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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registration [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
St. Paul Bancorp, Inc.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total Fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing:
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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Preliminary Copy
6700 West North Avenue
Chicago, Illinois 60707
(773) 622-5000
March 27, 1998
Dear Shareholder:
You are invited to attend the annual meeting of shareholders (the
"Annual Meeting") of St. Paul Bancorp, Inc. (the "Corporation") to be held on
Wednesday, May 6, 1998 at 10:00 a.m. at the Drury Lane Oakbrook, 100 Drury
Lane, Oakbrook Terrace, Illinois 60181.
The Annual Meeting has been called for the following purposes: (1) to
elect each of four directors for a three-year term; (2) to consider and vote
upon a proposed amendment to the Corporation's 1995 Incentive Plan to increase
by [1,500,000] the number of shares of Common Stock reserved for issuance
thereunder; (3) to consider and vote upon a proposed amendment to the
Corporation's Certificate of Incorporation to increase the authorized number of
shares of Common Stock from 40,000,000 to 80,000,000; and (4)to transact such
other business as may properly come before the Annual Meeting or any
adjournments thereof.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS THAT YOU VOTE
"FOR" ELECTION OF THE FOUR NOMINEES OF THE BOARD OF DIRECTORS AS DIRECTORS,
"FOR" THE AMENDMENT TO THE 1995 INCENTIVE PLAN AND "FOR" THE AMENDMENT TO THE
CERTIFICATE OF INCORPORATION. The accompanying proxy statement provides
detailed information concerning the matters to be voted on at the Annual
Meeting. Also enclosed is our 1997 annual report to shareholders, which
reviews results for the 1997 fiscal year.
It is important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, you are requested to
complete, date, sign and return the enclosed proxy card in the enclosed
postage-paid envelope.
On behalf of the Board of Directors, thank you for returning your
proxy and for your continued interest and support.
Sincerely yours,
Joseph C. Scully
Chairman of the Board and
Chief Executive Officer
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Preliminary Copy
6700 West North Avenue
Chicago, Illinois 60707
(773) 622-5000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, MAY 6, 1998
NOTICE IS HEREBY GIVEN that the 1998 annual meeting of shareholders
(the "Annual Meeting") of St. Paul Bancorp, Inc. (the "Corporation") will be
held on Wednesday, May 6, 1998 at 10:00 a.m. at the Drury Lane Oakbrook, 100
Drury Lane, Oakbrook Terrace, Illinois 60181 for the following purposes:
(1) To elect each of four directors for a three-year term
(Proposal 1);
(2) To consider and vote upon a proposed amendment to the
Corporation's 1995 Incentive Plan to increase by [1,500,000]
the number of shares of Common Stock reserved for issuance
thereunder (Proposal 2);
(3) To consider and vote upon a proposed amendment to the
Corporation's Certificate of Incorporation to increase the
authorized number of shares of Common Stock from 40,000,000 to
80,000,000 (Proposal 3); and
(4) To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
Pursuant to the Corporation's Bylaws, the Board of Directors has fixed
the close of business on March 17, 1998 as the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting. Only holders of common stock of record at the close of business on
that date will be entitled to notice of and to vote at the Annual Meeting or
any adjournments thereof.
In the event that there are not sufficient votes to approve any one or
more of the foregoing proposals at the time of the Annual Meeting, the Annual
Meeting may be adjourned in order to permit further solicitation of proxies by
the Corporation.
By Order of the Board of Directors
Joseph C. Scully
Chairman of the Board and
Chief Executive Officer
Chicago, Illinois
March 27, 1998
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER
OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN,
DATE AND COMPLETE THE
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ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
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Preliminary Copy
6700 West North Avenue
Chicago, Illinois 60707
(773) 622-5000
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1998
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This proxy statement is furnished to shareholders of St. Paul
Bancorp, Inc. (the "Corporation") in connection with the solicitation by the
Board of Directors of the Corporation of proxies to be used at the 1998 annual
meeting of shareholders (the "Annual Meeting") to be held on Wednesday, May 6,
1998 at 10:00 a.m. at the Drury Lane Oakbrook, 100 Drury Lane, Oakbrook
Terrace, Illinois 60181, and at any adjournments thereof. This proxy statement
and the accompanying proxy are initially being mailed to shareholders on or
about March 27, 1998.
The Annual Meeting has been called for the following purposes: (1) to
elect each of four directors for a three-year term; (2) to consider and vote
upon a proposed amendment to the Corporation's 1995 Incentive Plan to increase
by [1,500,000] the number of shares of Common Stock reserved for issuance
thereunder; (3) to consider and vote upon a proposed amendment to the
Corporation's Certificate of Incorporation to increase the authorized number of
shares of Common Stock from 40,000,000 to 80,000,000; and(4) to transact such
other business as may properly come before the Annual Meeting or any
adjournments thereof.
If the enclosed form of proxy is properly executed and returned to the
Corporation in time to be voted at the Annual Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
EXECUTED BUT UNMARKED PROXIES WILL BE VOTED (A) FOR PROPOSAL 1 TO ELECT EACH OF
THE FOUR NOMINEES TO THE BOARD OF DIRECTORS, (B) FOR PROPOSAL 2 TO AMEND THE
CORPORATION'S 1995 INCENTIVE PLAN AND (C) FOR PROPOSAL 3 TO AMEND THE
CORPORATION'S CERTIFICATE OF INCORPORATION. Except for procedural matters
incident to the conduct of the Annual Meeting, the Corporation does not know of
any matters other than those described in the Notice of Annual Meeting that are
to come before the Annual Meeting. If any other matters are properly brought
before the Annual Meeting, the persons named in the accompanying proxy will
vote the shares represented by the proxies on such matters as determined by a
majority of the Board of Directors.
The presence of a shareholder at the Annual Meeting will not
automatically revoke such shareholder's proxy. Shareholders may, however,
revoke a proxy at any time prior to its exercise by delivering to the
Corporation a duly executed proxy bearing a later date, by attending the Annual
Meeting and voting in person, or by filing a written notice of revocation with
Clifford M. Sladnick, Senior Vice President, General Counsel and Corporate
Secretary, at 6700 West North Avenue, Chicago, Illinois 60707.
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Preliminary Copy
The cost of soliciting proxies in the form enclosed herewith will be
borne by the Corporation. In addition to the solicitation of proxies by mail,
the Corporation and its wholly-owned subsidiary, St. Paul Federal Bank For
Savings (the "Bank" or "St. Paul Federal"), through their directors, officers
and employees, may also solicit proxies personally or by telephone or
telecommunication. The Corporation also will request persons, firms and
corporations holding shares in their names or in the name of their nominees,
which are beneficially owned by others, to send proxy materials to and obtain
proxies from such beneficial owners and will reimburse such holders for their
reasonable expenses in doing so. The Corporation also has retained Morrow &
Co. to assist in the solicitation of proxies at a fee of $7,500, plus
reimbursement of certain out-of-pocket expenses.
The securities which can be voted at the Annual Meeting consist of
shares of common stock, par value $.01 per share (the "Common Stock") of the
Corporation, with each share entitling its owner to one vote on all matters.
There is no cumulative voting of shares. The close of business on March 17,
1998 has been fixed by the Board of Directors as the record date for the
determination of shareholders entitled to vote at the Annual Meeting. The
number of shares of the Corporation's Common Stock outstanding on March 17,
1998 was _______________. There were approximately __________ record holders
of the Corporation's Common Stock as of that date. The presence, in person or
by proxy, of at least one-third of the total number of issued and outstanding
shares of Common Stock of the Corporation is necessary to constitute a quorum
at the Annual Meeting.
Votes cast, either in person or by proxy, will be tabulated by
BankBoston, N.A. Under Delaware corporate law and the Corporation's Bylaws,
directors are elected by plurality of votes of shares present (in person or by
proxy) and entitled to vote. Unless otherwise required by law or the
Corporation's Certificate of Incorporation or Bylaws, any other matter put to a
shareholder vote will be decided by the affirmative vote of a majority of the
votes cast on the matter. Abstentions and broker non-votes will be treated as
shares that are present, or represented, and entitled to vote for purposes of
determining the presence of a quorum. Abstentions and broker non-votes will
not be counted as shares present and entitled to vote nor as a vote cast on any
matter presented at the Annual Meeting.
THE CORPORATION IS REQUIRED TO FILE AN ANNUAL REPORT/FORM 10-K FOR ITS
FISCAL YEAR ENDED DECEMBER 31, 1997 WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE "SEC"). A COPY OF THE ANNUAL REPORT/FORM 10-K, EXCLUDING EXHIBITS,
ACCOMPANIES THIS PROXY STATEMENT. FOR A REASONABLE FEE, THE CORPORATION WILL
PROVIDE COPIES OF THE EXHIBITS TO THE ANNUAL REPORT/FORM 10-K UPON WRITTEN
REQUEST DIRECTED TO CLIFFORD M. SLADNICK, SENIOR VICE PRESIDENT, GENERAL
COUNSEL AND CORPORATE SECRETARY, ST. PAUL BANCORP, INC., 6700 WEST NORTH
AVENUE, CHICAGO, ILLINOIS 60707.
ELECTION OF DIRECTORS
(PROPOSAL 1)
Under the Corporation's Bylaws, the number of directors is set at
nine. The directors are divided into three classes. The term of office of
only one class of directors expires in each year, and their successors are
elected for terms of three years and until their successors are elected and
qualified.
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At the 1998 Annual Meeting, each of four directors will be elected for
a three-year term. Unless otherwise specified on the proxy, it is the
intention of the persons named in the proxy to vote the shares represented by
each properly executed proxy for the election as director of the persons named
below as nominees. The Board of Directors believes that each of the nominees
will stand for election and will serve if elected as directors. However, if
any of the persons nominated by the Board of Directors fails to stand for
election or will be unable to accept election, the proxies will be voted for
the election of such other person or persons as the Board of Directors may
nominate.
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth the names of the Board of Directors'
four nominees for election as directors and those directors who will continue
to serve as such after the 1998 Annual Meeting. Also set forth is certain
other information, some of which has been obtained from the Corporation's
records and some of which has been supplied by the nominees and continuing
directors, with respect to each such person's age at March 17, 1998, the
periods during which such person has served as a director of the Bank, and
positions currently held with the Corporation. Each person has been a director
of the Corporation since its formation in 1987, except for Patrick J. Agnew,
who joined the Board in 1989, John W. Croghan and Jean C. Murray, O.P., who
joined the Board in 1993, and Paul C. Gearen, who joined the Board in 1997.
<TABLE>
<CAPTION>
DIRECTOR OF
THE BANK POSITIONS HELD WITH EXPIRATION
AGE SINCE THE CORPORATION OF TERM
--- ----- --------------- -------
<S> <C> <C> <C> <C>
NOMINEES FOR 3-YEAR TERM:
Patrick J. Agnew (a)(b)(c)(d)(e)(f) 55 1989 President, Chief Operating
Officer and Director 2001
William A. Anderson (b)(c)(d)(g) 72 1985 Director 2001
Alan J. Fredian (d)(e)(h)(i) 67 1977 Director 2001
Jean C. Murray, O.P. (e)(f) 70 1993 Director 2001
CONTINUING DIRECTORS:
John W. Croghan (b)(g)(i) 67 1993 Director 1999
Kenneth J. James (a)(c) 65 1987 Director 1999
Paul C. Gearen (a) 46 1997 Director 2000
Joseph C. Scully (a)(b)(c)(d)(e)(f) 57 1980 Chairman of the Board,
Chief Executive Officer
and Director 2000
John J. Viera (d)(f)(g)(h)(i) 66 1978 Director 2000
</TABLE>
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(a) Member of the Loan Committee of the Bank.
(b) Member of the Investment Committee of the Bank.
(c) Member of the Loan Loss Reserve Committee of the Bank.
(d) Member of the Executive Committees of the Corporation and the Bank.
(e) Member of the Profit Sharing, Pension and ESOP Trust Committee of the
Bank.
(f) Member of the Corporate Responsibility Committee of the Bank.
(g) Member of the Audit and Accounting Committees of the Corporation and
the Bank.
(h) Member of the Organizational Planning Committees of the Corporation
and the Bank.
(i) Member of the Stock Option Committee of the Corporation.
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The principal occupation of each nominee and continuing director of
the Corporation for the past five years is set forth below.
PATRICK J. AGNEW joined the Bank in 1979 as General Counsel. He was
appointed President, Chief Operating Officer and a Director in December 1989.
Prior to joining the Bank, he was a partner in the law firm of Righeimer,
Martin and Cinquino. Mr. Agnew holds a juris doctor degree from DePaul
University College of Law. He serves on the boards of directors of the Oak
Park Development Corporation and the Oak Park YMCA. Mr. Agnew is a board
member of the Chicagoland Association of Savings Institutions and the Illinois
League of Savings Associations. He is also a member of the President's Council
of Rosary College.
WILLIAM A. ANDERSON is a Certified Public Accountant and a retired
partner of Ernst & Young LLP. While with that firm, he specialized in
providing professional accounting services to the savings and loan industry.
Since his retirement, he has provided consulting services to financial
institutions and other companies. He is Secretary, Treasurer of the Mason
Foundation, Inc., a private charitable foundation, and a member of the board of
trustees of the Fourth Presbyterian Church of Chicago. He is a member of the
American Institute of Certified Public Accountants and the Illinois CPA
Society. Mr. Anderson holds a bachelor's degree in accounting from the
University of Illinois.
ALAN J. FREDIAN is an organizational psychologist and president of
Alan J. Fredian and Associates, management consultants. Dr. Fredian is a
retired Professor of the Institute of Human Resources and Industrial Relations
at Loyola University and has been affiliated with the University since 1967.
He has authored several books and publications. He is a member of the Academy
of Management and the American Psychological Association's Division of
Industrial and Organizational Psychology. Dr. Fredian is a life member of the
board of directors of Building Owners and Managers Institute International. He
holds a doctorate degree in industrial psychology from the Illinois Institute
of Technology.
JEAN C. MURRAY, O.P., is the retired President of Dominican University
(formerly Rosary College)in River Forest, Illinois. She has been affiliated
with the University since 1961, serving as a professor and an administrator in
various capacities prior to her appointment as President in 1981. She is
currently an Associate Professor of French and a senior advisor to the
President of the University. Dr. Murray has been a member of the Sinsinawa
Dominicans since 1952. She holds an undergraduate degree in French from Rosary
College and a doctorate degree in French from the University of Fribourg,
Switzerland. She also holds a certificate from the Institute of Educational
Management at Harvard University. Dr. Murray is a member of the Board of
Governors of the American Heart Association of Metropolitan Chicago and a
trustee of North Central College in Naperville.
JOHN W. CROGHAN is Chairman of Lincoln Capital Management Company, a
Chicago-based investment counseling firm of which he was a founder in 1967.
Mr. Croghan is a graduate of Loyola University and holds a Masters of Business
Administration degree from Harvard University. He is a director of Lindsay
Manufacturing Company and Morgan Stanley's public closed-end funds. Mr.
Croghan serves on several non-profit boards, including Northwestern University
and Evanston Hospital.
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PAUL C. GEAREN is the President of Nicolson, Porter & List, Inc., a
corporate real estate brokerage and management company, specializing in
industrial real estate. He is a director of Motion Engineering, Inc., a
software company in Santa Barbara, California that manufactures motion control
boards for computerized manufacturing. [He is also the Chairman of Records
Management Services, Inc., a national records storage firm.] Mr. Gearen is a
member of the Chicago Council on Foreign Relations and has been involved in
fundraising for various organizations, including Horizons for Youth, ACORN,
Link Unlimited and DePorres House. Mr. Gearen holds a BA degree from the
University of Wisconsin, Madison.
KENNETH J. JAMES is Chairman of the Board of James Investment Company,
real estate developers. He is a director of the Illinois Masonic Medical
Center and the Robert R. McCormick unit of the Chicago Boys' and Girls' Clubs.
Mr. James is also a director and Vice President/Secretary of the Homebuilders
Association of Greater Chicago. He holds an A.B. degree in economics from
Stanford University and a juris doctor degree from Northwestern University.
Mr. James is a member of the Illinois Bar.
JOSEPH C. SCULLY joined the Bank in 1963 as a real estate appraiser.
He was appointed Assistant Vice President in 1965, Vice President in 1968,
Corporate Secretary in 1971 and Senior Vice President in 1974. He was elected
President, Chief Operating Officer and a Director in 1980. He was elected
Chief Executive Officer in 1982. Mr. Scully held the dual roles of President
and Chief Executive Officer from 1982 to 1989, when he relinquished the role of
President to become Chairman and Chief Executive Officer. He holds
undergraduate and graduate degrees from Loyola University. In 1981, Loyola
University named him alumnus of the year. He serves as a trustee of Loyola
University and chairs its investment committee. Mr. Scully serves on the board
of the Austin Career Education Center Corp., the advisory board of Goodwill
Industries, and the Leadership Committee of the Central Board of Neighborhood
Housing Services. For the 1994 United Way/Crusade of Mercy campaign, he was
chairman of the West Region's Major Employers Division. Mr. Scully presently
serves as a member of the Thrift Institutions Advisory Council, a panel
established by the Federal Reserve Board. He is also the past chairman of the
Community Investment Corporation of Chicago, the Institute of Financial
Education of the United States League, the Federal Savings and Loan Council and
the Chicagoland Association of Savings Institutions.
JOHN J. VIERA is a retired Corporate Vice President of Commonwealth
Edison Company. He holds an undergraduate degree in electrical engineering
from Marquette University and a graduate degree in business administration from
the Illinois Institute of Technology. After joining Commonwealth Edison
Company in 1957, he held several engineering and administrative positions. Mr.
Viera is a member of the Economic and Serra Clubs of Chicago, a Northwestern
Associate and a member of the advisory boards for Marquette University and the
Local Initiatives Support Corporation. He is a member of the Illinois Housing
Development Authority and a trustee of Roosevelt University and the Chicago
Architecture Foundation. He is on the boards of Children's Memorial Hospital,
Urban Gateways, Neighborhood Housing Services and Catholic Charities.
DIRECTOR COMPENSATION
Directors of the Corporation are not paid for attending meetings of
the Board of Directors of the Corporation. Each director of the Corporation is
also a director of the Bank. Non-employee directors of the Bank are paid an
annual director's fee of $24,000. In addition to the annual fee, non-employee
directors receive board and
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committee meeting fees of $500 per meeting ($600 for committee chairpersons),
based upon attendance. Non-employee directors also receive monthly meeting
fees of $500 per month from St. Paul Financial Development Corporation and
$200 per month from Annuity Network, Inc., which are both wholly-owned
subsidiaries of the Corporation, as well as $300 per month from SPF Insurance
Agency, Inc., a wholly-owned subsidiary of the Bank. Directors who are
employees of the Bank do not receive any such fees.
Under the terms of the Corporation's 1995 Incentive Plan, each
non-employee director is automatically granted, on the date of each annual
meeting of shareholders beginning with the 1995 Annual Meeting, a non-qualified
option to purchase 2,250 shares of the Corporation's Common Stock at an option
price per share equal to the fair market value of a share of Common Stock on
the date of grant.
The Corporation and the Bank have adopted a nonqualified retirement
plan, as amended (the "Retirement Plan") for non-employee directors of the
Corporation and the Bank. Under the Retirement Plan, eligible directors
receive annual benefits consisting of a minimum of 60% (increasing to 70% for
eleven or more years of service and increasing by an additional 1% for each
year of service in excess of 20 years) of the regular annual compensation paid
for services as a director of the Corporation, the Bank or any of their
subsidiaries during the 12-month period immediately preceding a termination of
service (or, if greater, during any 12 consecutive month period occurring
during the three-year period immediately preceding a termination of service).
The Retirement Plan provides that benefits are paid once a director reaches age
70; after the director's permanent and total disability; after a director
nominated by the Corporation is not reelected; or after termination following a
change in control. For the definition of "change in control," see "Executive
Compensation--Employment Agreements." Benefits are not paid if the director is
removed from the board for "cause," as defined.
Monthly payments are made under the Retirement Plan for the number of
months equal to the number of full months the eligible director has served as a
director. Directors have the right to elect to receive a lump-sum payment, as
calculated based upon an actuarial determination of the present value of the
plan's benefits. The Retirement Plan provides for a spouse's benefit if the
director is married at the time of death. Eligible directors must agree not to
become an employee of any financial institution located within 50 miles of the
Bank's headquarters for a one-year period after termination of service as a
director in order to receive benefits. The Retirement Plan provides that the
obligation of the Corporation and the Bank to each eligible director will be
funded as each such director becomes entitled to receive payment of benefits.
The Retirement Plan may be amended or terminated at any time, but without
affecting the vested rights of directors to receive benefits.
CORPORATE GOVERNANCE AND OTHER MATTERS
The Board of Directors of the Corporation acts as a nominating
committee for selecting nominees for election as directors and has made its
nominations for the 1998 Annual Meeting. The Corporation's Bylaws also permit
shareholders eligible to vote at the Annual Meeting to make nominations for
directors, but only if such nominations are made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, notice must be
delivered to, or mailed to and received at, the principal executive offices of
the Corporation not less than 30 days nor more than 90 days prior to the date
of the meeting, provided that at least 45 days' notice or prior public
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disclosure of the date of the meeting is given or made to shareholders. Public
disclosure of the date of the 1998 Annual Meeting was made on March 16, 1998 by
the issuance of a press release followed by a filing of a Current Report on
Form 8-K under the Securities Exchange Act of 1934, as amended (the "1934 Act")
with the SEC. A shareholder's notice of nomination must also set forth certain
information specified in Article III, Section 13 of the Corporation's Bylaws
concerning each person the shareholder proposes to nominate for election and
the nominating shareholder. Prior to printing this proxy statement, the
Corporation had received no such nominations.
The Boards of Directors of the Corporation and the Bank have each
appointed a standing audit committee. During the year ended December 31, 1997,
the audit committees each conducted five meetings. The current members of the
audit committees are Messrs. Anderson, Croghan and Viera. The duties of the
committees include reviewing with management and the Corporation's independent
auditors the annual financial statements, significant accounting policies,
audit conclusions regarding significant accounting estimates and the
independent auditors' letter to management concerning the effectiveness of
financial and accounting controls. In addition, the committees review the
scope of the annual independent auditors' audit and recommend to the Board of
Directors the firm to be engaged as the independent auditor. The committees
also oversee the Corporation's internal audit function and review with the
Director of Internal Audit his conclusions regarding the adequacy of the
organization's internal controls. The committees may also examine and consider
other matters relating to the financial affairs of the Corporation and the Bank
as they determine appropriate.
The Boards of Directors of the Corporation and the Bank have each
appointed a standing organizational planning committee. During the year ended
December 31, 1997, the organizational planning committees each conducted four
meetings. The current members of the organizational planning committees are
Dr. Fredian and Mr. Viera. The organizational planning committees function as
compensation committees. The duties of such committees include making
recommendations to the Boards of Directors concerning compensation of executive
officers and employee benefit plans. See "Executive Compensation--Report of
the Organizational Planning and Stock Option Committees on Executive
Compensation."
The Boards of Directors of the Corporation and the Bank have each
appointed a standing executive committee. The Bylaws of the Corporation and
the Bank give the executive committees certain powers and authority in the
management of the business and affairs of the Corporation and the Bank when the
Boards of Directors are not in session. During the year ended December 31,
1997, no executive committee meetings were conducted. The current members of
the executive committees are Dr. Fredian and Messrs. Agnew, Anderson, Scully
and Viera.
The Board of Directors of the Corporation has appointed a standing
stock option committee. The duties of the committee include making
recommendations to the Board of Directors concerning eligible persons to whom
options will be granted under the Corporation's 1995 Incentive Plan and the
Corporation's Employee Incentive Plan. During the year ended December 31,
1997, the stock option committee conducted three meetings. The current members
of the stock option committee are Dr. Fredian, Mr. Viera and Mr. Croghan. See
"Executive Compensation--Report of the Organizational Planning and Stock Option
Committees on Executive Compensation."
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During 1997, the Corporation's Board of Directors held twelve
meetings. No incumbent director attended fewer than 75% of the aggregate of
the total number of meetings of the Corporation's Board of Directors and the
total number of meetings held by all committees of such board on which the
director served.
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EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain summary information concerning
the compensation paid by the Corporation and its subsidiaries for services
rendered during each of the fiscal years ended December 31, 1995, 1996 and 1997
to the Corporation's chief executive officer and to each of the four other most
highly compensated executive officers of the Corporation determined as of
December 31, 1997 (the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------
SECURITIES
ANNUAL COMPENSATION(b) UNDERLYING ALL OTHER
------------------------ OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(a) #(c) ($)(d)
- --------------------------- ---- --------- ----------- ---- ------
<S> <C> <C> <C> <C> <C>
Joseph C. Scully 1997 $________ $________ 1,500 $________
Chairman of the Board, 1996 394,644 ________ 56,250 149,660
Chief Executive Officer and Director 1995 372,036 298,758 75,000 144,019
Patrick J. Agnew 1997 ________ ________ 1,500 ________
President, Chief 1996 280,008 ________ 56,250 94,055
Operating Officer and Director 1995 263,713 295,516 75,000 90,680
Robert N. Parke 1997 ________ ________ 1,500 ________
Senior Vice President, Finance 1996 152,580 ________ 18,750 2,897
and Chief Financial Officer 1995 146,700 123,865 37,500 2,765
Thomas J. Rinella 1997 ________ ________ 1,500 ________
Senior Vice President, 1996 160,788 ________ 18,750 2,897
Community Lending 1995 154,595 119,677 37,500 2,765
Donald G. Ross 1997 ________ ________ 1,500 ________
Senior Vice President, 1996 150,456 ________ 18,750 2,897
Retail Banking 1995 144,661 115,557 37,500 2,765
</TABLE>
- ---------
(a) Includes incentive compensation paid in July of 1995, 1996 and 1997 to
the Bank's officers based on a percentage of earnings, as well as
annual holiday bonuses (3% of base compensation) paid in December of
each year. Incentive compensation, if any, is paid in July of each
year based upon the Corporation's earnings during the preceding twelve
month period, and is included in the table based on the amount earned
with respect to each year presented. The amount of incentive
compensation earned by the named executive officers for the last six
months of 1997 is not yet calculable.
(b) Certain executive officers of St. Paul Federal receive indirect
compensation in the form of personal benefits; including insurance
premiums, death benefits, personal tax, financial and estate planning
services, club memberships, the use of automobiles and various
benefits (including medical and retirement plans)
<PAGE> 14
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generally available to employees of the Corporation. The amount of
such indirect compensation in 1997 did not exceed, with respect to any
named executive officer, the lesser of $50,000 or 10% of the total
amount of annual salary and bonus paid to such officer.
(c) Represents stock options granted on June 26, 1995, June 20, 1996 and
June 19, 1997, under the Corporation's Stock Option Plan and 1995
Incentive Plan to purchase the stated number of shares of the
Corporation's Common Stock at exercise prices of $12.00, $12.27 and
$21.83 per share, respectively. The number of shares subject to stock
options and the per share exercise prices have been adjusted to
reflect the Corporation's five-for-four stock split on January 14,
1997 and three-for-two stock split on July 14, 1997. Although the
Corporation's Stock Option Plan and 1995 Incentive Plan permit the
grant of stock appreciation rights ("SARs"), no grants of SARs have
been made.
(d) Consists of contributions to the Corporation's Employee Stock
Ownership Plan (the "ESOP") with respect to Mr. Parke, Mr. Rinella and
Mr. Ross. With respect to Messrs. Scully and Agnew, data consists of
ESOP contributions and deferred compensation. For 1997, ESOP
contributions for Messrs. Scully and Agnew were $__________ each, and
deferred compensation was $_______________ and $_______________,
respectively, earned under their respective employment agreements.
STOCK OPTION GRANTS
The following table sets forth certain information concerning the
grant of stock options under the Corporation's 1995 Incentive Plan during the
fiscal year ended December 31, 1997 to each of the named executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
NUMBER OF -----------------
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS GRANT DATE
OPTIONS/SARS GRANTED TO EXERCISE OR PRESENT
GRANTED EMPLOYEES BASE PRICE EXPIRATION VALUE
NAME (#)(a)(b) IN FISCAL YEAR ($/SHARE)(b) DATE ($)(c)
- ---- --------- -------------- ------------ ---- ------
<S> <C> <C> <C> <C> <C>
Joseph C. Scully 1,500 ____% $21.83 7/19/07 $_______
Patrick J. Agnew 1,500 ____% 21.83 7/19/07 _______
Robert N. Parke 1,500 ____% 21.83 7/19/07 _______
Thomas J. Rinella 1,500 ____% 21.83 7/19/07 _______
Donald G. Ross 1,500 ____% 21.83 7/19/07 _______
</TABLE>
__________
(a) All options were granted with an exercise price equal to the fair
market value of the Corporation's Common Stock on the date of grant.
Options granted under the 1995 Incentive Plan are exercisable in
respect of 50% of the number of shares on the first anniversary of the
date of grant and are exercisable in respect of an additional 25% on
each of the second and third anniversaries of the grant, provided that
options are 100% exercisable for any employee who has completed
<PAGE> 15
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five years of employment with the Corporation. The options also
become exercisable upon any merger or consolidation in which the
Corporation is not the surviving entity.
(b) Number of options granted and exercise price per share have been
adjusted to reflect the Corporation's three- for-two stock split on
July 14, 1997.
(c) Based on the Black-Scholes option pricing model adapted for use in
valuing executive stock options. The actual value, if any, an
employee may realize will depend on the excess of the stock price over
the exercise price on the date the option is exercised. There is no
assurance that the value realized by an employee will be at or near
the value estimated by the Black-Scholes model. The estimated values
under that model are based on assumptions as to variables such as the
expected term of the option (seven years), the risk-free interest rate
for the expected term of the option (based upon the rate available on
the date of grant on a [seven-year] zero-coupon U.S. Treasury Note of
[6.91%]), stock price volatility (based on the Corporation's month-end
stock price history over the [seven-year] period prior to the date of
grant), and expected future dividend yield (based upon the dividend
yield at date of grant). No adjustments were made for
non-transferability and risk of forfeiture.
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information, with respect to
the named executive officers, concerning the exercise of options during the
fiscal year ended December 31, 1997 and the value of unexercised options held
as of December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT FISCAL
ACQUIRED ON VALUE FISCAL YEAR-END(#)(a) YEAR-END ($)(b)
EXERCISE REALIZED --------------------- ---------------
NAME (#)(a) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------ --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Scully 295,313 $_________ 285,939 1,500 $_________ _________
Patrick J. Agnew 37,500 _________ 398,439 1,500 _________ _________
Robert N. Parke - 0 - _________ 104,063 1,500 _________ _________
Thomas J. Rinella 37,500 _________ 104,063 1,500 _________ _________
Donald G. Ross 14,063 _________ 104,063 1,500 _________ _________
</TABLE>
- ----------
(a) Adjusted for the Corporation's five-for-four stock split on January
14, 1997 and three-for-two stock split on July 14, 1997.
(b) Market value of underlying securities at year-end, minus the exercise
price.
<PAGE> 16
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REPORT OF THE ORGANIZATIONAL PLANNING AND STOCK OPTION COMMITTEES ON EXECUTIVE
COMPENSATION
Overview and Philosophy
The Organizational Planning Committee (the "Planning Committee") of
the Corporation's Board of Directors is composed of two outside directors, Dr.
Fredian and Mr. Viera. The Stock Option Committee (together with the Planning
Committee herein referred to as the "Committee") of the Corporation's Board of
Directors is composed of three outside directors, Dr. Fredian, Mr. Croghan and
Mr. Viera.
The Planning Committee is responsible for developing and making
recommendations to the Board with respect to the Corporation's executive
compensation policies. In addition, the Planning Committee determines annually
the compensation that is paid to the Chief Executive Officer and the other
executive officers of the Corporation, subject to Board approval. The Stock
Option Committee selects, subject to Board approval, the eligible persons to
whom options will be granted based on each individual's performance and
responsibilities. The Stock Option Committee prescribes the terms and
provisions (which need not be identical) of each option granted under the
Corporation's 1995 Incentive Plan and the Employee Incentive Plan.
The Committee has access to outside compensation consultants and
independent national, regional and industry compensation survey information.
The objectives of the Corporation's executive compensation program are
to:
o Directly tie individual executive pay to corporate
performance;
o Support the achievements of the long- and short-term strategic
goals and performance objectives of the Corporation;
o Provide a competitive compensation program that will attract
and retain talented and qualified executives while rewarding
individual achievement and contribution; and
o Align the executives' interests with corporate success by
making a substantial portion of compensation subject to
profitability.
The Corporation's executive compensation program provides an overall
level of compensation opportunity that is competitive within the thrift and
banking industry. The Committee will use its discretion to set executive
compensation where, in its judgment, external, internal or individual
circumstances warrant it.
The 1993 Tax Act
The Omnibus Budget Reconciliation Act of 1993 added a provision to the
Internal Revenue Code of 1986, as amended (the "Code"), which generally limits
to $1.0 million the Corporation's allowable deduction for federal income tax
purposes of certain compensation paid to executive officers, except for certain
"performance-based" compensation and certain compensation related to employee
benefit plans.
<PAGE> 17
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The Committee has considered the implications of this law and has
concluded that, since the cash compensation paid to the Corporation's executive
officers is significantly below the $1.0 million limitation, no general policy
with respect to this matter is necessary at this time. The Corporation,
however, could be impacted by this law to the extent that option exercises by
executive officers cause an individual's compensation in a particular year to
exceed $1.0 million. Accordingly, the Committee has attempted to conform the
terms of the 1995 Incentive Plan in order that compensation attributable to
awards thereunder will not be subject to the deduction limitation.
Executive Officer Compensation Program
The Corporation's executive officer compensation program consists of
base salary, annual cash incentive compensation, long-term incentive
compensation in the form of stock options, deferred compensation, personal
benefits such as insurance premiums, tax services, club memberships, financial
and estate planning and the use of automobiles, and various benefits including
medical and retirement plans generally available to employees of the
Corporation. The executive officer compensation program is reviewed, with the
assistance of an independent compensation consultant, relative to other
well-managed large thrift institutions, regional thrifts and local bank
competitors (the "Compensation Peer Group"). The Compensation Peer Group
(which consists of [30] large national thrifts, [13] regional and local thrifts
and [six] local banks) is used to compare the Corporation's compensation
packages to that of other companies that compete with the Bank for executives.
The Committee believes that this peer group, which differs from the published
NASDAQ indices utilized in the Comparative Performance Graph set forth below,
is appropriate for executive compensation purposes.
Base Salary. Executive officer base salaries are set relative to
market data and surveys of the Compensation Peer Group. Base salaries are
reviewed position by position and are generally set at levels lower than the
market due to the large emphasis on incentive compensation determined by annual
corporate and individual performance. Overall base salaries for the named
executive officers average [20%] below the combined base salaries of the
Compensation Peer Group. In determining base salaries, the Committee also
takes into consideration individual experience and contributions, as well as
level of responsibility.
Annual Incentive Compensation. The officer incentive compensation
program is the Corporation's annual incentive program for corporate officers.
The purpose of the incentive compensation program is to provide a direct link
between executive officer compensation and corporate earnings. The Planning
Committee believes that compensation tied to corporate performance strengthens
management's incentive to increase the Corporation's profitability.
Accordingly, annual incentive compensation is a significant component of the
executive officers' total cash compensation. For the named executive officers,
the portion of compensation attributable to the incentive program in 1997
ranged from __________% to __________% of total compensation.
Incentive compensation for all corporate officers has generally
averaged 5% of the Corporation's pre-tax earnings for the preceding
twelve-month period, with adjustments made for certain non-recurring items.
Aggregate incentive compensation of $__________ million was paid on July _____,
1997, and was distributed to officers based on individual performance and
position within the Corporation.
<PAGE> 18
Preliminary Copy
For the period from July 1, 1996 to June 30, 1997, the Corporation's
pre-tax earnings increased by __________%, or $____________ million, over the
same period in 1996. Bonus payments made in July 1997 to all officers of the
Corporation were approximately __________% higher than the prior year. The
Planning Committee believes that the annual incentive program provides an
excellent link between the level of the Corporation's earnings and the
incentives paid to executive officers.
Individual incentive bonus awards to the executive officers are
determined, at the discretion of the Planning Committee, based on individual
performance and achievement. The annual incentive bonus, when combined with
base salary, resulted in average compensation payments during 1997 to the named
executive officers at __________% below the average of the Compensation Peer
Group. The Planning Committee believes that the level of compensation paid to
the named executive officers during 1997 was appropriate based upon the
Corporation's financial performance and the significant portion of compensation
tied to corporate performance.
Stock Options. The Board of Directors of the Corporation believes
that stock options are important to increase the incentive and to attract and
encourage the continued employment and service of executive officers and other
key officers and employees by facilitating their purchase of a stock interest
in the Corporation. The Stock Option Committee believes that the grant of
stock options aligns management with the interests of the Corporation's
shareholders, while creating another form of performance-based compensation.
The Corporation's 1995 Incentive Plan authorizes the Stock Option
Committee to administer the plan and make recommendations to award stock
options to key officers, directors and employees. Stock options are granted at
the discretion of the Stock Option Committee, with grants generally made based
on individual contributions and upon promotion. Stock options are granted at
an option price equal to the fair market value of the Corporation's Common
Stock on the date of grant, have ten year terms and have exercise restrictions
based on length of service. The amount of stock option grants increases
according to salary and position within the Corporation. See "Proposed
Amendment to 1995 Incentive Plan".
In fiscal 1997, the named executive officers received stock option
grants for an aggregate of 7,500 shares of Common Stock, at an exercise price
of $21.83 per share. These grants represent __________% of all stock options
granted in fiscal 1997 and, based on option prices, result in an average
multiple of __________ times 1997 total annual cash compensation for this
group. These grants were made by the Committee to reward corporate and
individual performance.
Deferred Compensation Plan. A deferred compensation plan is provided
to Messrs. Scully and Agnew as part of their long-term incentive compensation
program. This plan, as specified in their employment agreements, requires that
a specified sum be credited annually to their account. In fiscal 1997, the
amounts credited (without earnings) for Messrs. Scully and Agnew were
$_______________ and $_______________, respectively, representing 20% of Mr.
Scully's and 15% of Mr. Agnew's annual compensation.
Benefits. The Corporation provides medical, life insurance and
retirement benefits to the executive officers that are generally available on
the same terms to other employees of the Corporation. Certain executive
officers receive indirect
<PAGE> 19
Preliminary Copy
compensation in the form of personal benefits; including insurance premiums,
death benefits, personal tax services, financial planning, club memberships and
the use of automobiles. As to each executive officer, the amount of these
perquisites, as determined in accordance with the rules of the SEC relating to
executive compensation, did not exceed the lesser of either $50,000 or 10% of
the total amount of salary and bonus for fiscal 1997.
Chief Executive Officer Compensation
At the beginning of fiscal 1997, Mr. Scully's base salary was
$_______________. During the year, Mr. Scully received a base salary increase
of $_______________, representing an increase of 4% effective July 1, 1997.
His base salary at the end of the fiscal year was $_______________. Mr.
Scully's base salary is reviewed annually by the Committee. The Committee
consults with an independent compensation consultant who conducts a customized
survey of the Compensation Peer Group. The survey data is used to develop
trend line analysis which shows the relationship between CEO total compensation
and return on assets, as well as CEO total compensation and institution asset
size. As discussed above, the Corporation's base salaries are set at the low
end of the market data range, allowing for an effective incentive compensation
program. For 1997, Mr. Scully's base salary was __________% below the peer
group.
Mr. Scully received a bonus in fiscal 1997 of $_______________ for the
period from July 1, 1996 through June 30, 1997. The bonus was the result of
corporate performance for the above period and was paid from a pool which
averaged __________% of the Corporation's earnings for such period, without
deducting for net additions to general loss reserves and taxes (but reduced by
specific loan loss reserves and loan charge-offs).
The Corporation's incentive program is designed to reward officers
according to annual earnings. Mr. Scully's 1997 incentive bonus payment was
__________% higher than the 1996 incentive bonus payment. The Committee
believes that Mr. Scully's leadership and management abilities have allowed the
Corporation to successfully compete within a challenging business environment,
while achieving financial results generally equivalent to the Compensation Peer
Group. Mr. Scully's total cash compensation paid in 1997 was __________% below
the average of the Compensation Peer Group.
The stock options for 1,500 shares granted to Mr. Scully in fiscal
1997 brought his cumulative option grants to 779,627 since the Corporation's
formation in 1987.
Submitted by the Members of the
Organizational Planning Committee
and the Stock Option Committee
Alan J. Fredian, Chairman
John C. Croghan
John J. Viera
<PAGE> 20
Preliminary Copy
COMPARATIVE PERFORMANCE GRAPH
The following graph sets forth comparative information regarding the
Corporation's cumulative shareholder return on its Common Stock over the last
five fiscal years. The shareholder return is measured by dividing total
dividends (assuming dividend reinvestment) plus share price change for a period
by the share price at the beginning of the measurement period. The
Corporation's cumulative shareholder return, based on an investment of $100 at
the beginning of the five-year period beginning January 1, 1993, is compared to
the cumulative total return of the NASDAQ Stock Market Index and the NASDAQ
Bank Stock Index.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ST. PAUL BANCORP 100 124.17 117.62 173.64 203.60 347.26
NASDAQ BANK 100 114.04 113.63 169.22 223.41 377.44
NASDAQ 100 114.79 112.21 158.68 195.19 239.63
</TABLE>
[GRAPH]
Employment Agreements. The Corporation and the Bank have entered into
employment agreements with Joseph C. Scully, Chairman of the Board and Chief
Executive Officer, and Patrick J. Agnew, President and Chief Operating Officer.
The salaries for Messrs. Scully and Agnew for the twelve-month period
ending June 30, 1998 are $_______________ and $_______________, respectively.
Each officer receives annual salary increases as determined by the Bank's Board
of Directors. Both Mr. Scully and Mr. Agnew are entitled to participate in any
discretionary bonuses and retirement or other benefit plans applicable to the
Corporation's or the Bank's executive officers. The employment agreements for
Messrs. Scully and Agnew, as amended, are each for terms of three years, with
each expiring on December 19, 2000. The Corporation and the Bank may, upon the
majority affirmative vote of each of their respective Boards, by written notice
to the officer, renew the employment agreements for one additional year on each
anniversary date, commencing with the December 19, 1998 anniversary date,
unless the officer gives contrary written notice to the other parties prior to
such anniversary date. The employment agreements provide that the terms
thereof are automatically terminated upon the officer attaining the age of 65.
The employment of Messrs. Scully and Agnew may be terminated by the
Boards of Directors of the Corporation and the Bank at any time; provided,
however, that if the termination is not for cause, as defined in the
agreements, each is entitled: (a) to receive a lump sum payment in an amount
equal to his then-current compensation (including any bonuses paid during the
then-current fiscal year and deferred compensation credited for the preceding
year) calculated for a period equal to the
<PAGE> 21
Preliminary Copy
remaining term of the agreement (provided that the aggregate amount of such
payment shall not exceed three times the officer's then-current compensation)
and (b) subject to certain limitations, to continue to participate in
retirement and other benefit plans for the remaining term of the agreement, to
be funded by an irrevocable trust established by the Corporation and the Bank.
Such lump sum payments for termination without cause would be $_______________
and $_______________ for Messrs. Scully and Agnew, respectively, based upon
current salary and deferred compensation plus the most recent incentive
compensation paid to such officers, assuming a remaining term of three years.
However, if the termination of employment is in connection with a "change in
control," the lump sum severance payment would instead be calculated in
accordance with the provisions described below.
If any such officer terminates his employment without the consent of
both Boards, then the agreements restrict the terminating officer for one year
or the remaining term of the agreement plus six months, whichever is less, from
being employed by a competing bank, savings bank, savings and loan association
or mortgage banking company, or a holding company affiliate of any of the
foregoing, having an office in Illinois within 50 miles of the Bank's home
office, out of which the terminating officer would be primarily based.
If, during the term of the employment agreements, there is a "change
in control" of the Corporation or of the Bank, and the employment of Messrs.
Scully or Agnew is terminated, voluntarily or involuntarily, within two years
thereafter (except by reason of normal retirement, disability, death or for
cause), each will be entitled to receive, as liquidated damages for services
previously rendered, a lump sum cash payment. Such payment will be in the
amount of one year's then-current compensation, including deferred compensation
and any bonuses paid during the past twelve months, if employment is
voluntarily terminated without "good reason," defined in the agreements as,
among other things, a material reduction in the officer's salary or deferred
compensation, a material reduction in the officer's bonus below a certain
amount, the officer's relocation of more than 50 miles or a material reduction
in his position, authority, duties or responsibilities. If the officer's
employment is terminated by him voluntarily with good reason or involuntarily
by the Corporation or the Bank, such payment will be equal to the sum of (X)
the amount of the officer's then-current compensation which, but for such
termination, would be payable for the remaining term of the agreement, plus (Y)
one year's then-current compensation; provided that the aggregate amount of
such payment shall not exceed three times the officer's then-current
compensation. Based upon current salary and deferred compensation plus the
most recent incentive compensation paid to such officers, such payments would
be $_______________ and $_______________ for Messrs. Scully and Agnew,
respectively, if employment were terminated as described in the second sentence
of this paragraph, and, $_______________ and $_______________, respectively, if
employment were terminated as described in the third sentence of this
paragraph. This payment will be in lieu of the lump sum amount payable for
termination without cause. The agreements also permit Messrs. Scully and Agnew
to receive a lump sum amount equal to, but in lieu of, the above payment if
they elect to terminate their employment agreements while continuing to work
for the Corporation and the Bank following a change in control. In addition,
such officers would be entitled, subject to certain limitations, to continue to
participate in retirement and other benefit plans to be funded by an
irrevocable trust created by the Corporation and the Bank. The employment
agreements provide that the officers shall not have the right to receive any
payment or benefits under the
<PAGE> 22
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agreement to the extent that such payment or benefit would cause any payment to
be considered a "parachute payment" under Section 280G of the Code.
A "change in control" of the Corporation will be deemed to have
occurred if (i) any person becomes the beneficial owner of 25% or more of the
Corporation's voting shares; (ii) any person receives certain regulatory
approvals to acquire control of the Corporation; (iii) any person enters into a
binding agreement to acquire (by means of stock purchase, tender offer or
merger) beneficial ownership of 25% or more of the Corporation's voting shares,
provided that a change in control would not be deemed to occur unless the Board
of Directors makes a determination that such action constitutes a change in
control, and further provided that a change in control shall no longer be
deemed to have occurred upon any termination of such an agreement; (iv) any
person becomes the beneficial owner of 10% to 25% of the Corporation's voting
shares, provided that the Office of Thrift Supervision (the "OTS") has made a
determination that such ownership constitutes a change in control of the
Corporation; (v) any person (other than persons named as proxies solicited on
behalf of the Corporation) holds irrevocable proxies for 25% or more of the
Corporation's voting shares, provided that the Board of Directors has made a
determination that such action constitutes a change in control; (vi) as the
result of any tender offer, business combination or contested proxy
solicitation, the persons who were directors prior to such transaction cease to
constitute at least two-thirds of the Board of Directors of the Corporation;
(vii) the Corporation enters into an agreement with respect to any merger other
than (a) a merger which would result in the voting shares of the Corporation
outstanding immediately prior thereto continuing to represent more than 80% of
the combined voting power of the voting shares outstanding immediately after
such merger or (b) a merger effected to implement a recapitalization of the
Corporation; or (viii) the Corporation enters into an agreement with respect to
any merger with any other person having total consolidated assets in an amount
that is at least 60% of the Corporation's total consolidated assets; provided
that a change in control will not be deemed to have occurred under clauses
(vii) or (viii) if the Board of Directors of the Corporation has made a
determination that such action will not constitute a change in control. The
Board of Directors may de-trigger any transaction or event (pursuant to which
any person became the beneficial owner of up to 50% of the Corporation's voting
shares) which terminates or ceases to exist. A "change in control" of the Bank
will be deemed to have taken place if the Corporation's beneficial ownership of
the total number of outstanding voting shares of the Bank is reduced to less
than 50%.
The employment agreements with Messrs. Scully and Agnew each provide
for deferred compensation. In general, the employment agreements require St.
Paul Federal to credit a specified sum annually as deferred compensation for
each of these officers. The accrued payments will be paid to a named
beneficiary if the officer dies prior to retirement. In case of involuntary
termination before the end of the term of the agreement, the officer will
receive the entire accrued amount in annual payments over a period of ten years
or a lesser period at the option of the Bank. If the officer voluntarily
terminates his employment, 75% of the accrued amount will be payable to the
officer in five annual payments. If the officer remains in the employment of
St. Paul Federal until he retires due to age, early retirement or disability
and refrains from engaging in any competitive business, as described above, the
accrued payments will be paid to the officer in ten annual installments or a
lesser period at the option of the Bank. Each officer may elect, one year
prior to the officer's retirement, to extend the period within which he or his
beneficiaries will receive distribution of the accrued payments to a period not
in excess of 15 years, except that at the option of
<PAGE> 23
Preliminary Copy
the Bank it may be paid over a lesser period. Also, at the option of the Bank
distribution of the accrued payments may begin at age 70 and such payments may
be made over a 15-year period. The employment agreements permit Messrs. Scully
and Agnew to direct that deferred compensation contributions be invested in
government securities, the Common Stock of the Corporation or such other types
of investments as directed by the officer.
Severance Agreements. The Corporation and the Bank have entered into
severance agreements with the Senior Vice Presidents and First Vice Presidents
of the Corporation and the Bank, including Robert N. Parke, Thomas J. Rinella
and Donald G. Ross, Senior Vice Presidents of the Corporation and the Bank.
Under these agreements, each officer is entitled to receive a severance payment
in the event his employment with the Corporation and the Bank is terminated,
voluntarily or involuntarily (except by reason of normal retirement,
disability, death or for cause), within two years of a change in control of the
Corporation or of the Bank.
The severance agreements provide that each officer will receive one
year's then-current compensation, including any bonuses paid and any deferred
compensation credited to his account during the past twelve months, if he
voluntarily terminates his employment without "good reason" (defined in the
agreements to include, among other things, a reduction in the officer's salary,
a reduction in the officer's bonus below a certain amount, the officer's
relocation of more than 50 miles, or a material reduction in the position,
authority, duties or responsibilities which existed prior to the change in
control). In the event the employment of any such officer is terminated by him
voluntarily with good reason or involuntarily by the Corporation or the Bank,
he will receive three times his average annual compensation for the five-year
period before termination. Based upon current salaries and the most recent
incentive compensation payments received, the aggregate amount of such payments
under the severance agreements would be $_______________, $_______________ and
$_______________ for Messrs. Parke, Rinella and Ross, respectively, if
employment were terminated as described in the first sentence of this
paragraph, and would be $_______________, $_______________ and $_______________
for Messrs. Parke, Rinella and Ross, respectively, if employment were
terminated as described in the second sentence hereof. In addition, such
employees will be entitled, subject to certain limitations, to continue to
participate in retirement and other benefit plans to be funded by an
irrevocable trust created by the Corporation and the Bank. The severance
agreements provide that the officers shall not have the right to receive any
payment or benefits under the agreement to the extent that such payment or
benefit would cause any payment to be considered a "parachute payment" under
Section 280G of the Code.
The severance agreements are each for terms of three years, with each
expiring on December 20, 2000. The Corporation and the Bank may, upon the
majority affirmative vote of each of their respective Boards, by written notice
to the officer, renew the severance agreements for one additional year on each
anniversary date, commencing with the December 20, 1998 anniversary date,
unless the officer gives contrary written notice to the other parties prior to
such anniversary date.
Pension Plans. The Bank maintains a qualified noncontributory pension
plan administered by trustees appointed by the Board of Directors of the Bank
for its employees and the employees of its subsidiaries. All of the current
trustees are members of the Bank's Board of Directors. The plan covers those
employees who have reached the age of 21 and who have completed at least 1,000
hours of employment in a
<PAGE> 24
Preliminary Copy
12-month period. Contributions are determined in accordance with actuarial
principles, subject to the approval of the Board of Directors. Accrued
benefits of eligible employees become vested after five years of service.
The Bank has established an excess benefit plan entitled the "St.
Paul Federal Supplemental Retirement Plan and Excess Benefit Plan" (the
"Plan"). The purpose of the Plan is to provide employees who are participants
in the pension plan with benefits which are not currently available because
such benefits would be in excess of the limitations on contributions and
benefits imposed by the Code. The Plan is also intended to provide a targeted
level of retirement income to eligible participants.
The Bank has established and maintains a grantor "rabbi" trust for the
purpose of accumulating funds with which to meet the Bank's future obligations
under the Plan. Although the trust is irrevocable and contributed assets can
only be used to pay benefits (with certain exceptions), the benefits under the
Plan remain obligations of the Bank. The Bank has purchased company-owned life
insurance policies for its benefit on the lives of certain participants in the
Plan, estimated to be sufficient to recover, over time, the cost of benefits
provided under the Plan, plus the cost of insurance. The program results in
little or no cost to the Bank over time.
<PAGE> 25
Preliminary Copy
The following table shows estimated aggregate annual pension benefits
at age 65 payable to employees under the pension plan and the supplemental
benefit plan in the form of a single life annuity for various levels of
compensation and years of credited service, without any limitations on benefits
imposed by the Code:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------
COMPENSATION(A) 15 20 25 30 35
- --------------- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 150,000 $ 47,280 $ 64,155 $ 81,029 $ 97,903 $112,903
200,000 63,930 86,805 109,679 132,553 152,853
250,000 80,580 109,455 138,329 167,203 192,803
300,000 97,230 132,105 166,979 201,853 232,753
350,000 113,880 154,755 195,629 236,503 272,703
400,000 130,530 177,405 224,279 271,153 312,653
450,000 147,180 200,055 252,929 305,803 352,603
500,000 163,830 222,705 281,579 340,453 392,553
550,000 180,480 245,355 310,229 375,103 432,503
600,000 197,130 268,005 338,879 409,753 472,453
650,000 213,780 290,655 367,529 444,403 512,403
700,000 230,430 313,305 396,179 479,053 552,353
750,000 247,080 335,955 424,829 513,703 592,303
</TABLE>
- ----------
(a) Compensation is assumed to be the average of the final 60 months of
compensation, which includes base salary plus incentive compensation
(as set forth under "Annual Compensation" in the Summary Compensation
Table with respect to the named executive officers), multiplied by 12.
Benefits shown reflect the Social Security offset allowance as defined
in the pension plan.
The amount of any lump sum payment under the plans is calculated based
upon an actuarial determination of the present value, as of the date of
retirement, of the annual pension benefits.
Messrs. Scully, Agnew, Parke, Rinella and Ross had 34, 18, 20, 29 and
25 years of credited service, respectively, under the plans as of December 31,
1997.
Death Benefit Plan. The Board of Directors has adopted a death
benefit plan which will provide benefits to the beneficiaries of eligible
executives, including the named executive officers, who die prior to
termination of employment and before retirement. Generally, the plan provides
for five years of payments to the beneficiary in an amount equal to 100% of the
executive's annual base salary for the first year and 50% of executive's annual
base salary in each of the following four years.
Certain Transactions. Certain directors and executive officers of the
Corporation and the Bank, as well as certain members of their families and
certain business entities with which they or their families are affiliated, are
borrowers from the Bank. All such loans, including bridge loans, were made in
the ordinary course of business, did not involve more than the normal risk of
collection or present other
<PAGE> 26
Preliminary Copy
unfavorable features, and were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the same time for
comparable transactions with unaffiliated persons. All loans to directors and
executive officers must be approved by the Board of Directors.
The Bank leases a warehouse facility from a limited partnership in
which Mr. Paul C. Gearen, a director of the Corporation, owns a general partner
interest. The lease, which commenced in April 1983, expires on August 31, 1998
and provides for a monthly rental payment of $7,166.67.
PROPOSED AMENDMENT TO 1995 INCENTIVE PLAN
(PROPOSAL 2)
INTRODUCTION
The St. Paul Bancorp, Inc. 1995 Incentive Plan (the "1995 Plan") was
established by the Board of Directors of the Corporation in 1995, and was
approved by the shareholders of the Corporation at the Corporation's annual
meeting on May 3, 1995. The purposes of the 1995 Plan are (i) to align the
interests of the Corporation's shareholders with those of the Corporation's
directors, officers and key employees by providing such recipients with a
proprietary interest in the Corporation's growth and success and (ii) to
advance the interests of the Corporation by attracting and retaining
well-qualified officers, other key employees and directors who are not officers
or other salaried employees of the Corporation ("Non-Employee Directors").
Under the 1995 Plan, 1,687,500 shares of Common Stock are currently
reserved for issuance.
Under the 1995 Plan, the Corporation may grant non-qualified stock
options, "incentive stock options" within the meaning of Section 422 of the
Code, stock appreciation rights ("SARs"), limited stock appreciation rights
("LSARs"), restricted stock, performance shares and performance units
(collectively, "shares and rights"). To date, the Corporation has granted
non-qualified options with respect to [1,391,863] shares of Common Stock under
the 1995 Plan.
In May 1997, the Board of Directors of the Corporation adopted the St.
Paul Bancorp, Inc. Employee Incentive Plan (the "Employee Plan"), which
provides for the award of shares and rights to all full-time and part-time
employees of the Corporation. Under the Employee Plan, 412,500 shares of
Common Stock are reserved for the award of the same types of shares and rights
as may be granted under the 1995 Plan (except incentive stock options). To
date, the Corporation has granted non-qualified options under the Employee Plan
relating to 372,600 shares of Common Stock to all employees with at least two
years of service (approximately 1,400 people). The Employee Plan is not
intended for the awarding of Benefits to the senior officers of the
Corporation.
The Board of Directors of the Corporation has now adopted, subject to
shareholder approval, an amendment to the 1995 Plan to increase by [1,500,000],
from [1,687,500] to [3,187,500] the number of shares of Common Stock reserved
for issuance thereunder. Except as amended, the provisions of the 1995 Plan
will remain unchanged. The principal provisions of the 1995 Plan are summarized
below.
<PAGE> 27
Preliminary Copy
Assuming the presence of a quorum, the affirmative vote of holders of
a majority of the shares present and eligible vote, in person or by proxy, at
the Annual Meeting is required to approve the amendment to the 1995 Plan.
Unless otherwise indicated, properly executed proxies will be voted in favor of
Proposal 2 to amend the Corporation's 1995 Plan. The Board of Directors
recommends a vote FOR approval of the amendment to the 1995 Plan.
REASONS FOR AMENDMENT
The Board of Directors of the Corporation believes that stock options
and the other benefits available under the 1995 Plan are important to increase
the incentive and to attract and encourage the continued employment and service
of directors, officers and other key employees by facilitating their purchase
of an equity interest in the Corporation. As of March 17, 1998, only [295,637]
shares of Common Stock remain available for future grants under the 1995 Plan.
Approval of the proposed amendment will increase by [1,500,000], to
[3,187,500], the number of shares of Common Stock reserved under the 1995 Plan,
including [1,795,637] shares reserved for future awards. Upon approval of the
amendment, the number of shares reserved under the 1995 Plan and the Employee
Plan for future grants plus shares subject to options granted and outstanding
will represent approximately [13.08%] of the sum of the number of outstanding
shares of Corporation Common Stock, plus such optioned and reserved shares.
The Board of Directors has concluded that it is advisable that the
Corporation and its shareholders continue to have the incentive of stock
options and other benefits available as a means of attracting and retaining
directors, officers and key employees. As the Corporation progresses, officers
and key employees are continually being retained or moving into positions
where, in the judgment of the Board, an initial or increased option will be a
valuable incentive and will serve to the ultimate benefit of the shareholders.
DESCRIPTION OF THE 1995 PLAN
Administration. The 1995 Plan is administered by the Board of
Directors, which may appoint a Stock Option Committee of the Board of Directors
(the "Committee") to administer the 1995 Plan. The Board has appointed the
Board's existing Stock Option Committee as the Committee with authority to act
on behalf of the Board of Directors with respect to the granting of awards and
the administration of the 1995 Plan.
Subject to the express provisions of the 1995 Plan, and except for
options granted to Non-Employee Directors, the Committee has the authority to
select eligible officers and other key employees who will receive awards and to
determine the terms and conditions of each award.
Available Shares. Under the 1995 Plan, 1,687,500 shares of Common
Stock are reserved for awards to officers, other key employees and Non-Employee
Directors, with [295,637] shares available for future issuance. The limitations
are subject to adjustment in the event of a stock split, stock dividend,
recapitalization, reorganization, merger or other similar event or change in
capitalization. In general, shares covered by an option, SAR, restricted stock
award, performance share or performance unit that expires or terminates
unexercised or is canceled or forfeited would again be available for awards
under the 1995 Plan. The maximum number of shares of Common Stock with respect
to which awards may be granted during any calendar year to any individual is
168,750.
<PAGE> 28
Preliminary Copy
Change in Control. In the event of a "change in control" of the
Corporation or the Bank, all outstanding options, SARs, and LSARs will become
exercisable in full, and all other awards will vest. See "Executive
Compensation--Employment Agreements" for the definition of a "change in
control".
Non-Qualified Stock Options, Stock Appreciation Rights and Limited
Stock Appreciation Rights. The period for the exercise of a non-qualified stock
option or SAR and the option exercise price and base price of an SAR are
determined at the time of grant. The option exercise price of a non-qualified
stock option cannot be less than the fair market value of the Common Stock on
the date of grant of such option. The 1995 Plan contemplates that options and
SARs granted to employees will become exercisable in installments of 50% after
one year and 12.5% in each of the next four years, except as provided in the
related option agreement. The 1995 Plan also contemplates that, except as
otherwise provided, options and SARs will become fully exercisable upon the
date on which the optionee completes five years of employment with the
Corporation or the Bank.
LSARs become exercisable only upon the occurrence of a change in
control of the Corporation or the Bank. LSARs may be granted under the 1995
Plan with respect to options or SARs granted or previously granted under the
1995 Plan. Each LSAR will be identified with a share of Common Stock subject
to an option or a SAR and the number of LSARs granted to a grantee shall equal
the sum of the number of shares of Common Stock subject to the option or the
number of SARs with which such LSARs are identified.
In the event of termination of employment by reason of normal
retirement (or prior thereto with the consent of the Committee), each
non-qualified stock option will not terminate until the expiration of such
award in accordance with the terms of the 1995 Plan, and each SAR and LSAR may
be exercised for a period of three months (or such longer period as may be
determined by the Committee) after the date of such termination of service or
employment, unless earlier terminated. In the event of termination of
employment by reason of death or permanent and total disability (which, for
purposes of the 1995 Plan, is total disability within the meaning of Section
22(e)(3) of the Code), each non-qualified stock option may be exercised by the
recipient or his or her executor or administrator at any time prior to the
expiration of such award in accordance with the terms of the 1995 Plan, and
each SAR and LSAR may be exercised within one year (or such longer period as
may be determined by the Committee) after the date of the holder's death or
termination of employment (and prior to the termination of the award), but only
to the extent such award was exercisable immediately prior to the recipient's
death or termination. In the event of termination of employment for any other
reason, each non-qualified stock option will terminate three months after the
date of such termination of employment, and each SAR and LSAR will terminate on
the date of termination of employment (although the Committee may extend such
period for up to three months), unless earlier terminated.
Incentive Stock Options. No incentive stock option will be exercisable
more than ten years after its date of grant. If the recipient of the incentive
stock option owns greater than ten percent of the voting power of all shares of
capital stock of the Corporation (a "ten percent holder"), the option must be
exercised within five years after its date of grant. The option exercise price
of an incentive stock option will
<PAGE> 29
Preliminary Copy
not be less than the fair market value of the Common Stock on the date of grant
of such option, unless the recipient of the incentive stock option is a ten
percent holder, in which case the option exercise price will be the price
required by the Code, currently 110% of fair market value.
In the event of a termination of employment by reason of death, the
executor or administrator of the recipient's estate may exercise any incentive
stock option at any time within one year (or such longer period as may be
determined by the Committee) of such recipient's death to the extent such
option was exercisable immediately prior to the recipient's death. In the event
of termination of employment by reason of permanent and total disability, the
recipient may exercise an incentive stock option for a period of one year (or,
although such option may no longer qualify as an incentive stock option, such
longer period as may be determined by the Committee) after such termination to
the extent such award was exercisable on the date of such termination. In the
event of a termination of employment for any other reason, incentive stock
options will be exercisable to the extent exercisable on the date of
termination for a period of three months (or, although such options may no
longer qualify as incentive stock options, such longer period as may be
determined by the Committee) after such termination, but in no event after the
expiration of the incentive stock option. If the holder of an incentive stock
option dies during the one-year period following termination of employment by
reason of permanent and total disability, or during the three-month period
following termination of employment for any other reason, each incentive stock
option will be exercisable to the extent such option was exercisable on the
date of the holder's death and may thereafter be exercised for a period of one
year (or such longer period as may be determined by the Committee), but in no
event after the expiration of such incentive stock option.
Non-Employee Director Options. Under the 1995 Plan, each Non-Employee
Director of the Corporation is automatically granted, on the date of each
annual meeting of shareholders, a non-qualified option to purchase 2,250 shares
of Common Stock at an option exercise price per share equal to the fair market
value of a share of Common Stock on the date of grant. In addition, an option
to purchase 14,063 shares of Common Stock, at an option exercise price per
share equal to the fair market value of a share of Common Stock on the date of
grant, will be granted to each new Non- Employee Director upon his or her
initial election to the Committee. Such options will be fully exercisable on
the date one year after the date of grant and will expire ten years after the
date of grant, provided that no Common Stock acquired upon the exercise of said
options shall be sold or transferred by the person exercising such option
during the six-month period following the date of grant of such option. The
maximum number of options that may be granted to Non- Employee Directors as a
group shall not exceed 30% of the shares covered by the 1995 Plan (as increased
by the proposed amendment).
Restricted Stock Awards. The 1995 Plan provides for the grant of stock
awards which are subject to a restriction period ("restricted stock") and to
the satisfaction of specified performance measures for the applicable
restriction period. Prior to the grant, the Committee will determine the
restrictions applicable to such shares. Shares of restricted stock are
non-transferable until they have become nonforfeitable. An award of shares of
restricted stock, or portion thereof, is subject to forfeiture if the holder
does not remain continuously in the employment of the Corporation during the
restriction period or to the extent the performance measures are not attained
during the restriction period; provided, however, that termination of
employment by reason of normal retirement (or prior thereto with the consent of
the Committee), total
<PAGE> 30
Preliminary Copy
disability or death, will result in the restricted stock becoming fully vested.
In the event of termination of employment for any other reason, the portion of
a restricted stock award which is then subject to a restriction period will be
forfeited and canceled by the Corporation. Unless otherwise determined by the
Committee, the holder of a restricted stock award will have rights as a
stockholder of the Corporation, including the right to vote and to receive
dividends with respect to the shares of restricted stock.
Performance Share Awards. The 1995 Plan also provides for the grant of
performance shares. Each performance share is a right, contingent upon the
attainment of specified performance measures within a specified performance
period, to receive one share of Common Stock, which may be restricted stock, or
the fair market value of such performance share in cash. Prior to the
settlement of a performance share award in shares of Common Stock, the
Committee may determine to afford the holder of such award rights as a
stockholder of the Corporation with respect to the shares of Common Stock
subject to the award. Performance shares will be non-transferable. An award of
performance shares, or portion thereof, is subject to forfeiture to the extent
the specified performance measures are not attained during the applicable
performance period; provided, however, that termination of employment by reason
of normal retirement (or prior thereto with the consent of the Committee),
total disability or death, will result in the performance share award becoming
fully vested. In the event of termination of employment for any other reason,
the portion of a performance share award which is then subject to a performance
period will be forfeited and canceled by the Corporation.
Performance Unit Awards. Performance units may be granted under the
1995 Plan to provide a benefit if specified performance measures determined by
the Committee are achieved during a performance cycle. A performance cycle may
consist of a period of not less than one year nor more than three years. As
soon as practicable after each applicable performance cycle, the Committee
shall determine the number of performance units which have been earned and
shall pay each participant the value of such units in cash or, at the
discretion of the Committee, wholly or partly in shares of Common Stock. The
value of the amount payable to the participant equals a percentage (which may
exceed 100%) of the value of one share of Common Stock multiplied by the number
of performance units earned. The Committee may, in its discretion, permit
deferment of the payment provided that the election to defer is made prior to
the applicable performance cycle.
Prior to the grant of a performance unit, the Committee will determine
the performance measures, the length of the performance cycle and the value of
a performance unit. Performance unit awards will be non-transferable. An award
of performance units, or portion thereof, is subject to forfeiture to the
extent that specified performance measures are not attained during the
applicable performance cycle. In the event of a termination of employment by
reason of normal retirement (or prior thereto with the consent of the
Committee), total disability or death or under circumstances determined by the
Committee to be for the Corporation's convenience, the holder will receive the
same percentage of the performance unit award which is earned by other
participants for such performance cycle. In the event of termination of
employment for any other reason before the end of a performance cycle, the
performance award will be forfeited and canceled by the Corporation.
<PAGE> 31
Preliminary Copy
Performance Measures. Under the 1995 Plan, the vesting or payment of
restricted stock awards, performance share awards and performance unit awards
will be subject to the satisfaction of certain performance measures. The
performance measures applicable to a particular award will be determined by the
Committee at the time of grant of such award. At present, no such awards are
outstanding and, accordingly, no performance measures have been designated by
the Committee. Such performance measures may be one or more of the following:
a level specified by the Committee for (a) return on assets, (b) return on
equity, (c) growth in net earnings, and (d) growth in earnings per share.
Pursuant to the 1995 Plan, the maximum number of shares with respect to which
awards may be granted during any calendar year to any individual is 168,750.
Section 162(m) of the Code. In general, Code Section 162(m) limits to
$1 million the amount that a publicly held corporation is allowed to deduct
each year for compensation paid to each of its chief executive officer and four
other most highly compensated executive officers. The deduction limitation
does not apply to "qualified performance-based compensation" as defined in
Code Section 162(m) and The Treasury Regulations under that section. Whether
compensation under the 1995 Plan will be "qualified performance-based
compensation" for such purposes depends upon a number of factors, including
disclosure to and approval by shareholders of the Corporation of the material
terms of the performance goals (and any material changes in such goals) under
which the compensation is to be paid. The Code and Regulations also prescribe
certain procedural requirements that must be met in order to satisfy the
"qualified performance-based compensation" definition, including that such
compensation be paid solely on account of the attainment of one or more
preestablished, objective performance goals established by a committee
comprised of two or more "outside" directors (as defined in Code Section 162(m)
and the Regulations) and that such committee must certify the attainment of the
relevant performance goals before any compensation will be paid. Special rules
apply to compensation paid under stock options and stock appreciation rights
having an exercise price not less than the fair market value of the stock
covered by such options or rights at the date of grant, provided that the plan
under which such options or rights are granted contains a limitation on the
maximum number of options or rights that may be granted to any employee during
a specified period of time. The Corporation expects that shareholder approval
of the amendment of the 1995 Plan will permit compensation payable with respect
to options, SARs and LSARs granted under the 1995 Plan to continue to
constitute "qualified performance-based compensation" for purposes of the $1
million deduction limitation. Although the Corporation has also structured the
1995 Plan, as amended, such that compensation payable with respect to other
awards under the 1995 Plan will satisfy the applicable requirements with
respect to "qualified performance-based compensation," awards may be made that
do not satisfy such requirements and there can be no assurance that awards
under the 1995 Plan intended to satisfy such requirements will in fact be
"qualified performance-based compensation" for purposes of Code Section 162(m).
Accordingly, the Corporation may be limited in the deductions it may take with
respect to certain awards under the 1995 Plan.
Federal Income Tax Consequences. The following discussion of the
federal income tax consequences of the 1995 Plan is only a summary of the
general rules applicable to the grant and settlement of awards under the 1995
Plan and does not purport to give specific details on every aspect and does not
cover, among other things, state and local tax treatment. The information is
based on present law and regulations, which are subject to being changed
prospectively or retroactively.
<PAGE> 32
Preliminary Copy
A participant receiving a non-qualified stock option under the 1995
Plan, including options granted to Non- Employee Directors, does not recognize
taxable income upon the grant of the option, but will recognize taxable
compensation at the time of exercise in the amount of the difference between
the exercise price and the fair market value on the date of exercise of the
shares acquired pursuant to the exercise of the option. At that time, the
Corporation will be entitled to a deduction as compensation expense in an
amount equal to the amount taxable to the participant as income.
A participant receiving an incentive stock option will not recognize
taxable income upon the grant or exercise of the option, but will recognize
income or loss upon disposition of the shares acquired pursuant to the exercise
of the option, which may be ordinary income or capital gain (or loss),
depending on the length of time the shares have been held. The Corporation will
not be entitled to any deduction with respect to the grant or exercise of a
participant's incentive stock option. However, if the participant disposes of
the shares acquired pursuant to the exercise of the option before the later of
two years from the date of grant and one year from the date of exercise, the
Corporation will, except as limited by Section 162(m) of the Code, be entitled
to a deduction as compensation expense in an amount taxable to the participant
as ordinary income and not capital gain. Such ordinary income is the amount by
which the lesser of the fair market value of the shares on the date of exercise
or on the date of disposition exceeds the exercise price of the option.
A participant who is granted SARs or LSARs will not recognize any
taxable income upon the grant of the SARs or LSARs. Upon exercise, the
participant recognizes taxable compensation in an amount equal to the fair
market value of any shares delivered and the amount of cash paid by the
Corporation. This amount is deductible by the Corporation as compensation
expense.
A participant receiving restricted stock will not recognize taxable
income at the time of the grant, and the Corporation will not be entitled to a
tax deduction at such time, unless the participant makes an election to be
taxed at the time restricted stock is granted. If such election is not made,
the participant will recognize taxable income at the time the restrictions
lapse or the stock becomes vested, in an amount equal to the excess of the fair
market value of the shares at such time over the amount, if any, paid for such
shares. The amount of ordinary income recognized by a participant by making the
above-described election or upon the lapse of the restrictions or upon vesting
is deductible by the Corporation as compensation expense, except to the extent
the deduction limits of Section 162(m) of the Code apply.
A participant receiving performance shares and performance units will
not recognize taxable income upon the grant of such shares or units, as the
case may be, and the Corporation will not be entitled to a tax deduction at
such time. Upon the settlement of performance shares or performance units, the
participant will recognize ordinary income in an amount equal to the fair
market value of any shares delivered and any cash paid by the Corporation. This
amount is deductible by the Corporation as compensation expense, except to the
extent the deduction limits of Section 162(m) of the Code apply.
In the event of a change in control, the acceleration of the vesting
or payment of any awards under the 1995 Plan may result in the receipt by the
participant of "parachute payments" under Section 280G of the Code. As such,
the participant may be
<PAGE> 33
Preliminary Copy
subject to an excise tax, in addition to ordinary income tax, and the
Corporation may not be entitled to a deduction with respect to such amounts.
Accounting Consequences. Under current generally accepted accounting
principles, the value of stock options granted under the 1995 Plan are
non-compensatory and is not charged against the Corporation's earnings for
financial accounting purposes. Increases in the market value of stock following
the date of grant of SARs are currently treated as a compensation expense for
financial accounting purposes. LSARs, however, may be granted without incurring
an accounting charge until the occurrence of the event which "triggers"
exercisability of the LSAR. The Corporation would recognize compensation
expense attributable to awards of restricted stock, which expense would reflect
the aggregate market value of the shares of restricted stock on the award date,
accrued over the period during which the shares vest. With respect to
performance share and performance unit awards, a compensation expense is
recognized as measured by the market price of the related shares.
<PAGE> 34
Preliminary Copy
Grants to Non-Employee Directors. The following table sets forth the
number of shares of Common Stock underlying options which are granted
automatically to Non-Employee Directors on the date of each annual meeting of
shareholders, including the 1998 Annual Meeting.
1995 INCENTIVE PLAN
<TABLE>
<CAPTION>
NAME STOCK OPTIONS
---- -------------
<S> <C>
William A. Anderson . . . . . . . . . . . . . . . . 2,250
John W. Croghan . . . . . . . . . . . . . . . . . . 2,250
Alan J. Fredian . . . . . . . . . . . . . . . . . . 2,250
Paul C. Gearen . . . . . . . . . . . . . . . . . . 2,250
Kenneth J. James . . . . . . . . . . . . . . . . . 2,250
Jean C. Murray, O.P. . . . . . . . . . . . . . . . 2,250
John J. Viera . . . . . . . . . . . . . . . . . . . 2,250
All Non-Employee Directors as a Group (7 persons) 15,750(1)
</TABLE>
- ------------------
(1) The option exercise price per share would be the closing sale price of the
Corporation's Common Stock on The Nasdaq Stock Market's National Market
("NASDAQ National Market") on the date of grant. For example, on March 17,
1998, the closing sale price of Common Stock on the NASDAQ National Market
was $__.___ per share. Each option would be fully exercisable one year
after the date of grant and would expire ten years after the date of
grant.
The Corporation's option committee has not determined how any additional
benefits will be awarded among the Corporation's executive officers, other
officers or key employees if the proposed amendment to the 1995 Plan is
approved by shareholders. See "Executive Compensation - Option/SAR Grants in
Last Fiscal Year" for certain information as to option grants to the named
executive officers during 1997 and "Executive Compensation - Aggregated
Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values"
for information as to how outstanding options were allocated among such
individuals as of December 31, 1997.
The Board of Directors may terminate or suspend the 1995 Plan at any time.
Unless previously terminated, the 1995 Plan will terminate automatically on May
3, 2005, the tenth anniversary of the effective date of the plan.
The Board of Directors of the Corporation recommends that
the shareholders vote FOR the proposed amendment to the 1995 Plan.
AMENDMENT TO CERTIFICATE OF INCORPORATION
INCREASING THE AUTHORIZED SHARES OF COMMON STOCK
(PROPOSAL 3)
The Board of Directors of the Corporation has unanimously approved an
amendment to the Corporation's Certificate of Incorporation, increasing the
number of authorized shares of Common Stock from 40,000,000 to 80,000,000
shares. The Board of Directors has determined that the proposed amendment to
the Certificate of Incorporation is advisable and in the best interests of the
Corporation and its stockholders, and unanimously recommends that the holders
of the Corporation's Common Stock vote to approve the amendment.
<PAGE> 35
Preliminary Copy
The Corporation's Certificate of Incorporation currently provides that the
total number of shares of all classes of capital stock that the Corporation has
authority to issue is 50,000,000, consisting of 40,000,000 shares of Common
Stock and 10,000,000 shares of serial preferred stock, par value $0.01 per
share. The proposed amendment to the Corporation's Certificate of Incorporation
is to increase the number of authorized shares of Common Stock from 40,000,000
to 80,000,000, resulting in an increase in the number of authorized shares of
capital stock from 50,000,000 to 90,000,000. The increase will be effected by
amending the first sentence of the first paragraph of Article 4 of the
Corporation's Certificate of Incorporation to read as follows:
"The total number of shares of all classes of the capital stock which the
Corporation has authority to issue is ninety million (90,000,000), of
which eighty million (80,000,000) shall be common stock, par value $0.01
per share, amounting in the aggregate to eight hundred thousand dollars
($800,000), and ten million (10,000,000) shall be serial preferred stock,
par value $0.01 per share, amounting in the aggregate to one hundred
thousand dollars ($100,000)."
Of the 40,000,000 presently authorized shares of Corporation Common Stock,
[34,204,659] shares were issued and outstanding as of March 17, 1998 and
[3,645,256] shares were reserved for issuance with respect to the Corporation's
stock option plans. The Corporation effected a five-for-four stock split for
shareholders on January 14, 1997 and a three-for-two stock split on July 14,
1997, resulting in ___________ shares of Common Stock being issued during 1997
for these purposes. Accordingly, as of March 17, 1998, only [2,150,085] shares
of authorized but not outstanding and unreserved shares of Corporation Common
Stock remained available for future issuance. As of March 17, 1998, no shares
of the Corporation's preferred stock were outstanding.
The proposed amendment to the Corporation's Certificate of Incorporation
will result in the Corporation having [42,150,085] shares of Common Stock
available for issuance. Although the Corporation has no present intention of
issuing authorized but unissued and unreserved shares of Corporation capital
stock, the Board of Directors believes that the increased number of shares of
Common Stock will benefit the Corporation and its shareholders by making a
sufficient number of shares available in the future for use in connection with
possible stock dividends or splits, the raising of additional capital through
public offerings or private placements, possible future mergers or
acquisitions, or under employee option or stock ownership plans.
The unissued and unreserved shares of Corporation Common Stock will be
available for any proper corporate purpose, as authorized by the Board of
Directors, without further approval by the shareholders of the Corporation,
except as otherwise required by law or the rules of the NASDAQ Stock Market,
Inc. ("NASDAQ"). Shareholders of the Corporation do not have any preemptive or
other rights to purchase additional shares of Corporation Common Stock. Further
issuances of additional shares of Common Stock or securities convertible into
Common Stock, therefore, may have a dilutive effect on existing shareholders of
the Corporation.
In the event of a proposed merger, tender offer or other attempt to gain
control of the Corporation, it may be possible for the Board of Directors to
approve the issuance of shares of Corporation Common Stock or preferred stock
in a transaction that could have the effect of frustrating or impeding such
takeover attempt. The Board of Directors has no current intention to issue
authorized but unissued shares for such purpose. The Board of Directors is not
aware of any specific effort to accumulate the Corporation's capital stock in
order to obtain control of the Corporation by means of merger, tender offer or
otherwise.
<PAGE> 36
Preliminary Copy
Approval of the proposed amendment to the Corporation's Certificate of
Incorporation requires the affirmative vote of holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting.
Your Board of Directors recommends that you vote "FOR" the proposed
amendment to the Corporation's Certificate of Incorporation.
<PAGE> 37
Preliminary Copy
STOCK OWNED BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth information as of March 17, 1998 with
respect to the shares of the Corporation's Common Stock beneficially owned by
each director of the Corporation, each of the named executive officers and by
all directors and executive officers of the Corporation as a group. Such
individuals and certain of the Corporation's employee benefit plans
beneficially own a total of [3,699,071] shares of the Corporation's Common
Stock, or [15.4%] of the Common Stock outstanding, including shares subject to
options that will become exercisable within 60 days.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF COMMON
BENEFICIAL STOCK
NAME AND POSITION WITH THE CORPORATION OWNERSHIP(a) OUTSTANDING
- -------------------------------------- ------------ -----------
<S> <C> <C>
Joseph C. Scully
Chairman of the Board, Chief Executive
Officer and Director 408,918(b) 1.8%
Patrick J. Agnew
President, Chief Operating Officer and Director 399,833(b) 1.7%
William A. Anderson
Director 11,388 *
John W. Croghan
Director 78,000 *
Alan J. Fredian
Director 23,921(b)(c) *
Paul C. Gearen
Director 36,628 *
Kenneth J. James
Director 94,174 *
Jean C. Murray, O.P.
Director 12,375(b)(c) *
John J. Viera
Director 21,915 *
Robert N. Parke
Senior Vice President 162,096 *
Thomas J. Rinella
Senior Vice President 140,327 *
Donald G. Ross
Senior Vice President 127,759 *
All directors and executive officers as a group (15 persons) 1,814,633(b)(c) 7.6%
</TABLE>
- ---------------------
* Less than 1%
(a) In accordance with Rule 13d-3 under the 1934 Act, a person is deemed
to be the beneficial owner, for purposes of this table, of any shares
of Common Stock if he has or shares voting power or investment power
with respect to such security, or has the right to acquire beneficial
ownership at any time within 60 days from March 17, 1998. As used
herein, "voting power" is the power to vote or direct the voting of
shares and "investment power" is the power to dispose or direct the
disposition of shares. The table includes shares owned by spouses or
other immediate family members or that are held in trust, as to which
the persons named in the table possess shared voting and/or investment
power as follows: Mr. Scully, 22,231 shares; Mr. Agnew, 47,461 shares;
Dr. Fredian, 11,549 shares;
<PAGE> 38
Preliminary Copy
Mr. James, 81,798 shares; Mr. Viera, 9,615 shares; Mr. Parke, 51,401
shares; Mr. Rinella, 9,497 shares; Mr. Ross, 14,224 shares; and all
directors and executive officers as a group, 250,252 shares. The
table includes 8,916 shares and 29,660 shares as of March 17, 1998
held for the benefit of Mr. Scully and Mr. Agnew, respectively, under
the St. Paul Federal Bank For Savings Deferred Compensation Trust.
All other shares included in the table are held by persons who have
sole voting and investment power over such shares. The table includes
969,965 shares of Common Stock subject to outstanding options which
are exercisable within 60 days from March 17, 1998. The table also
includes 289,450 shares as of March 17, 1998 allocated to executive
officers' accounts under the Bank's ESOP and 401(k) Profit Sharing
Plan.
(b) Does not include 222,772 shares as of March 17, 1998 with respect to
which the St. Paul Federal Bank For Savings Employees Pension Plan
has sole voting and dispositive power. Also does not include 267,745
unallocated shares with respect to which the ESOP has shared voting
and dispositive power. Dr. Fredian, Dr. Murray and Messrs. Scully
and Agnew are the trustees of the Employees Pension Plan and the ESOP.
(c) Except as allotted to Messrs. Scully and Agnew as indicated above,
does not include 58,107 shares as of March 17, 1998 with respect to
which the St. Paul Federal Bank For Savings Deferred Compensation
Trust has shared voting and dispositive power. Dr. Fredian and Dr.
Murray are the trustees of the Deferred Compensation Trust.
As of March 17, 1998, no persons are known by the Corporation to have
filed a beneficial ownership report with the SEC with regard to 5% or more of
the Corporation's outstanding Common Stock.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the 1934 Act requires the Corporation's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Corporation's equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Corporation. Officers, directors and greater
than ten-percent shareholders are required by SEC regulation to furnish the
Corporation with copies of all Section 16(a) forms they file.
To the Corporation's knowledge, based solely upon review of the copies
of such reports furnished to the Corporation and written representations that
no other reports were required, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with.
INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP to
continue as independent auditors for the Corporation for the year ending
December 31, 1998. Ernst & Young LLP was appointed as the independent auditors
of St. Paul Federal in 1981 and has performed audits for the Bank for the
years since then. Ernst & Young LLP has also served as the independent
auditors of the Corporation since its organization as
<PAGE> 39
Preliminary Copy
the holding company of St. Paul Federal. Representatives of Ernst & Young LLP
are expected to be present at the Annual Meeting. They will be given an
opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions.
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
TO BE PRESENTED AT 1999 ANNUAL MEETING OF SHAREHOLDERS
Any proposal intended to be presented by any shareholder for action at
the 1999 annual meeting of shareholders of the Corporation must be received by
the Secretary of the Corporation at 6700 West North Avenue, Chicago, Illinois
60707 not later than November 27, 1998 in order for the proposal to be
considered for inclusion in the proxy statement and proxy relating to the 1999
annual meeting. In addition, the Corporation's Bylaws require that notice of
shareholder proposals and nominations for director be delivered to, or mailed
to and received at, the principal executive offices of the Corporation not less
than 30 days nor more than 90 days prior to the date of an annual meeting,
unless notice or public disclosure of the date of the meeting occurs less than
45 days prior to the date of such meeting, in which event, shareholders may
deliver such notice not later than the 15th day following the day on which
notice of the date of the meeting was mailed or public disclosure thereof was
made. Nothing in this paragraph shall be deemed to require the Corporation to
include in its proxy statement and proxy relating to the 1999 annual meeting
any shareholder proposal which does not meet all of the requirements for
inclusion established by the SEC in effect at the time such proposal is
received.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors of the
Corporation does not know of any other matters to be presented for action by
the shareholders at the Annual Meeting. If, however, any other matters not now
known are properly brought before the meeting, the persons named in the
accompanying proxy will vote such proxy in accordance with the determination of
a majority of the Board of Directors.
By Order of the Board of Directors
Joseph C. Scully
Chairman of the Board and
Chief Executive Officer
Chicago, Illinois
March 27, 1998
<PAGE> 40
Preliminary Copy
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Solicitation, Voting and Revocability of Proxies -
Election of Directors -
Executive Compensation -
Amendment to 1995 Incentive Plan -
Amendment to Certificate of Incorporation Increasing the
Authorized Shares of Common Stock -
Stock Owned by Management and Principal Shareholders -
Independent Auditors -
Deadline for Submission of Shareholder Proposals to be Presented at
1999 Annual Meeting of Shareholders -
Other Matters -
</TABLE>
<PAGE> 41
[LOGO] ST. PAUL BANCORP INC.
The officers and directors of St. Paul Bancorp, Inc.
cordially invite you to attend
the Annual Meeting of Shareholders
Wednesday, May 6, 1998 at 10:00 a.m.
Drury Lane Oakbrook
100 Drury Lane, Oakbrook Terrace, Illinois
Joseph C. Scully
Chairman and Chief Executive Officer
PLEASE BRING THIS CARD TO THE MEETING AS YOUR ADMISSION TICKET.
Directions to Drury Lane Oakbrook on reverse.
DETACH HERE
REVOCABLE PROXY ST. PAUL BANCORP, INC. REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of St. Paul Bancorp, Inc. (the "Corporation")
hereby appoints Joseph C. Scully and John J. Viera, or either of them, with
full power of substitution in each, as proxies to cast all votes which the
undersigned shareholder is entitled to cast at the annual meeting of
shareholders to be held at 10:00 a.m. on May 6, 1998, at the Drury Lane
Oakbrook, 100 Drury Lane, Oakbrook Terrace, Illinois 60181, and at any
adjournments thereof, upon the following matters. The undersigned shareholder
hereby revokes any proxy or proxies heretofore given.
THIS PROXY WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED SHAREHOLDER.
UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF THE NOMINEES LISTED IN PROPOSAL 1, FOR PROPOSAL 2 TO AMEND THE CORPORATION'S
1995 INCENTIVE PLAN AND FOR PROPOSAL 3 TO AMEND THE CORPORATION'S CERTIFICATE
OF INCORPORATION AND IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE
BOARD OF DIRECTORS AS TO OTHER MATTERS. THE UNDERSIGNED SHAREHOLDER MAY REVOKE
THIS PROXY AT ANY TIME BEFORE IT IS VOTED BY DELIVERING TO THE SECRETARY OF THE
CORPORATION EITHER A WRITTEN REVOCATION OF THE PROXY OR A DULY EXECUTED PROXY
BEARING A LATER DATE, OR BY APPEARING AT THE ANNUAL MEETING AND VOTING IN
PERSON. THE UNDERSIGNED SHAREHOLDER HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE
OF ANNUAL MEETING AND PROXY STATEMENT.
(CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE) SEE REVERSE SIDE
<PAGE> 42
DIRECTIONS TO DRURY LANE OAKBROOK
When approaching Drury Lane Oakbrook:
From the North or South on Route 83 (Kingery), exit at Roosevelt Road (38)
East and follow GREEN sign to DRURY LANE.
From the East or West on Roosevelt Road, exit Route 83 (Kingery) South to
Roosevelt Road (38) East and follow GREEN sign to DRURY LANE.
From Downtown Chicago and the Loop, take Eisenhower Expressway (I-290) West
to Roosevelt Road (38) West. Proceed to 83 (Kingery) South, exit 83 South
at Roosevelt Road (38) East and follow GREEN sign to DRURY LANE.
From the West on I-88, exit at Midwest Road, proceed north to Butterfield
Road (56), turn right onto Butterfield Road, exit Roosevelt Road (38) East
to DRURY LANE.
From I-294 (Tri-State), take I-88 West to Aurora, exit at Cermak Road (22nd
Street), make no turns and proceed north on Spring Road 3/4 of a mile to
DRURY LANE.
DRURY LANE OAKBROOK, 100 DRURY LANE, OAKBROOK TERRACE, ILLINOIS
Located next door to the 31-Story Oakbrook Terrace Tower
DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL CARDS
IN THE ACCOMPANYING ENVELOPE.
-------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3
-------------------------------------------------------------------
1. Election of each of four directors for a three-year term.
NOMINEES: PATRICK J. AGNEW, WILLIAM A. ANDERSON, ALAN J. FREDIAN AND JEAN
C. MURRAY, O.P.
FOR WITHHELD MARK HERE
IF YOU PLAN [ ]
[ ] [ ] TO ATTEND
THE MEETING
For, except vote withheld from the following nominee(s):
MARK HERE
[ ] FOR ADDRESS [ ]
------------------------------ CHANGE AND
NOTE BELOW
2. To amend the Corporation's 1995 Incentive Plan to increase by 1,500,000
the number of shares of Common Stock reserved for issuance thereunder.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To amend the Corporation's Certificate of Incorporation to increase the
authorized number of shares of Common Stock from 40,000,000 to 80,000,000
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING, OR ANY ADJOURNMENTS THEREOF, IN ACCORDANCE WITH
THE DETERMINATION OF A MAJORITY OF THE CORPORATION'S BOARD OF DIRECTORS.
PLEASE DATE AND SIGN EXACTLY AS NAME APPEARS HEREIN. EACH EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN, ATTORNEY-IN-FACT AND OTHER FIDUCIARY SHOULD
SIGN AND INDICATE HIS OR HER FULL TITLE. WHEN STOCK HAS BEEN ISSUED IN THE
NAME OF TWO OR MORE PERSONS, ALL SHOULD SIGN.
SIGNATURE: DATE: SIGNATURE: DATE:
----------------- -------- ------------- ---------
