other personnel having a
stock ownership in its business, since stock ownership is viewed as an effective
performance incentive and a means of attracting, retaining and compensating
management and other personnel. No change will be made in the Board of Directors
or management as a result of the Conversion.
II. DEFINITIONS
Acting in Concert: The term "acting in concert" shall have the same
meaning given it in ss.574.2(c) of the Rules and Regulations of the OTS.
Actual Subscription Price: The price per share, determined as provided
in Section V of the Plan, at which Holding Company Conversion Stock will be sold
in the Subscription Offering.
Affiliate: An "affiliate" of, or a Person "affiliated" with, a
specified Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by or is under common control with,
the Person specified.
Associate: The term "associate," when used to indicate a relationship
with any Person, means (i) any corporation or organization (other than the
Holding Company, the Bank or a majority-owned subsidiary of the Holding Company)
of which such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of ten percent or more of any class of equity securities, (ii)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity, and (iii) any relative or spouse of such Person, or
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any relative of such spouse, who has the same home as such Person or who is a
director or officer of the Holding Company or the Bank or any subsidiary of the
Holding Company; provided, however, that any Tax-Qualified or Non-Tax-Qualified
Employee Plan shall not be deemed to be an associate of any director or officer
of the Holding Company or the Bank, to the extent provided in Section V hereof.
Bank: Douglas Savings Bank or such other name as the institution may
adopt.
Conversion: Change of the Bank's charter and bylaws to federal stock
charter and bylaws; sale by the Holding Company of Holding Company Conversion
Stock; and issuance and sale by the Converted Bank of Converted Bank Common
Stock to the Holding Company, all as provided for in the Plan.
Converted Bank: The federally chartered stock savings institution
resulting from the Conversion of the Bank in accordance with the Plan.
Deposit Account: Any withdrawable or repurchasable account or deposit
in the Bank including Savings Accounts and demand accounts.
Direct Community Offering: The offering to the general public of any
unsubscribed shares which may be effected as provided in Section V hereof.
Eligibility Record Date: The close of business on January 31, 1997.
Eligible Account Holder: Any Person holding a Qualifying Deposit in the
Bank on the Eligibility Record Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Holding Company: A corporation which upon completion of the Conversion
will own all of the outstanding common stock of the Converted Bank, and the name
of which will be selected in the future.
Holding Company Conversion Stock: Shares of common stock, par value
$.01 per share, to be issued and sold by the Holding Company as a part of the
Conversion; provided, however, that for purposes of calculating Subscription
Rights and maximum purchase limitations under the Plan, references to the number
of shares of Holding Company Conversion Stock shall refer to the number of
shares offered in the Subscription Offering.
Local Community: The geographic area encompassing Cook County,
Illinois.
Market Maker: A dealer (i.e., any Person who engages directly or
indirectly as agent, broker or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
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competitive bid and offer quotations in a recognized inter-dealer quotation
system; or (ii) furnishes bona fide competitive bid and offer quotations on
request; and (iii) is ready, willing, and able to effect transactions in
reasonable quantities at his quoted prices with other brokers or dealers.
Maximum Subscription Price: The price per share of Holding Company
Conversion Stock to be paid initially by subscribers in the Subscription
Offering.
Member: Any Person or entity that qualifies as a member of the Bank
pursuant to its charter and bylaws.
Non-Tax-Qualified Employee Plan: Any defined benefit plan or defined
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan or other plan, which with
its related trust does not meet the requirements to be "qualified" under Section
401 of the Internal Revenue Code.
OTS: Office of Thrift Supervision, Department of the Treasury, and its
successors.
Officer: An executive officer of the Holding Company or the Bank,
including the Chairman of the Board, President, Executive Vice Presidents,
Senior Vice Presidents in charge of principal business functions, Secretary and
Treasurer.
Order Forms: Forms to be used in the Subscription Offering to exercise
Subscription Rights.
Other Members: Members of the Bank, other than Eligible Account
Holders, Tax-Qualified Employee Plans or Supplemental Eligible Account Holders,
as of the Voting Record Date.
Person: An individual, a corporation, a partnership, an association, a
joint-stock company, a trust, any unincorporated organization, or a government
or political subdivision thereof.
Plan: This Plan of Conversion of the Bank, including any amendment
approved as provided in this Plan.
Public Offering: The offering for sale to selected members of the
general public of any shares of Holding Company Conversion Stock not subscribed
for in the Subscription Offering or the Direct Community Offering, if any.
Public Offering Price: The price per share at which any unsubscribed
shares of Holding Company Conversion Stock are initially offered for sale in the
Public Offering.
Qualifying Deposit: The aggregate balance of $50 or more of each
Deposit Account (which, in accordance with ss.563b(e), includes demand deposit
accounts as well as Savings Accounts)of an Eligible Account Holder as of the
Eligibility Record Date or of a Supplemental Eligible Account Holder as of the
Supplemental Eligibility Record Date.
SAIF: Savings Association Insurance Fund.
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Savings Account: The term "Savings Account" means any withdrawable
account in the Bank except a demand account.
SEC: Securities and Exchange Commission.
Special Meeting: The Special Meeting of Members called for the purpose
of considering and voting upon the Plan of Conversion.
Subscription Offering: The offering of shares of Holding Company
Conversion Stock for subscription and purchase pursuant to Section V of the
Plan.
Subscription Rights: Non-transferable, non-negotiable, personal rights
of the Bank's Eligible Account Holders, Tax-Qualified Employee Plans,
Supplemental Eligible Account Holders, Other Members, and directors, Officers
and employees to subscribe for shares of Holding Company Conversion Stock in the
Subscription Offering.
Supplemental Eligibility Record Date: The last day of the calendar
quarter preceding approval of the Plan by the OTS.
Supplemental Eligible Account Holder: Any person holding a Qualifying
Deposit in the Bank (other than an officer or director and their associates) on
the Supplemental Eligibility Record Date.
Tax-Qualified Employee Plans: Any defined benefit plan or defined
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan or other plan, which with
its related trust meets the requirements to be "qualified" under Section 401 of
the Internal Revenue Code.
Voting Record Date: The date set by the Board of Directors in
accordance with federal regulations for determining Members eligible to vote at
the Special Meeting.
III. STEPS PRIOR TO SUBMISSION OF PLAN OF CONVERSION TO THE MEMBERS FOR
APPROVAL
Prior to submission of the Plan of Conversion to its Members for
approval, the Bank must receive from the OTS approval of the Application for
Approval of Conversion to convert to the federal stock form of organization. The
following steps must be taken prior to such regulatory approval:
A. The Board of Directors shall adopt the Plan by not less than a
two-thirds vote.
B. The Bank shall notify its Members of the adoption of the Plan by
publishing a statement in a newspaper having a general circulation in
each community in which the Bank maintains an office.
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C. Copies of the Plan adopted by the Board of Directors shall be made
available for inspection at each office of the Bank.
D. The Bank will promptly cause an Application for Approval of Conversion
on Form AC to be prepared and filed with the OTS, an Application on
Form H-(e)1 (or other applicable form) to be prepared and filed with
the OTS and a Registration Statement on Form S-1 to be prepared and
filed with the SEC.
E. Upon receipt of notice from the OTS to do so, the Bank shall notify
its Members that it has filed the Application for Approval of
Conversion by posting notice in each of its offices and by publishing
notice in a newspaper having general circulation in each community in
which the Bank maintains an office.
IV. CONVERSION PROCEDURE
Following approval of the application by the OTS, the Plan will be
submitted to a vote of the Members at the Special Meeting. If the Plan is
approved by Members holding a majority of the total number of votes entitled to
be cast at the Special Meeting, the Bank will take all other necessary steps
pursuant to applicable laws and regulations to convert to a federal stock
savings institution as part of a concurrent holding company formation pursuant
to the terms of the Plan.
The Holding Company Conversion Stock will be offered for sale in the
Subscription Offering at the Maximum Subscription Price to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders,
Other Members and directors, Officers and employees of the Bank, prior to or
within 45 days after the date of the Special Meeting. The Bank may, either
concurrently with, at any time during, or promptly after the Subscription
Offering, also offer the Holding Company Conversion Stock to and accept
subscriptions from other Persons in a Direct Community and/or Public Offering;
provided that the Bank's Eligible Account Holders, Tax- Qualified Employee
Plans, Supplemental Eligible Account Holders, Other Members and directors,
Officers and employees shall have the priority rights to subscribe for Holding
Company Conversion Stock set forth in Section V of this Plan. However, the
Holding Company and the Bank may delay commencing the Subscription Offering
beyond such 45-day period in the event there exist unforeseen material adverse
market or financial conditions. If the Subscription Offering commences prior to
the Special Meeting, subscriptions will be accepted subject to the approval of
the Plan at the Special Meeting.
The period for the Subscription Offering and Direct Community Offering
and/or Public Offering will be not less than 20 days nor more than 45 days
unless extended by the Bank. If for any reason all the Conversion shares are not
sold in the Subscription Offering and Direct Community and/or Public Offering,
the Holding Company and the Bank will use their best efforts to obtain other
purchasers, subject to OTS approval. Completion of the sale of all shares of
Holding Company Conversion Stock not sold in the Subscription Offering and
Direct Community and/or Public Offering is required within 45 days after
termination of the Subscription Offering, subject to extension of such 45-day
period by the Holding Company and the Bank with the approval of the OTS. The
Holding Company and the Bank may jointly seek one or more extensions of such
45-day
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period if necessary to complete the sale of all shares of Holding Company
Conversion Stock. In connection with such extensions, subscribers and other
purchasers will be permitted to increase, decrease or rescind their
subscriptions or purchase orders to the extent required by the OTS in approving
the extensions. Completion of the sale of all shares of Holding Company
Conversion Stock is required within 24 months after the date of the Special
Meeting.
V. STOCK OFFERING
A. Total Number of Shares and Purchase Price of Conversion Stock
The total number of shares of Holding Company Conversion Stock to
be issued and sold in the Conversion will be determined jointly by the
Boards of Directors of the Holding Company and the Bank prior to the
commencement of the Subscription Offering, subject to adjustment if
necessitated by market or financial conditions prior to consummation
of the Conversion. The total number of shares of Holding Company
Conversion Stock shall also be subject to increase in connection with
any oversubscriptions in the Subscription Offering or Direct Community
and/or Public Offering.
The aggregate price for which all shares of Holding Company
Conversion Stock will be issued will be based on an independent
appraisal of the estimated total pro forma market value of the Holding
Company and the Converted Bank. Such appraisal shall be performed in
accordance with OTS guidelines and will be updated as appropriate
under or required by applicable regulations.
The appraisal will be made by an independent investment banking
or financial consulting firm experienced in the area of thrift
institution appraisals. The appraisal will include, among other
things, an analysis of the historical and pro forma operating results
and net worth of the Converted Bank and a comparison of the Holding
Company, the Converted Bank and the Conversion Stock with comparable
thrift institutions and holding companies and their respective
outstanding capital stocks.
Based upon the independent appraisal, the Boards of Directors of
the Holding Company and the Bank will jointly fix the Maximum
Subscription Price.
The Actual Subscription Price for each share of Holding Company
Conversion Stock will be determined by dividing the estimated
appraised aggregate pro forma market value of the Holding Company and
the Converted Bank, based on the independent appraisal as updated upon
completion of the Subscription Offering and Direct Community Offering
and/or Public Offering, if any, or other sale of all of the Holding
Company Conversion Stock, by the total number of shares of Holding
Company Conversion Stock to be issued and sold by the Holding Company
upon Conversion. Such appraisal will then be expressed in terms of a
specific aggregate dollar amount rather than as a range.
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B. Subscription Rights
Non-transferable Subscription Rights to purchase shares will be
issued without payment therefor to Eligible Account Holders,
Tax-Qualified Employee Plans, Supplemental Eligible Account Holders,
Other Members and directors, Officers and employees of the Bank as set
forth below.
1. Preference Category No. 1: Eligible Account Holders
Each Eligible Account Holder shall receive non-transferable
Subscription Rights to subscribe for shares of Holding Company
Conversion Stock in an amount equal to the greater of $200,000,
or one-tenth of one percent (.10%) of the total offering of
shares, or 15 times the product (rounded down to the next whole
number) obtained by multiplying the total number of shares of
common stock to be issued by a fraction of which the numerator is
the amount of the qualifying deposit of the Eligible Account
Holder and the denominator is the total amount of qualifying
deposits of all Eligible Account Holders in the converting Bank
in each case on the Eligibility Record Date.
If sufficient shares are not available, shares shall be
allocated first to permit each subscribing Eligible Account
Holder to purchase to the extent possible 100 shares and
thereafter among each subscribing Eligible Account Holder pro
rata in the same proportion that his Qualifying Deposit bears to
the total Qualifying Deposits of all subscribing Eligible Account
Holders whose subscriptions remain unsatisfied.
Non-transferable Subscription Rights to purchase Holding
Company Conversion Stock received by directors and Officers of
the Bank and their Associates, based on their increased deposits
in the Bank in the one-year period preceding the Eligibility
Record Date, shall be subordinated to all other subscriptions
involving the exercise of non-transferable Subscription Rights of
Eligible Account Holders.
2. Preference Category No. 2: Tax-Qualified Employee Plans
Each Tax-Qualified Employee Plan shall be entitled to
receive non-transferable Subscription Rights to purchase up to
10% of the shares of Holding Company Conversion Stock, provided
that singly or in the aggregate such plans (other than that
portion of such plans which is self-directed) shall not purchase
more than 10% of the shares of the Holding Company Conversion
Stock. Subscription Rights received pursuant to this Category
shall be subordinated to all rights received by Eligible Account
Holders to purchase shares pursuant to Category No. 1; provided,
however, that notwithstanding any other provision of this Plan to
the contrary, the Tax- Qualified Employee Plans shall have a
first priority Subscription Right to the extent that the total
number of shares of Holding Company Conversion Stock sold in the
Conversion exceeds the maximum of the appraisal range as set
forth in the subscription prospectus.
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3. Preference Category No. 3: Supplemental Eligible Account Holders
Each Supplemental Eligible Account Holder shall receive
non-transferable Subscription Rights to subscribe for shares of
Holding Company Conversion Stock in an amount equal to the
greater of $200,000, or one-tenth of one percent (.10%) of the
total offering of shares, or 15 times the product (rounded down
to the next whole number) obtained by multiplying the total
number of shares of common stock to be issued by a fraction of
which the numerator is the amount of the qualifying deposit of
the Supplemental Eligible Account Holder and the denominator is
the total amount of qualifying deposits of all Supplemental
Eligible Account Holders in the converting Bank in each case on
the Supplemental Eligibility Record Date.
Subscription Rights received pursuant to this category shall
be subordinated to all Subscription Rights received by Eligible
Account Holders and Tax-Qualified Employee Plans pursuant to
Category Nos. 1 and 2 above.
Any non-transferable Subscription Rights to purchase shares
received by an Eligible Account Holder in accordance with
Category No. 1 shall reduce to the extent thereof the
Subscription Rights to be distributed to such person pursuant to
this Category.
In the event of an oversubscription for shares under the
provisions of this subparagraph, the shares available shall be
allocated first to permit each subscribing Supplemental Eligible
Account Holder, to the extent possible, to purchase a number of
shares sufficient to make his total allocation (including the
number of shares, if any, allocated in accordance with Category
No. 1) equal to 100 shares, and thereafter among each subscribing
Supplemental Eligible Account Holder pro rata in the same
proportion that his Qualifying Deposit bears to the total
Qualifying Deposits of all subscribing Supplemental Eligible
Account Holders whose subscriptions remain unsatisfied.
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4. Preference Category No. 4: Other Members
Each Other Member shall receive non-transferable
Subscription Rights to subscribe for shares of Holding Company
Conversion Stock remaining after satisfying the subscriptions
provided for under Category Nos. 1 through 3 above, subject to
the following conditions:
a. Each Other Member shall be entitled to subscribe for an
amount of shares equal to the greater of $200,000, or
one-tenth of one percent (.10%) of the total offering of
shares of common stock in the Conversion, to the extent that
Holding Company Conversion Stock is available.
b. In the event of an oversubscription for shares under the
provisions of this subparagraph, the shares available shall
be allocated among the subscribing Other Members pro rata in
the same proportion that his number of votes on the Voting
Record Date bears to the total number of votes on the Voting
Record Date of all subscribing Other Members on such date.
Such number of votes shall be determined based on the Bank's
mutual charter and bylaws in effect on the date of approval
by members of this Plan of Conversion.
5. Preference Category No. 5: Directors, Officers and Employees
Each director, Officer and employee of the Bank as of the
date of the commencement of the Subscription Offering shall be
entitled to receive non-transferable Subscription Rights to
purchase shares of the Holding Company Conversion Stock to the
extent that shares are available after satisfying subscriptions
under Category Nos. 1 through 4 above. The shares which may be
purchased under this Category are subject to the following
conditions:
a. The total number of shares which may be purchased under this
Category may not exceed 23% of the number of shares of
Holding Company Conversion Stock.
b. The maximum amount of shares which may be purchased under
this Category by any Person is $200,000 of Holding Company
Conversion Stock. In the event of an oversubscription for
shares under the provisions of this subparagraph, the shares
available shall be allocated pro rata among all subscribers
in this Category.
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C. Public Offering and Direct Community Offering
1. Any shares of Holding Company Conversion Stock not subscribed for
in the Subscription Offering may be offered for sale in a Direct
Community Offering. This will involve an offering of all
unsubscribed shares directly to the general public with a
preference to those natural persons residing in the Local
Community. The Direct Community Offering, if any, shall be for a
period of not less than 20 days nor more than 45 days unless
extended by the Holding Company and the Bank, and shall commence
concurrently with, during or promptly after the Subscription
Offering. The purchase price per share to the general public in a
Direct Community Offering shall be the same as the Actual
Subscription Price. The Holding Company and the Bank may use an
investment banking firm or firms on a best efforts basis to sell
the unsubscribed shares in the Subscription and Direct Community
Offering. The Holding Company and the Bank may pay a commission
or other fee to such investment banking firm or firms as to the
shares sold by such firm or firms in the Subscription and Direct
Community Offering and may also reimburse such firm or firms for
expenses incurred in connection with the sale. The Holding
Company Conversion Stock will be offered and sold in the Direct
Community Offering, in accordance with OTS regulations, so as to
achieve the widest distribution of the Holding Company Conversion
Stock. No person, by himself or herself, or with an Associate or
group of Persons acting in concert, may subscribe for or purchase
more than $200,000 of Holding Company Conversion Stock in the
Direct Community Offering.
In the event of an oversubscription for shares in the Direct
Community Offering, shares may be allocated (to the extent shares
remain available) first to cover orders of natural persons
residing in the Local Community, then to cover the orders of any
other person subscribing for shares in the Direct Community
Offering so that each such person may receive 1,000 shares, and
thereafter, on a pro rata basis to such persons based on the
amount of their respective subscriptions.
The Bank and the Holding Company, in their sole discretion, may
reject subscriptions, in whole or in part, received from any
Person under this Section V.C. Further, the Bank and the Holding
Company may, at their sole discretion, elect to forego a Direct
Community Offering and instead effect a Public Offering as
described below.
2. Any shares of Holding Company Conversion Stock not sold in the
Subscription Offering and the Direct Community Offering, if any,
may be sold to selected members of the general public in the
Public Offering. The Public Offering shall be completed within 45
days after the termination of the Subscription Offering, unless
such period is extended as provided in Section IV hereof. The
Holding Company and the Bank may, in their sole
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discretion, reject any subscription, in whole or in part,
received in the Public Offering. No person, by himself or
herself, or with an Associate or group of persons acting in
concert, may purchase more than $200,000 of shares in the Public
Offering and/or Direct Community Offering.
3. If for any reason a Public Offering of unsubscribed shares of
Holding Company Conversion Stock cannot be effected and any
shares remain unsold after the Subscription Offering and the
Direct Community Offering, if any, the Boards of Directors of the
Holding Company and the Bank will seek to make other arrangements
for the sale of the remaining shares. Such other arrangements
will be subject to the approval of the OTS and to compliance with
applicable securities laws.
D. Additional Limitations Upon Purchases of Shares of Holding Company
Conversion Stock
The following additional limitations shall be imposed on all
purchases of Holding Company Conversion Stock in the Conversion:
1. No Person, by himself or herself, or with an Associate or group
of Persons acting in concert, may subscribe for or purchase in
the Conversion a number of shares of Holding Company Conversion
Stock which exceeds an amount of shares equal to $800,000. For
purposes of this paragraph, an Associate of a Person does not
include a Tax-Qualified or Non-Tax Qualified Employee Plan in
which the person has a substantial beneficial interest or serves
as a trustee or in a similar fiduciary capacity. Moreover, for
purposes of this paragraph, shares held by one or more
Tax-Qualified or Non-Tax Qualified Employee Plans attributed to a
Person shall not be aggregated with shares purchased directly by
or otherwise attributable to that Person.
2. Directors and Officers and their Associates may not purchase in
all categories in the Conversion an aggregate of more than 33% of
the Holding Company Conversion Stock. For purposes of this
paragraph, an Associate of a Person does not include any
Tax-Qualified Employee Plan. Moreover, any shares attributable to
the Officers and directors and their Associates, but held by one
or more Tax-Qualified Employee Plans shall not be included in
calculating the number of shares which may be purchased under the
limitation in this paragraph.
3. The minimum number of shares of Holding Company Conversion Stock
that may be purchased by any Person in the Conversion is 25
shares, provided sufficient shares are available.
4. The Boards of Directors of the Holding Company and the Bank may,
in their sole discretion, increase the maximum purchase
limitation referred to in
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subparagraph 1. herein up to 9.99%, provided that orders for
shares exceeding 5% of the shares being offered in the Conversion
shall not exceed, in the aggregate, 10% of the shares being
offered in the Conversion. Requests to purchase additional shares
of Holding Company Conversion Stock under this provision will be
allocated by the Boards of Directors on a pro rata basis giving
priority in accordance with the priority rights set forth in this
Section V.
Depending upon market and financial conditions, the Boards of Directors
of the Holding Company and the Bank, with the approval of the OTS and without
further approval of the Members, may increase or decrease any of the above
purchase limitations.
For purposes of this Section V, the directors of the Holding Company
and the Bank shall not be deemed to be Associates or a group acting in concert
solely as a result of their serving in such capacities.
Each Person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the above purchase
limitations.
E. Restrictions and Other Characteristics of Holding Company Conversion
Stock Being Sold
1. Transferability. Holding Company Conversion Stock purchased by
Persons other than directors and Officers of the Holding Company
or the Bank will be transferable without restriction. Shares
purchased by directors or Officers shall not be sold or otherwise
disposed of for value for a period of one year from the date of
Conversion, except for any disposition of such shares (i)
following the death of the original purchaser, or (ii) resulting
from an exchange of securities in a merger or acquisition
approved by the applicable regulatory authorities. Any transfers
that could result in a change of control of the Bank or the
Holding Company or result in the ownership by any Person or group
acting in concert of more than 10% of any class of the Bank's or
the Holding Company's equity securities are subject to the prior
approval of the OTS.
The certificates representing shares of Holding Company
Conversion Stock issued to directors and Officers shall bear a
legend giving appropriate notice of the one-year holding period
restriction. Appropriate instructions shall be given to the
transfer agent for such stock with respect to the applicable
restrictions relating to the transfer of restricted stock. Any
shares of common stock of the Holding Company subsequently issued
as a stock dividend, stock split, or otherwise, with respect to
any such restricted stock, shall be subject to the same holding
period restrictions for Holding Company or Bank directors and
Officers as may be then applicable to such restricted stock.
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No director or Officer of the Holding Company or of the Bank, or
Associate of such a director or Officer, shall purchase any
outstanding shares of capital stock of the Holding Company for a
period of three years following the Conversion without the prior
written approval of the OTS, except through a broker or dealer
registered with the SEC or in a "negotiated transaction"
involving more than one percent of the then-outstanding shares of
common stock of the Holding Company. As used herein, the term
"negotiated transaction" means a transaction in which the
securities are offered and the terms and arrangements relating to
any sale are arrived at through direct communications between the
seller or any Person acting on its behalf and the purchaser or
his investment representative. The term "investment
representative" shall mean a professional investment advisor
acting as agent for the purchaser and independent of the seller
and not acting on behalf of the seller in connection with the
transaction.
2. Repurchase and Dividend Rights. Except as permitted by applicable
regulations, for a period of three years following Conversion,
the Converted Bank shall not repurchase any shares of its capital
stock, except in the case of an offer to repurchase on a pro rata
basis made to all holders of capital stock of the Converted Bank.
A repurchase of qualifying shares of a director shall not be
deemed to be a repurchase for purposes of this Section V.E.2.
Present regulations also provide that the Converted Bank may not
declare or pay a cash dividend on or repurchase any of its stock
(i) if the result thereof would be to reduce the regulatory
capital of the Converted Bank below the amount required for the
liquidation account to be established pursuant to Section XIII
hereof, and (ii) except in compliance with requirements of
Section 563.134 of the Rules and Regulations of the OTS.
The above limitations are subject to Section 563b.3 (g)(3) of the
Rules and Regulations of the OTS, which generally provides that
the Converted Bank may repurchase its capital stock provided (i)
no repurchases occur within one year following conversion, (ii)
repurchases during the second and third year after conversion are
part of an open market stock repurchase program that does not
allow for a repurchase of more than 5% of the Bank's outstanding
capital stock during a twelve-month period without OTS approval,
(iii) the repurchases do not cause the Bank to become
undercapitalized, and (iv) the Bank provides notice to the OTS at
least 10 days prior to the commencement of a repurchase program
and the OTS does not object. In addition, the above limitations
shall not preclude payments of dividends or repurchases of
capital stock by the Converted Bank in the event applicable
federal regulatory limitations are liberalized or waived by the
OTS subsequent to OTS approval of the Plan.
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3. Voting Rights. After Conversion, holders of deposit accounts will
not have voting rights in the Bank or the Holding Company.
Exclusive voting rights as to the Bank will be vested in the
Holding Company, as the sole stockholder of the Bank. Voting
rights as to the Holding Company will be held exclusively by its
stockholders.
F. Exercise of Subscription Rights; Order Forms
1. If the Subscription Offering occurs concurrently with the
solicitation of proxies for the Special Meeting, the subscription
prospectus and Order Form may be sent to each Eligible Account
Holder, Tax-Qualified Employee Plan, Supplemental Eligible
Account Holder, Other Member, and director, Officer and employee
at their last known address as shown on the records of the Bank.
However, the Bank may, and if the Subscription Offering commences
after the Special Meeting the Bank shall, furnish a subscription
prospectus and Order Form only to Eligible Account Holders,
Tax-Qualified Employee Plans, Supplemental Eligible Account
Holders, Other Members, and directors, Officers and employees who
have returned to the Bank by a specified date prior to the
commencement of the Subscription Offering a post card or other
written communication requesting a subscription prospectus and
Order Form. In such event, the Bank shall provide a postage-paid
post card for this purpose and make appropriate disclosure in its
proxy statement for the solicitation of proxies to be voted at
the Special Meeting and/or letter sent in lieu of the proxy
statement to those Eligible Account Holders, Tax- Qualified
Employee Plans or Supplemental Eligible Account Holders who are
not Members on the Voting Record Date.
2. Each Order Form will be preceded or accompanied by a subscription
prospectus describing the Holding Company and the Converted Bank
and the shares of Holding Company Conversion Stock being offered
for subscription and containing all other information required by
the OTS or the SEC or necessary to enable Persons to make
informed investment decisions regarding the purchase of Holding
Company Conversion Stock.
3. The Order Forms (or accompanying instructions) used for the
Subscription Offering will contain, among other things, the
following:
(i) A clear and intelligible explanation of the Subscription
Rights granted under the Plan to Eligible Account Holders,
Tax- Qualified Employee Plans, Supplemental Eligible Account
Holders, Other Members, and directors, Officers and
employees;
(ii) A specified expiration date by which Order Forms must be
returned to and actually received by the Bank or its
representative for purposes of exercising Subscription
Rights, which date will be not less than 20 days after the
Order Forms are mailed by the Bank;
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(iii)The Maximum Subscription Price to be paid for each share
subscribed for when the Order Form is returned;
(iv) A statement that 25 shares is the minimum number of shares
of Holding Company Conversion Stock that may be subscribed
for under the Plan;
(v) A specifically designated blank space for indicating the
number of shares being subscribed for;
(vi) A set of detailed instructions as to how to complete the
Order Form including a statement as to the available
alternative methods of payment for the shares being
subscribed for;
(vii)Specifically designated blank spaces for dating and signing
the Order Form;
(viii) An acknowledgment that the subscriber has received the
subscription prospectus;
(ix) A statement of the consequences of failing to properly
complete and return the Order Form, including a statement
that the Subscription Rights will expire on the expiration
date specified on the Order Form unless such expiration date
is extended by the Holding Company and the Bank, and that
the Subscription Rights may be exercised only by delivering
the Order Form, properly completed and executed, to the Bank
or its representative by the expiration date, together with
required payment of the Maximum Subscription Price for all
shares of Holding Company Conversion Stock subscribed for;
(x) A statement that the Subscription Rights are
non-transferable and that all shares of Holding Company
Conversion Stock subscribed for upon exercise of
Subscription Rights must be purchased on behalf of the
Person exercising the Subscription Rights for his own
account; and
(xi) A statement that, after receipt by the Bank or its
representative, a subscription may not be modified,
withdrawn or canceled without the consent of the Bank.
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G. Method of Payment
Payment for all shares of Holding Company Conversion Stock
subscribed for, computed on the basis of the Maximum Subscription
Price, must accompany all completed Order Forms. Payment may be made
in cash (if presented in Person), by check, or, if the subscriber has
a Deposit Account in the Bank (including a certificate of deposit),
the subscriber may authorize the Bank to charge the subscriber's
account.
If a subscriber authorizes the Bank to charge his or her account,
the funds will continue to earn interest, but may not be used by the
subscriber until all Holding Company Conversion Stock has been sold or
the Plan of Conversion is terminated, whichever is earlier. The Bank
will allow subscribers to purchase shares by withdrawing funds from
certificate accounts without the assessment of early withdrawal
penalties with the exception of prepaid interest in the form of
promotional gifts. In the case of early withdrawal of only a portion
of such account, the certificate evidencing such account shall be
canceled if the remaining balance of the account is less than the
applicable minimum balance requirement, in which event the remaining
balance will earn interest at the passbook rate. This waiver of the
early withdrawal penalty is applicable only to withdrawals made in
connection with the purchase of Holding Company Conversion Stock under
the Plan of Conversion. Interest will also be paid, at not less than
the then-current passbook rate, on all orders paid in cash, by check
or money order, from the date payment is received until consummation
of the Conversion. Payments made in cash, by check or money order will
be placed by the Bank in an escrow or other account established
specifically for this purpose.
In the event of an unfilled amount of any subscription order, the
Converted Bank will make an appropriate refund or cancel an
appropriate portion of the related withdrawal authorization, after
consummation of the Conversion, including any difference between the
Maximum Subscription Price and the Actual Subscription Price (unless
subscribers are afforded the right to apply such difference to the
purchase of additional whole shares). If for any reason the Conversion
is not consummated, purchasers will have refunded to them all payments
made and all withdrawal authorizations will be canceled in the case of
subscription payments authorized from accounts at the Bank.
If any Tax-Qualified Employee Plans or Non-Tax-Qualified Employee
Plans subscribe for shares during the Subscription Offering, such
plans will not be required to pay for the shares subscribed for at the
time they subscribe, but may pay for such shares of Holding Company
Conversion Stock subscribed for upon consummation of the Conversion.
In the event that, after the completion of the Subscription Offering,
the amount of shares to be issued is increased above the maximum of
the appraisal range included in the Prospectus, the Tax Qualified and
Non-Tax Qualified Employee Plans shall be entitled to increase their
subscriptions by a percentage equal to the percentage increase in the
amount of shares to be issued above the maximum of the appraisal range
provided that such subscriptions shall continue to be subject to
applicable purchase limits and stock allocation procedures.
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H. Undelivered, Defective or Late Order Forms; Insufficient Payment
The Boards of Directors of the Holding Company and the Bank shall
have the absolute right, in their sole discretion, to reject any Order
Form, including but not limited to, any Order Forms which (i) are not
delivered or are returned by the United States Postal Service (or the
addressee cannot be located); (ii) are not received back by the Bank
or its representative, or are received after the termination date
specified thereon; (iii) are defectively completed or executed; (iv)
are not accompanied by the total required payment for the shares of
Holding Company Conversion Stock subscribed for (including cases in
which the subscribers' Deposit Accounts or certificate accounts are
insufficient to cover the authorized withdrawal for the required
payment); or (v) are submitted by or on behalf of a Person whose
representations the Boards of Directors of the Holding Company and the
Bank believe to be false or who they otherwise believe, either alone
or acting in concert with others, is violating, evading or
circumventing, or intends to violate, evade or circumvent, the terms
and conditions of this Plan. In such event, the Subscription Rights of
the Person to whom such rights have been granted will not be honored
and will be treated as though such Person failed to return the
completed Order Form within the time period specified therein. The
Bank may, but will not be required to, waive any irregularity relating
to any Order Form or require submission of corrected Order Forms or
the remittance of full payment for subscribed shares by such date as
the Bank may specify. The interpretation of the Holding Company and
the Bank of the terms and conditions of this Plan and of the proper
completion of the Order Form will be final, subject to the authority
of the OTS.
I. Member in Non-Qualified States or in Foreign Countries
The Holding Company and the Bank will make reasonable efforts to
comply with the securities laws of all states in the United States in
which Persons entitled to subscribe for Holding Company Conversion
Stock pursuant to the Plan reside. However, no shares will be offered
or sold under the Plan of Conversion to any such Person who (1)
resides in a foreign country or (2) resides in a state of the United
States in which a small number of Persons otherwise eligible to
subscribe for shares under the Plan of Conversion reside or as to
which the Holding Company and the Bank determine that compliance with
the securities laws of such state would be impracticable for reasons
of cost or otherwise, including, but not limited to, a requirement
that the Holding Company or the Bank or any of their officers,
directors or employees register, under the securities laws of such
state, as a broker, dealer, salesman or agent. No payments will be
made in lieu of the granting of Subscription Rights to any such
Person.
VI. FEDERAL STOCK CHARTER AND BYLAWS
A. As part of the Conversion, the Bank will take all appropriate steps to
amend its charter to read in the form of federal stock savings
institution charter as prescribed by the OTS. The name of the Bank, as
converted, will not change. A copy of the proposed stock charter is
available upon request. By their approval of the Plan, the Members of
the Bank will thereby approve and adopt such charter.
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B. The Bank will also take appropriate steps to amend its bylaws to read
in the form prescribed by the OTS for a federal stock savings
institution. A copy of the proposed federal stock bylaws is available
upon request.
C. The effective date of the adoption of the Bank's federal stock charter
and bylaws shall be the date of the issuance and sale of the Holding
Company Conversion Stock as specified by the OTS.
VII. HOLDING COMPANY CERTIFICATE OF INCORPORATION
A copy of the proposed certificate of incorporation of the Holding
Company will be made available from the Bank upon request.
VIII. DIRECTORS OF THE CONVERTED BANK
Each Person serving as a member of the Board of Directors of the Bank
at the time of the Conversion will thereupon become a director of the Converted
Bank.
IX. STOCK OPTION AND INCENTIVE PLAN AND RECOGNITION AND RETENTION PLAN
In order to provide an incentive for directors, Officers and employees
of the Holding Company and its subsidiaries (including the Bank), the Board of
Directors of the Holding Company intends to adopt, subject to shareholder
approval, a stock option and incentive plan and a recognition and retention plan
as soon as permitted by applicable regulation.
X. CONTRIBUTIONS TO TAX-QUALIFIED EMPLOYEE PLANS
The Converted Bank and the Holding Company may in their discretion make
scheduled contributions to any Tax-Qualified Employee Plans, provided that any
such contributions which are for the acquisition of Holding Company Conversion
Stock, or the repayment of debt incurred for such an acquisition, do not cause
the Converted Bank to fail to meet its regulatory capital requirements.
XI. SECURITIES REGISTRATION AND MARKET MAKING
Promptly following the Conversion, the Holding Company will register
its stock with the SEC pursuant to the Exchange Act. In connection with the
registration, the Holding Company will
18
undertake not to deregister such stock, without the approval of the OTS, for a
period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
two or more market makers to establish and maintain a market for its common
stock promptly following Conversion. The Holding Company will also use its best
efforts to cause its common stock to be quoted on the National Association of
Securities Dealers, Inc. Automated Quotations System or to be listed on a
national or regional securities exchange.
XII. STATUS OF SAVINGS ACCOUNTS AND LOANS SUBSEQUENT TO CONVERSION
Each Deposit Account holder shall retain, without payment, a
withdrawable Deposit Account or Accounts in the Converted Bank, equal in amount
to the withdrawable value of such account holder's Deposit Account or Accounts
prior to Conversion. All Deposit Accounts will continue to be insured by the
SAIF up to the applicable limits of insurance coverage, and shall be subject to
the same terms and conditions (except as to voting and liquidation rights) as
such Deposit Account in the Bank at the time of the Conversion. All loans shall
retain the same status after Conversion as these loans had prior to Conversion.
XIII. LIQUIDATION ACCOUNT
For purposes of granting to Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain Deposit Accounts at the
Converted Bank a priority in the event of a complete liquidation of the
Converted Bank, the Converted Bank will, at the time of Conversion, establish a
liquidation account in an amount equal to the net worth of the Bank as shown on
its latest statement of financial condition contained in the final offering
circular used in connection with the Conversion. The creation and maintenance of
the liquidation account will not operate to restrict the use or application of
any of the regulatory capital accounts of the Converted Bank; provided, however,
that such regulatory capital accounts will not be voluntarily reduced below the
required dollar amount of the liquidation account. Each Eligible Account Holder
and Supplemental Eligible Account Holder shall, with respect to the Deposit
Account held, have a related inchoate interest in a portion of the liquidation
account balance ("subaccount balance").
The initial subaccount balance of a Deposit Account held by an Eligible
Account Holder and/or Supplemental Eligible Account Holder shall be determined
by multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of the Qualifying Deposit in the Deposit
Account on the Eligibility Record Date and/or the Supplemental Eligibility
Record Date and the denominator is the total amount of the Qualifying Deposits
of all Eligible Account Holders and Supplemental Eligible Account Holders on
such record dates in the Bank. For Deposit Accounts in existence at both dates,
separate subaccounts shall be determined on the basis of the Qualifying Deposits
in such Deposit Accounts on such record dates. Such initial subaccount balance
shall not be increased, and it shall be subject to downward adjustment as
provided below.
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If the deposit balance in any Deposit Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing date subsequent to the record date is less than the lesser of (i)
the deposit balance in such Deposit Account at the close of business on any
other annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date or (ii) the amount of the Qualifying
Deposit in such Deposit Account on the Eligibility Record Date or Supplemental
Eligibility Record Date, the subaccount balance shall be reduced in an amount
proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, the subaccount balance shall not be subsequently increased,
notwithstanding any increase in the deposit balance of the related Deposit
Account. If all funds in such Deposit Account are withdrawn, the related
subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Bank (and only in such
event), each Eligible Account Holder and Supplemental Eligible Account Holder
shall be entitled to receive a liquidation distribution from the liquidation
account in the amount of the then-current adjusted subaccount balances for
Deposit Accounts then held before any liquidation distribution may be made to
stockholders. No merger, consolidation, bulk purchase of assets with assumptions
of Deposit Accounts and other liabilities, or similar transactions with another
institution the accounts of which are insured by the SAIF, shall be considered
to be a complete liquidation. In such transactions, the liquidation account
shall be assumed by the surviving institution.
XIV. RESTRICTIONS ON ACQUISITION OF CONVERTED BANK
Regulations of the OTS limit acquisitions, and offers to acquire,
direct or indirect beneficial ownership of more than 10% of any class of an
equity security of the Converted Bank or the Holding Company. In addition,
consistent with the regulations of the OTS, the charter of the Converted Bank
shall provide that for a period of five years following completion of the
Conversion: (i) no Person (i.e., no individual, group acting in concert,
corporation, partnership, association, joint stock company, trust, or
unincorporated organization or similar company, syndicate, or any other group
formed for the purpose of acquiring, holding or disposing of securities of an
insured institution) shall directly or indirectly offer to acquire or acquire
beneficial ownership of more than 10% of any class of the Bank's equity
securities. Shares beneficially owned in violation of this charter provision
shall not be counted as shares entitled to vote and shall not be voted by any
Person or counted as voting shares in connection with any matter submitted to
the shareholders for a vote. This limitation shall not apply to any offer to
acquire or acquisition of beneficial ownership of more than 10% of the common
stock of the Bank by a corporation whose ownership is or will be substantially
the same as the ownership of the Bank, provided that the offer or acquisition is
made more than one year following the date of completion of the Conversion; (ii)
shareholders shall not be permitted to cumulate their votes for elections of
directors; and (iii) special meetings of the shareholders relating to changes in
control or amendment of the charter may only be called by the Board of
Directors.
XV. AMENDMENT OR TERMINATION OF PLAN
If necessary or desirable, the Plan may be amended at any time prior to
submission of the Plan and proxy materials to the Members by a two-thirds vote
of the respective Boards of Directors of the Holding Company and the Bank. After
submission of the Plan and proxy materials to the
20
Members, the Plan may be amended by a two-thirds vote of the respective Boards
of Directors of the Holding Company and the Bank only with the concurrence of
the OTS. In the event that the Bank determines that for tax purposes or
otherwise it is in the best interest of the Bank to convert from a federal
mutual to a federal stock institution without the concurrent formation of a
holding company, the Plan may be substantively amended, with OTS approval, in
such respects as the Board of Directors of the Bank deems appropriate to reflect
such change from a holding company conversion to a direct conversion. In the
event the Plan is so amended, common stock of the Bank will be substituted for
Holding Company Conversion Stock in the Subscription and Direct Community and/or
Public Offerings, if any, and subscribers will be resolicited as described in
Section V hereof. Any amendments to the Plan (including amendments to reflect
the elimination of the concurrent holding company formation) made after approval
by the Members with the concurrence of the OTS shall not necessitate further
approval by the Members unless otherwise required.
The Plan may be terminated by a two-thirds vote of the Bank's Board of
Directors at any time prior to the Special Meeting of Members, and at any time
following such Special Meeting with the concurrence of the OTS. In its
discretion, the Board of Directors of the Bank may modify or terminate the Plan
upon the order or with the approval of the OTS and without further approval by
Members. The Plan shall terminate if the sale of all shares of Conversion Stock
is not completed within 24 months of the date of the Special Meeting. A specific
resolution approved by a majority of the Board of Directors of the Bank is
required in order for the Bank to terminate the Plan prior to the end of such
24-month period.
XVI. EXPENSES OF THE CONVERSION
The Holding Company and the Bank shall use their best efforts to assure
that expenses incurred by them in connection with the Conversion shall be
reasonable.
XVII. TAX RULING
Consummation of the Conversion is expressly conditioned upon prior
receipt of either a ruling of the United States Internal Revenue Service or an
opinion of tax counsel or other tax advisor with respect to federal taxation,
and either a ruling of the Illinois taxation authorities or an opinion of tax
counsel or other tax advisor with respect to Illinois taxation, to the effect
that consummation of the transactions contemplated herein will not be taxable to
the Holding Company or the Bank.
XVIII. EXTENSION OF CREDIT FOR PURCHASE OF STOCK
The Bank may not knowingly loan funds or otherwise extend credit to any
Person to purchase in the Conversion shares of Holding Company Conversion Stock.
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