<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
St. Paul Bancorp Inc.
.............................................................................
(Name of Registrant as Specified In Its Charter)
St. Paul Bancorp Inc.
..............................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.......................................................................
2) Aggregate number of securities to which transaction applies:
.......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: _/
.......................................................................
4) Proposed maximum aggregate value of transaction:
.......................................................................
_/ Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
1) Amount Previously Paid:
......................................................
2) Form, Schedule or Registration Statement No.:
......................................................
3) Filing Party:
......................................................
4) Date Filed:
......................................................
Notes:
<PAGE>
LOGO
6700 West North Avenue
Chicago, Illinois 60635
(312) 622-5000
April 4, 1994
Dear Shareholder:
You are invited to attend the annual meeting of shareholders (the "Annual
Meeting") of St. Paul Bancorp, Inc. (the "Corporation") to be held on
Wednesday, May 4, 1994 at 10:00 a.m. at The Drury Lane Oakbrook, 100 Drury
Lane, Oakbrook Terrace, Illinois 60181.
The Annual Meeting has been called for the following purposes: (1) to elect
each of three directors for a three-year term; (2) to consider and vote upon a
proposed amendment to the Corporation's Stock Option Plan to increase by
175,000 the number of shares of common stock reserved for issuance thereunder
(subject to a limit of 25,000 shares with respect to which any individual may
be granted options or stock appreciation rights during any calendar year), and
to permit the grant of stock options to newly-elected directors at the time of
election; (3) to ratify the appointment by the Board of Directors of the firm
of Ernst & Young as independent auditors of the Corporation for the year ending
December 31, 1994; and (4) to transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS THAT YOU VOTE "FOR"
ELECTION OF THE THREE NOMINEES OF THE BOARD OF DIRECTORS AS DIRECTORS; "FOR"
PROPOSAL 2 TO AMEND THE CORPORATION'S STOCK OPTION PLAN; AND "FOR" RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG AS INDEPENDENT AUDITORS OF THE CORPORATION
FOR THE YEAR ENDING DECEMBER 31, 1994. The accompanying proxy statement
provides detailed information concerning the matters to be voted on at the
Annual Meeting. Also enclosed is our 1993 annual report to shareholders which
reviews results for the 1993 fiscal year.
It is important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, you are requested to
complete, date, sign and return the enclosed proxy card in the enclosed postage
paid envelope.
On behalf of the Board of Directors, thank you for returning your proxy and
for your continued interest and support.
Sincerely yours,
LOGO
Joseph C. Scully
Chairman of the Board and
Chief Executive Officer
<PAGE>
LOGO
6700 West North Avenue
Chicago, Illinois 60635
(312) 622-5000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, MAY 4, 1994
----------------
NOTICE IS HEREBY GIVEN that the 1994 annual meeting of shareholders (the
"Annual Meeting") of St. Paul Bancorp, Inc. (the "Corporation") will be held on
Wednesday, May 4, 1994 at 10:00 a.m. at The Drury Lane Oakbrook, 100 Drury
Lane, Oakbrook Terrace, Illinois 60181 for the following purposes:
(1) To elect each of three directors for a three-year term (Proposal 1);
(2) To consider and vote upon a proposed amendment to the Corporation's
Stock Option Plan to increase by 175,000 the number of shares of common
stock reserved for issuance thereunder (subject to a limit of 25,000
shares with respect to which any individual may be granted options or
stock appreciation rights during any calendar year), and to permit the
grant of stock options to newly-elected directors at the time of
election (Proposal 2);
(3) To ratify the appointment by the Board of Directors of the firm of
Ernst & Young as independent auditors of the Corporation for the year
ending December 31, 1994 (Proposal 3); and
(4) To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Pursuant to the Corporation's Bylaws, the Board of Directors has fixed the
close of business on March 25, 1994 as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. Only
holders of common stock of record at the close of business on that date will be
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
In the event that there are not sufficient votes to approve any one or more
of the foregoing proposals at the time of the Annual Meeting, the Annual
Meeting may be adjourned in order to permit further solicitation of proxies by
the Corporation.
By Order of the Board of Directors
LOGO
Joseph C. Scully
Chairman of the Board and
Chief Executive Officer
Chicago, Illinois
April 4, 1994
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
LOGO
6700 West
North Avenue
Chicago,
Illinois
60635
(312) 622-
5000
----------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 4, 1994
----------------
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This proxy statement is furnished to shareholders of St. Paul Bancorp, Inc.
(the "Corporation") in connection with the solicitation by the Board of
Directors of the Corporation of proxies to be used at the 1994 annual meeting
of shareholders (the "Annual Meeting") to be held on Wednesday, May 4, 1994 at
10:00 a.m. at The Drury Lane Oakbrook, 100 Drury Lane, Oakbrook Terrace,
Illinois 60181, and at any adjournments thereof. This proxy statement and the
accompanying proxy are initially being mailed to shareholders on or about April
4, 1994.
The Annual Meeting has been called for the following purposes: (1) to elect
each of three directors for a three-year term; (2) to consider and vote upon a
proposed amendment to the Corporation's Stock Option Plan to increase by
175,000 the number of shares of the Corporation's common stock, par value $.01
per share (the "Common Stock") reserved for issuance thereunder (subject to a
limit of 25,000 shares with respect to which any individual may be granted
options or stock appreciation rights ("SARs") during any calendar year), and to
permit the grant of stock options to newly-elected directors at the time of
election; (3) to ratify the appointment by the Board of Directors of the firm
of Ernst & Young as independent auditors of the Corporation for the year ending
December 31, 1994; and (4) to transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
If the enclosed form of proxy is properly executed and returned to the
Corporation in time to be voted at the Annual Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
EXECUTED BUT UNMARKED PROXIES WILL BE VOTED (1) FOR PROPOSAL 1 TO ELECT EACH OF
THE THREE NOMINEES TO THE BOARD OF DIRECTORS; (2) FOR PROPOSAL 2 TO AMEND THE
CORPORATION'S STOCK OPTION PLAN TO INCREASE BY 175,000 THE NUMBER OF SHARES OF
COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER (SUBJECT TO A LIMIT OF 25,000
SHARES WITH RESPECT TO WHICH ANY INDIVIDUAL MAY BE GRANTED OPTIONS OR SARS
DURING ANY CALENDAR YEAR), AND TO PERMIT THE GRANT OF STOCK OPTIONS TO NEWLY-
ELECTED DIRECTORS AT THE TIME OF ELECTION; AND (3) FOR PROPOSAL 3 TO RATIFY THE
APPOINTMENT OF ERNST & YOUNG AS INDEPENDENT AUDITORS OF THE CORPORATION FOR THE
YEAR ENDING DECEMBER 31, 1994. Except for procedural matters incident to the
conduct of the Annual Meeting, the Corporation does not know of any matters
other than those described in the Notice of Annual Meeting that are to come
before the Annual Meeting. If any other matters are properly brought before the
Annual Meeting, the persons named in the accompanying proxy will vote the
shares represented by the proxies on such matters as determined by a majority
of the Board of Directors.
1
<PAGE>
The presence of a shareholder at the Annual Meeting will not automatically
revoke such shareholder's proxy. Shareholders may, however, revoke a proxy at
any time prior to its exercise by delivering to the Corporation a duly executed
proxy bearing a later date, by attending the Annual Meeting and voting in
person, or by filing a written notice of revocation with Clifford M. Sladnick,
Senior Vice President, General Counsel and Corporate Secretary, at 6700 West
North Avenue, Chicago, Illinois 60635.
The cost of soliciting proxies in the form enclosed herewith will be borne by
the Corporation. In addition to the solicitation of proxies by mail, the
Corporation and the Bank (as hereinafter defined), through their directors,
officers and employees, may also solicit proxies personally or by telephone or
telecommunication. The Corporation also will request persons, firms and
corporations holding shares in their names or in the name of their nominees,
which are beneficially owned by others, to send proxy material to and obtain
proxies from such beneficial owners and will reimburse such holders for their
reasonable expenses in doing so. The Corporation also has retained D.F. King &
Co., Inc. to assist in the solicitation of proxies at a fee of $7,500, plus
reimbursement of certain out-of-pocket expenses.
The securities which can be voted at the Annual Meeting consist of shares of
Common Stock of the Corporation, with each share entitling its owner to one
vote on all matters. There is no cumulative voting of shares. The close of
business on March 25, 1994 has been fixed by the Board of Directors as the
record date for determination of shareholders entitled to vote at the Annual
Meeting. The number of shares of the Corporation's Common Stock outstanding on
March 25, 1994 was 19,696,331. There were approximately 7,587 record holders of
the Corporation's Common Stock as of that date. The presence, in person or by
proxy, of at least one-third of the total number of issued and outstanding
shares of Common Stock of the Corporation is necessary to constitute a quorum
at the Annual Meeting.
Votes cast, either in person or by proxy, will be tabulated by The First
National Bank of Boston. Under Delaware corporate law and the Corporation's
Bylaws, directors are elected by plurality of votes of shares present (in
person or by proxy) and entitled to vote. Pursuant to the terms of the
Corporation's Stock Option Plan, the affirmative vote of holders of a majority
of the shares voted (in person or by proxy) is required to approve the proposed
amendment to the Option Plan. Unless otherwise required by law or the
Corporation's Certificate of Incorporation or Bylaws, any other matter put to a
shareholder vote will be decided by the affirmative vote of a majority of the
votes cast on the matter. Abstentions and broker non-votes will be treated as
shares that are present, or represented, and entitled to vote for purposes of
determining the presence of a quorum. Broker non-votes will not be counted as a
vote cast on any matter presented at the Annual Meeting. Abstentions will have
the same effect as a negative vote on Proposal 2.
A copy of the annual report to shareholders for the year ended December 31,
1993 accompanies this proxy statement. THE CORPORATION IS REQUIRED TO FILE AN
ANNUAL REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1993 WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC"). SHAREHOLDERS MAY OBTAIN, FREE
OF CHARGE, A COPY OF THE FORM 10-K, EXCLUDING EXHIBITS, BY WRITING TO CLIFFORD
M. SLADNICK, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY,
ST. PAUL BANCORP, INC., 6700 WEST NORTH AVENUE, CHICAGO, ILLINOIS 60635. THE
CORPORATION WILL PROVIDE COPIES OF THE EXHIBITS TO THE FORM 10-K UPON REQUEST
DIRECTED TO THE SAME ADDRESS FOR A REASONABLE FEE.
ELECTION OF DIRECTORS
(PROPOSAL 1)
Under the Corporation's Bylaws, the number of directors is set at ten. The
directors are divided into three classes. The term of office of only one class
of directors expires in each year, and their successors are elected for terms
of three years and until their successors are elected and qualified.
2
<PAGE>
At the 1994 Annual Meeting, each of three directors will be elected for a
three-year term. Unless otherwise specified on the proxy, it is the intention
of the persons named in the proxy to vote the shares represented by each
properly executed proxy for the election as director of the persons named below
as nominees. The Board of Directors believes that each of the nominees will
stand for election and will serve if elected as directors. However, if any of
the persons nominated by the Board of Directors fails to stand for election or
will be unable to accept election, the proxies will be voted for the election
of such other person or persons as the Board of Directors may nominate.
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth the names of the Board of Directors' three
nominees for election as directors and those directors who will continue to
serve as such after the 1994 Annual Meeting. Also set forth is certain other
information, some of which has been obtained from the Corporation's records and
some of which has been supplied by the nominees and continuing directors, with
respect to each such person's age at March 25, 1994, the periods during which
such person has served as a director of St. Paul Federal Bank For Savings (the
"Bank", or "St. Paul Federal"), a wholly-owned subsidiary of the Corporation,
and positions currently held with the Corporation. Each person has been a
director of the Corporation since its formation in 1987, except for Patrick J.
Agnew, who joined the Board in 1989, and John W. Croghan and Jean C. Murray,
O.P., who joined the Board in 1993.
<TABLE>
<CAPTION>
DIRECTOR
OF
THE BANK POSITIONS HELD WITH EXPIRATION
AGE SINCE THE CORPORATION OF TERM
--- -------- ------------------- ----------
<C> <C> <S> <C> <C>
NOMINEES FOR 3-YEAR TERM:
Joseph C. Scully (a)(b)(c)(d)(e)(f). 53 1980 1997
Chairman of the Board,
Chief Executive Officer
and Director
John J. Viera (e)(g)(h)(i).......... 62 1978 Director 1997
James B. Wood (a)(b)(d)(f)(g)....... 73 1982 Director 1997
CONTINUING DIRECTORS:
Patrick J. Agnew (a)(b)(c)(d)(e)(f). 51 1989 1995
President, Chief Operating
Officer and Director
William A. Anderson (b)(f)(g)....... 68 1985 Director 1995
Alan J. Fredian (c)(h)(i)........... 63 1977 Director 1995
Jean C. Murray, O.P.(e)............. 66 1993 Director 1995
John W. Croghan (f)................. 63 1993 Director 1996
Kenneth J. James (a)(b)............. 61 1987 Director 1996
Michael R. Notaro (c)(d)(h)(i)...... 75 1966 Director 1996
</TABLE>
- --------
(a)Member of the Loan Committee of the Bank.
(b)Member of the Loan Loss Reserve Committee of the Bank.
(c)Member of the Profit Sharing, Pension and ESOP Trust Committee of the Bank.
(d)Member of the Executive Committees of the Corporation and the Bank.
(e)Member of the Corporate Responsibility Committee of the Bank.
(f)Member of the Investment Committee of the Bank.
(g)Member of the Audit and Accounting Committees of the Corporation and the
Bank.
(h)Member of the Organizational Planning Committees of the Corporation and the
Bank.
(i)Member of the Stock Option Committee of the Corporation.
3
<PAGE>
The principal occupation of each nominee and continuing director of the
Corporation for the past five years is set forth below.
JOSEPH C. SCULLY joined the Bank in 1963 as a real estate appraiser. He was
appointed Assistant Vice President in 1965, Vice President in 1968, Corporate
Secretary in 1971 and Senior Vice President in 1974. He was elected President,
Chief Operating Officer and a Director in 1980. He was elected Chief Executive
Officer in 1982. He served as President until December 1989 when he was elected
Chairman of the Board. He holds undergraduate and graduate degrees from Loyola
University. In 1981, Loyola University named him alumnus of the year. He served
as a member of the board of the Community Investment Corporation and was its
chairman from 1983 through 1986. He served as the 1988 National Chairman of The
Institute of Financial Education of the United States League of Savings
Institutions and is chairman of the Equity Assurance Commission of Oak Park. He
serves as a trustee of Loyola University and chairman of its Investment
Committee, and is the past chairman of Business Mobilized for Loyola
University, the Federal Savings and Loan Council of Illinois and the
Chicagoland Association of Savings Institutions. He serves on the Board of
Directors of the Oak Park Housing Center. He is also a member of the United
States Federal Affairs Policy Committee.
JOHN J. VIERA is a Corporate Vice President of Commonwealth Edison Company.
He holds an undergraduate degree in electrical engineering from Marquette
University and a graduate degree in business administration from the Illinois
Institute of Technology. Since joining Commonwealth Edison Company in 1957, he
has held several engineering and administrative positions. Mr. Viera is a
member of the Economic and Serra Clubs of Chicago, a Northwestern Associate and
Treasurer of Chicago Community Ventures, Inc. He is a board member of the
Illinois Housing Development Authority and a trustee of Roosevelt University
and the Chicago Architecture Foundation. He is a member of the advisory boards
for Marquette University, Urban Gateways and Catholic Charities. Mr. Viera
maintains memberships in the Western Society of Engineers and the Institute of
Electronic and Electrical Engineers.
JAMES B. WOOD is President of Equity Builders of Illinois, Inc., with which
he has been affiliated since 1954. Equity Builders of Illinois, Inc. is a
construction firm engaged in the development of apartments and single-family
homes. Mr. Wood is past president of Northern Illinois Home Builders and a
former director of Standard Alliance Industries, Inc. He is past president of
the Oak Park-River Forest High School Board of Education and a life trustee of
West Suburban Hospital. Mr. Wood holds an undergraduate degree from Indiana
University and a graduate degree from Harvard Business School.
PATRICK J. AGNEW joined the Bank in 1979 as General Counsel. He was appointed
President, Chief Operating Officer and a Director in December 1989. Prior to
joining the Bank, he was a partner in the law firm of Righeimer, Martin and
Cinquino, legal counsel to the Bank. Mr. Agnew holds a juris doctor degree from
DePaul University College of Law. He serves on the boards of directors of the
Oak Park Development Corporation, the Oak Park Education Foundation and the Oak
Park YMCA. Mr. Agnew is a trustee of West Suburban Hospital and is a member of
the President's Council of Rosary College.
WILLIAM A. ANDERSON is a Certified Public Accountant and a retired partner of
Ernst & Young. While with that firm, he specialized in providing professional
accounting services to the savings and loan industry. Since his retirement he
has provided consulting services to financial institutions and other companies.
He has served on various charitable and professional boards. He is a member of
the American Institute of Certified Public Accountants and the Illinois Society
of CPAs. Mr. Anderson holds a bachelor's degree in accounting from the
University of Illinois.
4
<PAGE>
JOHN W. CROGHAN is Chairman of Lincoln Capital Management Company, a Chicago-
based investment counseling firm, of which he was a founder in 1967. Mr.
Croghan is a graduate of Loyola University and holds a Masters of Business
Administration degree from Harvard University. He is a director of Blockbuster
Entertainment Corporation, Lindsay Manufacturing Company and the Morgan Stanley
Emerging Markets Fund. Mr. Croghan serves on several non-profit boards,
including Northwestern University and Evanston Hospital.
ALAN J. FREDIAN is Professor of the Institute of Human Resources and
Industrial Relations at Loyola University and has been affiliated with the
University since 1967. Dr. Fredian is an organizational psychologist and
president of Alan J. Fredian and Associates, management consultants. He has
authored several books and publications. He is a member of the Academy of
Management and the American Psychological Association's Division of Industrial
and Organizational Psychology. He serves as chairman of Loyola University's
Retirement Allowance Committee. He is a life member of the Board of Directors
of Building Owners and Managers Institute International. He holds a doctorate
degree in industrial psychology from the Illinois Institute of Technology.
KENNETH J. JAMES is Chairman of the Board of James Investment Company, real
estate developers, and J.S. James & Co., Inc., a real estate brokerage and
management company. He is a director of Illinois Masonic Medical Center, the
Robert R. McCormick unit of the Chicago Boys' and Girls' Clubs and the
Homebuilders Association of Greater Chicago. He holds an A.B. degree in
economics from Stanford University and a juris doctor degree from Northwestern
University. He is a member of the Illinois Bar.
JEAN C. MURRAY, O.P., has been President of Rosary College in River Forest,
Illinois since 1981. She has been affiliated with the College since 1961,
serving as a professor and an administrator in various capacities prior to her
appointment as President. Dr. Murray has been a member of the Sinsinawa
Dominicans since 1952. She holds an undergraduate degree in French from Rosary
College and a doctorate degree in French from the University of Fribourg, in
Switzerland. She also holds a certificate from the Institute of Educational
Management at Harvard University. Dr. Murray is a member of the Board of
Directors of Fenwick High School in Oak Park, Illinois, and the Association of
Catholic Colleges. She is a member of the American Association of Teachers of
French and the Associated Colleges of Illinois, and serves as the Chairperson
of the Federation of Independent Illinois Colleges and Universities.
MICHAEL R. NOTARO is retired from Computer Data Processing Corp., a
privately-held firm which offered computer data processing services. From 1936
through 1990, Mr. Notaro was president of Chicago-based Statistical Tabulating
Corporation, a privately-held firm founded by Mr. Notaro. Mr. Notaro is a
trustee of DePaul University and former chairman of its board. He holds an
honorary doctor of laws degree from DePaul University. He serves on the boards
of Catholic Charities of Chicago, the Chicago Boys' Club and the Hundred Club
of Cook County. He is a former trustee of the Illinois Institute of Technology
and currently serves as a member of the Citizens Board of Loyola Hospital. Mr.
Notaro is an emeritus member of the Finance Council for Cardinal Joseph
Bernardin of the Archdiocese of Chicago. He is a Knight of St. Gregory and a
Knight of Malta. He is co-trustee and co-executor of the George S. Halas
Estate, deceased owner of the Chicago Bears.
DIRECTOR COMPENSATION
Directors of the Corporation are not paid for attending meetings of the Board
of Directors of the Corporation. Each director of the Corporation is also a
director of the Bank. Non-employee directors of the Bank are paid an annual
director's fee of $24,000, except that Mr. Notaro, as Chairman of the Executive
5
<PAGE>
Committee, receives an annual director's fee of $36,000. In addition to the
annual fee, non-employee directors receive board and committee meeting fees of
$500 per meeting ($600 for committee chairpersons), based upon attendance. Non-
employee directors also receive monthly meeting fees of $500 per month from St.
Paul Financial Development Corporation and $200 per month from Annuity Network,
Inc., which are both wholly-owned subsidiaries of the Corporation, as well as
$300 per month from St. Paul Service, Inc., a wholly-owned subsidiary of the
Bank. Directors who are employees of the Bank do not receive any such fees.
The Corporation and the Bank have adopted a nonqualified retirement plan (the
"Retirement Plan") for non-employee directors of the Corporation and the Bank.
Under the Retirement Plan, as amended, eligible directors receive annual
benefits consisting of a minimum of 60% (increasing to 70% for eleven or more
years of service and increasing by an additional 1% for each year of service in
excess of 20 years) of the regular annual compensation paid for services as a
director of the Corporation, the Bank or any of their subsidiaries during the
12-month period immediately preceding a termination of service (or, if greater,
during any 12 consecutive month period occurring during the three-year period
immediately preceding a termination of service). The Retirement Plan, as
amended, provides that benefits are paid once a director reaches age 70; after
the director's permanent and total disability; after a director nominated by
the Corporation is not reelected; or after termination following a change in
control. For the definition of "change in control", see "Executive
Compensation--Employment Agreements". Benefits are not paid if the director is
removed from the board for "cause", as defined.
Monthly payments are made under the Retirement Plan for the number of months
equal to the number of full months the eligible director has served as a
director. Directors have the right to elect to receive a lump-sum payment, as
calculated based upon an actuarial determination of the present value of the
plan's benefits. The Retirement Plan, as amended, provides for a spouse's
benefit if the director is married at the time of death. Eligible directors
must agree not to become an employee of any financial institution located
within 50 miles of the Bank's headquarters for a one-year period after
termination of service as a director in order to receive benefits. The
Retirement Plan, as amended, provides that the obligation of the Corporation
and the Bank to each eligible director will be funded as each such director
becomes entitled to receive payment of benefits. The Retirement Plan may be
amended or terminated at any time, but without affecting the vested rights of
directors to receive benefits.
CORPORATE GOVERNANCE AND OTHER MATTERS
The Board of Directors of the Corporation acts as a nominating committee for
selecting nominees for election as directors and has made its nominations for
the 1994 Annual Meeting. The Corporation's Bylaws also permit shareholders
eligible to vote at the Annual Meeting to make nominations for directors, but
only if such nominations are made pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, notice must be delivered to, or
mailed to and received at, the principal executive offices of the Corporation
not less than 30 days nor more than 90 days prior to the date of the meeting,
provided that at least 45 days' notice or prior public disclosure of the date
of the meeting is given or made to shareholders. Public disclosure of the date
of the 1994 Annual Meeting was made on March 16, 1994 by the issuance of a
press release followed by a filing of a Current Report on Form 8-K under the
Securities Exchange Act of 1934 (the "1934 Act") with the SEC. A shareholder's
notice of nomination must also set forth certain information specified in
Article III, Section 13 of the Corporation's Bylaws concerning each person the
shareholder proposes to nominate for election and the nominating shareholder.
Prior to printing this proxy statement, the Corporation had received no such
nominations.
The Boards of Directors of the Corporation and the Bank have each appointed a
standing audit committee. During the year ended December 31, 1993, the audit
committees each conducted four meetings. The current members of the audit
committees are Messrs. Anderson, Viera and Wood. The duties of the
6
<PAGE>
committees include reviewing with management and the Corporation's independent
accountant the annual financial statements, significant accounting policies,
audit conclusions regarding significant accounting estimates and the
independent accountant's letter to management concerning the effectiveness of
financial and accounting controls. In addition, the committees review the scope
of the annual independent accountant's audit and recommend to the Board of
Directors the firm to be engaged as the independent accountant. The committees
also oversee the Bank's internal audit function and review with the Director of
Internal Audit his conclusions regarding the adequacy of the organization's
internal controls. The committees may also examine and consider other matters
relating to the financial affairs of the Corporation and the Bank as they
determine appropriate.
The Boards of Directors of the Corporation and the Bank have each appointed a
standing organizational planning committee. During the year ended December 31,
1993, the organizational planning committees each conducted seven meetings. The
current members of the organizational planning committees are Dr. Fredian and
Messrs. Notaro and Viera. The organizational planning committees function as
compensation committees. The duties of such committees include making
recommendations to the Boards of Directors concerning compensation of executive
officers and employee benefit plans. See "Executive Compensation--Report of the
Organizational Planning and Stock Option Committees on Executive Compensation".
The Boards of Directors of the Corporation and the Bank have each appointed a
standing executive committee. The Bylaws of the Corporation and the Bank give
the executive committees certain powers and authority in the management of the
business and affairs of the Corporation and the Bank when the Boards of
Directors are not in session. The executive committees also review and make
recommendations to the Boards of Directors concerning the Corporation's and the
Bank's annual budgets. During the year ended December 31, 1993, the executive
committees each conducted three meetings. The current members of the executive
committees are Messrs. Agnew, Notaro, Scully and Wood.
The Board of Directors of the Corporation has appointed a standing stock
option committee. The duties of the committee include making recommendations to
the Board of Directors concerning eligible persons to whom options will be
granted under the Corporation's stock option plan. During the year ended
December 31, 1993, the stock option committee conducted three meetings. The
current members of the stock option committee are Dr. Fredian and Messrs.
Notaro and Viera. See "Executive Compensation--Report of the Organizational
Planning and Stock Option Committees on Executive Compensation".
During 1993, the Corporation's Board of Directors held twelve meetings. No
incumbent director attended fewer than 75% of the aggregate of the total number
of meetings of the Corporation's Board of Directors and the total number of
meetings held by all committees of such board on which the director served.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain summary information concerning the
compensation paid by the Corporation and its subsidiaries for services rendered
during each of the fiscal years ended December 31, 1991, 1992 and 1993 to the
Corporation's chief executive officer and to each of the four other most highly
compensated executive officers of the Corporation determined as of December 31,
1993 (the "named executive officers").
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION (B) COMPENSATION
------------------------ ------------
AWARDS
------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL BONUS OPTIONS/SARS COMPENSATION
POSITION YEAR SALARY ($) $ (A) # (C) ($) (D)
------------------ ---- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Joseph C. Scully............ 1993 $323,699 $182,375 37,500 $146,041
Chairman of the Board 1992 279,384 348,690 37,500 140,625
and Chief Executive Officer 1991 266,701 302,317 0 --
Patrick J. Agnew............ 1993 231,028 179,595 37,500 96,285
President and Chief 1992 201,119 317,423 37,500 86,783
Operating Officer 1991 191,989 252,780 0 --
Robert N. Parke............. 1993 136,299 75,811 0 5,730
Senior Vice President,
Finance 1992 129,800 145,253 18,000 8,206
and Chief Financial Officer 1991 123,907 126,174 0 --
Thomas J. Rinella........... 1993 143,642 73,375 0 6,038
Senior Vice President,
Marketing 1992 136,804 140,227 18,000 8,648
and Community Lending 1991 130,594 124,266 0 --
Clifford M. Sladnick........ 1993 133,695 57,138 15,000 5,620
Senior Vice President,
General 1992 117,804 108,244 18,000 7,447
Counsel and Corporate
Secretary 1991 104,715 87,248 15,000 --
</TABLE>
- --------
(a) Includes incentive compensation paid in July of 1991, 1992 and 1993 to the
Bank's officers based on a percentage of earnings, as well as annual
holiday bonuses (3% of base compensation) paid in December of each year.
Incentive compensation, if any, is paid in July of each year based upon the
Corporation's earnings during the preceding twelve month period, and is
included in the table based on the amount earned with respect to each year
presented. The amount of incentive compensation earned by the named
executive officers for the last six months of 1993 is not yet calculable.
(b) Certain executive officers of St. Paul Federal receive indirect
compensation in the form of personal benefits; including insurance
premiums, personal tax, financial and estate planning services, club
memberships and the use of automobiles. The amount of such indirect
compensation in 1993 did not exceed, with respect to any executive officer,
the lesser of $50,000 or 10% of the total amount of annual salary and bonus
paid to such officer.
(c) Represents stock options granted on June 20, 1991, June 22, 1992 and June
3, 1993 under the Corporation's Stock Option Plan to purchase the stated
number of shares of the Corporation's Common Stock at exercise prices of
$9.1667, $12.00 and $14.1667 per share, respectively. The number of shares
subject to the stock options and the per share exercise prices have been
adjusted to reflect the Corporation's three-for-two stock split on January
4, 1994. Although the Corporation's Stock Option Plan permits the grant of
stock appreciation rights ("SARs"), no grants of SARs have been made.
(d) Consists of contributions to the Corporation's Employee Stock Ownership
Plan (the "ESOP") with respect to Mr. Parke, Mr. Rinella, and Mr. Sladnick.
With respect to Messrs. Scully and Agnew, for 1993 consists of ESOP
contributions of $9,914 and $9,712, respectively, deferred compensation of
$135,565 and $86,573, respectively, earned under their respective
employment agreements, as well as $562 of preferential amounts (interest in
excess of 120% of the applicable federal long-term rate prescribed by the
Internal Revenue Code) earned by Mr. Scully on deferred compensation.
Pursuant to SEC rules, "All Other Compensation" does not include amounts
earned for the fiscal year ended December 31, 1991.
8
<PAGE>
STOCK OPTION GRANTS
The following table sets forth certain information concerning the grant of
stock options under the Corporation's Stock Option Plan during the fiscal year
ended December 31, 1993 to each of the named executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL GRANT
UNDERLYING OPTIONS/SARS EXERCISE OR DATE
OPTIONS/SARS GRANTED BASE PRICE PRESENT
GRANTED TO EMPLOYEES ($/SHARE) EXPIRATION VALUE
NAME (#) (A) (B) IN FISCAL YEAR (B) DATE ($) (C)
- ---- ------------ -------------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Joseph C. Scully........ 37,500 17.24 $14.167 7-03-03 $235,988
Patrick J. Agnew........ 37,500 17.24 14.167 7-03-03 235,988
Robert N. Parke......... -- -- -- -- --
Thomas J. Rinella....... -- -- -- -- --
Clifford M. Sladnick.... 15,000 6.90 14.167 7-03-03 94,395
</TABLE>
- --------
(a) All options were granted with an exercise price equal to the fair market
value of the Corporation's Common Stock on the date of grant. Options
granted under the Stock Option Plan are exercisable in respect of 50% of
the number of shares on the first anniversary of the date of grant and are
exercisable in respect of an additional 12.5% on each of the second, third,
fourth and fifth anniversaries of the date of grant, provided that options
are 100% exercisable for any employee who has completed five years of
employment with the Corporation. The options also become exercisable upon
any merger or consolidation in which the Corporation is not the surviving
entity.
(b) Number of options granted and exercise price per share have been adjusted
to reflect the Corporation's three-for-two stock split on January 4, 1994.
(c) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an employee may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised, so that there is no assurance the value
realized by an employee will be at or near the value estimated by the
Black-Scholes model. The estimated values under that model are based on
assumptions as to variables such as interest rates (based on the ten-year
U.S. Treasury rate of 6% on date of grant), stock price volatility (based
on the Corporation's 180-day stock price history from date of grant),
future dividend yield (based on the Corporation's quarterly dividend rate
and 180-day stock price history from date of grant), and ten-year period of
exercisability. No adjustments were made for non-transferability and risk
of forfeiture.
9
<PAGE>
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information, with respect to the named
executive officers, concerning the exercise of options during the fiscal year
ended December 31, 1993 and the value of unexercised options held as of
December 31, 1993.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS/SARS AT
OPTIONS/SARS AT FISCAL YEAR-END
SHARES ACQUIRED VALUE FISCAL YEAR-END (#) (A) ($) (A) (B)
ON REALIZED ------------------------- -------------------------
NAME EXERCISE (#) (A) ($) (A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Scully........ -- -- 345,000 -- $3,687,490 --
Patrick J. Agnew........ -- -- 202,500 -- 1,965,620 --
Robert N. Parke......... 7,500 $82,500 78,000 -- 846,498 --
Thomas J. Rinella....... -- -- 85,500 -- 937,123 --
Clifford M. Sladnick.... -- -- 26,625 33,375 253,030 $229,968
</TABLE>
- --------
(a) Adjusted for Corporation's three-for-two stock split on January 4, 1994.
(b) Market value of underlying securities at year-end, minus the exercise
price.
REPORT OF THE ORGANIZATIONAL PLANNING AND STOCK OPTION COMMITTEES ON EXECUTIVE
COMPENSATION
Overview and Philosophy
The Organizational Planning Committee (the "Planning Committee") and the
Stock Option Committee (together with the Planning Committee herein referred to
as the "Committee") of the Corporation's Board of Directors are both composed
of three outside directors, Dr. Fredian and Messrs. Notaro and Viera. Mr.
Faustin A. Pipal was a director of the Corporation and a member of the
Committee until his death on January 17, 1994. The Planning Committee is
responsible for developing and making recommendations to the Board with respect
to the Corporation's executive compensation policies. In addition, the Planning
Committee determines annually the compensation that is paid to the Chief
Executive Officer and the other executive officers of the Corporation, subject
to Board approval. The Stock Option Committee selects, subject to Board
approval, the eligible persons to whom options will be granted based on each
individual's performance and responsibilities. The Stock Option Committee
prescribes the terms and provisions (which need not be identical) of each
option granted under the Option Plan.
The Committee has outside compensation consultants available and access to
independent national, regional and industry compensation survey information.
The objectives of the Corporation's executive compensation program are to:
. Directly tie individual executive pay to corporate performance;
. Support the achievements of the long-and short-term strategic goals and
performance objectives of the Corporation;
. Provide a competitive compensation program that will attract and retain
talented and qualified executives while rewarding individual achievement
and contribution; and
. Align the executives' interests with corporate success by making a
substantial portion of compensation subject to profitability.
10
<PAGE>
The Corporation's executive compensation program provides an overall level of
compensation opportunity that is competitive within the thrift and banking
industry. The Committee will use its discretion to set executive compensation
where, in its judgment, external, internal or individual circumstances warrant
it.
The 1993 Tax Act
The Omnibus Budget Reconciliation Act of 1993 added a provision to the
Internal Revenue Code of 1986, as amended (the "Code"), which generally limits
to $1.0 million the Corporation's allowable deduction for federal income tax
purposes of certain compensation paid to executive officers, except for certain
"performance-based" compensation and certain compensation related to employee
benefit plans.
The Committee has considered the implications of this new law and has
concluded that, since the cash compensation paid to the Corporation's executive
officers is significantly below the $1.0 million limitation, no general policy
with respect to this matter is necessary at this time. The Corporation,
however, could be impacted by this new law to the extent that option exercises
by executive officers cause an individual's compensation in a particular year
to exceed $1.0 million. Accordingly, the Committee has determined to amend the
Corporation's Stock Option Plan to conform with the new law. See "Proposed
Amendment to Stock Option Plan--Reasons for Option Plan and Amendment--Annual
Limitation".
Executive Officer Compensation Program
The Corporation's executive officer compensation program consists of base
salary, annual cash incentive compensation, long-term incentive compensation in
the form of stock options, deferred compensation, personal benefits such as tax
services, club memberships, financial planning and the use of automobiles, and
various benefits including medical and retirement plans generally available to
employees of the Corporation. The executive officer compensation program is
reviewed, with the assistance of an independent compensation consultant,
relative to other well-managed large thrift institutions, regional thrifts and
local bank competitors (the "Compensation Peer Group"). The Compensation Peer
Group (which consists of 20 large national thrifts, eight regional and local
thrifts and five local banks) is used to compare the Corporation's compensation
packages to that of other companies that compete with the Bank for executives.
The Committee believes that this peer group, which differs from the published
NASDAQ indices utilized in the Comparative Performance Graph set forth below,
is appropriate for executive compensation purposes.
Base Salary. Executive officer base salaries are set relative to market data
and surveys of the Compensation Peer Group. Base salaries are reviewed position
by position and are generally set at levels lower than market due to the large
emphasis on incentive compensation determined by annual corporate and
individual performance. Overall base salaries for the named executive officers
average 20% below the combined base salaries of the Compensation Peer Group. In
determining base salaries, the Committee also takes into consideration
individual experience and contributions, as well as level of responsibility.
Annual Incentive Compensation. The officer incentive compensation program is
the Corporation's annual incentive program for corporate officers. The purpose
of the incentive compensation program is to provide a direct link between
executive officer compensation and corporate earnings. The Planning Committee
believes that compensation tied to corporate performance strengthens
management's incentive to increase the Corporation's profitability.
Accordingly, annual incentive compensation is a significant component of the
executive officers' total cash compensation. For the named executive officers,
the portion of compensation attributable to the incentive program in 1993
ranged from 40% to 56% of total compensation.
11
<PAGE>
Incentive compensation for all corporate officers has averaged 5% of the
Corporation's earnings for the preceding twelve-month period, without deducting
for net additions to general loss reserves and taxes (but reduced by specific
loan loss reserves and loan charge-offs) and has been distributed to officers
based on individual performance and corporate level. In the absence of
earnings, no bonus is paid.
In fiscal 1993, the Corporation's net earnings increased by 9.8%, or
$3,700,000, over 1992. The Planning Committee believes that the annual
incentive program provides an excellent link between the level of the
Corporation's earnings and the incentives paid to executive officers.
Individual incentive bonus awards to the executive officers are determined,
at the discretion of the Planning Committee, based on individual performance
and achievement. The annual incentive bonus, when combined with base salary,
resulted in average compensation payments to the named executive officers at 6%
above the average of the Compensation Peer Group. The Planning Committee
believes that the level of compensation paid to the named executive officers
during 1993 was appropriate based upon the Corporation's financial performance
and the significant portion of compensation tied to corporate performance.
Stock Options. The Board of Directors of the Corporation believes that stock
options are important to increase the incentive and to attract and encourage
the continued employment and service of executive officers and other key
officers and employees by facilitating their purchase of a stock interest in
the Corporation. The Stock Option Committee believes that the grant of stock
options aligns management with the interests of the Corporation's stockholders,
while creating another form of performance-based compensation.
The Stock Option Plan authorizes the Stock Option Committee to administer the
plan and make recommendations to award stock options to key officers, directors
and employees. Stock options are granted at the discretion of the Stock Option
Committee, with grants generally made based on individual contributions and
upon promotion. Stock options are granted at an option price equal to the fair
market value of the Corporation's Common Stock on the date of grant, have ten
year terms and have exercise restrictions based on length of service. The
amount of stock option grants increases according to salary and position within
the Corporation.
In fiscal 1993, the named executive officers received stock option grants for
an aggregate of 90,000* shares of Common Stock, at an exercise price of $14.17*
per share. These grants represent 41.0% of all stock options granted in fiscal
1993 and, based on option prices, result in an average multiple of 1.67 times
1993 total annual cash compensation for this group. These grants were made by
the Committee to reward outstanding individual performance, which resulted in
successful acquisition activity and regulatory improvements.
Deferred Compensation Plan. A deferred compensation plan is provided to
Messrs. Scully and Agnew as part of their long-term incentive compensation
program. This plan, as specified in their employment agreements, requires that
a specified sum be credited annually to their account. In fiscal 1993, the
amounts credited (without earnings) for Messrs. Scully and Agnew were $135,565
and $86,573, respectively, representing 20% of Mr. Scully's and 15% of Mr.
Agnew's annual compensation.
Benefits. The Corporation provides medical, life insurance and retirement
benefits to the executive officers that are generally available on the same
terms to other employees of the Corporation. Certain executive officers receive
indirect compensation in the form of personal benefits; including insurance
premiums, personal tax services, financial planning, club memberships and the
use of automobiles. As to each executive officer, the amount of these
perquisites, as determined in accordance with the rules of the SEC relating to
executive compensation, did not exceed the lesser of either $50,000 or 10% of
annual compensation for fiscal 1993.
- --------
*Adjusted for the Corporation's three-for-two stock split on January 4, 1994.
12
<PAGE>
Chief Executive Officer Compensation
At the beginning of fiscal 1993, Mr. Scully's base salary was $286,200.
During the year, Mr. Scully received a base salary increase of $75,000,
representing an increase of 26% effective July 1, 1993. His base salary at the
end of the fiscal year was $361,200. Mr. Scully's base salary is reviewed
annually by the Committee. The Committee consults with an independent
compensation consultant who conducts a custom survey of the Compensation Peer
Group. The survey data is used to develop trend line analysis which shows the
relationship between CEO total compensation and return on assets, as well as
CEO total compensation and institution asset size. In both cases, because the
Corporation's base salaries are set at the low end of the market data range,
allowing for an effective incentive compensation program, Mr. Scully's base
salary was considerably below the trend line and, therefore, the above increase
resulted in an adjustment from 37% to 27% below the peer group.
Mr. Scully received a bonus in fiscal 1993 of $325,000 for the period from
July 1, 1992 through June 30, 1993. The bonus was the result of corporate
performance for the above period and was paid from a pool which averaged 5% of
the Corporation's earnings for such period, without deducting for net additions
to general loss reserves and taxes (but reduced by specific loan loss reserves
and loan charge-offs).
In fiscal 1993, net earnings of the Corporation rose to $41.4 million, an
increase of 9.8% over 1992. In addition, return on average assets (ROA)
increased to 1.10%, with return on average equity (ROE) at 12.77%. Through Mr.
Scully's leadership of the Corporation's senior management group, the Bank
successfully acquired Elm Financial Services, Inc., adding approximately $366
million in assets and adding eight retail banking offices. The Bank also
improved its regulatory position during the year.
The Committee believes that Mr. Scully has managed the Corporation well in a
challenging business environment for financial institutions, and has achieved
financial results generally equivalent to the Compensation Peer Group. Mr.
Scully's total cash compensation paid in 1993 was 6% above the average of the
Compensation Peer Group. The Planning Committee believes that this level of
compensation was appropriate based on Mr. Scully's individual contributions to
the financial performance of the Corporation.
The stock options for 37,500* shares granted to Mr. Scully in fiscal 1993
brought his cumulative option grants to 345,000* since the Corporation's
formation in 1987. The 1993 grant was made by the Committee to reward Mr.
Scully for his outstanding leadership of the Corporation's senior management
group.
Submitted by the Members of the
Organizational Planning Committee
and the Stock Option Committee
Michael R. Notaro, Chairman Alan J. Fredian
John J. Viera
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Faustin A. Pipal served on the Organizational Planning Committee and the
Stock Option Committee of the Corporation until his death on January 17, 1994.
Mr. Pipal was formerly an executive officer of the Corporation.
13
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The following graph, which is required under a recently adopted SEC rule,
sets forth comparative information regarding the Corporation's cumulative
shareholder return on its Common Stock over the last five fiscal years. The
shareholder return is measured by dividing total dividends (assuming dividend
reinvestment) plus share price change for a period by the share price at the
beginning of the measurement period. The Corporation's cumulative shareholder
return, based on an investment of $100 the beginning of the five-year period
beginning January 1, 1989, is compared to the cumulative total return of the
NASDAQ Stock Market Index and the NASDAQ Bank Stock Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
AMONG ST. PAUL BANCORP, NASDAQ AND NASDAQ BANK
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period ST. PAUL NASDAQ
(Fiscal Year Covered) BANCORP NASDAQ BANK
- --------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-
12/31/88 $100 $100 $100
FYE 12/31/89 $157.90 $121.24 $111.15
FYE 12/31/90 $ 79.31 $102.96 $ 81.40
FYE 12/31/91 $131.66 $165.21 $133.57
FYE 12/31/92 $233.82 $192.10 $194.19
FYE 12/31/93 $290.35 $219.21 $221.32
</TABLE>
Employment Agreements. The Corporation and the Bank have entered into
employment agreements with Joseph C. Scully, Chairman of the Board and Chief
Executive Officer, and Patrick J. Agnew, President and Chief Operating Officer.
The salaries for Messrs. Scully and Agnew for the twelve month period ending
June 30, 1994 are $361,200 and $256,032, respectively. Each officer receives
annual salary increases as determined by the Bank's Board of Directors. Both
Mr. Scully and Mr. Agnew are entitled to participate in any discretionary
bonuses and retirement or other benefit plans applicable to the Corporation's
or the Bank's executive officers. The employment agreements for Messrs. Scully
and Agnew, as amended, are each for terms of three years, with each expiring on
June 21, 1996. The Corporation and the Bank may, upon the majority affirmative
vote of each of their respective Boards, by written notice to the officer,
renew the employment agreements for one additional year on each anniversary
date, commencing with the June 21, 1994 anniversary date, unless the
14
<PAGE>
officer gives contrary written notice to the other parties prior to such
anniversary date. The employment agreements provide that the terms thereof are
automatically terminated upon the officer attaining the age of 65.
The employment of Messrs. Scully and Agnew may be terminated by the Boards of
Directors of the Corporation and the Bank at any time; provided, however, that
if the termination is not for cause, as defined in the agreements, each is
entitled: (a) to receive a lump sum payment in an amount equal to his then-
current compensation (including any bonuses paid during the then-current fiscal
year and deferred compensation credited for the preceding year) calculated for
a period equal to the remaining term of the agreement (provided that the
aggregate amount of such payment shall not exceed three times the officer's
then-current compensation) and (b) subject to certain limitations, to continue
to participate in retirement and other benefit plans for the remaining term of
the agreement, to be funded by an irrevocable trust established by the
Corporation and the Bank. Such lump sum payments for termination without cause
would be $2,494,428 and $ 2,023,608 for Messrs. Scully and Agnew, respectively,
based upon current salary and deferred compensation plus the most recent
incentive compensation paid to such officers, assuming a remaining term of
three years. However, if the termination of employment is in connection with a
change in control, the lump sum severance payment would instead be calculated
in accordance with the provisions described below.
If any such officer terminates his employment without the consent of both
Boards, then the agreements restrict the terminating officer for one year or
the remaining term of the agreement plus six months, whichever is less, from
being employed by a competing bank, savings bank, savings and loan association
or mortgage banking company, or a holding company affiliate of any of the
foregoing, having an office in Illinois within 50 miles of the Bank's home
office, out of which the terminating officer would be primarily based.
If, during the term of the employment agreements, there is a "change in
control" of the Corporation or of the Bank, and the employment of Messrs.
Scully or Agnew is terminated, voluntarily or involuntarily, within two years
thereafter (except by reason of normal retirement, disability, death or for
cause), each will be entitled to receive, as liquidated damages for services
previously rendered, a lump sum cash payment. Such payment will be in the
amount of one year's then-current compensation, including deferred compensation
and any bonuses paid during the past twelve months, if employment is
voluntarily terminated without "good reason", defined in the agreements as,
among other things, a material reduction in the officer's salary or deferred
compensation, a material reduction in the officer's bonus below a certain
amount, the officer's relocation of more than 50 miles or a material reduction
in his position, authority, duties or responsibilities. If the officer's
employment is terminated by him voluntarily with good reason or involuntarily
by the Corporation or the Bank, such payment will be equal to the sum of (X)
the amount of the officer's then-current compensation which, but for such
termination, would be payable for the remaining term of the agreement, plus (Y)
one year's then-current compensation; provided that the aggregate amount of
such payment shall not exceed three times the officer's then-current
compensation. Based upon current salary and deferred compensation plus the most
recent incentive compensation paid to such officers, such payments would be
$831,476 and $674,536 for Messrs. Scully and Agnew, respectively, if employment
were terminated as described in the second sentence of this paragraph, and,
$2,494,428 and $2,023,608, respectively, if employment were terminated as
described in the third sentence of this paragraph. This payment will be in lieu
of the lump sum amount payable for termination without cause. The agreements
also permit Messrs. Scully and Agnew to receive a lump sum amount equal to, but
in lieu of, the above payment if they elect to terminate their employment
agreements while continuing to work for the Corporation and the Bank following
a change in control. In addition, such officers would be entitled, subject to
certain limitations, to continue to participate in retirement and other benefit
plans to be funded by an irrevocable trust created by the
15
<PAGE>
Corporation and the Bank. The employment agreements provide that the officers
shall not have the right to receive any payment or benefits under the agreement
to the extent that such payment or benefit would cause any payment to be
considered a "parachute payment" under Section 280G of the Code.
A "change in control" of the Corporation will be deemed to have occurred if
(i) any person becomes the beneficial owner of 25% or more of the Corporation's
voting shares; (ii) any person receives certain regulatory approvals to acquire
control of the Corporation; (iii) any person enters into a binding agreement to
acquire (by means of stock purchase, tender offer or merger) beneficial
ownership of 25% or more of the Corporation's voting shares, provided that a
change in control would not be deemed to occur unless the Board of Directors
makes a determination that such action constitutes a change in control, and
further provided that a change in control shall no longer be deemed to have
occurred upon any termination of such an agreement; (iv) any person becomes the
beneficial owner of 10% to 25% of the Corporation's voting shares, provided
that the OTS has made a determination that such ownership constitutes a change
in control of the Corporation; (v) any person (other than persons named as
proxies solicited on behalf of the Corporation) holds irrevocable proxies for
25% or more of the Corporation's voting shares, provided that the Board of
Directors has made a determination that such action constitutes a change in
control; and (vi) as the result of any tender offer, business combination or
contested proxy solicitation, the persons who were directors prior to such
transaction cease to constitute at least two-thirds of the Board of Directors
of the Corporation. The Board of Directors may de-trigger any transaction or
event (pursuant to which any person became the beneficial owner of up to 50% of
the Corporation's voting shares) which terminates or ceases to exist. A "change
in control" of the Bank will be deemed to have taken place if the Corporation's
beneficial ownership of the total number of outstanding voting shares of the
Bank is reduced to less than 50%.
The employment agreements with Messrs. Scully and Agnew each provide for
deferred compensation. In general, the employment agreements require St. Paul
Federal to credit a specified sum annually as deferred compensation for each of
these officers. The accrued payments will be paid to a named beneficiary if the
officer dies prior to retirement. In case of involuntary termination before the
end of the term of the agreement, the officer will receive the entire accrued
amount in annual payments over a period of ten years or a lesser period at the
option of the Bank. If the officer voluntarily terminates his employment, 75%
of the accrued amount will be payable to the officer in five annual payments.
If the officer remains in the employment of St. Paul Federal until he retires
due to age, early retirement or disability and refrains from engaging in any
competitive business, as described above, the accrued payments will be paid to
the officer in ten annual installments or a lesser period at the option of the
Bank. Each officer may elect, one year prior to the officer's retirement, to
extend the period within which he or his beneficiaries will receive
distribution of the accrued payments to a period not in excess of 15 years,
except that at the option of the Bank it may be paid over a lesser period.
Also, at the option of the Bank and with the consent of the officer,
distribution of the accrued payments may begin at age 70 and such payments may
be made over a 15-year period. The employment agreements permit Messrs. Scully
and Agnew to direct that deferred compensation contributions be deemed to be
invested in government securities, the Common Stock of the Corporation or such
other types of investments as directed by the officer.
Severance Agreements. The Corporation and the Bank have entered into
severance agreements with the senior vice presidents and first vice presidents
of the Corporation and the Bank, including Robert N. Parke, Thomas J. Rinella
and Clifford M. Sladnick, Senior Vice Presidents of the Corporation and the
Bank. Under these agreements, each officer is entitled to receive a severance
payment in the event his employment with the Corporation and the Bank is
terminated, voluntarily or involuntarily (except by reason of normal
retirement, disability, death or for cause), within two years of a change in
control of the Corporation or of the Bank.
16
<PAGE>
The severance agreements provide that each officer will receive one year's
then-current compensation, including any bonuses paid and any deferred
compensation credited to his account during the past twelve months, if he
voluntarily terminates his employment without "good reason" (defined in the
agreements to include, among other things, a material reduction in the
officer's salary, a material reduction in the officer's bonus below a certain
amount, the officer's relocation of more than 50 miles, or a material reduction
in the position, authority, duties or responsibilities which existed prior to
the change in control). In the event the employment of any such officer is
terminated by him voluntarily with good reason or involuntarily by the
Corporation or the Bank, he will receive three times his average annual
compensation for the five-year period before termination. Based upon current
salaries and the most recent incentive compensation payments received, the
aggregate amount of such payments under the severance agreements would be
$278,721, $281,453, and $250,723 for Messrs. Parke, Rinella, and Sladnick,
respectively, if employment were terminated as described in the first sentence
of this paragraph and would be $724,946, $740,743, and $559,595 for Messrs.
Parke, Rinella, and Sladnick, respectively, if employment were terminated as
described in the second sentence hereof. In addition, such employees will be
entitled, subject to certain limitations, to continue to participate in
retirement and other benefit plans to be funded by an irrevocable trust created
by the Corporation and the Bank. The severance agreements provide that the
officers shall not have the right to receive any payment or benefits under the
agreement to the extent that such payment or benefit would cause any payment to
be considered a "parachute payment" under Section 280G of the Internal Revenue
Code.
The severance agreements are each for terms of three years, with each
expiring on December 20, 1996. The Corporation and the Bank may, upon the
majority affirmative vote of each of their respective Boards, by written notice
to the officer renew the severance agreements for one additional year on each
anniversary date, commencing with the December 20, 1994 anniversary date,
unless the officer gives contrary written notice to the other parties prior to
such anniversary date.
Pension Plans. St. Paul Federal maintains a qualified noncontributory pension
plan administered by trustees appointed by the Board of Directors of the Bank
for its employees and the employees of its subsidiaries. All of the current
trustees are members of the Bank's Board of Directors. The plan covers those
employees who have reached the age of 21 and who have completed at least 1,000
hours of employment in a 12-month period. Contributions are determined in
accordance with actuarial principles, subject to the approval of the Board of
Directors. Accrued benefits of eligible employees become vested after five
years of service.
The Board of Directors has adopted an excess benefit plan entitled the "St.
Paul Federal Supplemental Retirement Plan and Excess Benefit Plan". The purpose
of this plan is to provide employees who are participants in the pension plan
with benefits which are not currently available because such benefits would be
in excess of the limitations on contributions and benefits imposed by the Code.
17
<PAGE>
The following table shows estimated aggregate annual pension benefits at age
65 payable to employees under the pension plan and the supplemental benefit
plan in the form of a single life annuity for various levels of compensation
and years of credited service, without any limitations on benefits imposed by
the Code:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------
COMPENSATION (A) 15 20 25 30 35
- ---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$150,000........................... $ 48,641 $ 65,546 $ 82,452 $ 99,357 $108,739
200,000........................... 65,701 88,606 111,512 134,418 146,999
250,000........................... 82,801 111,706 140,612 169,518 185,299
300,000........................... 99,901 134,806 169,712 204,618 223,599
350,000........................... 117,001 157,906 198,812 239,718 261,899
400,000........................... 134,101 181,006 227,912 274,818 300,199
450,000........................... 151,201 204,106 257,012 309,918 338,499
500,000........................... 168,301 227,206 286,112 345,018 376,799
550,000........................... 185,401 250,306 315,212 380,118 415,099
600,000........................... 202,501 273,406 344,312 415,218 453,399
650,000........................... 219,601 296,506 373,412 450,318 491,699
700,000........................... 236,701 319,606 402,512 485,418 529,999
750,000........................... 253,801 342,706 431,612 520,518 568,299
</TABLE>
- --------
(a) Compensation is assumed to be the average of the final 60 months of
compensation, which includes base salary plus incentive compensation (as
set forth under "Annual Compensation" in the Summary Compensation Table
with respect to the named executive officers), multiplied by 12. Benefits
shown reflect the Social Security offset allowance as defined in the
pension plan.
The amount of any lump sum payment under the plans is calculated based upon
an actuarial determination of the present value, as of the date of retirement,
of the annual pension benefits.
Messrs. Scully, Agnew, Parke, Rinella and Sladnick had 30, 14, 16, 25 and 4
years of credited service, respectively, under the pension plan as of December
31, 1993.
Certain Transactions. Certain directors and executive officers of the
Corporation and the Bank, as well as certain members of their families and
certain business entities with which they or their families are affiliated, are
borrowers from the Bank. All such loans were made in the ordinary course of
business, did not involve more than the normal risk of collection or present
other unfavorable features, and were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the same time
for comparable transactions with unaffiliated persons. All loans to directors
and officers must be approved by the Board of Directors.
Statistical Tabulating Corporation, the firm of which Michael R. Notaro was
president, filed on February 27, 1990 for reorganization under Chapter 11 of
the United States Bankruptcy Code and substantially all of its assets were sold
on August 14, 1990.
18
<PAGE>
PROPOSED AMENDMENT TO STOCK OPTION PLAN
(PROPOSAL 2)
INTRODUCTION
The St. Paul Bancorp, Inc. Stock Option Plan (the "Option Plan") was
established by the Board of Directors of the Corporation in 1987, in connection
with the Bank's conversion to stock form and the concurrent holding company
formation, and was approved by the shareholders of the Corporation at the 1988
annual meeting. An amendment to the Option Plan was approved by the
shareholders at the 1992 annual meeting to increase the number of shares of the
Corporation's Common Stock reserved for issuance thereunder from 1,770,000 to
2,520,000.*
The Board of Directors of the Corporation has now adopted, subject to
shareholder approval, an amendment to the Option Plan to increase by 175,000,
from 2,520,000 to 2,695,000, the number of shares of Common Stock reserved for
issuance thereunder (subject to a limit of 25,000 shares with respect to which
any individual may be granted options or SARs during any calendar year), and to
permit the grant of stock options to newly-elected directors at the time of
election. Except as amended, the provisions of the Option Plan will remain
unchanged. The principal provisions of the Option Plan are summarized below.
Assuming the presence of a quorum, the affirmative vote of holders of a
majority of the shares voted, in person or by proxy, at the Annual Meeting is
required to approve the amendment to the Option Plan. Unless otherwise
indicated, properly executed proxies will be voted in favor of Proposal 2 to
amend the Corporation's Option Plan. The Board of Directors recommends a vote
FOR approval of the amendment to the Option Plan.
REASONS FOR OPTION PLAN AND AMENDMENT
Additional Shares. The Board of Directors of the Corporation believes that
stock options are important to increase the incentive and to attract and
encourage the continued employment and service of directors, officers and other
key employees by facilitating their purchase of an equity interest in the
Corporation. As of March 25, 1994, only 48,375 shares of Common Stock remain
available for future option grants under the Option Plan. Approval of the
proposed amendment will increase by 175,000, to 2,695,000, the number of shares
of Common Stock reserved under the Option Plan, including 223,375 shares
reserved for future options. Upon approval of the amendment, the number of
shares reserved under the Option Plan for future grants plus shares subject to
options granted and outstanding will represent approximately 9.86% of the sum
of the number of outstanding shares of Corporation Common Stock, plus shares
subject to outstanding options, and reserved for future grants, under the
Option Plan.
The Board of Directors has concluded that it is advisable that the
Corporation and its shareholders continue to have the incentive of stock
options available as a means of attracting and retaining directors, officers
and key employees. As the Corporation progresses, officers and key employees
are continually being retained or moving into positions where, in the judgment
of the Board, an initial or increased option will be a valuable incentive and
will serve to the ultimate benefit of the shareholders.
The current intention of the Board of Directors is to utilize the 175,000
additional shares to be reserved under the Option Plan for grants to newly-
hired and promoted officers.
- --------
*All share numbers have been adjusted to reflect the Corporation's three-for-
two stock split on January 4, 1994.
19
<PAGE>
Annual Limitation. The proposed amendment to the Option Plan includes a
limitation of 25,000 shares of the Corporation's Common Stock with respect to
which any individual may be granted options or SARs during any calendar year.
As discussed below, upon the exercise of non-incentive options or SARs, the
Corporation is generally entitled to a compensation expense deduction for
federal income tax purposes equal to the difference between the exercise price
and fair market value of the Corporation's Common Stock on the date of
exercise. Recently-enacted Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), generally limits to $1.0 million the Corporation's
federal income tax deduction of certain compensation paid to executive
officers, except for certain "performance-based" compensation and certain
compensation related to retirement or employee benefit plans.
Section 162(m) of the Code and the proposed regulations recently issued by
the United States Department of the Treasury exempt from the $1.0 million
limitation compensation from the exercise of stock options or SARs granted
under plans which satisfy certain conditions, including a requirement that the
plan state the maximum number of shares with respect to which options or SARs
may be granted during a specified period to any employee. The annual 25,000
share individual limitation is being added to the Option Plan to conform the
plan to the requirements of Section 162(m) and the proposed regulations.
Section 162(m) and the proposed regulations indicate that the $1.0 million
limitation does not apply to compensation paid under existing contracts.
Therefore, based upon its interpretation of Section 162(m) and the proposed
regulations, the Corporation believes that, with the proposed amendment,
currently outstanding options and any newly-granted options or SARs under the
Option Plan will be exempt from the limitations of Section 162(m). To date,
however, no final regulations have been issued with respect to Section 162(m).
Accordingly, there can be no assurance that the Corporation will not be limited
by Section 162(m) in the deductions it may take in the future with respect to
options or SARs granted under the Option Plan.
If the proposed amendment is approved, the annual 25,000 share limitation
with respect to any individual will be effective for all option or SAR grants
occurring subsequent to the date of the annual meeting.
Director Options. The Option Plan as initially adopted provided that newly-
elected outside directors will receive one-time option grants for 7,500 shares
of Common Stock upon completion of three years of service as directors. Since
the Option Plan's adoption, option grants have been utilized as one means to
attract new officers. In its search for new outside directors during 1993, the
Board of Directors realized that the availability of immediate stock option
grants was also an important means to attract and retain qualified directors.
Accordingly, the Board has determined to propose to amend the Option Plan to
eliminate the existing requirement that options be granted to new directors
upon completion of three years of service and to permit the one-time grant of
options to purchase 7,500 shares to newly-elected directors at the time of
election.
At the time of their election to the Board of Directors on October 25, 1993,
each of Jean C. Murray, O.P. and John W. Croghan were granted non-incentive
options to purchase 7,500 shares of the Corporation's Common Stock at an
exercise price of $19.0834 per share (the fair market value of the stock on the
date of grant), subject to shareholder approval of the amendment to the Option
Plan.
20
<PAGE>
DESCRIPTION OF THE PLAN
Under the Option Plan, as initially adopted, 1,770,000 shares of authorized
but unissued Common Stock (equal to approximately 10% of the total number of
shares of the Corporation's Common Stock issued in the Bank's conversion to
stock form and concurrent holding company formation) were reserved for
issuance. In 1992, the number of shares reserved under the Option Plan was
increased to 2,520,000.
The Option Plan is used primarily as an incentive for directors, officers and
other key employees responsible for the decision making, policy formulation and
personnel supervision which most directly affect the earnings of the
Corporation and the welfare of its shareholders. The Option Plan provides for
the grant of options that are intended to qualify as "incentive options" under
Section 422 of the Code, as well as non-incentive options. Outside directors of
the Corporation are eligible only for a one-time grant of non-incentive
options. The Option Plan also provides that stock appreciation rights ("SARs")
relating to options may be granted to officers and other key employees under
the Option Plan, but not to outside directors. The grant of an SAR permits the
optionee to surrender an option and receive in exchange cash or shares of the
Corporation's Common Stock equivalent to the difference between the fair market
value of the stock subject to the option and the option exercise price. To
date, no SARs have been granted under the Option Plan.
The Option Plan is administered through a committee appointed by the Board of
Directors consisting of no fewer than three outside directors. The current
members of the option committee are Dr. Fredian and Messrs. Notaro and Viera.
The option committee selects the eligible persons to whom options or SARs will
be granted based on the participant's performance and responsibilities (other
than non-employee directors of the Corporation, who are eligible only for one-
time grant of options). The option committee prescribes the terms and
provisions (which need not be identical) of each option and SAR granted under
the Option Plan (other than options granted to non-employee directors of the
Corporation).
Under the Option Plan, all outside directors of the Corporation with one year
of service on the Board of the Bank at the time of the conversion to stock form
received a one-time grant of a non-incentive option for 15,000 shares, except
that Mr. Faustin A. Pipal, as the then Chairman of the Board, received a one-
time grant for 30,000 shares. Outside directors with less than one year of
service on the effective date of the Option Plan received a one-time grant for
7,500 shares. These options were granted on the same general terms as other
options granted pursuant to the Option Plan, except as described below. Subject
to stockholder approval of the proposed amendment to the Option Plan, each of
Jean C. Murray, O.P. and John W. Croghan, received a one-time grant of 7,500
shares upon their election to the Board in October 1993, and future newly-
elected outside directors will receive one-time grants for 7,500 shares upon
election. Pursuant to the terms of the Option Plan, the maximum number of
options that may be granted to all outside directors of the Corporation and its
subsidiaries may not exceed 30% of the shares covered by the plan.
The option exercise price may not be less than 100% of the fair market value
of the Common Stock on the date of grant of the option. The maximum option term
is generally ten years. No person can receive any incentive stock option if, at
the time of the grant, such person owns directly or indirectly more than 10% of
the total combined voting power of the Corporation or a subsidiary, unless the
option price is at least 110% of the fair market value of the Common Stock and
the exercise period of such incentive option is by its terms limited to five
years. The maximum fair market value of Common Stock covered by incentive
options that first become exercisable by any employee in any one calendar year
is limited to $100,000. To date, no incentive stock options have been granted
under the Option Plan.
21
<PAGE>
Payment for shares purchased under the Option Plan must be made either in
cash or by exchanging shares of the Corporation's Common Stock with a fair
market value equal to or less than the total option price, plus cash for any
difference. If permitted by the particular option agreement, options may be
exercised by directing that certificates for the shares purchased be delivered
to a licensed broker as agent for the optionee, provided that the broker
tenders to the Corporation cash or cash equivalents equal to the option
exercise price plus the amount of any taxes that the Corporation may be
required to withhold in connection with the exercise of the option. The Option
Plan provides that options granted to outside directors will become exercisable
in full after one year from the date of grant. The Plan contemplates that
options and SARs granted to employees will become exercisable in installments
of 50% after one year and 12.5% in each of the next four years, except as
provided in the option agreement.
SARs would be exercisable by delivering to the Corporation on any business
day, at its principal office addressed to the attention of the option
committee, written notice of exercise specifying the number of SARs being
exercised. The date upon which such notice is received by the Corporation is
the exercise date of the SARs. Under the Option Plan, an optionee may exercise
SARs only at such times as the related option may be exercised and only at such
times as the fair market value of a share of Common Stock on the exercise date
exceeds the option price of the related option.
As to SARs that would be exercisable for shares of Common Stock, the number
of shares issued pursuant to the exercise of SARs shall be determined by
dividing (i) the total number of SARs being exercised, multiplied by the excess
of the fair market value of a share of the Corporation's Common Stock on the
exercise date over the per share exercise price, by (ii) the fair market value
of a share of the Corporation's Common Stock on the exercise date. However, no
fractional shares shall be issued by the Corporation on exercise of SARs and
the Corporation will pay cash to the optionee in lieu of any fractional shares.
If any optionee dies while in the employ of the Corporation or a subsidiary
or if the optionee's employment is terminated by reason of permanent and total
disability, his or her incentive options or SARs, if exercisable at the time of
the optionee's death or disability, may be exercised by his or her estate or by
a person who acquires the right to exercise such option by bequest or
inheritance, within one year after the date of the optionee's death or
disability (but not later than the date the option would otherwise expire), and
his or her non-incentive options or SARs, if exercisable at the time of the
optionee's death or disability, may be similarly exercised until the date the
option would otherwise expire. If the employment of an optionee terminates for
any reason other than death or disability, options and SARs held by such
optionee terminate three months after the date of such termination (but not
later than the date the option would otherwise expire) except that, if
termination is by reason of normal retirement or early retirement with the
consent of the Board of Directors, non-incentive options and SARs will remain
exercisable until the expiration of their original term. The option committee
may extend the period following a termination of employment during which an
option and related SAR may be exercised by so providing in a particular option
agreement. Options granted to non-employee directors of the Corporation shall
remain exercisable until the expiration of their original term, notwithstanding
the director's termination of service on the Board.
The Board of Directors of the Corporation at any time may amend the Option
Plan as to shares of Common Stock for which options or SARs have not been
granted, subject to any required regulatory approval. However, the Board of
Directors may not amend the Option Plan, except subject to the approval of the
Corporation's shareholders, if such amendment would (1) materially change the
requirements as to eligibility to receive options or SARs under the Option
Plan; (2) increase the number of shares for which options or SARs may be
granted under the Option Plan, other than adjustments upon certain changes in
capitalization; (3) change the minimum option price; (4) increase the maximum
period during which options
22
<PAGE>
or SARs may be exercised; (5) extend the term of the Option Plan; or (6)
materially increase the benefits accruing to eligible individuals under the
Option Plan.
The Board of Directors at any time may terminate or suspend the Option Plan.
Unless previously terminated, the Option Plan will terminate automatically on
May 14, 1997, the tenth anniversary of the effective date of the plan. No
termination, suspension or amendment of the Option Plan may, without the
consent of the optionee to whom an option or SAR has been granted, adversely
affect the rights of the holder of the option or SAR.
The Corporation's option committee has not determined how any additional
options or SARs will be allocated among the Corporation's executive officers,
other officers or key employees if the proposed amendment to the Option Plan is
approved by shareholders. See "Executive Compensation--Option/SAR Grants in
Last Fiscal Year" for certain information as to option grants to the named
executive officers during 1993 and "Executive Compensation--Aggregated
Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values"
for information as to how outstanding options under the Option Plan were
allocated among such individuals as of December 31, 1993.
Based upon the last sales price of the Corporation's common stock on March
25, 1994, the aggregate market value of the 175,000 additional shares of Common
Stock to be reserved under the Option Plan pursuant to the proposed amendment
was $3,368,750.
FEDERAL INCOME TAX AND ACCOUNTING CONSEQUENCES
With respect to "incentive stock options", an optionee will not recognize
taxable income upon grant or exercise of an incentive option, and any gain
realized upon a disposition of shares acquired pursuant to the exercise of an
incentive option will be taxed as long-term capital gain if the optionee holds
the shares for a least two years after the date of grant and one year after the
date of exercise. However, the excess of the fair market value of the stock
subject to an incentive option on the exercise date over the option exercise
price will generally be included in the optionee's alternative minimum taxable
income in the year of exercise for purposes of the alternative minimum tax.
This excess increases the optionee's basis in the stock for purposes of the
alternative minimum tax, but not for purposes of the regular income tax. An
optionee may be entitled to a credit against tax liability in future years for
minimum taxes paid with respect to the exercise of incentive options. The
Corporation and its subsidiaries is not entitled to any business expense
deduction with respect to the grant or exercise of an incentive option, except
as discussed below.
For the exercise of an incentive option to qualify for favorable tax
treatment, the optionee generally must be an employee of the Corporation or a
subsidiary from the date the option is granted through a date within three
months before the date of exercise. In the case of an optionee who is disabled,
within the meaning of Section 22(e)(3) of the Code, the three-month period for
exercise following termination of employment is extended to one year. In the
case of an employee who dies, the time for exercising incentive options after
termination of employment and the holding period for stock received pursuant to
the exercise of the option are waived.
If all of the requirements for incentive option treatment are met, except for
the special holding period rules set forth above, the optionee will recognize
ordinary income upon the disposition of the stock generally in an amount equal
to the excess of the fair market value of the stock at the time the option was
exercised over the option exercise price. The balance of the realized gain, if
any, will be long- or short-term capital gain, depending upon whether the stock
was sold more than one year after the option was exercised. If the
23
<PAGE>
optionee sells the stock prior to the satisfaction of the holding period rules
but at a price below the fair market value of the stock at the time the option
was exercised, the amount of ordinary income will be limited to the excess of
the amount realized on the sale over the option exercise price. If the optionee
sells the stock in the taxable year during which he or she exercised the
option, the alternative minimum tax (discussed above) will not apply to the
exercise of the option. If the employer corporation complies with any
applicable withholding requirements, it will be allowed a business expense
deduction to the extent the optionee recognizes ordinary income (except to the
extent that the deduction limits of Section 162(m) of the Code are applicable).
If, pursuant to an option agreement, an optionee exercises an incentive
option by tendering shares of Common Stock with a fair market value equal to
part or all of the option exercise price, the exchange of shares will be
treated as a nontaxable exchange (except that this treatment would not apply if
the optionee had acquired the shares being transferred pursuant to the exercise
of an incentive option and had not satisfied the special holding period
requirements summarized above). If the exercise is treated as a tax-free
exchange, the optionee would have no taxable income from the exchange and
exercise (other than minimum taxable income as discussed above) and the tax
basis of the shares exchanged would be treated as the substituted basis for the
shares received. The shares tendered would be treated as exchanged for an
equivalent number of new shares, which would take the tax basis of the tendered
shares, and the additional option shares would have a zero basis. These rules
would not apply if the optionee used shares received pursuant to the exercise
of an incentive option (or another statutory option) as to which the optionee
had not satisfied the applicable holding period requirement. In that case, the
exchange would be treated as a taxable disqualifying disposition of the
exchanged shares, with the result that the excess of the fair market value of
the shares tendered over the optionee's basis in the shares would be taxable.
Upon exercise of a non-incentive option, an optionee generally recognizes
ordinary income in an amount equal to the difference between the option
exercise price and the fair market value of the stock on the date of exercise.
The employer corporation is generally entitled to a business expense deduction
in the same amount and at the same time as the optionee recognizes ordinary
income (except to the extent that the deduction limits of Section 162(m) of the
Code are applicable). Upon a subsequent sale or exchange of shares acquired
pursuant to the exercise of a non-incentive option, the optionee will have
taxable gain or loss, measured by the difference between the amount realized on
the disposition and the tax basis of the shares (generally, the amount paid for
the shares plus the amount treated as ordinary income at the time the option
was exercised).
If, pursuant to an option agreement, the optionee surrenders shares of Common
Stock in payment of part or all of the exercise price for non-incentive
options, no gain or loss will be recognized with respect to the shares
surrendered (regardless of whether the shares were acquired pursuant to the
exercise of an incentive option) and the optionee will be treated as receiving
an equivalent number of shares pursuant to the exercise of the option in a
nontaxable exchange. The basis of the shares surrendered will be treated as the
substituted tax basis for an equivalent number of option shares received and
the new shares will be treated as having been held for the same holding period
as had expired with respect to the transferred shares. However, the fair market
value of any shares received in excess of the number of shares surrendered
(i.e., the difference between the aggregate option exercise price and the
aggregate fair market value of the shares received pursuant to the exercise of
the option) will be taxed as ordinary income. The optionee's basis in the
additional shares will be equal to the amount included in the optionee's
income.
Upon exercise of a SAR, an optionee would recognize ordinary income in an
amount equal to the cash or the fair market value of the stock received on the
exercise date. If it complies with the applicable withholding requirements, the
employer corporation would be entitled to a business expense deduction in the
same amount and at the same time as the optionee recognizes ordinary income
(except to the extent that the deduction limits of Section 162(m) of the Code
are applicable).
24
<PAGE>
Under current generally accepted accounting principles, the value of stock
options issued by the Corporation is not charged against earnings for financial
accounting purposes. Increases in the market value of stock following the date
of grant of SARs are currently treated as a compensation expense for financial
accounting purposes. A proposed change to the accounting rules would require
corporations to recognize for financial accounting purposes, with respect to
options and SARs granted after 1996, the value of such options and SARs as a
compensation expense over the period during which such awards vest.
The Board of Directors and management of the Corporation recommend that the
shareholders vote FOR the proposed amendment to the Option Plan.
STOCK OWNED BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth information as of March 25, 1994 with respect
to the shares of the Corporation's Common Stock beneficially owned by each
director of the Corporation, each of the named executive officers and by all
directors and executive officers of the Corporation as a group. Such
individuals and certain of the Corporation's employee benefit plans
beneficially own a total of 2,834,315 shares of the Corporation's Common Stock,
or 13.8% of the Common Stock outstanding, including shares subject to options
that will become exercisable within 60 days.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF COMMON
BENEFICIAL STOCK
NAME AND POSITIONS WITH THE CORPORATION OWNERSHIP(A) OUTSTANDING
- --------------------------------------- ------------ -----------
<S> <C> <C>
Joseph C. Scully
Chairman of the Board, Chief Executive Officer
and Director.................................... 432,140(b) 2.2%
Patrick J. Agnew
President, Chief Operating Officer and Director.. 284,137(b) 1.4%
William A. Anderson
Director......................................... 7,131 *
John W. Croghan
Director......................................... 60,000 *
Alan J. Fredian
Director......................................... 23,826(b)(c) *
Kenneth J. James
Director......................................... 67,692 *
Jean C. Murray, O.P.
Director......................................... 7,500 *
Michael R. Notaro
Director......................................... 24,104(b)(c) *
John J. Viera
Director......................................... 22,694 *
James B. Wood
Director......................................... 43,051 *
Robert N. Parke
Senior Vice President............................ 127,404 *
Thomas J. Rinella
Senior Vice President............................ 128,769 *
Clifford M. Sladnick
Senior Vice President............................ 30,213 *
All directors and executive officers as a group
(13 persons)..................................... 1,258,661(b)(c) 6.1%
</TABLE>
25
<PAGE>
- --------
*Less than 1%
(a) In accordance with Rule 13d-3 under the 1934 Act, a person is deemed to be
the beneficial owner, for purposes of this table, of any shares of
Corporation Common Stock if he has or shares voting power or investment
power with respect to such security, or has the right to acquire beneficial
ownership at any time within 60 days from March 25, 1994. As used herein,
"voting power" is the power to vote or direct the voting of shares and
"investment power" is the power to dispose or direct the disposition of
shares. The table includes shares owned by spouses or other immediate
family members or that are held in trust, as to which the persons named in
the table possess shared voting and/or investment power as follows: Mr.
Scully, 18,392 shares; Mr. Agnew, 35,752 shares; Mr. Anderson, 7,073
shares; Dr. Fredian, 8,825 shares; Mr. James, 60,191 shares; Mr. Notaro,
24,103 shares; Mr. Viera, 7,693 shares; Mr. Wood, 22,425 shares; Mr. Parke,
19,752 shares; Mr. Rinella, 7,599 shares; Mr. Sladnick, 727 shares; and all
directors and executive officers as a group, 212,532 shares. The table
includes 6,813 shares and 14,307 shares as of March 25, 1994 held for the
benefit of Mr. Scully and Mr. Agnew, respectively, under the St. Paul
Federal Bank For Savings Deferred Compensation Trust. All other shares
included in the table are held by persons who have sole voting and
investment power over such shares. The table includes 805,125 shares of
Common Stock subject to outstanding options which are exercisable within 60
days from March 25, 1994. The table also includes 153,133 shares as of
March 25, 1994 allocated to executive officers' accounts under the Bank's
ESOP and 401(k) Profit Sharing Plan.
(b) Does not include 178,218 shares as of March 25, 1994 with respect to which
the St. Paul Federal Bank For Savings Employees Pension Plan has sole
voting and dispositive power. Also does not include 249,925 unallocated
shares with respect to which the ESOP has shared voting and dispositive
power. Dr. Fredian, and Messrs. Scully, Agnew and Notaro are the trustees
of the Employees Pension Plan and the ESOP.
(c) Except as allotted to Messrs. Scully and Agnew as indicated above, does not
include 42,361 shares as of March 25, 1994 with respect to which the St.
Paul Federal Bank For Savings Deferred Compensation Trust has shared voting
and dispositive power. Dr. Fredian and Mr. Notaro are the trustees of the
Deferred Compensation Trust.
As of March 25, 1994, no persons are known by the Corporation to have filed a
beneficial ownership report with the SEC with regard to 5% or more of the
Corporation's outstanding Common Stock.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the 1934 Act requires the Corporation's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Corporation's equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Corporation. Officers, directors and greater
than ten-percent shareholders are required by SEC regulation to furnish the
Corporation with copies of all Section 16(a) forms they file.
To the Corporation's knowledge, based solely upon review of the copies of
such reports furnished to the Corporation and written representations that no
other reports were required, all Section 16(a) filing requirements applicable
to its officers, directors and greater than ten-percent beneficial owners were
complied with.
26
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL 3)
The Board of Directors has appointed the firm of Ernst & Young to continue as
independent auditors for the Corporation for the year ending December 31, 1994,
subject to ratification of such appointment by the shareholders. Ernst & Young
was appointed as the independent auditors of St. Paul Federal in 1981 and has
performed audits for the Bank for the years since then. Ernst & Young has also
served as the independent auditors of the Corporation since its organization as
the holding company of St. Paul Federal. Unless otherwise indicated, properly
executed proxies will be voted in favor of ratifying the appointment of Ernst &
Young, independent certified public accountants, to audit the books and
accounts of the Corporation for the year ending December 31, 1994. No
determination has been made as to what action the Board of Directors would take
if the shareholders do not ratify the appointment.
Representatives of Ernst & Young are expected to be present at the Annual
Meeting. They will be given an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
TO BE PRESENTED AT 1995 ANNUAL MEETING OF SHAREHOLDERS
Any proposal intended to be presented by any shareholder for action at the
1995 annual meeting of shareholders of the Corporation must be received by the
Secretary of the Corporation at 6700 West North Avenue, Chicago, Illinois 60635
not later than December 5, 1994 in order for the proposal to be considered for
inclusion in the proxy statement and proxy relating to the 1995 annual meeting.
In addition, the Corporation's bylaws require that notice of shareholder
proposals and nominations for director be delivered to the Secretary of the
Corporation not less than 30 days nor more than 90 days prior to the date of an
annual meeting, unless notice or public disclosure of the date of the meeting
occurs less than 45 days prior to the date of such meeting, in which event,
shareholders may deliver such notice not later than the 15th day following the
day on which notice of the date of the meeting was mailed or public disclosure
thereof was made. Nothing in this paragraph shall be deemed to require the
Corporation to include in its proxy statement and proxy relating to the 1995
annual meeting any shareholder proposal which does not meet all of the
requirements for inclusion established by the SEC in effect at the time such
proposal is received.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors of the
Corporation does not know of any other matters to be presented for action by
the shareholders at the Annual Meeting. If, however, any other matters not now
known are properly brought before the meeting, the persons named in the
accompanying proxy will vote such proxy in accordance with the determination of
a majority of the Board of Directors.
By Order of the Board of Directors
LOGO
Joseph C. Scully
Chairman of the Board and
Chief Executive Officer
Chicago, Illinois
April 4, 1994
27
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Solicitation, Voting and Revocability of Proxies.......................... 1
Election of Directors..................................................... 2
Executive Compensation.................................................... 7
Proposed Amendment to Stock Option Plan................................... 19
Stock Owned by Management and Principal Shareholders...................... 25
Ratification of Appointment of Independent Auditors....................... 27
Deadline for Submission of Shareholder Proposals to be Presented at 1995
Annual Meeting of Shareholders........................................... 27
Other Matters............................................................. 27
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOGO
--------------------------
PROXY STATEMENT
--------------------------
APRIL 4, 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
REVOCABLE PROXY ST. PAUL BANCORP, INC. REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of St. Paul Bancorp, Inc. (the "Corporation")
hereby appoints Patrick J. Agnew and Michael R. Notaro, or either of them, with
full power of substitution in each, as proxies to cast all votes which the
undersigned shareholder is entitled to cast at the annual meeting of
shareholders to be held at 10:00 a.m. on May 4, 1994, at the Drury Lane
Oakbrook, 100 Drury Lane, Oakbrook Terrace, Illinois 60181, and at any
adjournments thereof, upon the following matters. The undersigned shareholder
hereby revokes any proxy or proxies heretofore given.
This Proxy will be voted as directed by the undersigned shareholder. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES LISTED IN PROPOSAL 1, FOR PROPOSAL 2 TO AMEND THE CORPORATION'S STOCK
OPTION PLAN AND FOR PROPOSAL 3 TO RATIFY THE APPOINTMENT OF ERNST & YOUNG AS
INDEPENDENT AUDITORS OF THE CORPORATION FOR THE YEAR ENDING DECEMBER 31, 1994
AND IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE BOARD OF DIRECTORS
AS TO OTHER MATTERS. The undersigned shareholder may revoke this proxy at any
time before it is voted by delivering to the Secretary of the Corporation either
a written revocation of the proxy or a duly executed proxy bearing a later date,
or by appearing at the annual meeting and voting in person. The undersigned
shareholder hereby acknowledges receipt of the notice of annual meeting and
proxy statement.
SEE REVERSE
SIDE
(CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL CARDS IN THE
ACCOMPANYING ENVELOPE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. Election of each of three directors for a three-year term.
NOMINEES: Joseph C. Scully, John J. Viera and James B. Wood
[_] FOR [_] WITHHELD
[_] ________________________________________
For, all nominees except as noted above.
2. Amendment to the Corporation's Stock Option Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
3. To ratify the appointment by the Board of Directors of the firm of Ernst &
Young as independent auditors of the Corporation for the year ending
December 31, 1994.
[_] FOR [_] AGAINST [_] ABSTAIN
THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING, OR ANY ADJOURNMENTS THEREOF, IN ACCORDANCE WITH THE
DETERMINATION OF A MAJORITY OF THE CORPORATION'S BOARD OF DIRECTORS.
MARK HERE MARK HERE
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT [_] THE MEETING [_]
Please date and sign exactly as name appears hereon. Each executor,
administrator, trustee, guardian, attorney-in-fact and other fiduciary should
sign and indicate his or her full title. When stock has been issued in the name
of two or more persons, all should sign.
Signature: _________________________________________________ Date ______________
Signature: _________________________________________________ Date ______________
