<PAGE>
Filed Pursuant to Rule 424(B)(1)
Registration No. 333-18677
PROSPECTUS
$100,000,000
LOGO
7 1/8% SENIOR NOTES DUE FEBRUARY 15, 2004
The 7 1/8% Senior Notes Due February 15, 2004 (the "Notes") are unsecured
debt obligations of St. Paul Bancorp, Inc. ("St. Paul Bancorp" or the
"Company") and will rank equally with all other unsubordinated and unsecured
Indebtedness of the Company. Interest on the Notes will be payable
semiannually on February 15 and August 15 each year, commencing August 15,
1997. The Notes may not be redeemed prior to maturity and no sinking fund is
provided for the Notes. As of September 30, 1996, the Company had $34.5
million of outstanding Indebtedness which ranked junior to the Notes. See
"Description of Notes."
The Notes will be represented by one permanent global certificate (the
"Global Security") registered in the name of a nominee of The Depository Trust
Company, as depositary (the "Depositary"). The Notes will be available for
purchase in minimum denominations of $1,000 or any amount in excess thereof
which is an integral multiple of $1,000 in book-entry form only. Beneficial
interests in the Global Security will be shown on, and transfers thereof will
be effected only through, records maintained by the Depositary and its
participants. Except as described under "Description of Notes" herein, owners
of beneficial interests in the Global Security will not be entitled to receive
Notes in definitive form.
----------------
THE NOTES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE
FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) CORPORATION(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note............................... 99.538% 1.00% 98.538%
- --------------------------------------------------------------------------------
Total.................................. $99,538,000 $1,000,000 $98,538,000
</TABLE>
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- -------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $150,000.
The Notes are offered by the several Underwriters when, as and if issued by
the Company, delivered to and accepted by the Underwriters and subject to
their right to reject orders in whole or in part. It is expected that delivery
of the Global Security, in book-entry form, will be made through the
facilities of the Depositary on or about February 18, 1997, against payment in
immediately available funds.
KEEFE, BRUYETTE & WOODS, INC. ABN AMRO CHICAGO CORPORATION
The date of this Prospectus is February 11, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files proxy statements, reports and other information with the
Securities and Exchange Commission (the "Commission"). This filed material can
be inspected and copied at the Commission's office at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the Commission's Regional Offices in New York
(Seven World Trade Center, 14th Floor, New York, New York 10048) and Chicago
(500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511) and copies
of such materials can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a web site (http:\\www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants such as the Company. In addition, the Common Stock of the Company
is quoted on the NASDAQ National Market System (symbol: SPBC), and such
reports, proxy statements, and other information concerning the Company also
may be inspected at the offices of the National Association of Securities
Dealers, Inc. at 9513 Key West Avenue, Rockville, Maryland 20850-3389.
The Company has filed with the Commission a Registration Statement under the
Securities Act of 1933 (the "Securities Act"), with respect to the securities
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto. For further
information with respect to the Company and the securities offered hereby,
reference is hereby made to the Registration Statement and the exhibits and
schedules filed therewith, which may be obtained from the principal office of
the Commission in Washington, D.C., upon payment of the fees prescribed by the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1995, the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996, and the Company's
Current Reports on Form 8-K dated as of January 18, 1996, March 26, 1996, July
16, 1996, December 16, 1996 and January 15, 1997, previously filed with the
Commission by the Company, are incorporated in this Prospectus by reference
and made a part hereof. Financial information included in these documents do
not reflect the five-for-four stock split effective January 14, 1997 for
stockholders of record as of December 31, 1996 (the "Stock Split"). However,
the financial information presented in this Prospectus has been restated to
give effect to the Stock Split. Each document or report subsequently filed by
the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date hereof and prior to the termination of the
offering of the Notes shall be deemed to be incorporated by reference into
this Prospectus and to be a part of this Prospectus from the date of filing of
such document. Any statement contained herein, or in the document all or a
portion of which is incorporated or deemed to be incorporated by reference
herein, shall be deemed to be modified or superseded for purposes of the
Registration Statement and this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement or this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference, other than
certain exhibits to such documents. Written requests should be directed to St.
Paul Bancorp, Inc., 6700 West North Avenue, Chicago, Illinois 60707;
Attention: Clifford M. Sladnick (telephone: (773) 622-5000).
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
THE COMPANY
St. Paul Bancorp is the holding company for St. Paul Federal Bank For
Savings (the "Bank"), the largest independent savings institution in the State
of Illinois. The Company, either directly or through the Bank, also owns
financial services subsidiaries involved in discount brokerage, real estate
development, insurance and annuity product sales. For the nine months ended
September 30, 1996, the Company had consolidated net income of $15.4 million,
after a pre-tax charge of $21.0 million in connection with a one-time special
assessment on the Bank's deposits to recapitalize the Savings Association
Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"). At
September 30, 1996, the Company had $4.3 billion in assets and $371.6 million
in stockholders' equity.
The Bank is a FDIC insured retail depository institution that operates
through 52 branches in the Chicago metropolitan area. The Bank's branch
network includes 35 free-standing offices and 17 banking offices located in
Omni(R) and Cub(R) superstores. The Bank's expansion of its branch network
through "in-store" facilities provides access to a larger retail customer base
through offices which have relatively lower overhead. The Bank has also
recently expanded its automated teller machine ("ATM") network to 460 machines
by installing 261 ATMs in White Hen Pantry(R) convenience stores in the eight
county Chicago area, including stores in Northwest Indiana. In addition, the
Bank opened a telephone banking facility in 1995 to support customer service,
as well as handle inquiries and loan applications.
The Bank services approximately 179,000 checking accounts, offering a number
of options, including special sports checking programs such as Chicago Bulls
Checking, Chicago Cubs Checking and Chicago Bears Checking. The Bank also
offers a variety of savings, money market and certificate of deposit products.
At September 30, 1996, the Bank had total deposits of $3.3 billion.
The Bank's interest earning assets primarily consist of loans secured by
mortgages on residential real estate, securities and, to a lesser extent,
consumer and commercial real estate loans. At September 30, 1996, the Bank's
mortgage loan portfolio included $2.0 billion of 1-4 family residential
mortgage loans, $961.4 million of multifamily residential mortgage loans,
$54.4 million of commercial and other mortgage loans, and $20.0 million in
consumer loans. At September 30, 1996, the Bank also held $799.2 million of
mortgage-backed securities ("MBS"), and invested in government and other
investment grade, liquid securities.
The Bank's 1-4 family residential mortgage products are originated through
its retail banking offices and telephone banking facility, as well as a
correspondent loan program in the Chicago metropolitan area and midwestern
states (including Wisconsin, Indiana, Michigan and Ohio). In the first nine
months of 1996, the Bank (either directly or through correspondents)
originated over $220.0 million of 1-4 family residential mortgage loans. In
addition to such originations, in the first nine months of 1996 the Bank
purchased $435.1 million of 1-4 family adjustable-rate mortgage loans secured
by 1-4 family residential real estate located throughout the U.S.
The Bank also originates loans secured by apartment buildings in Illinois,
Wisconsin, Indiana, Minnesota and Ohio, using the same underwriting standards
throughout the area. At September 30, 1996, the Bank's portfolio of Midwest
apartment building loans totaled $111.5 million or 3.7% of the loan portfolio.
The Bank offers a variety of consumer loan products through its retail
banking offices, telemarketing and its telephone banking facility, including
home equity loans, secured lines of credit, education and automobile loans.
The Bank has entered into agreements to sell consumer loans that do not meet
its underwriting standards to third parties, rather than retaining them.
At September 30, 1996, the Bank's loan portfolio included $909.1 million of
loans originated prior to 1990 on a nationwide basis secured by multifamily
real estate and, to a lesser extent, commercial real estate. Approximately 38%
of this portfolio is scheduled to mature between the third quarter of 1996 and
the end of 1998. The Bank intends to refinance a large portion of these loans,
depending upon the credit characteristics. The Bank was able to refinance over
70% of the loans in this portfolio which matured in the first nine months of
1996. The remainder of these loans was paid off or liquidated out of
foreclosed real estate.
3
<PAGE>
Subsidiaries of the Bank or the Company include Investment Network, Inc., a
discount broker with over $3.8 million in commission revenue for the nine
months ended September 30, 1996; Annuity Network, Inc., which offers customers
fixed rate annuity products; and SPF Insurance Agency, Inc., which offers
homeowners, auto, life and disability insurance. The Company's real estate
development subsidiary, St. Paul Financial Development Corporation, engages in
single family real estate development and, to some extent, commercial real
estate construction financing.
The principal offices of the Company are located at 6700 West North Avenue,
Chicago, Illinois 60707, telephone (773) 622-5000.
4
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth certain historical selected consolidated
financial information regarding the Company and its subsidiaries at the dates
and for the periods indicated. The Financial Condition Data and Operating Data
at and for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 were
derived from the Company's consolidated financial statements which have been
audited by Ernst & Young LLP, independent auditors. This data should be read
in conjunction with the Company's consolidated financial statements and
related notes thereto and its Management's Discussion and Analysis, which are
incorporated by reference in this Prospectus. See "Incorporation of Certain
Documents by Reference." The financial data for the nine-month period ended
September 30, 1996, and 1995 are derived from unaudited financial statements.
The unaudited financial statements include all adjustments, consisting of
normal recurring accruals, which St. Paul Bancorp. Inc. considered necessary
for a fair presentation of the financial position and results of operations
for these periods. Operating results for the nine months ended September 30,
1996, are not necessarily indicative of the results that may be expected for
the entire year ending December 31, 1996. The data should be used in
conjunction with the consolidated financial statements, related notes, and
other financial information incorporated by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
AT SEPTEMBER 30, ------------------------------------------------------
1996 1995 1994 1993(A) 1992 1991
---------------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DA-
TA:
Assets
Cash and investments... $ 294,002 $ 279,399 $ 259,591 $ 478,382 $ 419,299 $ 340,033
Mortgage-backed
securities............ 799,227 975,422 1,126,617 733,649 643,941 717,354
Loans receivable-net of
accumulated provision
for loan losses....... 2,999,549 2,683,890 2,568,381 2,304,319 2,270,198 2,415,540
Other assets........... 183,430 177,968 176,948 189,026 166,822 190,316
---------- ---------- ---------- ---------- ---------- ----------
Total assets........... $4,276,208 $4,116,679 $4,131,537 $3,705,376 $3,500,260 $3,663,243
========== ========== ========== ========== ========== ==========
Liabilities and
stockholders' equity
Deposits............... $3,288,096 $3,231,810 $3,232,903 $3,252,618 $2,985,124 $3,004,419
Borrowings............. 541,253 441,427 492,927 63,970 186,408 334,528
Other liabilities...... 75,228 59,245 54,310 41,459 41,387 59,232
Subordinated capital
notes................. -- -- -- -- -- 12,176
Stockholders'
equity(b)............. 371,631 384,197 351,397 347,329 287,341 252,888
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity.. $4,276,208 $4,116,679 $4,131,537 $3,705,376 $3,500,260 $3,663,243
========== ========== ========== ========== ========== ==========
Stockholders' equity per
share(c)............... $ 16.44 $ 16.39 $ 14.97 $ 14.12 $ 12.59 $ 11.20
Tangible book value per
share(c)............... $ 16.37 $ 16.33 $ 14.89 $ 14.02 $ 12.45 $ 11.04
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------------------------------
1996 1995 1995 1994 1993(A) 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest income........ $ 220,173 $ 208,453 $ 278,750 $ 253,262 $ 256,937 $ 278,687 $ 321,291
Interest expense....... 127,327 121,226 162,116 135,069 132,982 165,844 222,487
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income.... 92,846 87,227 116,634 118,193 123,955 112,843 98,804
Provision for loan
losses................ 1,500 1,400 1,900 5,150 10,750 10,625 11,100
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income
after provision for
loan losses........... 91,346 85,827 114,734 113,043 113,205 102,218 87,704
Net gain on assets
sold.................. 1,423 967 1,054 524 2,150 3,024 2,680
Income from real estate
operations............ 1,842 2,069 2,807 3,150 2,969 2,442 2,037
Other operating
income................ 23,395 22,118 29,860 26,097 27,387 22,882 17,930
Other operating
expense............... 72,500 67,530 90,165 87,166 82,747 71,240 64,754
SAIF recapitalization.. 21,000 -- -- -- -- -- --
Loss on foreclosed real
estate................ 1,245 968 1,159 2,145 2,516 1,316 1,898
Income taxes........... 7,860 15,391 20,737 18,991 19,061 20,325 16,507
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income(d).......... $ 15,401 $ 27,092 $ 36,394 $ 34,512 $ 41,387 $ 37,685 $ 27,192
=========== =========== =========== =========== =========== =========== ===========
Primary earnings per
share(c)(d)........... $ 0.65 $ 1.11 $ 1.49 $ 1.36 $ 1.62 $ 1.60 $ 1.18
=========== =========== =========== =========== =========== =========== ===========
Dividends declared per
share(c)(e)........... $ 0.26 $ 0.18 $ 0.24 $ 0.24 $ 0.22 $ 0.22 $ 0.22
=========== =========== =========== =========== =========== =========== ===========
Primary shares
outstanding(c)........ 23,841,430 24,343,273 24,388,970 25,307,576 25,444,495 23,521,248 22,925,543
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------ -------------------------------------------
1996 1995 1995 1994 1993(A) 1992 1991
-------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
KEY OPERATING RATIOS AND
OTHER DATA(F)
(UNAUDITED)
Interest rate spread... 2.75% 2.72% 2.72% 2.76% 3.30% 3.48% 2.95%
Net interest margin.... 3.07% 2.99% 3.01% 3.15% 3.46% 3.27% 2.84%
Return on average
assets(g)............. 0.49% 0.89% 0.90% 0.88% 1.10% 1.05% 0.76%
Return on average
stockholders' equity
(net worth)(g)........ 5.35% 9.91% 9.86% 9.72% 12.77% 13.88% 11.15%
Average equity as a
percentage of average
assets................ 9.11% 8.96% 9.10% 9.05% 8.64% 7.57% 6.78%
Weighted average rate
on loans and
investment
securities............ 7.34% 7.28% 7.28% 6.98% 6.96% 7.74% 8.91%
Weighted average cost
of funds.............. 4.59% 4.56% 4.56% 4.22% 3.66% 4.26% 5.96%
ASSET QUALITY RATIOS:(F)
(UNAUDITED)
Allowance for loan and
lease losses to total
loans and leases...... 1.20% 1.50% 1.42% 1.62% 1.98% 2.10% 1.88%
Net loans and leases
charged off to average
loans and leases...... 0.17% 0.24% 0.21% 0.39% 0.56% 0.34% 0.45%
Nonperforming assets to
total loans and leases
and other real estate
owned................. 0.68% 0.95% 1.07% 1.03% 2.09% 2.07% 3.19%
Allowance for loan and
lease losses to
nonperforming loans
and leases............ 246.60% 279.80% 216.62% 424.72% 156.99% 165.81% 101.49%
CAPITAL RATIOS:
(UNAUDITED)
Tier 1 risk-based
capital ratio......... 15.43% 16.42% 16.18% 15.33% 15.33% 11.47% 9.27%
Total risk-based
capital ratio......... 16.68% 17.71% 17.47% 16.65% 16.67% 12.82% 11.00%
Tier 1 leverage ratio.. 8.65% 9.12% 8.95% 8.51% 9.50% 7.71% 6.52%
RATIO OF EARNINGS TO
FIXED CHARGES(H)
(UNAUDITED)
Excluding interest on
deposits.............. 1.99 2.86 2.94 3.66 6.64 3.81 2.23
Including interest on
deposits.............. 1.18 1.35 1.35 1.40 1.45 1.35 1.20
</TABLE>
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(a) Includes the operations of Elm Financial Services from the acquisition
date of February 23, 1993.
(b) The Company has in place a stock repurchase program which runs until July
15, 1997. Of the 1.125 million shares of common stock authorized to be
repurchased under the program (representing approximately 5% of the
outstanding shares), none had been purchased as of September 30, 1996 and
168,750 shares had been purchased as of January 15, 1997 at an average
price of $22.46 per share. There can be no assurance that any additional
shares authorized to be repurchased under the program will be repurchased,
nor can there be any assurance as to the cost of any additional shares
which may be repurchased in future periods.
(c) Restated for a five-for-four stock split effective on January 14, 1997
(with a record date of December 31, 1996). Also includes a restatement for
a three-for-two stock split on January 4, 1994.
(d) Without the one-time SAIF recapitalization charge, net income would have
been $29,303,000 or $1.23 per primary share for the first nine months of
1996.
(e) Subsequent to the five-for-four stock split, the Company's quarterly cash
dividend rate has been maintained at $0.12 per share, effective with the
dividend declared on January 15, 1997.
(f) Annualized where applicable.
(g) Without the one-time SAIF recapitalization charge, return on average
assets would have been 0.93% and return on average stockholders' equity
would have been 10.17% for the nine months ended September 30, 1996.
(h) On a pro forma basis, giving effect to the $100,000,000 principal amount
of Notes offered hereby and the redemption of the Company's outstanding
8.25% Subordinated Notes due 2000, the ratio of earnings to fixed charges
for the nine months ended September 30, 1996 would be 1.87 excluding
interest on deposits and 1.18 including interest on deposits. See
"Capitalization".
6
<PAGE>
RECENT DEVELOPMENTS
The Company's net income for the fourth quarter of 1996 was $10.9 million,
which represents an increase of 17% over the $9.3 million during the same
quarter in 1995. Earnings per share increased over 20% to 46 cents for the
current quarter, versus 38 cents per share for the same period a year ago./1/
Net interest income for the fourth quarter of 1996 rose 8% to $31.9 million,
compared to $29.4 million in the same quarter a year ago. Also during the
fourth quarter of 1996, other operating income rose 6% to $9.1 million,
compared to $8.6 million during the same quarter in 1995. These increases were
partially offset by a $1.7 million, or 7%, increase in operating expenses.
Net income for 1996 was $26.3 million, or $1.10 per share. Operating results
for the year included a $21.0 million pretax third quarter charge for a one-
time assessment to recapitalize the Savings Association Insurance Fund
("SAIF"). Excluding the SAIF charge, net income would have been $40.2 million,
or $1.69 per share, which represents a 10% increase over 1995 net income of
$36.4 million, or $1.49 per share. The improvement in operating earnings for
the year reflects the results of the Company's strategy to increase earning
assets and to continue to increase other income. The Company intends to
continue this strategy in 1997, as well as seek opportunities to expand its
franchise in the Chicago area by opening additional in-store or storefront
branches.
For the year 1996, the return on average assets was 0.62% (0.95% without the
SAIF charge) versus 0.90% for the year 1995 and the return on average equity
was 6.85% (10.48% without the SAIF charge) versus 9.86% for the year 1995.
Also, at December 31, 1996, stockholders' equity was equivalent to 8.91% of
total assets or $17.04 per share.
Total assets at December 31, 1996 were $4.4 billion, which represents an
increase of almost 6% over the $4.1 billion as of December 31, 1995. The
increase in assets during 1996 was primarily in mortgage loans receivable
which increased by $92.0 million and mortgage-backed securities which
increased by $187.6 million. These increases have been funded primarily by a
decrease in investment securities of $27.6 million, an increase in deposits of
$105.2 million and an increase in borrowings of $119.8 million. During 1996,
the Company purchased over $600.0 million of 1-4 family adjustable-rate
mortgage loans, of which $190.0 million were purchased in the fourth quarter.
Net interest income for 1996 was $124.7 million, an increase of $8.1 million
or 7% over the $116.6 million reported during 1995. The Company reported an
increase in both interest income and interest expense due to the increases in
both interest-earning assets and interest-bearing liabilities. The Company's
average earning assets grew 4.6% or $178.5 million, to $4.1 billion for 1996
from $3.9 billion for 1995. The Company's average interest-bearing liabilities
grew by $161.9 million to $3.8 billion, an increase of 4.5%. At December 31,
1996 the yield on earning assets increased to 7.36% from 7.28% at December 31,
1995. In comparison, at December 31, 1996 the rate on interest-bearing
liabilities increased to 4.58% from 4.56%. As a result, the net interest
spread (equal to the yield on earning assets less the rate on interest-bearing
liabilities) increased to 2.78% at December 31, 1996 from 2.72% at December
31, 1995. The net interest margin (net yield on average earning assets) was
3.07% in 1996, compared to 3.01% during 1995.
Other income rose 6% to $35.7 million for 1996, compared to $33.7 million
during the previous year. The increase in revenues for the year resulted from
higher revenues from discount brokerage operations and ATMs--including the
installation of 261 ATMs in White Hen Pantries during 1996.
Other operating expenses totaled $117.8 million during 1996, including the
$21.0 million SAIF charge recorded during the third quarter of the year.
Without the one-time SAIF charge, other operating expenses would have been
$96.8 million, or 7% higher than the $90.2 million of G&A expenses during
1995. Advertising and
- --------
(1) Per share amounts have been restated to reflect a five-for-four stock
split distributed on January 14, 1997 to stockholders of record as of
December 31, 1996.
7
<PAGE>
occupancy expenses showed the greatest percentage increases for the year. The
benefits from the reduction in deposit insurance premiums resulting from the
SAIF recapitalization will be realized starting in the first quarter of 1997.
The Company reported nonperforming assets at December 31, 1996 of $12.5
million or 0.29% of total assets, the lowest level since the Company went
public in 1987. This compares with nonperforming assets of $20.6 million
(0.48% of total assets) at September 30, 1996 and $29.2 million (or 0.71% of
total assets) at December 31, 1995. Net loan and REO charge-offs were $7.0
million during 1996, compared to $6.3 million during 1995. At December 31,
1996, the general valuation allowance for loans was $30.7 million, or 1.09% of
total loans receivable and 322% of nonperforming loans.
The Company's leverage ratio, Tier 1 capital ratio and total risk-based
capital ratio were 8.80%, 16.02% and 17.27%, respectively, at December 31,
1996, compared to 8.95%, 16.18% and 17.47% respectively, at December 31, 1995.
8
<PAGE>
CERTAIN REGULATORY MATTERS
GENERAL
The Company is a "savings and loan holding company" registered with the
Office of Thrift Supervision (the "OTS") and, as such, the Company is subject
to OTS regulations, examinations, supervision and reporting. The Bank is
subject to examination and comprehensive regulation by the OTS. The Bank's
deposits are insured by the Savings Association Insurance Fund ("SAIF") of the
FDIC and the Bank is subject to regulation by the FDIC and by the Board of
Governors of the Federal Reserve System with respect to reserves maintained
against deposits and certain other matters.
RESTRICTIONS ON CAPITAL DISTRIBUTIONS AND TRANSACTIONS BY THE BANK WITH
AFFILIATES
The principal source of funds for the Company's payments of principal and
interest on the Notes (and cash dividends on its common stock) will be
dividends from the Bank and the Company's other subsidiaries. In addition, at
September 30, 1996, the Company had $22.8 million in cash and cash
equivalents.
The OTS has adopted a regulation governing capital distributions by savings
institutions, which include cash dividends, stock redemptions or repurchases,
cash-out mergers, interest payments on certain convertible debt and other
transactions charged to the capital account of a savings institution.
Generally, the regulation creates a safe harbor for specified levels of
capital distributions from institutions meeting at least their minimum capital
requirements, so long as such institutions notify the OTS and receive no
objection to the distribution from the OTS. Institutions that do not qualify
for the safe harbor are required to obtain prior OTS approval before making
any capital distributions. These regulations do not apply to distributions
from direct subsidiaries of the Company, such as Annuity Network, Inc. and St.
Paul Financial Development Corporation.
The Bank is currently a "Tier 1" institution under the OTS regulation and,
under the safe harbor, may make capital distributions of up to the greater of
100% of its net income during a calendar year plus the amount that would
reduce by one-half its surplus capital ratio (the percentage by which the
institution's capital-to-assets ratio exceeds the ratio of its fully phased-in
capital requirements to its assets) at the beginning of the calendar year, or
75% of its net income over the most recent four quarter period.
The OTS has proposed to amend its regulation on capital distributions such
that the Bank would no longer have to obtain approval from the OTS in order to
make a distribution in excess of the safe harbor amount, unless such
distribution would cause the Bank to fail to meet the OTS's prompt corrective
action ("PCA") capital standards for a "well-capitalized" institution. The OTS
would, however, continue to receive prior notice of a distribution and would
retain the authority to prohibit any capital distribution upon a determination
that the making of such distribution would constitute an unsafe or unsound
practice. The Company does not anticipate that adoption of the proposed
regulation would have a material impact on the Bank's ability to make
distributions of capital.
In addition to regulation of capital distributions, there are various
statutory and regulatory limitations on the extent to which the Bank can
finance or otherwise transfer funds to the Company or its non-banking
subsidiaries, whether in the form of loans, extensions of credit, investments
or asset purchases. Such transfers by the Bank to the Company or any non-
banking subsidiary are generally limited to 10% of the Bank's capital and
surplus and, with respect to the Company and all such non-banking
subsidiaries, to an aggregate of 20% of the Bank's capital and surplus.
Furthermore, loans and extensions of credit are required to be secured in
specified amounts and are required to be on terms and conditions consistent
with safe and sound banking practices. The OTS Director may further restrict
these transactions in the interest of safety and soundness.
CAPITAL REGULATIONS
The OTS has prescribed capital regulations (the "Capital Regulations") that
establish three capital requirements which must be met by the Bank--a "core
capital requirement," a "tangible capital requirement"
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<PAGE>
and a "risk-based capital requirement." The Capital Regulations require thrift
institutions to maintain "core" capital of at least 3% of adjusted total
assets, "tangible" capital of at least 1.5% of adjusted total assets, and
"risk-based" capital of at least 8% of risk-weighted assets. Capital standards
for thrifts must be no less stringent than the capital standards applicable to
national banks (a leverage ratio of 4% of adjusted total assets). Therefore,
the Bank believes that it is required to maintain core capital of at least 4%
of adjusted total assets. The Bank exceeded all of the capital requirements at
September 30, 1996.
The OTS has also adopted separate PCA regulations that call for the OTS to
enforce certain restrictions on savings institutions that are classified as
undercapitalized. As of September 30, 1996, the Bank met the requirements of
the OTS to be categorized for PCA purposes as a "well-capitalized
institution." An institution's capital category, however, is determined solely
for regulatory purposes and may not constitute an accurate representation of
the institution's financial condition or prospects.
Under the Federal Deposit Insurance Corporation Improvement Act of 1991, the
OTS recently published regulations to ensure that its risk-based capital
standards take adequate account of concentration of credit risk, risk from
nontraditional activities, and actual performance and expected risk of loss on
multifamily mortgages. These rules allow the regulators to impose, on a case-
by-case basis, an additional capital requirement above the current
requirements where an institution has significant concentration of credit risk
or risks from nontraditional activities. The Bank is currently not subject to
any additional capital requirements under these regulations.
The OTS may establish capital requirements higher than the generally
applicable minimum for a particular savings institution if the OTS determines
the institution's capital was or may become inadequate in view of its
particular circumstances. Individual minimum capital requirements may be
appropriate where the savings institution is receiving special supervisory
attention, has a high degree of exposure to interest rate risk, or poses
safety or soundness concerns. The Bank has no such requirements.
RECENT LEGISLATION
To mitigate the disparity and any competitive disadvantage due to disparate
deposit insurance premium schedules between the Bank Insurance Fund ("BIF")
and SAIF, on September 30, 1996, President Clinton signed legislation to
recapitalize the SAIF. This legislation required members of SAIF, such as the
Bank, to pay a one-time special assessment of 65.7 cents per $100 of deposits
as of March 31, 1995, to fully capitalize SAIF to the desired levels.
Beginning in 1997, annual SAIF insurance premiums will drop to about 6.4 cents
per $100 of deposits, while BIF premiums will be 1.3 cents per $100 of
deposits. The Company's third quarter operating results include a $21.0
million pre-tax charge for the Bank's share of the special assessment. As a
result, management expects future SAIF insurance premiums to be reduced by
$5.5 million annually, based upon current deposit levels.
Recent legislation also eliminated the availability of the percentage-of-
taxable income bad debt method for federal income tax purposes. The Bank will
be required to use the specific charge-off method in the future. Previously,
the Bank had been able to use either the percentage-of-taxable income method
or the specific charge-off method. The legislation also eliminated the
recapture of the base year tax reserve (i.e., tax bad debt reserves
established before 1988) if the Bank were to fail the qualified thrift lender
test. As a result of the legislation, the base year tax reserve becomes
subject to recapture if the Bank ceased to be a bank or made distributions of
the tax bad debt reserves to shareholders. The legislation also requires the
Bank to recapture, into taxable income, $547,000 of additions made to the tax
bad debt reserve since 1988. This recapture will occur over a six year period
beginning in 1996, but can be delayed for two years if the Bank meets recently
developed loan origination tests.
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<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used to repurchase or
redeem, at par, all of the Company's outstanding 8.25% Subordinated Notes due
2000 ("Subordinated Notes"), the outstanding principal balance of which is
approximately $34.5 million. The Company expects to repurchase or redeem the
Subordinated Notes within 60 days after the sale of the Notes. The remainder
of the net proceeds will be added to the general funds of the Company to be
available for any general corporate purpose.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization including borrowings, of
the Company as of September 30, 1996, and the pro forma capitalization on a
combined basis giving effect to the proposed sale of the Notes and the
application of the estimated net proceeds therefrom, as described in "Use of
Proceeds."
<TABLE>
<CAPTION>
ST. PAUL OFFERING PRO FORMA
BANCORP ADJUSTMENTS(1) AS ADJUSTED
-------- -------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Borrowings:(2)
Short-term borrowings................... $280,499 $ -- $280,499
Long-term borrowings.................... 260,754 (33,798) 226,956
Senior notes due 2004 offered hereby.... -- 100,000 100,000
-------- -------- --------
Total borrowings...................... $541,253 $ 66,202 $607,455
======== ======== ========
Stockholders' equity:(3)
Preferred stock ($.01 par value);
10,000,000 shares authorized; none
issued................................. $ -- $ -- $ --
Common stock ($.01 par value);
40,000,000 shares authorized;
25,309,023 shares issued and 22,602,308
shares outstanding..................... 253 -- 253
Paid-in capital......................... 144,851 -- 144,851
Retained income......................... 279,362 (465) 278,897
Less unrealized loss on securities, net
of taxes............................... (4,393) -- (4,393)
Less borrowing by employee stock
ownership plan......................... (441) -- (441)
Less unearned employee stock ownership
plan shares (245,438 shares)........... (2,883) -- (2,883)
Less treasury stock (2,706,715 shares).. (45,118) -- (45,118)
-------- -------- --------
Total stockholders' equity............ $371,631 $ (465) $371,166
======== ======== ========
</TABLE>
- --------
(1) Adjusted to reflect the sale of $100,000,000 principal amount of Notes
pursuant to the offering made hereby and the application of a portion of
the net proceeds from such sale for repayment or redemption of all of the
Company's outstanding 8.25% Subordinated Notes due 2000.
(2) For information concerning the Company's borrowings, see Note O to the
Company's Consolidated Financial Statements included in its Annual Report
on Form 10-K for the year ended December 31, 1995, which document is
incorporated herein by reference.
(3) Restated for a five-for-four stock split effective January 14, 1997, based
upon a stockholder record date of December 31, 1996.
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<PAGE>
DESCRIPTION OF NOTES
The following sets forth certain general terms and provisions of the Notes.
The Notes are to be issued under an indenture (the "Indenture") between the
Company and Harris Trust and Savings Bank, as trustee (the "Trustee"). A copy
of the form of the Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. See "Available Information." The
following summaries of certain provisions of the Notes and the Indenture do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to all of the provisions of the Indenture, including the
definition therein of certain terms, and the actual provisions of the Notes.
Capitalized terms used herein have the meanings attributed to them in the
Indenture (unless otherwise defined herein). Section references made herein
refer to sections of the Indenture.
GENERAL
The Notes will constitute a single series of debt securities ("Debt
Securities") to be issued under the Indenture. The Notes will be limited to
$100,000,000 in aggregate principal amount, will mature on February 15, 2004
and will be unsecured, unsubordinated obligations of the Company.
The Notes will bear interest at the rate set forth on the cover page of this
Prospectus. Interest on the Notes will be payable semi-annually on each
February 15 and August 15 (each an "Interest Payment Date"), commencing August
15, 1997. Interest payable on each Interest Payment Date will include interest
accrued from February 18, 1997 or from the most recent Interest Payment Date
to which interest has been paid or duly provided for. Interest payable on any
Interest Payment Date will be payable to the person in whose name a Note (or
any predecessor Note) is registered at the close of business on the January 31
or July 31, as the case may be, next preceding such Interest Payment Date.
Principal of and interest on the Notes will be payable at the office or agency
of the Company maintained for such purpose in Chicago, Illinois, which
initially will be the office of the Paying Agent, provided that payment of
interest may be made (subject to collection), at the option of the Company, by
check mailed to the person entitled thereto. Interest shall be computed on the
basis of a 360-day year comprised of twelve 30-day months.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. No service charge
will be made for any registration of transfer or exchange of Notes, except in
certain circumstances for any tax or other governmental charge that may be
imposed in connection therewith. (Sections 3.1, 3.2 and 3.5)
RANKING
The Notes will be general unsecured obligations and will rank pari passu
with all other unsecured and unsubordinated senior indebtedness of the
Company.
The Company conducts its operations primarily through its subsidiaries. The
rights of the Company and its creditors, including the holders of the Notes
offered hereby, to participate in the assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise will be subject to the
prior claims of the subsidiary's depositors and creditors, except to the
extent that the Company may itself be a creditor with recognized claims
against the subsidiary.
OPTIONAL REDEMPTION
The Notes will not be redeemable prior to maturity. The Company may purchase
Notes in the open market, by tender or by contract. Notes so purchased may be
held, resold or surrendered to the Trustee for cancellation. If applicable,
the Company will comply with the requirements of Rule 14e-1 under the Exchange
Act and other securities laws and regulations in connection with any such
purchase.
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<PAGE>
SINKING FUND
There will be no sinking fund payments for the Notes.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Sale or Issuance of Capital Stock or Convertible Securities
of, and Merger or Sale of Assets by, a Bank. The Company will not: (i) nor
will it permit any Bank to, issue, sell, transfer, assign, pledge or otherwise
dispose of any shares of capital stock of any class of a Bank or any
securities convertible or exchangeable into shares of capital stock of any
class of a Bank unless after giving effect to such transaction and to shares
issuable upon conversion or exchange of outstanding securities convertible or
exchangeable into such capital stock (including such securities, if any, which
may be the subject of such transaction), at least 80% of the outstanding
shares of capital stock of each class of such Bank shall be owned at that time
by the Company; or (ii) permit a Bank to merge or consolidate or convey or
transfer all or substantially all of its assets, unless at least 80% of the
capital stock of each class (after giving effect to such transaction and to
shares issuable upon conversion or exchange of outstanding securities
convertible or exchangeable into capital stock, including such securities, if
any, which may be issued in such transaction) of the surviving corporation in
the case of a merger or consolidation or of the transferee corporation in the
case of a conveyance or transfer, shall be owned at that time by the Company.
(Section 9.12)
Ownership of Material Subsidiary Stock. The Company will not take any action
which would result in a decrease in the percentage of the outstanding shares
of voting stock of any Material Subsidiary directly or indirectly owned by the
Company, except as a result of (i) the issuance of directors' qualifying
shares; (ii) sales or other dispositions to the Company or to one or more
Material Subsidiaries; (iii) the purchase or retirement of shares with the
proceeds of newly issued shares; or (iv) the sale of capital stock at a price
determined by the Company (which determination may be evidenced by a
resolution of the Company's Board of Directors) to be the fair value thereof.
(Section 9.10)
Limitation on Liens. Except as provided below, the Company will not issue,
assume or guarantee any indebtedness for borrowed money ("indebtedness")
secured by a mortgage, encumbrance, security interest, pledge, lien or charge
(a "pledge" or "pledges") of or upon any property of the Company, whether such
property is owned at the date of the Indenture or thereafter acquired, without
effectively providing that the Notes (together with, if the Company shall so
determine, any other indebtedness issued, assumed by the Company and then
existing or thereafter created) shall be secured equally and ratably with (or
prior to) such indebtedness, so long as such indebtedness shall be so secured.
The foregoing does not apply to: (i) pledges upon any shares of capital
stock or indebtedness acquired by the Company after the date of the Indenture
(A) to secure the payment of all or any part of the purchase price of such
shares of capital stock or indebtedness upon the acquisition thereof by the
Company, or (B) to secure any indebtedness issued, assumed or guaranteed by
the Company prior to, at the time of, or within 360 days after the acquisition
of such shares of capital stock or indebtedness, which indebtedness is issued,
assumed or guaranteed for the purpose of financing or refinancing all or any
part of the purchase price of such shares of capital stock or indebtedness;
(ii) pledges of or upon shares of capital stock or indebtedness, which pledges
exist at the time of acquisition of such shares or indebtedness by the
Company; (iii) pledges of or upon any property of a corporation, which pledges
exist at the time such corporation is merged with or into or consolidated with
the Company or which pledges exist at the time of a sale or transfer of the
properties of a corporation as an entirety
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<PAGE>
or substantially as an entirety to the Company; (iv) mortgages existing on the
date of the Indenture; and (v) any extension, renewal, substitution,
refinancing, refunding or replacement (or successive extensions, renewals,
substitutions, refinancings, refundings or replacements) (each a
"refinancing") in whole or in part of any pledge existing at the date of the
Indenture or any pledge referred to in clauses (i) through (iv) above,
inclusive, provided, however, that the principal amount of indebtedness
secured thereby may not exceed the principal amount of indebtedness so secured
at the time of the refinancing plus the aggregate amount of premiums, other
payments, costs and expenses required to be paid or incurred in connection
with the refinancing, and that the refinancing shall be limited to all or a
part of the shares of capital stock or indebtedness which was subject to the
pledge so extended, renewed, substituted, refinanced, refunded or replaced.
The Company may, without equally and ratably securing the Debt Securities,
issue, assume or guarantee indebtedness secured by a pledge not excepted by
clauses (i) through (v) above, so long as after giving effect thereto, the
Company will own at least 80% of the capital stock of all of its Material
Subsidiaries then issued and outstanding, free and clear of any pledge.
(Section 9.9)
The Indenture does not contain any provisions other than the foregoing which
will restrict the Company from incurring, assuming or becoming liable with
respect to any indebtedness or other obligations, whether secured or
unsecured, or from paying dividends or making other distributions on its
capital stock or purchasing or redeeming its capital stock. The Indenture does
not contain any financial ratios, or specified levels of net worth or
liquidity to which the Company must adhere. In addition, the Indenture does
not contain any provision which would require that the Company repurchase or
redeem or otherwise modify the terms of any of the Notes upon a change in
control or other events involving the Company which may adversely affect the
creditworthiness of the Notes.
MERGERS, CONSOLIDATIONS AND TRANSFERS OF ASSETS
The Company may merge or consolidate with or into any other corporation or
sell, convey, transfer or otherwise dispose of all or substantially all of its
assets to any Person, if: (a) (i) in the case of a merger or consolidation,
the Company is the surviving corporation, or (ii) in the case of a merger or
consolidation where the Company is not the surviving corporation and in the
case of any such sale, conveyance, transfer or other disposition, the
successor or acquiring corporation is a corporation organized and existing
under the laws of the United States or a State thereof and such corporation
expressly assumes by supplemental indenture all the obligations of the Company
under the Debt Securities and under the Indenture or such assumption is
provided by law; (b) immediately thereafter, giving effect to such merger or
consolidation, or such sale, conveyance, transfer or other disposition, no
Default or Event of Default shall have occurred and be continuing; and (c) the
Company has delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel each stating that such merger or consolidation, or such sale,
conveyance, transfer or other disposition complies with the Indenture and that
all conditions precedent therein provided for relating to such transaction
have been complied with. In the event of the assumption by a successor
corporation of the obligations of the Company as provided in clause (a)(ii) of
the immediately preceding sentence, such successor corporation shall succeed
to and be substituted for the Company under the Indenture and under the Debt
Securities and all obligations of the Company thereunder shall terminate.
(Section 7.1).
TRANSACTIONS WITH AFFILIATES
The Company will not enter into any transaction (including the purchase,
sale or exchange of property or the rendering of any service) with any
Affiliate of the Company or any Subsidiary, other than in the ordinary course
of business and upon fair and reasonable terms taking into account the nature
of the Company's or the Subsidiary's business. (Section 9.11).
CORPORATE EXISTENCE
Subject to the permitted actions described above in "--Mergers,
Consolidations and Transfers of Assets," the Company will at all times do or
cause to be done all things necessary to preserve and keep in full force and
15
<PAGE>
effect its corporate existence and rights and franchises; provided, however,
that the Company may abandon or terminate any right or franchise if, in the
determination of the Company, such abandonment or termination is in the best
interests of the Company and does not materially adversely affect the ability
of the Company to operate its business or to fulfill its obligations under the
Indenture. (Section 9.4).
WAIVERS OF CERTAIN COVENANTS
The Company may fail or omit in any particular instance to comply with any
of the covenants set forth in the Indenture (other than the covenants relating
to payment of principal, premium and interest, maintaining an office or agency
or preserving its corporate existence) with respect to any series of Debt
Securities if the Company shall have obtained and filed with the Trustee prior
to the time for such compliance the consent in writing of the Holders of at
least a majority in aggregate principal amount of all of the Debt Securities
of such series at the time Outstanding either waiving such compliance in such
instance or generally waiving compliance with such covenant or covenants, but
no such waiver shall extend to or affect any obligation not expressly waived
or impair any right consequent thereon. (Section 9.13).
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities: (a) a default for 30 days in
the payment of any installment of interest on any Debt Security of such
series; (b) a default in the payment of any principal of, or premium, if any,
on, any such Debt Security of such series at its Maturity, upon redemption (if
applicable) or otherwise; (c) a default for 60 days after written notice to
the Company by the Trustee, or to the Company and the Trustee by the Holders
of at least 33% in principal amount of the Outstanding Debt Securities of such
series, in the performance of, or breach of, any other covenant or warranty of
the Company in respect of the Debt Securities of such series contained in the
Indenture; (d) a default under any agreement or instrument under which there
may be issued or by which there may be secured or evidenced any indebtedness
for money borrowed (excluding for such purposes non-recourse indebtedness
having in the aggregate an outstanding principal amount of less than $25
million), whether such indebtedness now exists or shall hereafter be created,
having an outstanding principal amount of $25 million or more in the
aggregate, which default shall have resulted in such indebtedness being
declared due and payable prior to the date on which it would otherwise have
become due and payable, without such declaration of acceleration having been
rescinded or annulled within a period of ten days (or sixty days if the
default is not caused by a failure to pay when due principal or interest on
such indebtedness within the applicable grace period) after there shall have
been given, by registered or certified mail, to the Company by the Trustee, or
to the Company and the Trustee by the Holders of at least 33% in aggregate
principal amount of the Outstanding Debt Securities of such series, a written
notice specifying such Event of Default, and stating that such notice is a
"Notice of Default" under the Indenture; provided, however, that if such
default under such agreement or instrument is remedied or cured by the Company
or waived by the holders of such indebtedness, then such Event of Default by
reason thereof shall be deemed likewise to have been thereupon remedied, cured
or waived without further action upon the part of either the Trustee or any of
the Holders of the Debt Securities of that series; (e) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Company or its subsidiaries; or (f) any other
Event of Default provided in or pursuant to the Officer's Certificate, the
applicable resolution of the Board of Directors, or established in the
supplemental indenture under which such series of Debt Securities is issued.
(Section 5.1). No Event of Default with respect to a particular series of Debt
Securities necessarily constitutes an Event of Default with respect to any
other series of Debt Securities issued under the Indenture.
Within 90 days after the occurrence of any Default with respect to any
series of Debt Securities which is continuing, the Trustee for such series
must give the Holders of Debt Securities of such series notice of all Defaults
of which it has knowledge and that have not been cured or waived.
Nevertheless, except in the case of a Default in payment on the Debt
Securities of any series, the Trustee may withhold notice to the Holders of
Debt Securities of any series of any Default with respect to such series if
and so long as it determines that the withholding of such notice is in the
interest of such Holders; provided, however, that, in the case of any default
or breach of the
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<PAGE>
character specified, in clause (c) of the preceding paragraph with respect to
the Debt Securities of such series, no such notice to Holders shall be given
until at least 60 days after the occurrence thereof. (Section 6.6).
If an Event of Default with respect to any series of Debt Securities at the
time Outstanding shall have occurred and is continuing, the Trustee or the
Holders of at least 33% in aggregate principal amount of the Outstanding Debt
Securities of such series may, by written notice, declare the principal amount
thereof (or, if the Debt Securities of such series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of such series) to be due and payable immediately. (Section 5.2).
The Indenture contains a provision entitling the Trustee to be indemnified
by the Holders of Debt Securities issued thereunder before proceeding to
exercise any right or power vested in the Trustee under the Indenture at the
request of any Holders. (Section 6.2). The Indenture provides that the Holders
of a majority in aggregate principal amount of the Outstanding Debt Securities
of any series issued thereunder may, with certain exceptions, direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, with
respect to the Debt Securities of such series. (Section 5.8). The right of a
Holder to institute a proceeding with respect to the Indenture is subject to
certain conditions precedent, including notice and indemnity to the Trustee,
but each Holder has a right to the receipt of payment of principal, premium,
if any, and interest, if any, at the respective Stated Maturities of the Debt
Securities (or, in the case of a redemption, on the Redemption Date) or to
institute suit for the enforcement thereof, which right shall not be impaired
or affected without the consent of such Holder. (Sections 5.9 and 5.10).
The Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of any series may, on behalf of the Holders of all such Debt
Securities, waive any past Default or Event of Default with respect to such
series and its contingencies, except (a) a Default or Event of Default in the
payment of principal of, premium, if any, or interest, if any, on any Debt
Securities of such series, or (b) in respect of any covenant or provision of
the Indenture that cannot be modified or amended without the consent of the
Holder of each Outstanding Debt Security of that series adversely affected.
(Sections 5.7 and 8.2).
The Indenture requires the Company to furnish to the Trustee annual
statements as to the fulfillment by the Company of its obligations under the
Indenture. (Section 9.7).
MODIFICATION OF THE INDENTURE
The Company, when authorized by a Board Resolution, and the Trustee may, at
any time and from time to time, without the consent of any Holders of Debt
Securities, modify and amend the Indenture, for any of the following purposes:
(a) to evidence the succession of another corporation to the Company and the
assumption by any such successor of the covenants of the Company under the
Indenture and in the Debt Securities; (b) to add to the covenants of the
Company for the benefit of the Holders of all or any series of Debt Securities
(and if such covenants are to be for the benefit of less than all series of
Debt Securities, stating that such covenants are expressly being included
solely for the benefit of such series) or to surrender any right or power
conferred by the Indenture upon the Company; (c) to add any additional Events
of Default with respect to all or any series of Debt Securities; (d) to add to
or change any of the provisions of the Indenture to facilitate the issuance of
Debt Securities in global form; (e) to add to, change or eliminate any of the
provisions of the Indenture; provided, however, that any such addition, change
or elimination shall become effective only when there is no Debt Security
Outstanding of any series created prior to the execution of the supplemental
indenture which is entitled to the benefit of such provision; (f) to secure
the Debt Securities; (g) to establish the form or terms of Debt Securities of
any series as permitted by Sections 2.1 and 3.1 of the Indenture; (h) to
evidence and provide for the acceptance of appointment under the Indenture by
a successor Trustee with respect to the Debt Securities of one or more series
and to add to or change any of the provisions of the Indenture as shall be
necessary to provide for or facilitate the administration of the trusts under
the Indenture by more than one Trustee, pursuant to the requirements of
Section 6.11 of the Indenture; (i) to correct or supplement any provision
under the Indenture which may be inconsistent with any other provision under
the Indenture or to make any other provisions with respect to matters or
questions arising under the Indenture, provided, however, such action shall
not adversely
17
<PAGE>
affect the interests of the Holders of Debt Securities of any series issued
under the Indenture in any material respect; or to cure any ambiguity or
correct any mistake; or (j) to modify, eliminate or add to the provisions of
the Indenture to the extent necessary to effect the qualification of the
Indenture under the Trust Indenture Act of 1939 (the "TIA") or under any
similar federal statute subsequently enacted and to add to the Indenture such
other provisions as may be expressly required under the TIA. (Section 8.1).
Modifications and amendments to the Indenture may be made by the Company and
the Trustee with the written consent of the Holders of a majority of the
aggregate principal amount of each series of Debt Securities at the time
Outstanding that is adversely affected thereby; provided, however, that no
such modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security of such series adversely affected thereby: (i)
change the Stated Maturity of the principal of, or any installment of
principal of or interest on, any Debt Security of such series, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the principal of
an Original Issue Discount Security of such series that would be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant to
Section 5.2 of the Indenture, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof (or,
in the case of redemption, on or after the Redemption Date); (ii) reduce the
percentage in aggregate principal amount of the Outstanding Debt Securities of
such series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of the Indenture or certain
defaults thereunder and their consequences) provided for in the Indenture;
(iii) change any obligation of the Company to maintain an office or agency in
the Place of Payment for the Debt Securities of such series where such Debt
Securities may be presented or surrendered for payment, where such Debt
Securities of such series may be surrendered for registration of transfer or
exchange or where notices and demands to or upon the Company in respect of the
Debt Securities of such series may be served; or (iv) make any change in
Section 5.7 or Section 8.2 of the Indenture except to increase any percentage
or to provide that certain other provisions of the Indenture cannot be
modified or waived without the consent of the Holders of each Outstanding Debt
Security of such series adversely affected thereby. (Section 8.2).
SATISFACTION AND DISCHARGE; DEFEASANCE
The Indenture, with respect to any series of Debt Securities (except for
certain specified surviving obligations referred to below), will be discharged
and canceled upon the satisfaction of certain conditions, including the
following: (a) all Debt Securities of such series not theretofore delivered to
the Trustee for cancellation have become due or payable, will become and due
and payable at their Stated Maturity within one year, or are to be called for
redemption within one year; and (b) the deposit with the Trustee of an amount
sufficient to pay the principal, premium, if any, and interest to the Maturity
of all Debt Securities of such series. Upon any such discharge of the
Company's obligations, the Holders of the Debt Securities of such series shall
no longer be entitled to the benefits of the Indenture, except for the
purposes of registration of transfer and exchange of the Debt Securities or
replacement of lost, stolen or mutilated Debt Securities and shall look only
to such deposited funds or obligations for payment. (Sections 4.1 and 4.2).
The Indenture also provides that the Company may elect:
(a) to be discharged from its obligations with respect to the Debt
Securities of or within a series on and after the date the conditions
described below regarding Section 4.6 of the Indenture are satisfied
(hereinafter "defeasance"). For this purpose, such defeasance means that
the Company shall be deemed to have paid and discharged the entire
indebtedness represented by such Debt Securities which shall thereafter be
deemed to be "Outstanding" only for the purposes of Article 4 of the
Indenture, and to have satisfied all its other obligations under such Debt
Securities and the Indenture insofar as such Debt Securities are concerned
(and the Trustee, at the expense of the Company, shall on a Company Order
execute proper instruments acknowledging the same), except the following
which shall survive until otherwise terminated or discharged hereunder: (i)
the rights of Holders of such Debt Securities to receive, solely from the
trust funds described below regarding Section 4.6(a) of the Indenture,
payments in respect of the principal of,
18
<PAGE>
premium, if any, and interest, if any, on such Debt Securities when such
payments are due; (ii) the rights, powers, trusts, duties and immunities of
the Trustee under the Indenture; and (iii) Article 4 of the Indenture.
Subject to compliance with Article 4 of the Indenture, the Company may
exercise this option notwithstanding the prior exercise of its option to
effect covenant defeasance (as defined below) with respect to such Debt
Securities. (Section 4.4).
(b) to be released from its obligations with respect to the Debt
Securities of or within a series under "--Mergers, Consolidations and
Transfers of Assets" and "--Certain Covenants" above and certain other
obligations, and, if specified pursuant to provisions of the Indenture
establishing the terms of such Debt Securities, its obligations under any
other covenants with respect to such Debt Securities on and after the date
the conditions set forth below in the next paragraph are satisfied
(hereinafter "covenant defeasance"), and such Debt Securities shall
thereafter be deemed to be not "Outstanding" for the purpose of any
request, demand, authorization, direction, notice, consent, waiver or other
Act of Holders (and the consequences of any thereof) in connection with
such obligations or such other covenants, but shall continue to be deemed
"Outstanding" for all other purposes of the Indenture. For this purpose,
such covenant defeasance means that, with respect to such Debt Securities,
the Company may omit to comply with and shall have no liability in respect
of such obligations or such other covenants, whether directly or
indirectly, by reason of any reference elsewhere in the Indenture to any
such obligation or such other covenants or by reason of any reference to
any such obligation or such other covenants to any other provision in the
Indenture or in any other document or otherwise and such omission to comply
shall not constitute a Default or an Event of Default under the Indenture
or otherwise, as the case may be, but, except as specified above, the
remainder of the Indenture and such Debt Securities shall be unaffected
thereby. (Section 4.5).
Such defeasance or covenant defeasance will take effect with respect to any
Debt Securities of or within a series at any time prior to the Stated Maturity
or redemption thereof only when:
(a) The Company shall have deposited or caused to be deposited
irrevocably with the Trustee (or another trustee satisfying the eligibility
requirements of the Indenture who shall agree to comply with, and shall be
entitled to the benefits of, certain specified provisions of the Indenture
relating to defeasance or covenant defeasance and liability with respect to
trust funds, for purposes of such provisions also a "Trustee") as trust
funds in trust for the purpose of making the payments referred to in
clauses (x) and (y) below, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Debt Securities,
with instructions to the Trustee as to the application thereof, (i) money
in an amount, or (ii) Government Obligations which through the payment of
interest and principal in respect thereof in accordance with their terms
will provide, not later than one day before the due date of any payment
referred to in clause (x) or (y) below, money in an amount or (iii) a
combination thereof in an amount, sufficient, in the opinion of a
nationally recognized firm of independent certified public accountants
expressed in a written certification thereof delivered to the Trustee, to
pay and discharge, and which shall be applied by the Trustee to pay and
discharge, (x) the principal of, premium, if any, and interest, if any, on
such Debt Securities on the Maturity of such principal or installment of
principal or interest and (y) any mandatory sinking fund payments
applicable to such Debt Securities on the day on which such payments are
due and payable in accordance with the terms of the Indenture and such Debt
Securities. Before such a deposit the Company may make arrangements
satisfactory to the Trustee for the redemption of Debt Securities at a
future date or dates in accordance with the Indenture which shall be given
effect in applying the foregoing.
(b) Such defeasance or covenant defeasance shall not result in a breach
or violation of, or constitute a Default or Event of Default under the
Indenture or result in a breach or violation of, or constitute a default
under, any other material agreement or instrument to which the Company is a
party or by which it is bound.
(c) No Event of Default of the type described in clause (e) of "--Events
of Default, Notice and Waiver" above with respect to such Debt Securities
shall have occurred and be continuing during the period commencing on the
date of such deposit and ending on the 91st day after such date (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period).
(d) In the case of an exercise by the Company of its option to effect a
defeasance as described above, the Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel to the
19
<PAGE>
effect that (i) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling, or (ii) since the date of
execution of the Indenture, there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of such Debt
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such defeasance and will be subject to Federal
income tax on the same amount and in the same manner and at the same times,
as would have been the case if such deposit, defeasance and discharge had
not occurred.
(e) In the case of an exercise by the Company of its option to effect a
covenant defeasance as described above, the Company shall have delivered to
the Trustee an Opinion of Counsel to the effect that the Holders of such
Debt Securities will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred.
(f) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to such defeasance as described above or such covenant defeasance
as described above (as the case may be) have been complied with and an
Opinion of Counsel to the effect that either (i) as a result of a deposit
pursuant to subparagraph (a) above and the related exercise of the
Company's option to effect such defeasance as described above or to affect
such covenant defeasance as described above (as the case may be),
registration is not required under the Investment Company Act of 1940, as
amended, by the Company, with respect to the trust funds representing such
deposit or by the Trustee for such trust funds or (ii) all necessary
registrations under said Act have been effected.
(g) Such defeasance or covenant defeasance shall be effected in
compliance with any additional or substitute terms, conditions or
limitations which may be imposed on the Company in connection therewith as
contemplated by the provisions of the Indenture establishing the terms of
such Debt Securities. (Section 4.6).
PAYMENT AND TRANSFER
Principal of, premium, if any, and interest, if any, on the Debt Securities
of any series are to be payable at the Place of Payment for such series, which
may be the Corporate Trust Office of the Trustee or any other office or agency
maintained by the Company for such purposes, provided that payment of
interest, if any, on Debt Securities may be made at the option of the Company
by check mailed to the persons in whose names such Debt Securities are
registered at the close of business on the day or days specified in the
applicable Prospectus Supplement. (Sections 3.7 and 9.2).
Debt Securities may be transferred or exchanged at the Place of Payment for
such series, which may be the Corporate Trust Office of the Trustee or at any
other office or agency maintained by the Company for such purposes, subject to
the limitations in the Indenture, without the payment of any service charge
except for any tax or governmental charge incidental thereto. (Section 3.5).
SAME-DAY SETTLEMENT
Settlement for the Notes will be made by the underwriters, dealers or agents
in immediately available funds and all applicable payments of principal,
premium and interest on the Notes will be made by the Company in immediately
available funds.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS OR DIRECTORS
The Indenture provides that no recourse under or upon any obligation,
covenant or agreement of or contained in the Indenture or of or contained in
any Note, or for any claim based thereon or otherwise in respect thereof, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, officer or director, as such, past or
present of the Company or of any successor Person. Each Holder, by accepting
the Notes, waives and releases all such liability. (Section 1.13).
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<PAGE>
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. If an Event of Default has occurred and is continuing,
the Trustee will use the same degree of care and skill in its exercise of the
rights and powers vested in it by the Indenture as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
(Section 6.1).
The Indenture and provisions of the TIA incorporated by reference therein
contain limitations on the rights of the Trustee, should it become a creditor
of the Company, to obtain payment of claims in certain cases or to realize on
certain property received by it in respect of any such claims, as security or
otherwise. The Trustee is permitted to engage in other transactions; provided,
however, that if it acquires any conflicting interest, it must eliminate such
conflict or resign. (Section 6.3).
Harris Trust and Savings Bank is the Trustee under the Indenture. The
Company maintains banking relationships in the ordinary course of business
with the Trustee.
BOOK-ENTRY SYSTEM
The Notes will be represented by one fully registered Global Security
deposited with, or on behalf of, the Depository Trust Company ("DTC") or other
successor depositary (DTC or such other depositary appointed by the Company is
herein referred to as the "Depositary") and registered in the name of the
Depositary or its nominee. The Notes will not be issuable in definitive form,
except under the limited circumstances described herein.
DTC has advised the Company and the Underwriters that it intends to follow
the procedures described below:
The Depositary will act as securities depositary for the Global Security.
The Global Security will be issued as a fully registered security
registered in the name of Cede & Co. (the Depositary's partnership
nominee).
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depositary holds securities that its
participants ("Participants") deposit with the Depositary. The Depositary
also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). The Depositary is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the Depositary's system is also available to others
such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The
Rules applicable to the Depositary and its Participants are on file with
the Commission.
Purchases of the Notes must be made by or through Direct Participants,
which will receive a credit for the Notes on the Depositary's records. The
ownership interest of each actual purchaser of each Note ("Beneficial
Owner") is in turn recorded on the Direct and Indirect Participant's
records. Transfers of ownership interests in the Notes are to be
accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the Notes, except in the event
that use of the book-entry system for the Notes is discontinued.
To facilitate subsequent transfers, all Notes deposited by Participants
with the Depositary are registered in the name of the Depositary's
partnership nominee, Cede & Co. The deposit of Notes with the Depositary
21
<PAGE>
and their registration in the name of Cede & Co. effect no change in
beneficial ownership. The Depositary has no knowledge of the actual
Beneficial Owners of the Notes; the Depositary's records reflect only the
identity of the Direct Participants to whose accounts such Notes are
credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of
their customers.
Conveyance of Notes and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners are
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Notes. Under its usual procedures, the Depositary mails an Omnibus
Proxy to the issuer as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Notes are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Notes will be made to the
Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the payable date in accordance with their respective holdings
shown on the Depositary's records unless the Depositary has reason to
believe that it will not receive payment on the payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such Participant and not of the Depositary,
the Paying Agent or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal
and interest to the Depositary is the responsibility of the Company or the
Paying Agent, disbursement of such payments to Direct Participants shall be
the responsibility of the Depositary, and disbursement of such payments to
the Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
So long as the Depositary for the Global Security, or its nominee, is the
registered owner of the Global Security, the Depositary or its nominee, as the
case may be, will be considered the sole owner or Holder of the Notes
represented by the Global Security for all purposes under the Indenture.
Except as set forth below, owners of beneficial interests in the Global
Security will not be entitled to have Notes represented by the Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Notes in definitive form and will not be considered the owners or
Holders thereof under the Indenture. Accordingly, each person owning a
beneficial interest in the Global Security must rely on the procedures of the
Depositary and, if such person is not a Participant, those of the Participants
through which such person owns its interest, in order to exercise any rights
of a Holder under the Indenture.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such limits and
laws may impair the ability to transfer beneficial interests in the Global
Security.
Principal and interest payments on Notes registered in the name of or held
by the Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner or the Holder of the
Global Security representing such Notes. Neither the Company, the Paying Agent
nor the Trustee will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in the Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
If at any time the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary or if at any time the Depositary shall no
longer be eligible under the Indenture, the Company shall appoint a successor
Depositary with respect to the Notes. If a successor Depositary is not
appointed by the Company within 90 days after it receives such notice or
becomes aware of such ineligibility, the Company will issue certificated Notes
of like tenor, in authorized denominations and in an aggregate principal
amount equal to the principal amount of the Global Security in exchange for
the Global Security. (Section 3.5)
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<PAGE>
The Company may at any time in its sole discretion determine that the Notes
issued in global form shall no longer be represented by the Global Security.
In such event the Company will issue certificated Notes of like tenor, in
authorized denominations and in an aggregate principal amount equal to the
principal amount of the Global Security in exchange for the Global Security.
(Section 3.5)
CERTAIN DEFINITIONS
The following terms are defined in the Indenture (Sections 1.1, 5.1).
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bank" means (a) the Bank, so long as it is a Subsidiary of the Company, or
any successor thereto so long as such successor is a Subsidiary of the Company
and (b) any bank or savings or depository institution that is or shall become
an Affiliate of the Company.
"corporation" includes corporations, associations, partnerships, limited
liability companies, joint stock companies and business trusts.
"Default" means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.
"Event of Default" is defined above under "--Events of Default, Notice and
Waiver".
"Material Subsidiary" means, at any particular time, any Subsidiary that,
together with any Subsidiaries of such Subsidiary (i) accounted for more than
5% of the consolidated revenue of the Company for its most recently completed
fiscal year, or (ii) owned more than 5% of the consolidated assets of the
Company as at the end of such fiscal year, all as calculated in accordance
with generally accepted accounting principles.
"Maturity", where used with respect to any Debt Security, means the date on
which the principal of such Debt Security or an installment of principal
thereof becomes due and payable as therein or in the Indenture provided,
whether at the Stated Maturity or by declaration of acceleration, call for
redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President, any Executive Vice President or any Senior Vice
President, signing alone, or by any Vice President signing together with the
Corporate Secretary, any Assistant Secretary, the Treasurer or any Assistant
Treasurer of the Company.
"Opinion of Counsel" means a written opinion of legal counsel, who may be
(a) counsel for the Company or (b) other counsel designated by the Company or
the Trustee. Any counsel for the Company may be an employee of the Company.
"Stated Maturity", when used with respect to any Debt Security or any
installment of principal thereof or interest thereon, means the date specified
in such Debt Security as the fixed date on which the principal of such Debt
Security or such installment of principal or interest is due and payable.
"Subsidiary" means any corporation or Bank of which the Company at the time
owns or controls, directly or indirectly, more than 50% of the shares of
outstanding stock having general voting power under ordinary circumstances to
elect a majority of the Board of Directors of such corporation (irrespective
of whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening
of any contingency).
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") between the Company and Keefe, Bruyette &
Woods, Inc. (the "Representative") on its behalf and on behalf of ABN AMRO
Chicago Corporation (together with the Representative, the "Underwriters"),
the Company has agreed to sell to the Underwriters and the Underwriters have
severally agreed to purchase, the respective principal amounts of the Notes
set forth after their names below. In the Underwriting Agreement, the several
Underwriters have agreed, subject to the terms and conditions set forth
therein, to purchase all of the Notes offered hereby if any of the Notes are
purchased. In the event of a default by an Underwriter, the Underwriting
Agreement provides that, in certain circumstances, purchase commitments of the
nondefaulting Underwriter may be increased or the Underwriting Agreement may
be terminated.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
<S> <C>
Keefe, Bruyette & Woods, Inc................................................ $ 50,000,000
ABN AMRO Chicago Corporation................................................ $ 50,000,000
------------
Total..................................................................... $100,000,000
============
</TABLE>
The Representative has advised the Company that the Underwriters propose
initially to offer the Notes to the public at the public offering price set
forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of .60% of the principal amount of the
Notes. After the initial public offering, the public offering price and
concession may be changed.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain civil liabilities, including liabilities under
the Securities Act or contribute to payments the Underwriters may be required
to make in respect thereof.
The Notes will not be listed on any securities exchange. The Company has
been advised by the Representative that the Underwriters currently intend to
make a market in the Notes, as permitted by applicable laws and regulations.
The Underwriters are not obligated, however, to make a market in the Notes and
any such market-making may be discontinued at any time at the sole discretion
of the Underwriters. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Notes.
The Underwriters and their respective affiliates may be customers of, engage
in transactions with and perform services for the Company and its subsidiaries
in the ordinary course of business.
LEGAL OPINIONS
The legality of the Notes will be passed upon for the Company by Hogan &
Hartson L.L.P., Washington, D.C., special counsel to the Company. Certain
legal matters with respect to the Notes will be passed upon for the
underwriters by McDermott, Will & Emery, Chicago, Illinois. McDermott, Will &
Emery in the past has represented, and in the future may represent, the
Company on other matters.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in the Company's Annual Report (Form 10-K) for the year ended
December 31, 1995, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
24
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR IN-
CORPORATED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PRO-
SPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY ST. PAUL BANCORP OR ANY OF THE UNDER-
WRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF ST. PAUL BANCORP SINCE THE DATE HEREOF. THIS PROSPEC-
TUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAK-
ING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Selected Consolidated Financial Information................................ 5
Recent Developments........................................................ 7
Certain Regulatory Matters................................................. 9
Use of Proceeds............................................................ 11
Capitalization............................................................. 12
Description of Notes....................................................... 13
Underwriting............................................................... 24
Legal Opinions............................................................. 24
Experts.................................................................... 24
</TABLE>
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$100,000,000
[LOGO OF ST. PAUL BANCORP, INC.]
7 1/8% SENIOR NOTES
DUE FEBRUARY 15, 2004
---------------
PROSPECTUS
---------------
KEEFE, BRUYETTE & WOODS, INC.
ABN AMRO
CHICAGO CORPORATION
FEBRUARY 11, 1997
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