BEN FRANKLIN BANK OF ILLINOIS
14 N. Dryden Place
Arlington Heights, Illinois 60004
(847) 398-0990
---------------
NOTICE OF SPECIAL MEETING OF MEMBERS
---------------
Notice is hereby given that a Special Meeting of Members (the "Special
Meeting") of Ben Franklin Bank of Illinois ("Ben Franklin" or the "Bank") will
be held at the main office of the Bank located at 14 N. Dryden Place, Arlington
Heights, Illinois, on ________ __, 1998 at __:__ _.m., local time. The purpose
of this Special Meeting is to consider and vote upon:
1. A plan to convert the Bank from a federally chartered mutual savings
bank to a federally chartered stock savings bank, including the
adoption of a federal stock savings bank charter and bylaws, with the
concurrent sale of all the Bank's common stock to Ben Franklin
Financial, Inc., a Delaware corporation (the "Holding Company"), and
sale by the Holding Company of shares of its common stock; and
such other business as may properly come before the Special Meeting or any
adjournment thereof. Management is not aware of any such other business.
The members who shall be entitled to notice of and to vote at the
Special Meeting and any adjournment thereof are depositors of the Bank at the
close of business on _______ __, 1998 who continue to be depositors as of the
date of the Special Meeting. In the event there are not sufficient votes for
approval of the Plan of Conversion at the time of the Special Meeting, the
Special Meeting may be adjourned from time to time in order to permit further
solicitation of proxies.
BY ORDER OF THE BOARD OF DIRECTORS
Joseph J. Gasior
Chairman of the Board
Arlington Heights, Illinois
________ __, 1998
- --------------------------------------------------------------------------------
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE PLAN OF CONVERSION BY COMPLETING THE
ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
YOUR VOTE IS VERY IMPORTANT.
- --------------------------------------------------------------------------------
SUMMARY OF PROPOSED CONVERSION
This summary does not purport to be complete and is qualified in its
entirety by the more detailed information contained in the remainder of this
Proxy Statement and the accompanying Prospectus.
Under its present "mutual" form of organization, Ben Franklin has no
stockholders. Its deposit account holders are members of the Bank and have
voting rights in that capacity. In the unlikely event of liquidation, the Bank's
deposit account holders would have the sole right to receive any assets of the
Bank remaining after payment of its liabilities (including the claims of all
deposit account holders to the withdrawal value of their deposits). Under the
Plan of Conversion (the "Plan of Conversion") to be voted on at the Special
Meeting, the Bank would be converted into a federally chartered savings bank
organized in stock form, and all of the Bank's common stock would be sold
concurrently to the Holding Company (the "Conversion"). The Holding Company will
offer and sell its common stock (the "Common Stock") in an offering to (1)
account holders with an account balance of $50 or more on January 31, 1997
("Eligible Account Holders"), (2) tax-qualified employee plans of the Bank and
the Holding Company ("Tax-Qualified Employee Plans") provided, however, that the
Tax-Qualified Employee Plans shall have first priority Subscription Rights to
the extent that the total number of shares of Common Stock sold in the
Conversion exceeds the maximum of the appraisal range, (3) account holders of
the Bank with an account balance of $50 or more as of __________ __, 1997
("Supplemental Eligible Account Holders"), (4) certain other members of the Bank
as of ________ __, 1997 who are not Eligible or Supplemental Eligible Account
Holders ("Other Members") and (5) employees, officers and directors of the Bank
(the "Subscription Offering"). It is anticipated that Tax-Qualified Employee
Plans will purchase 8% of the Common Stock sold in the Conversion.
To the extent the Common Stock is not all sold to the persons in the
foregoing categories, the Holding Company may offer and sell the remainder of
the Common Stock in a direct community offering ("Direct Community Offering") or
public offering ("Public Offering") through Friedman, Billings, Ramsey & Co.,
Inc. ("FBR") to selected persons to whom a prospectus (the "Prospectus") is
delivered. The Subscription Offering and the Public Offering and/or Direct
Community Offering are referred to collectively as the "Offering." Voting and
liquidation rights with respect to the Bank would thereafter be held by the
Holding Company, except to the limited extent of the liquidation account (the
"Liquidation Account") that will be established for the benefit of Eligible and
Supplemental Eligible Account Holders of the Bank and voting and liquidation
rights in the Holding Company would be held only by those persons who become
stockholders of the Holding Company through purchase of shares of its Common
Stock. See "Description of the Plan of Conversion - Principal Effects of
Conversion - Liquidation Rights of Depositor Members."
THE CONVERSION WILL NOT AFFECT THE BALANCE, INTEREST RATE OR FEDERAL
INSURANCE PROTECTION OF ANY SAVINGS DEPOSIT, AND NO PERSON WILL BE OBLIGATED TO
PURCHASE ANY STOCK IN THE CONVERSION.
Business Purposes Net Conversion proceeds are expected to increase the capital
for Conversion of Ben Franklin, which will support the expansion of its
financial services to the public. The conversion to stock
form and the use of a holding company structure are also
expected to enhance its ability to expand through possible
mergers and acquisitions (although no such transactions are
contemplated at this time) and will facilitate its future
access to the capital markets. The Bank will continue to be
subject to comprehensive regulation and examination by the
Office of Thrift Supervision, Department of Treasury ("OTS")
and the Federal Deposit Insurance Corporation ("FDIC").
i
Subscription As part of the Conversion, Common Stock is being offered for
Offering sale in the Subscription Offering, in the priorities
summarized below, to the Bank's (1) Eligible Account Holders,
(2) Tax-Qualified Employee Plans, (3) Supplemental Eligible
Account Holders (4) Other Members, and (5) employees,
officers and directors. If necessary, all shares of Common
Stock not purchased in the Subscription Offering, if any, may
be offered in connection with the Public Offering and/or
Direct Community Offering for sale to selected persons
through FBR.
Subscription Each Eligible Account Holder has been given non-transferable
Rights of rights to subscribe for an amount equal to the greater of
Eligible Account $200,000 of Common Stock, one-tenth of one percent of the
Holders total number of shares offered in the Subscription Offering
or 15 times the product (rounded down to the whole next
number) obtained by multiplying the total number of shares to
be issued by a fraction of which the numerator is the amount
of qualifying deposits of such subscriber and the denominator
is the total qualifying deposits of all account holders in
this category on the qualifying date.
Subscription The Bank's Tax-Qualified Employee Plans have been given non-
Rights of Tax- transferable rights to subscribe, individually and in the
Qualified aggregate, for up to 10% of the total number of shares sold
Employee Plans in the Conversion after satisfaction of subscriptions of
Eligible Account Holders. Notwithstanding the foregoing, to
the extent orders for shares exceed the maximum of the
appraisal range, Tax-Qualified Employee Plans shall be
afforded a first priority to purchase shares sold above the
maximum of the appraisal range. It is anticipated that
Tax-Qualified Employee Plans will purchase 8% of the Common
Stock sold in the Conversion.
Subscription After satisfaction of subscriptions of Eligible Account
Rights of Holders and Tax- Qualified Employee Plans, each Supplemental
Supplemental Eligible Account Holder (other than directors and officers of
Eligible Account the Bank) has been given non-transferable rights to subscribe
Holders for an amount equal to the greater of $200,000 of Common
Stock, one-tenth of one percent of the total number of shares
offered in the Conversion or 15 times the product (rounded
down to the whole next number) obtained by multiplying the
total number of shares to be issued by a fraction of which
the numerator is the amount of qualifying deposits of such
subscriber and the denominator is the total qualifying
deposits of all account holders in this category on the
qualifying date. The subscription rights of each Supplemental
Eligible Account Holder shall be reduced to the extent of
such person's subscription rights as an Eligible Account
Holder.
Subscription Each Other Member has been given non-transferable rights to
Rights of Other subscribe for an amount equal to the greater of $200,000 of
Members Common Stock or one-tenth of one percent of the total number
of shares offered in the Conversion after satisfaction of the
subscriptions of the Bank's Eligible Account Holders,
Tax-Qualified Employee Plans and Supplemental Eligible
Account Holders.
ii
Subscription Each individual employee, officer and director of the Bank
Rights of Bank has been given the right to subscribe for an amount equal to
Personnel the greater of $200,000 of Common Stock after satisfaction of
the subscriptions of Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible Account Holders and
Other Members. Total shares subscribed for by the employees,
officers and directors in this category may not exceed 23% of
the total shares offered in the Conversion.
Public Offering Subject to prior rights of holders of subscription rights,
and/or Direct the Holding Company may also offer the Common Stock for sale
Community to selected persons through FBR in a Public Offering and/or
Offering Direct Community Offering.
Purchase No person may purchase more than $200,000 of Common Stock in
Limitations the Subscription Offering. No person, together with
associates, and persons acting in concert, may purchase more
than $800,000 of Common Stock in the Conversion. No person,
together with associates of and persons acting in concert
with such person, may purchase more than $200,000 of Common
Stock in the Public Offering and/or Direct Community
Offering. The aggregate purchases of directors and executive
officers and their associates may not exceed 33% of the total
number of shares offered in the Conversion. These purchase
limitations do not apply to the Bank's Tax-Qualified Employee
Plans.
Expiration Date of All subscriptions for Common Stock in connection with the
the Subscription Subscription Offering must be received by noon, Arlington
Offering Heights, Illinois Time on _____ __, 1998.
How to Subscribe For information on how to subscribe for Common Stock being
for Shares offered in the Subscription Offering, please read the
Prospectus and the order form and instructions accompanying
this Proxy Statement. Subscriptions will not become effective
until the Plan of Conversion has been approved by the Bank's
members and all of the Common Stock offered in the Conversion
has been subscribed for or sold in the Offering or through
such other means as may be approved by the OTS.
Price of Common All sales of Common Stock in the Offering will be made at the
Stock same price per share which is currently expected to be $10.00
per share on the basis of an independent appraisal of the pro
forma market value of the Bank and the Holding Company upon
Conversion. On the basis of a preliminary appraisal by
Ferguson and Company ("Ferguson"), which has been reviewed by
the OTS, a minimum of 1,190,000 and a maximum of 1,851,500
shares will be offered in the Conversion. See "The Conversion
Stock Pricing and Number of Shares to be Issued" in the
Prospectus.
Tax Consequences The Bank has received an opinion from Crowe Chizek and
Company LLP ("Crowe Chizek"), stating that the Conversion is
a nontaxable reorganization under Section 368(a)(1)(F) of the
Internal Revenue Code. The Bank has also received an opinion
from Crowe Chizek stating that the Conversion will not be a
taxable transaction for Illinois income tax purposes.
Required Vote Approval of the Plan of Conversion will require the
affirmative vote of a majority of all votes eligible to be
cast at the Special Meeting.
iii
BEN FRANKLIN BANK OF ILLINOIS
PROXY STATEMENT
SPECIAL MEETING OF MEMBERS TO BE HELD ON ________ __, 1998
PURPOSE OF MEETING
This Proxy Statement is being furnished to you in connection with the
solicitation on behalf of the Board of Directors of Ben Franklin Bank of
Illinois ("Ben Franklin" or the "Bank") of the proxies to be voted at the
Special Meeting of Members (the "Special Meeting") of the Bank to be held at the
Bank's main office located at 14 N. Dryden Place, Arlington Heights, Illinois
___________, on ________ __, 1998 at __:__ _.m., local time, and at any
adjournments thereof. The Special Meeting is being held for the purpose of
considering and voting upon a Plan of Conversion under which the Bank would be
converted (the "Conversion") from a federally chartered mutual savings bank into
a federally chartered stock savings bank, the concurrent sale of all the common
stock of the stock savings bank to Ben Franklin Financial, Inc. (the "Holding
Company"), a Delaware corporation, and the sale by the Holding Company of shares
of its common stock (the "Common Stock").
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE BANK UNANIMOUSLY RECOMMENDS THAT YOU VOTE
TO APPROVE THE PLAN OF CONVERSION.
The Bank is currently organized in "mutual" rather than "stock" form,
meaning that it has no stockholders and no authority under its federal mutual
charter to issue capital stock. The Bank's Board of Directors has adopted the
Plan of Conversion providing for the Conversion. The sale of Common Stock of the
Holding Company, which was recently formed to become the holding company of the
Bank, will substantially increase the Bank's net worth. The Holding Company will
exchange 50% of the net proceeds from the sale of the Common Stock for the
common stock of the Bank to be issued upon Conversion. The Holding Company
expects to retain the balance of the net proceeds as its initial capitalization,
a portion of which the Holding Company intends to lend to the ESOP to fund its
purchase of Common Stock. This increased capital will support the expansion of
the Bank's financial services to the public. The Board of Directors of the Bank
also believes that the conversion to stock form and the use of a holding company
structure will enhance the Bank's ability to expand through possible mergers and
acquisitions (although no such transactions are contemplated at this time) and
will facilitate its future access to the capital markets.
The Board of Directors of the Bank believes that the Conversion will
further benefit the Bank by enabling it to attract and retain key personnel
through prudent use of stock-related incentive compensation and benefit plans.
The Board of Directors of the Holding Company intends to adopt a stock option
and incentive plan and a recognition and retention plan, subject to approval of
Holding Company stockholders following completion of the Conversion. See
"Management - Benefit Plans" in the accompanying Prospectus.
Voting in favor of the Plan of Conversion will not obligate any person
to purchase any Common Stock.
THE OFFICE OF THRIFT SUPERVISION ("OTS") HAS APPROVED THE PLAN OF
CONVERSION SUBJECT TO THE APPROVAL OF THE BANK'S MEMBERS AND THE SATISFACTION OF
CERTAIN OTHER CONDITIONS. HOWEVER, SUCH APPROVAL DOES NOT CONSTITUTE A
RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION BY THE OTS.
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
The Board of Directors of the Bank has fixed , 1998 as the voting
record date ("Voting Record Date") for the determination of members entitled to
notice of the Special Meeting. All Bank depositors are members of the Bank under
its current charter. All Bank depositors of record as of the close of business
on the Voting Record
Date who continue to be depositors as of the date of the Special Meeting will be
entitled to vote at the Special Meeting or any adjournment thereof.
Each depositor member (including IRA and Keogh account beneficiaries)
will be entitled at the Special Meeting to cast one vote for each $100, or
fraction thereof, of the aggregate withdrawal value of all of such depositor's
accounts in the Bank as of the Voting Record Date, up to a maximum of 1,000
votes. In general, accounts held in different ownership capacities will be
treated as separate memberships for purposes of applying the 1,000 vote
limitation. For example, if two persons hold a $100,000 account in their joint
names and each of the persons also holds a separate account for $100,000 in his
own name, each person would be entitled to 1,000 votes for each separate account
and they would together be entitled to cast 1,000 votes on the basis of the
joint account. Where no proxies are received from IRA and Keogh account
beneficiaries, after due notification, the Bank, as trustee of these accounts,
is entitled to vote these accounts in favor of the Plan of Conversion.
Approval of the Plan of Conversion requires the affirmative vote of a
majority of the total outstanding votes of the Bank's members eligible to be
cast at the Special Meeting. As of _______ __, 1998, the Bank had approximately
______ members who were entitled to cast a total of approximately _________
votes at the Special Meeting.
Bank members may vote at the Special Meeting or any adjournment thereof
in person or by proxy. Any member giving a proxy will have the right to revoke
the proxy at any time before it is voted by giving written notice to the
Secretary of the Bank, provided that such written notice is received by the
Secretary prior to the Special Meeting or any adjournment thereof, or upon
request if the member is present and chooses to vote in person.
All properly executed proxies received by the Board of Directors of the
Bank will be voted in accordance with the instructions indicated thereon by the
members giving such proxies. If no instructions are given, such proxies will be
voted in favor of the Plan of Conversion and the establishment of the charitable
foundation. If any other matters are properly presented at the Special Meeting
and may properly be voted on, the proxies solicited hereby will be voted on such
matters in accordance with the best judgment of the proxy holders named thereon.
Management is not aware of any other business to be presented at the Special
Meeting.
If a proxy is not executed and is returned and the member does not vote
in person, the Bank is prohibited by OTS regulations from using a previously
executed proxy to vote for the Conversion or the Foundation. As a result,
failure to vote may have the same effect as a vote against the Plan of
Conversion and the Foundation.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited by officers, directors or regular employees of the
Bank, in person, by telephone or through other forms of communication and, if
necessary, the Special Meeting may be adjourned to a later date. In addition,
FBR will assist the Bank in the solicitation of proxies. Such persons will be
reimbursed by the Bank for their expenses incurred in connection with such
solicitation. The Bank will bear all costs of this solicitation. The proxies
solicited hereby will be used only at the Special Meeting and at any adjournment
thereof.
DESCRIPTION OF THE PLAN OF CONVERSION
The Plan of Conversion to be presented for approval at the Special
Meeting provides for the Conversion to be accomplished through adoption of
amended charter and bylaws for the Bank to authorize the issuance of capital
stock along with the concurrent formation of a holding company. As part of the
Conversion, the Plan of Conversion provides for the subscription offering (the
"Subscription Offering") of the Common Stock to the Bank's (i) Eligible Account
Holders (deposit account holders with an account balance of $50 or more as of
January 31, 1997; (ii) Tax-Qualified Employee Plans, (iii) Supplemental Eligible
Account Holders (deposit account holders with an account balance of $50 or more
as of __________ __, 1998); (iv) Other Members (deposit account holders eligible
to vote at the Special Meeting who are not as Eligible Account Holders or
Supplemental Eligible Account Holders); and (v) the Bank's employees, officers
and directors. Notwithstanding the foregoing, to the extent orders for shares
exceed the maximum of the appraisal range, Tax-Qualified Employee Plans shall be
afforded a first priority to purchase shares sold above the maximum of the
appraisal range. It is anticipated that Tax-Qualified Employee Plans will
purchase 8% of the Common Stock sold in the Conversion. If necessary, all shares
of Common Stock not purchased in the Subscription
2
Offering, if any, may be offered to selected persons in connection with the
Public Offering and/or Direct Community Offering through FBR.
THE SUBSCRIPTION OFFERING HAS COMMENCED AS OF THE DATE OF MAILING OF
THIS PROXY STATEMENT. A PROSPECTUS EXPLAINING THE TERMS OF THE SUBSCRIPTION
OFFERING, INCLUDING HOW TO ORDER AND PAY FOR SHARES AND DESCRIBING THE BUSINESS
OF THE BANK AND THE HOLDING COMPANY; ACCOMPANIES THIS PROXY STATEMENT AND SHOULD
BE READ BY ALL PERSONS WHO WISH TO CONSIDER SUBSCRIBING FOR COMMON STOCK. THE
SUBSCRIPTION OFFERING EXPIRES AT NOON, ARLINGTON HEIGHTS, ILLINOIS TIME ON
________ __, 1998 UNLESS EXTENDED BY THE BANK AND THE HOLDING COMPANY.
The federal conversion regulations require that all stock offered in a
conversion must be sold in order for the conversion to become effective. The
conversion regulations require that the offering be completed within 45 days
after completion of the Subscription Offering period unless extended by the Bank
and the Holding Company with the approval of the OTS. This 45-day period expires
________ __, 1998 unless the Subscription Offering is extended. If this is not
possible, an occurrence that is currently not anticipated, the Board of
Directors of the Bank and the Holding Company will consult with the OTS to
determine an appropriate alternative method of selling all unsubscribed shares
offered in the Conversion. The Plan of Conversion provides that the Conversion
must be completed within 24 months after the date of the Special Meeting.
The Public Offering and/or Direct Community Offering or any other sale
of the unsubscribed shares will be made as soon as practicable after the
completion of the Subscription Offering. No sales of shares may be completed,
either in the Subscription Offering or otherwise, unless the Plan of Conversion
is approved by the members of the Bank.
The commencement and completion of the Offering, however, is subject to
market conditions and other factors beyond the Bank's control. Due to adverse
conditions in the stock market in the past, a number of converting thrift
institutions encountered significant delays in completing their stock offerings
or were not able to complete them at all. No assurance can be given as to the
length of time after approval of the Plan of Conversion at the Special Meeting
that will be required to complete the Public Offering and/or Direct Community
Offering or other sale of the Common Stock to be offered in the Conversion. If
delays are experienced, significant changes may occur in the estimated pro forma
market value of the Holding Company's Common Stock, together with corresponding
changes in the offering price and the net proceeds realized by the Bank and the
Holding Company from the sale of the Common Stock. The Bank and the Holding
Company may also incur substantial additional printing, legal, accounting and
other expenses in completing the Conversion.
The following is a brief summary of the Conversion and is qualified in
its entirety by reference to the Plan of Conversion, a complete copy of which is
attached hereto. The Bank's federal stock charter and bylaws that will become
effective upon completion of the Conversion are available from the Bank upon
request. A copy of the Holding Company's articles of incorporation and bylaws
are also available from the Bank upon request.
Principal Effects of Conversion
Depositors. The Conversion will not change the amount, interest rate,
withdrawal rights or federal insurance protection of deposit accounts, or affect
deposit accounts in any way other than with respect to voting and liquidation
rights as discussed below.
Borrowers. The rights and obligations of borrowers under their loan
agreements with the Bank will remain unchanged by the Conversion. The principal
amount, interest rate and maturity date of loans will remain as they were
contractually fixed prior to the Conversion.
Voting Rights of Members. Under the Bank's current federal mutual
charter, depositors have voting rights as members of the Bank with respect to
the election of directors and certain other affairs of the Bank. After the
Conversion, exclusive voting rights with respect to all such matters will be
vested in the Holding Company as the sole stockholder of the Bank. Depositors
will no longer have any voting rights, except to the extent that they become
stockholders of the Holding Company through the purchase of its Common Stock.
Voting rights in the Holding Company will be held exclusively by its
stockholders.
3
Liquidation Rights of Depositor Members. Currently, in the unlikely
event of liquidation of the Bank, any assets remaining after satisfaction of all
creditors' claims in full (including the claims of all depositors to the
withdrawal value of their accounts) would be distributed pro rata among the
depositors of the Bank, with the pro rata share of each being the same
proportion of all such remaining assets as the withdrawal value of each
depositor's account is of the total withdrawal value of all accounts in the Bank
at the time of liquidation. After the Conversion, the assets of the Bank would
first be applied, in the event of liquidation, against the claims of all
creditors (including the claims of all depositors to the withdrawal value of
their accounts). Any remaining assets would then be distributed to the persons
who qualified as Eligible Account Holders or Supplemental Eligible Account
Holders under the Plan of Conversion to the extent of their interests in a
"Liquidation Account" that will be established at the time of the completion of
the Conversion and then to the Holding Company as the sole stockholder of the
Bank's outstanding common stock. The Bank's depositors who did not qualify as
Eligible Account Holders or Supplemental Eligible Account Holders would have no
right to share in any residual net worth of the Bank in the event of liquidation
after the Conversion, but would continue to have the right as creditors of the
Bank to receive the full withdrawal value of their deposits prior to any
distribution to the Holding Company as the Bank's sole stockholder. In addition,
the Bank's deposit accounts will continue to be insured by the Federal Deposit
Insurance Corporation ("FDIC") to the maximum extent permitted by law, currently
up to $100,000 per insured account. The Liquidation Account will initially be
established in an amount equal to the net worth of the Bank as of the date of
the Bank's latest statement of financial condition contained in the final
prospectus used in connection with the Conversion. Each Eligible Account Holder
and/or Supplemental Eligible Account Holder will receive an initial interest in
the Liquidation Account in the same proportion as the balance in all of his
qualifying deposit accounts was of the aggregate balance in all qualifying
deposit accounts of all Eligible Account Holders and Supplemental Eligible
Account Holders on January 31, 1997 or ________ __, 1998, respectively. For
accounts in existence on both dates, separate subaccounts shall be determined on
the basis of the qualifying deposits in such accounts on the record dates.
However, if the amount in the qualifying deposit account on any annual closing
date of the Bank is less than the lowest amount in such deposit account on the
Eligibility Record Date and/or Supplemental Eligibility Record Date, and any
subsequent annual closing date, this interest in the Liquidation Account will be
reduced by an amount proportionate to such reduction in the related deposit
account and will not thereafter be increased despite any subsequent increase in
the related deposit account.
The Bank. Under federal law, the stock savings bank resulting from the
Conversion will be deemed to be a continuation of the mutual savings bank rather
than a new entity and will continue to have all of the rights, privileges,
properties, assets and liabilities of the Bank prior to the Conversion. The
Conversion will enable the Bank to issue capital stock, but will not change the
general objectives, purposes or types of business currently conducted by the
Bank, and no assets of the Bank will be distributed in order to effect the
Conversion, other than to pay the expenses incident thereto. After the
Conversion, the Bank will remain subject to examination and regulation by the
OTS and will continue to be a member of the Federal Home Loan Bank System. The
Conversion will not cause any change in the executive officers or directors of
the Bank.
Tax Consequences. Consummation of the Conversion is expressly
conditioned upon prior receipt of either a ruling of the United States Internal
Revenue Service ("IRS") or an opinion letter with respect to federal taxation,
and either a ruling of the Illinois taxation authorities or an opinion letter
with respect to Illinois taxation, to the effect that the Conversion will not be
a taxable transaction to the Holding Company, the Bank or the Bank's deposit
account holders receiving subscription rights.
The Bank has received an opinion of Crowe Chizek, to the effect that
(i) the Conversion will qualify as a reorganization under Section 368(a)(1)(F)
of the Internal Revenue Code of 1986, as amended, and no gain or loss will be
recognized to the Bank in either its mutual form or its stock form by reason of
the proposed Conversion, (ii) no gain or loss will be recognized to the Bank in
its stock form upon the receipt of money and other property, if any, from the
Holding Company for the stock of the Bank; and no gain or loss will be
recognized to the Holding Company upon the receipt of money for Common Stock of
the Holding Company; (iii) the assets of the Bank in either its mutual or its
stock form will have the same basis before and after the Conversion; (iv) the
holding period of the assets of the Bank in its stock form will include the
period during which the assets were held by the Bank in its mutual form prior to
Conversion; (v) gain, if any, will be realized by the depositors of the Bank
upon the constructive issuance to them of withdrawable deposit accounts of the
Bank in its stock form, nontransferable subscription rights to purchase Holding
Company Common Stock and/or interests in the Liquidation Account (any such gain
will be recognized by such depositors, but only in an amount not in excess of
the fair market value of the subscription rights and Liquidation Account
interests received); (vi) the basis of the account holder's savings accounts in
the Bank after the Conversion will be the same as the
4
basis of his or her savings accounts in the Bank prior to the Conversion; (vii)
the basis of each account holder's interest in the Liquidation Account is
assumed to be zero; (viii) based on the Ferguson Letter, as hereinafter defined,
the basis of the subscription rights will be zero; (ix) the basis of the Holding
Company Common Stock to its stockholders will be the purchase price thereof; (x)
a stockholder's holding period for Holding Company Common Stock acquired through
the exercise of subscription rights shall begin on the date on which the
subscription rights are exercised and the holding period for the Conversion
Stock purchased in the Offering will commence on the date following the date on
which such stock is purchased; (xi) the Bank in its stock form will succeed to
and take into account the earnings and profits or deficit in earnings and
profits, of the Bank, in its mutual form, as of the date of Conversion; (xii)
the Bank, immediately after Conversion, will succeed to and take into account
the bad debt reserve accounts of the Bank, in mutual form, and the bad debt
reserves will have the same character in the hands of the Bank after Conversion
as if no Conversion had occurred; and (xiii) the creation of the Liquidation
Account will have no effect on the Bank's taxable income, deductions or addition
to reserve for bad debts either in its mutual or stock form.
The opinion from Crowe Chizek is based, among other things, on certain
assumptions, including the assumptions that the exercise price of the
Subscription Rights to purchase Holding Company Common Stock will be
approximately equal to the fair market value of that stock at the time of the
completion of the proposed Conversion. With respect to the Subscription Rights,
the Bank will receive a letter from Ferguson (the "Ferguson Letter") which,
based on certain assumptions, will conclude that the Subscription Rights to be
received by Eligible Account Holders, Supplemental Eligible Account Holders and
other eligible subscribers do not have any economic value at the time of
distribution or at the time the Subscription Rights are exercised, whether or
not a Direct Community or Public Offering takes place.
The Bank has also received an opinion of Crowe Chizek to the effect
that, based in part on the Ferguson Letter: (i) no taxable income will be
realized by depositors as a result of the exercise of non-transferable
Subscription Rights to purchase shares of Holding Company Common Stock at fair
market value; (ii) no taxable income will be recognized by directors, officers
and employees of the Bank on the receipt or exercise of Subscription Rights to
purchase shares of Holding Company Common Stock at fair market value; and (iii)
no taxable income will be realized by the Bank or Holding Company on the
issuance of Subscription Rights to eligible subscribers to purchase shares of
Holding Company Common Stock at fair market value.
Notwithstanding the Ferguson Letter, if the Subscription Rights are
subsequently found to have a fair market value and are deemed a distribution of
property, it is Crowe Chizek's opinion that gain or income will be recognized by
various recipients of the Subscription Rights (in certain cases, whether or not
the rights are exercised) and the Bank and/or the Holding Company may be taxable
on the distribution of the Subscription Rights.
With respect to Illinois taxation, the Bank has received an opinion
from Crowe Chizek to the effect that the Illinois tax consequences to the Bank,
in its mutual or stock form, the Holding Company, eligible account holders,
parties receiving Subscription Rights, parties purchasing conversion stock, and
other parties participating in the Conversion will be the same as the federal
income tax consequences described above.
Unlike a private letter ruling, the opinions of Crowe, Chizek, as well
as the Ferguson Letter, have no binding effect or official status, and no
assurance can be given that the conclusions reached in any of those opinions
would be sustained by a court if contested by the IRS or the Delaware or
Illinois tax authorities.
Approval, Interpretation, Amendment and Termination
Under the Plan of Conversion, the letter from the OTS giving approval
thereto, and applicable regulations, consummation of the Conversion is subject
to the satisfaction of the following conditions: (a) approval of the Plan of
Conversion by members of the Bank casting at least a majority of the votes
eligible to be cast at the Special Meeting; (b) sale of all of the Common Stock
to be offered in the Conversion; and (c) receipt of favorable rulings or
opinions of counsel as to the federal and Illinois tax consequences of the
Conversion.
The Plan of Conversion may be substantively amended by the Boards of
Directors of the Bank and the Holding Company with the concurrence of the OTS.
If the Plan of Conversion is amended, proxies which have been received prior to
such amendment will not be resolicited unless otherwise required by the OTS.
Also, as required by the federal regulations, the Plan of Conversion provides
that the transactions contemplated thereby may be terminated by the Board of
5
Directors of the Bank alone at any time prior to the Special Meeting and may be
terminated by the Board of Directors of the Bank at any time thereafter with the
concurrence of the OTS, notwithstanding approval of the Plan of Conversion by
the members of the Bank at the Special Meeting. All interpretations by the Bank
and the Holding Company of the Plan of Conversion and of the order forms and
related materials for the Subscription Offering will be final, except as regards
or affects the OTS.
Judicial Review
Section 5(i)(2)(B) of the Home Owners' Loan Act, as amended, 12 U.S.C.
ss.1464(i)(2)(B) and Section 563b.8(u) of the Rules and Regulations promulgated
thereunder (12 C.F.R. Section 563b.8(u)) provide: (i) that persons aggrieved by
a final action of the OTS which approves, with or without conditions, or
disapproves a plan of conversion, may obtain review of such final action only by
filing a written petition in the United States Court of Appeals for the circuit
in which the principal office or residence of such person is located, or in the
United States Court of Appeals for the District of Columbia, requesting that the
final action of the OTS be modified, terminated or set aside, and (ii) that such
petition must be filed within 30 days after publication of notice of such final
action in the Federal Register, or 30 days after the date of mailing of the
notice and proxy statement for the meeting of the converting institution's
members at which the conversion is to be voted on, whichever is later. The
notice of the Special Meeting of the Bank's members to vote on the Plan of
Conversion described herein is included at the beginning of this Proxy
Statement. The statute and regulation referred to above should be consulted for
further information.
ADDITIONAL INFORMATION
The information contained in the accompanying Prospectus, including a
more detailed description of the Plan of Conversion, consolidated financial
statements of the Bank and a description of the capitalization and business of
the Bank and the Holding Company, including the Bank's directors and executive
officers and their compensation, the anticipated use of the net proceeds from
the sale of the Common Stock, and a description of the Common Stock, is intended
to help you evaluate the Conversion and the establishment of the Foundation and
is incorporated herein by reference.
YOUR VOTE IS VERY IMPORTANT TO US. PLEASE TAKE A MOMENT NOW TO COMPLETE
AND RETURN YOUR PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. YOU MAY STILL
ATTEND THE SPECIAL MEETING AND VOTE IN PERSON EVEN THOUGH YOU HAVE VOTED YOUR
PROXY. FAILURE TO SUBMIT A PROXY WILL HAVE THE SAME EFFECT AS VOTING AGAINST THE
CONVERSION.
If you have any questions, please call our Information Center at (___)
___-____.
IMPORTANT: YOU MAY BE ENTITLED TO VOTE IN MORE THAN ONE CAPACITY.
PLEASE SIGN, DATE AND PROMPTLY RETURN EACH PROXY CARD YOU RECEIVE.
----------
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS.
THE COMMON STOCK IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY
INSURED OR GUARANTEED.
6
REVOCABLE PROXY
BEN FRANKLIN BANK OF ILLINOIS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST
SECURITY FEDERAL SAVINGS BANK
The undersigned member of Ben Franklin Bank of Illinois (the "Bank")
hereby appoints the Board of Directors of the Bank as proxies to cast all votes
which the undersigned member is entitled to cast at a Special Meeting of Members
to be held at the Bank's office located at 14 N. Dryden Place, Arlington
Heights, Illinois 60004, at the hour and date stated in the Proxy Statement, and
at any and all adjournments and postponements thereof, and to act with respect
to all votes that the undersigned would be entitled to cast, if then personally
present, in accordance with the instructions on the reverse side hereof to vote
FOR or AGAINST:
1) The adoption of the Plan of Conversion to convert the Bank
from a federally chartered mutual savings bank to a federally
chartered stock savings bank, including the adoption of a
federal stock savings bank charter and bylaws, with the
simultaneous issuance of its common stock to Ben Franklin
Financial, Inc., a Delaware corporation (the "Holding
Company") and sale by the Holding Company of shares of its
Common Stock; and
This proxy will be voted as directed by the undersigned member. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ADOPTION OF THE PLAN
OF CONVERSION. In addition, this proxy will be voted at the discretion of the
Board of Directors upon any other matter as may properly come before the Special
Meeting.
The undersigned member may revoke this proxy at any time before it is
voted by delivering to the Secretary of the Bank either by a written revocation
of the proxy or a duly executed proxy bearing a later date, or by appearing at
the Special Meeting and voting in person. The undersigned member hereby
acknowledges receipt of the Notice of Special Meeting and Proxy Statement.
(IMPORTANT: PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE)
BEN FRANKLIN BANK OF ILLINOIS
Please Mark Votes Below
Approval of the Plan of Conversion
FOR [ ] AGAINST [ ] DATE: _____________________, 1997
X __________________________________
X __________________________________
IMPORTANT: Please sign your name
exactly as it appears on this proxy.
Joint accounts need only one
signature. When signing as an
attorney, administrator, agent,
corporation, officer, executor,
trustee or guardian, etc., please
add your full title to your
signature.
NOTE: IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL CARDS
IN THE ACCOMPANYING ENVELOPE.