<PAGE>
As filed with the Securities and Exchange Commission on April 15, 1998
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
St. Paul Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 6712 36-3504665
(State of Incorporation) (Primary Standard Industrial (I.R.S.Employer
Classification Code Number) Identification No.)
------------------------
6700 West North Avenue
Chicago, Illinois 60707
(773) 622-5000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
Clifford M. Sladnick, Esq.
Senior Vice President, General Counsel and Secretary
St. Paul Bancorp, Inc.
6700 West North Avenue
Chicago, Illinois 60707
(773) 804-2282
(Name, address, including zip code, and telephone number,
including area code, of registrant's agent for service)
------------------------
Copies to:
Stuart G. Stein, Esq. Kurt W. Florian, Jr., Esq.
Hogan & Hartson L.L.P. Lord, Bissell & Brook
555 Thirteenth Street, N.W. 115 South LaSalle Street
Washington, D.C. 20004 Chicago, Illinois 60603
(202) 637-8575 (312) 443-1728
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==============================================================================================================================
Proposed Proposed
Amount Maximum Maximum Amount Of
Title Of Each Class Of To Be Offering Price Aggregate Registration
Securities To Be Registered Registered(1) Per Share(2) Offering Price(2) Fee(3)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per share 6,702,530 shares $ 26.1875 $ 165,119,939 $48,711
==============================================================================================================================
</TABLE>
(1) The number of shares of Common Stock, par value $0.01 per share (the "St.
Paul Common Stock"), of the Registrant to be registered has been determined
based on the product of (i) up to 6,305,296 shares of Beverly Common Stock
outstanding or subject to outstanding options to purchase Beverly Common
Stock as of close of business on April 14, 1998, and (ii) an exchange ratio
of 1.0630 shares of St. Paul Common Stock per share of Beverly Common Stock
outstanding or subject to outstanding options to purchase shares of Beverly
Common Stock as provided for in the Merger Agreement.
(2) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(f) of the Securities Act of 1933. Pursuant to Rule 457(f), the
maximum aggregate offering price is the product of (i) 26.1875,
representing the average of the high and low sales prices of Beverly Common
Stock as reported on the Nasdaq Stock Market on April 8, 1998, and (ii) up
to 6,305,296 shares of Beverly Common Stock to be acquired by the
Registrant and shares of Beverly Common Stock subject to options to
purchase Beverly Common Stock to be assumed by the Registrant pursuant to
the Merger Agreement.
(3) Calculated in accordance with Section 6(b) of the Securities Act and Rule
457(f)(1) promulgated thereunder.
------------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
================================================================================
<PAGE>
Beverly Bancorporation, Inc.
16345 South Harlem Avenue, Suite 3E
Tinley Park, Illinois 60477
May __, 1998
To the Shareholders of
Beverly Bancorporation, Inc.:
You are cordially invited to attend a special meeting of shareholders (the
"Beverly Special Meeting") of Beverly Bancorporation, Inc. ("Beverly") to be
held on June __, 1998, at ____ a.m. at ____.
As described in the enclosed Joint Proxy Statement/Prospectus, at the
Beverly Special Meeting you will be asked to approve the Agreement and Plan of
Merger, dated as of March 15, 1998 (the "Merger Agreement"), by and between St.
Paul Bancorp, Inc. ("St. Paul") and Beverly and the merger (the "Merger")
provided for therein, pursuant to which Beverly will be merged with and into St.
Paul. Upon the Merger, each outstanding share of Beverly common stock, par value
$0.01 per share ("Beverly Common Stock"), will be converted into the right to
receive 1.0630 shares of St. Paul common stock, par value $0.01 per share ("St.
Paul Common Stock"). Cash will be paid in lieu of fractional shares. Under
certain circumstances involving a decrease to below $21.25 (as reduced to
reflect changes in an index of stock prices of certain other financial
institution holding companies) in the per share price of St. Paul Common Stock,
the Merger Agreement may be terminated by Beverly, unless St. Paul determines to
increase the exchange ratio. It is intended that the conversion of Beverly
Common Stock into St. Paul Common Stock will qualify as a tax-free exchange for
federal income tax purposes.
Your Beverly Board of Directors believes that the Merger will enable you to
realize increased value due to the merger consideration representing a premium
over the pre-Merger Agreement market price, net income per share and book value
per share of Beverly Common Stock. Your Board of Directors also believes that
the Merger will enable you to participate in opportunities for appreciation of
St. Paul Common Stock.
Each share of Beverly Common Stock will entitle its holder to one vote.
Consummation of St. Paul's acquisition of Beverly is subject to certain
conditions, including approval of the Merger Agreement by at least a majority of
the issued and outstanding shares of Beverly Common Stock entitled to be voted
at the Beverly Special Meeting, and the receipt of St. Paul shareholder
approvals and certain regulatory approvals.
McDonald & Company Securities, Inc. ("McDonald"), the financial advisor of
Beverly in connection with the Merger, has delivered its opinion to the Board of
Directors of Beverly that the exchange ratio in the Merger is fair from a
financial point of view to the holders of Beverly Common Stock. The written
opinion of McDonald is reproduced in full as Appendix A to the accompanying
Joint Proxy Statement/Prospectus.
Your Board of Directors approved the Merger Agreement and the Merger
provided for therein and recommends that you vote "FOR" approval of the Merger
Agreement and the Merger.
<PAGE>
You are urged to carefully read the Joint Proxy Statement/Prospectus, which
provides you with a description of the St. Paul Common Stock and the terms of
the Merger. A copy of the Merger Agreement (including each of the exhibits
thereto) and the other documents described in the accompanying Joint Proxy
Statement/Prospectus will be provided without charge upon oral or written
request to Jeffrey M. Voss, Executive Vice President and Chief Financial
Officer, Beverly Bancorporation, Inc., 16345 South Harlem Avenue, Suite 3E,
Tinley Park, Illinois 60477, (708) 614-5070. It is very important that your
shares be represented at the Beverly Special Meeting. Whether or not you plan to
attend the Beverly Special Meeting, you are requested to complete, date and sign
the enclosed proxy card and return it as soon as possible in the enclosed
postage-paid envelope.
Sincerely,
ANTHONY R. PASQUINELLI
Chairman
JOHN D. VAN WINKLE
President and Chief Executive Officer
THE REQUIRED VOTE OF THE BEVERLY SHAREHOLDERS IS BASED UPON THE TOTAL
NUMBER OF OUTSTANDING SHARES OF BEVERLY COMMON STOCK, AND NOT UPON THE NUMBER OF
SHARES WHICH ARE ACTUALLY VOTED. THE FAILURE TO SUBMIT A PROXY CARD OR TO VOTE
IN PERSON AT THE BEVERLY SPECIAL MEETING, OR THE ABSTENTION FROM VOTING BY A
SHAREHOLDER, WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE MERGER AGREEMENT
AND THE MERGER.
<PAGE>
Beverly Bancorporation, Inc.
16345 South Harlem Avenue, Suite 3E
Tinley Park, Illinois 60477
(708) 614-5070
___________________
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON
JUNE __, 1998
___________________
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Beverly
Special Meeting") of Beverly Bancorporation, Inc. ("Beverly") will be held on
June __, 1998, at ____ a.m. at _______ for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of March 15, 1998 (the
"Merger Agreement"), between St. Paul Bancorp, Inc. ("St. Paul"),
and Beverly, and the merger provided for therein. As more fully
described in the accompanying Joint Proxy Statement/ Prospectus,
the Merger Agreement provides for Beverly to be merged with and
into St. Paul (the "Merger"). As part of the Merger, each of the
outstanding shares of Beverly common stock, par value $0.01 per
share ("Beverly Common Stock"), will be converted into the right
to receive 1.0630 shares of St. Paul common stock, par value
$0.01 per share. Cash will be paid in lieu of fractional shares.
Under certain circumstances involving a decrease to below $21.25
(as reduced to reflect changes in an index of stock prices of
certain other financial institution holding companies) in the per
share price of St. Paul Common Stock, the Merger Agreement may be
terminated by Beverly, unless St. Paul determines to increase the
exchange ratio.
2. To transact such other business as may properly come before the
Beverly Special Meeting, or any adjournments or postponements
thereof, including, without limitation, a motion to adjourn the
Beverly Special Meeting to another time and/or place for the
purpose of soliciting additional proxies in order to approve the
Merger Agreement and the Merger provided for therein or
otherwise.
The Board of Directors of Beverly has fixed the close of business on May
__, 1998 as the record date for the determination of shareholders of Beverly
entitled to notice of and to vote at the Beverly Special Meeting. Only holders
of record of the Beverly Common Stock at the close of business on that date will
be entitled to notice of and to vote at the Beverly Special Meeting or any
adjournments or postponements thereof.
By Order of the Board of Directors
ANTHONY R. PASQUINELLI JOHN D. VAN WINKLE
Chairman President and Chief Executive Officer
Tinley Park, Illinois
May __, 1998
WE URGE YOU TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN
IT AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU
PLAN TO ATTEND THE SPECIAL MEETING IN PERSON. YOUR PROXY MAY BE REVOKED IN THE
MANNER DESCRIBED IN THE
<PAGE>
ACCOMPANYING PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT IS VOTED AT THE
SPECIAL MEETING.
<PAGE>
St. Paul Bancorp, Inc.
6700 West North Avenue
Chicago, Illinois 60707
(773) 622-5000
May __, 1998
To the Shareholders of
St. Paul Bancorp, Inc.:
You are cordially invited to attend a special meeting of shareholders (the
"St. Paul Special Meeting") of St. Paul Bancorp, Inc. ("St. Paul") to be held on
June __, 1998 at ___ a.m. at _____.
As described in the enclosed Joint Proxy Statement/Prospectus, the St. Paul
Special Meeting has been called for the following purposes: (1) to consider and
vote upon a proposed amendment to St. Paul's Certificate of Incorporation to
increase the authorized number of shares of St. Paul common stock, par value
$0.01 per share ("St. Paul Common Stock"), from 40,000,000 to 80,000,000 shares
(the "Certificate Amendment"); and (2) to consider and vote upon a proposal to
authorize the issuance of St. Paul Common Stock (the "Share Issuance"), to
holders of Beverly Bancorporation, Inc. ("Beverly") common stock, par value
$0.01 per share ("Beverly Common Stock"), in connection with the merger of
Beverly with and into St. Paul (the "Merger"). As described in the enclosed
Joint Proxy Statement/Prospectus, pursuant to an Agreement and Plan of Merger,
dated as of March 15, 1998 (the "Merger Agreement"), by and between St. Paul and
Beverly, upon the Merger each outstanding share of Beverly Common Stock will be
converted into the right to receive 1.0630 shares of St. Paul Common Stock. Cash
will be paid in lieu of fractional shares. Under certain circumstances involving
a decrease to below $21.25 (as reduced to reflect changes in an index of stock
prices of certain other financial institution holding companies) in the per
share price of St. Paul Common Stock, the Merger Agreement may be terminated by
Beverly, unless St. Paul determines to increase the exchange ratio. Based on the
5,777,567 outstanding shares of Beverly Common Stock on May __, 1998, a total of
approximately 6,141,554 shares of St. Paul Common Stock will be issued in the
Merger and options to purchase up to 560,976 shares of St. Paul Common Stock
will be issued to holders of Beverly stock options.
The merger of Beverly Bank into St. Paul Bank is expected to broaden St.
Paul's existing operations in Chicago's south and southwest suburban areas, and
the greater Chicago area as a whole. The expanded operations of St. Paul will
include Beverly Bank's commercial banking and lending businesses, as well as
Beverly's trust business. The addition of Beverly Trust Company is expected to
strengthen St. Paul's franchise by expanding St. Paul's ability to address the
financial needs of its consumer and business banking customers. The combination
of Beverly's commercial banking and trust businesses with St. Paul's banking and
related financial services is expected to present opportunity for expansion of
each company's operations into the customer base of the other.
Each share of St. Paul Common Stock will entitle its holder to one vote.
Consummation of St. Paul's acquisition of Beverly is subject to certain
conditions, including shareholder approval of the Certificate Amendment and the
Share Issuance, as well as the receipt of Beverly shareholder approval and
certain regulatory approvals. The Certificate Amendment and the Share Issuance
must be approved so that St. Paul will have both enough shares to issue in the
Merger and authority to issue such shares in the Merger.
Merrill Lynch & Company ("Merrill Lynch"), the financial advisor of St.
Paul in connection with the Merger, has delivered its opinion to the Board of
Directors of St. Paul that the exchange
<PAGE>
ratio in the Merger is fair, from a financial point of view, to the holders of
St. Paul Common Stock. The written opinion of Merrill Lynch is reproduced in
full as Appendix B to the accompanying Joint Proxy Statement/Prospectus.
Your Board of Directors approved and recommends that you vote "FOR"
approval of the Certificate Amendment and the Share Issuance.
You are urged to carefully read the Joint Proxy Statement/Prospectus, which
provides you with a description of the terms of the Merger. A copy of the Merger
Agreement (including each of the exhibits thereto) and the other documents
described in the accompanying Joint Proxy Statement/Prospectus will be provided
without charge upon oral or written request to Clifford M. Sladnick, Senior Vice
President, General Counsel and Secretary of St. Paul, 6700 West North Avenue,
Chicago, Illinois 60707, telephone (773) 804-2282. It is very important that
your shares be represented at the St. Paul Special Meeting. Whether or not you
plan to attend the St. Paul Special Meeting, you are requested to complete, date
and sign the enclosed proxy card and return it as soon as possible in the
enclosed postage-paid envelope. Failure to return a properly executed proxy card
or to vote at the St. Paul Special Meeting will have the same effect as a vote
against the Certificate Amendment and will cause your shares of St. Paul Common
Stock to be counted as absent for purposes of determining the presence of a
quorum.
Sincerely,
JOSEPH C. SCULLY
Chairman & Chief Executive Officer
THE REQUIRED VOTE OF THE ST. PAUL SHAREHOLDERS WITH RESPECT TO THE
CERTIFICATE AMENDMENT IS BASED UPON THE TOTAL NUMBER OF OUTSTANDING SHARES OF
ST. PAUL COMMON STOCK AND NOT UPON THE NUMBER OF SHARES WHICH ARE ACTUALLY
VOTED. THE FAILURE TO SUBMIT A PROXY CARD OR TO VOTE IN PERSON AT THE ST. PAUL
SPECIAL MEETING OR THE ABSTENTION FROM VOTING BY A SHAREHOLDER WILL HAVE THE
SAME EFFECT AS A VOTE "AGAINST" THE CERTIFICATE AMENDMENT. THE REQUIRED VOTE OF
THE ST. PAUL SHAREHOLDERS WITH RESPECT TO THE SHARE ISSUANCE IS BASED UPON THE
NUMBER OF SHARES WHICH ARE ACTUALLY VOTED, BUT REQUIRES THE PRESENCE OF A QUORUM
OF AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF ST. PAUL COMMON STOCK. THE
FAILURE TO SUBMIT A PROXY WILL NOT COUNT AS A VOTE AGAINST THE SHARE ISSUANCE
BUT WILL NOT BE
<PAGE>
St. Paul Bancorp, Inc.
6700 West North Avenue
Chicago, Illinois 60707
-------------------
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON
JUNE __, 1998
-------------------
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "St.
Paul Special Meeting") of St. Paul Bancorp, Inc. ("St. Paul") will be held on
June __ at ___ a.m. at _______ for the following purposes:
1. To consider and vote upon a proposed amendment to St. Paul's
Certificate of Incorporation to increase the authorized number of
shares of St. Paul common stock, par value $0.01 ("St. Paul Common
Stock"), from 40,000,000 to 80,000,000 shares; and
2. To consider and vote upon a proposal to authorize the issuance of St.
Paul Common Stock to the current holders of Beverly Bancorporation,
Inc. common stock, par value $0.01, in connection with St. Paul's
acquisition of Beverly.
The Board of Directors of St. Paul has fixed the close of business on May
__, 1998 as the record date for the determination of shareholders of St. Paul
entitled to notice of and to vote at the St. Paul Special Meeting. Only holders
of record of St. Paul Common Stock at the close of business on that date will be
entitled to notice of and to vote at the St. Paul Special Meeting or any
adjournments or postponements thereof.
By Order of the Board of Directors
JOSEPH C. SCULLY
Chairman & Chief Executive Officer
Chicago, Illinois
May __, 1998
WE URGE YOU TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT AS
SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU PLAN
TO ATTEND THE SPECIAL MEETING IN PERSON. YOUR PROXY MAY BE REVOKED IN THE MANNER
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT
IS VOTED AT THE SPECIAL MEETING.
<PAGE>
ST. PAUL BANCORP, INC. BEVERLY BANCORPORATION, INC.
6700 West North Avenue 16345 South Harlem Avenue, Suite 3E
Chicago, Illinois 60707 Tinley Park, Illinois 60477
BEVERLY BANCORPORATION, INC.
PROXY STATEMENT
--------------------
ST. PAUL BANCORP, INC.
PROXY STATEMENT/PROSPECTUS
--------------------
This Joint Proxy Statement/Prospectus is being furnished to shareholders of
Beverly Bancorporation, Inc. ("Beverly"). It relates to the special meeting of
shareholders of Beverly (the "Beverly Special Meeting") to be held on June __,
1998, at ____ a.m. at ________, and to any adjournments or postponements of the
Beverly Special Meeting. This Joint Proxy Statement/Prospectus is first being
mailed to shareholders of Beverly on or about May __, 1998.
This Joint Proxy Statement/Prospectus is also being furnished to
shareholders of St. Paul Bancorporation, Inc. ("St. Paul"). It relates to the
special meeting of shareholders of St. Paul (the "St. Paul Special Meeting") to
be held on June __, 1998, at ____ a.m. at ________, and to any adjournments or
postponements of the St. Paul Special Meeting. This Joint Proxy
Statement/Prospectus is first being mailed to shareholders of St. Paul on or
about May __, 1998.
At the Beverly Special Meeting, the principal item of business will be to
consider and vote upon the approval and adoption of the Agreement and Plan of
Merger, dated as of March 15, 1998 (the "Merger Agreement"), by and between St.
Paul and Beverly and the merger provided for therein (the "Merger"). At the St.
Paul Special Meeting, the St. Paul shareholders will be asked to approve, in
separate votes, an amendment to the Certificate of Incorporation of St. Paul
that would increase the maximum number of authorized shares of St. Paul common
stock, par value $0.01 per share (the "St. Paul Common Stock"), from 40,000,000
to 80,000,000 shares (the "Certificate Amendment") and approve the issuance of
St. Paul Common Stock in connection with the Merger (the "Share Issuance").
Approvals of the Certificate Amendment and the Share Issuance are conditions to
the Merger.
The Merger Agreement provides for Beverly to be acquired by St. Paul
through a merger of Beverly with and into St. Paul. As part of the Merger
(except as described below), each issued and outstanding share of Beverly common
stock, par value $0.01 per share ("Beverly Common Stock"), will be converted
into the right to receive 1.0630 shares of St. Paul Common Stock (the "Exchange
Ratio"). Based on the 5,777,567 outstanding shares of Beverly Common Stock on
May __, 1998, a total of approximately 6,141,554 shares of St. Paul Common Stock
will be issued in the Merger. Cash will be paid in lieu of fractional shares.
The Merger Agreement also provides that each outstanding stock option to
purchase Beverly Common Stock (527,728 options as of May __, 1998) will be
converted into the right to receive options to purchase 1.0630 shares of St.
Paul Common Stock (a total of 560,976 shares).
If, after certain regulatory approvals are obtained, the per share price of
St. Paul Common Stock falls below the lesser of $21.25 or $21.25 reduced for
changes in an index of stock prices of certain other financial institution
holding companies, the Merger Agreement may be terminated by Beverly (subject to
the right of St. Paul to increase the number of shares of St. Paul Common Stock
it would issue to Beverly shareholders). See "THE MERGER." In connection with
the Merger Agreement, Beverly has granted St. Paul an irrevocable option (the
"Option") to purchase up to 1,155,512 newly issued shares of Beverly Common
Stock at a purchase price of $21.82 per share (which price is subject to
adjustment) upon the occurrence of certain events.
The Merger is subject to various conditions, including approval of the
Certificate Amendment and the Share Issuance by holders of St. Paul Common
Stock, approval of the Merger and the Merger Agreement by Beverly shareholders
and approvals of regulatory authorities.
<PAGE>
Beverly and St. Paul expect that the Merger will be consummated in the Summer of
1998, or as soon as possible after the receipt of all regulatory and shareholder
approvals and the expiration of all regulatory waiting periods. If the Merger is
not consummated by December 31, 1998, the Merger Agreement may be terminated by
either party, subject to certain exceptions. For a more detailed description of
the Merger and the Option, see "THE MERGER."
This Joint Proxy Statement/Prospectus also constitutes a prospectus of
St. Paul with respect to 6,702,530 shares of St. Paul Common Stock (6,141,554
shares, plus 560,976 shares underlying options) subject to adjustment, and
subject to issuance in connection with the merger of Beverly with and into St.
Paul pursuant to the Merger Agreement.
THE ST. PAUL COMMON STOCK HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION ("SEC"), ANY STATE SECURITIES COMMISSION, THE
OFFICE OF THRIFT SUPERVISION ("OTS"), OR THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC"), NOR HAS THE SEC, ANY STATE SECURITIES COMMISSION, THE OTS
OR THE FDIC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF ST. PAUL COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
SAVINGS DEPOSITS AND ARE NOT INSURED BY THE FDIC, THE BANK INSURANCE FUND, THE
SAVINGS ASSOCIATION INSURANCE FUND ("SAIF") OR ANY OTHER GOVERNMENTAL AGENCY.
The information set forth in this Joint Proxy Statement/Prospectus
concerning Beverly has been furnished by Beverly. The information concerning St.
Paul has been furnished by St. Paul. The descriptions of the Merger Agreement,
the Option Agreement and the Stockholder Agreement (as defined below) and other
documents in this Joint Proxy Statement/Prospectus are summaries which are
qualified in their entirety by reference to the text of those documents, which
are incorporated herein by reference, copies of which will be provided without
charge upon written or oral request addressed to Clifford M. Sladnick, Senior
Vice President, General Counsel and Secretary of St. Paul, telephone (773) 804-
2282.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT/ PROSPECTUS, OR
INCORPORATED BY REFERENCE HEREIN, IN CONNECTION WITH THE SOLICITATION OF PROXIES
BY BEVERLY OR ST. PAUL OR THE OFFERING OF ST. PAUL COMMON STOCK MADE HEREBY,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY BEVERLY OR ST. PAUL. THIS JOINT PROXY
STATEMENT/ PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO PURCHASE, ANY ST. PAUL COMMON STOCK OFFERED BY THIS JOINT PROXY
STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR
FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, OR SOLICITATION OF AN
OFFER, OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
JOINT PROXY STATEMENT/ PROSPECTUS NOR ANY DISTRIBUTION OF THE ST. PAUL COMMON
STOCK OFFERED PURSUANT TO THIS JOINT PROXY STATEMENT/PROSPECTUS SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF BEVERLY OR ST. PAUL OR THE INFORMATION HEREIN OR THE DOCUMENTS OR
REPORTS INCORPORATED BY REFERENCE SINCE THE DATE OF THIS JOINT PROXY
STATEMENT/PROSPECTUS.
---------------------
The date of this Joint Proxy Statement/Prospectus is May __, 1998.
-ii-
<PAGE>
AVAILABLE INFORMATION
Beverly and St. Paul are both subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder, and in accordance therewith
file reports, proxy statements and other information with the SEC. Such
reports, proxy statements and other information can be obtained at prescribed
rates from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, such reports, proxy statements and other
information filed by Beverly and St. Paul may be inspected and copied at the
public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices located
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60611 and 7 World Trade Center, Suite 1300, New York, New York 10048.
The SEC maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. The address of the SEC's Web site is http://www.sec.gov. St.
Paul Common Stock and Beverly Common Stock are traded on The Nasdaq Stock Market
National Tier (the "Nasdaq Stock Market"). Reports, proxy statements and other
information concerning St. Paul and Beverly can be inspected at the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
St. Paul has filed with the SEC a Registration Statement, part of which
contains this Joint Proxy Statement/Prospectus on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the St. Paul Common Stock to be issued to the shareholders of
Beverly in connection with the Merger. As permitted by the rules and regulations
of the SEC, this Joint Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement. Such additional information
may be obtained from the SEC's principal office in Washington, D.C. as set forth
above. Statements contained in this Joint Proxy Statement/Prospectus or in any
document incorporated by reference herein as to the contents of any contract or
other document are not necessarily complete and, in each instance where such
contract or document is filed as an exhibit to the Registration Statement,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference.
INFORMATION DELIVERED AND INCORPORATED BY REFERENCE
The following documents filed by Beverly with the SEC (SEC File No. 0-4707)
under the Exchange Act are hereby incorporated in this Joint Proxy
Statement/Prospectus by reference: Form 8-K for the event on March 15, 1998; and
Beverly's Annual Report on Form 10-K for the year ended December 31, 1997, as
amended.
The following documents filed by St. Paul with the SEC (File No. 0-15580)
under the Exchange Act are hereby incorporated in this Joint Proxy
Statement/Prospectus by reference: Forms 8-K for the events on March 15 and
March 16, 1998; and St. Paul's Annual Report on Form 10-K for the year ended
December 31, 1997.
All documents filed by Beverly or St. Paul pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Joint
Proxy Statement/Prospectus and prior to the date of the Special Meetings shall
be deemed to be incorporated by reference in this Joint Proxy
Statement/Prospectus. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Joint Proxy Statement/Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Joint
Proxy Statement/Prospectus. St. Paul will provide without charge to each person,
including any beneficial owner to whom a copy of this Joint Proxy
Statement/Prospectus is delivered, upon written or oral
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request of such person, a copy of any or all of the documents incorporated
herein by reference and not delivered herewith (not including exhibits to the
information incorporated by reference unless such exhibits are specifically
incorporated by reference into the text of such documents).
This Joint Proxy Statement/Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. Such documents relating to
St. Paul are available upon request from: Clifford M. Sladnick, Senior Vice
President, General Counsel and Secretary, St. Paul Bancorp, Inc., 6700 West
North Avenue, Chicago, Illinois 60707; telephone (773) 804-2282. Such documents
relating to Beverly are available upon request from: Jeffrey M. Voss, Executive
Vice President and Chief Financial Officer, Beverly Bancorporation, Inc., 16345
South Harlem Avenue, Suite 3E, Tinley Park, Illinois 60477; telephone (708) 614-
5070. In order to ensure timely delivery of the documents, any request should be
made as soon as possible, but no later than _____, 1998.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
THIS JOINT PROXY STATEMENT/PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING
STATEMENTS WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
BUSINESS OF ST. PAUL, BEVERLY AND THE COMBINED COMPANY FOLLOWING THE
CONSUMMATION OF THE MERGER, INCLUDING STATEMENTS RELATING TO THE COST SAVINGS
AND OTHER BUSINESS ENHANCEMENTS THAT ARE EXPECTED TO BE REALIZED FROM THE MERGER
AND THE EXPECTED IMPACT OF THE MERGER ON ST. PAUL'S FINANCIAL PERFORMANCE (SEE
"THE MERGER -- RECOMMENDATION OF THE ST. PAUL BOARD OF DIRECTORS AND REASONS FOR
THE MERGER" AND "-- RECOMMENDATION OF THE BEVERLY BOARD OF DIRECTORS AND REASONS
FOR THE MERGER," "-- OPINION OF ST. PAUL'S FINANCIAL ADVISOR," "-- OPINION OF
BEVERLY'S FINANCIAL ADVISOR" AND "MANAGEMENT AND OPERATIONS AFTER THE MERGER."
THESE FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES THAT
MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH HEREIN.
FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE
FOLLOWING POSSIBILITIES: (1) EXPECTED COST SAVINGS FROM THE MERGER CANNOT BE
FULLY REALIZED OR REALIZED WITHIN THE EXPECTED TIME FRAME; (2) REVENUES
FOLLOWING THE MERGER ARE LOWER THAN EXPECTED; (3) COMPETITIVE PRESSURES AMONG
DEPOSITORY INSTITUTIONS INCREASE SIGNIFICANTLY; (4) COSTS DIFFICULTIES RELATED
TO THE INTEGRATION OF THE BUSINESSES OF ST. PAUL AND BEVERLY ARE GREATER THAN
EXPECTED; (5) CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCE INTEREST MARGINS;
(6) GENERAL ECONOMIC AND CREDIT CONDITIONS, EITHER NATIONALLY OR IN THE REGION
IN WHICH THE COMBINED COMPANY WILL BE DOING BUSINESS, ARE LESS FAVORABLE THAN
EXPECTED; AND (7) LEGISLATION OR REGULATORY CHANGES ADVERSELY AFFECT THE
BUSINESS IN WHICH THE COMBINED COMPANY WOULD BE ENGAGED.
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TABLE OF CONTENTS
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Merger Summary................................................................... 1
The Parties................................................................... 1
The Merger.................................................................... 2
Summary Financial and Other Data.............................................. 9
The St. Paul Special Meeting..................................................... 15
General....................................................................... 15
Matters to be Considered...................................................... 15
Record Date and Voting........................................................ 15
Vote Required; Revocability of Proxies........................................ 15
Solicitation of Proxies....................................................... 16
The Beverly Special Meeting...................................................... 16
Matters to be Considered...................................................... 16
Record Date and Voting........................................................ 16
Vote Required; Revocability of Proxies........................................ 17
Solicitation of Proxies....................................................... 18
The Merger....................................................................... 19
The Parties................................................................... 19
Background of the Merger...................................................... 20
Purpose and Effects of the Merger............................................. 22
Recommendation of the St. Paul Board of Directors and Reasons for the Merger.. 23
Recommendation of the Beverly Board of Directors and Reasons for the Merger... 24
Opinion of St. Paul's Financial Advisor....................................... 26
Opinion of Beverly's Financial Advisor........................................ 31
Structure..................................................................... 37
Exchange Ratio................................................................ 37
Conversion of Beverly Stock Options........................................... 39
Regulatory Approvals.......................................................... 39
Conditions to the Merger...................................................... 40
Conduct of Business Pending The Merger........................................ 42
Expenses...................................................................... 44
Representations and Warranties................................................ 44
Compensation and Benefits..................................................... 44
Other Agreements.............................................................. 45
Termination and Amendment of the Merger Agreement............................. 45
Tax Treatment................................................................. 48
Accounting Treatment.......................................................... 48
Resales of St. Paul Common Stock Received in the Merger....................... 49
Interests of Certain Persons in the Merger -- Arrangements with and Payments
to Beverly Directors and Executive Officers................................. 49
Option Agreement.............................................................. 50
Pro Forma Combined Financial Statements.......................................... 52
Notes to Pro Forma Combined Financial Statements.............................. 57
Certain Federal Income Tax Consequences.......................................... 58
Market Prices and Dividends...................................................... 59
St. Paul Common Stock......................................................... 59
Beverly Common Stock.......................................................... 60
</TABLE>
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Beverly Common Stock.......................................................... 60
Description of St. Paul Capital Stock and Comparison of Shareholder Rights...... 60
St. Paul Common Stock......................................................... 60
St. Paul Preferred Stock...................................................... 61
Certificate of Incorporation and Bylaw Provisions............................. 61
The Certificate Amendment........................................................ 66
Adjournment of the Special Meeting.............................................. 68
Shareholder Proposals........................................................... 68
Other Matters................................................................... 68
Experts......................................................................... 68
Legal Matters................................................................... 69
Appendix A - Opinion of McDonald & Company Securities, Inc.
Appendix B - Opinion of Merrill Lynch & Co.
</TABLE>
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MERGER SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Joint Proxy Statement/Prospectus. This summary is not intended to be a
complete description and is qualified in its entirety by reference to the more
detailed information contained elsewhere in this Joint Proxy
Statement/Prospectus. Shareholders of St. Paul and Beverly are urged before
voting to give careful consideration to all of the information contained in or
incorporated by reference into this Joint Proxy Statement/Prospectus.
The Parties
St. Paul. St. Paul is a Delaware corporation and the holding company of St.
Paul Federal Bank For Savings ("St. Paul Bank"), its wholly owned federal
savings bank subsidiary, both of which are headquartered in Chicago, Illinois.
Deposits at St. Paul Bank are FDIC insured. St. Paul Bank is the largest
independent savings institution in the State of Illinois. Through St. Paul Bank,
St. Paul provides a variety of checking and savings deposit products, and
single-family, consumer and income-producing property loan products through 53
Chicago-area branches, 17 of which operate in high-volume grocery superstores.
St. Paul also operates a network of 500 automated teller machines ("ATMs") in
its market. In addition to its banking and related operations, St. Paul also
operates other financial services subsidiaries. Serve Corps Mortgage Corporation
("Serve Corps") is a residential mortgage broker acquired by St. Paul in 1998.
Investment Network, Inc. ("INI") is a discount brokerage operation, offering a
full range of investment products including mutual funds, equities and bonds.
Annuity Network, Inc. ("ANI") offers a variety of annuity products and SPF
Insurance Agency ("SPF Insurance") is an independent insurance agent, offering a
full range of insurance products including homeowners, automobile, recreational
vehicles/boats, umbrella liability, life/health, disability income, and business
and commercial lines for business owners. Through St. Paul Financial Development
Corp. ("SPF Development"), the Company engages in real estate development
projects.
At December 31, 1997, St. Paul had total consolidated assets of $4.6
billion, total deposits of $3.3 billion, and shareholders' equity of $417.9
million, or 9.17% of total assets. St. Paul Common Stock is quoted on The Nasdaq
Stock Market under the symbol "SPBC". The address of St. Paul's principal
executive offices is St. Paul Bancorp, Inc., 6700 West North Avenue, Chicago,
Illinois 60707 and its telephone number is (773) 622-5000. See "THE MERGER --
The Parties."
Beverly. Beverly is a Delaware corporation and the holding company of
Beverly National Bank ("Beverly Bank"), its wholly owned national bank
subsidiary, and Beverly Trust Company, an Illinois state-chartered trust
company. Beverly is headquartered in Tinley Park, Illinois. Deposits at Beverly
Bank are FDIC insured. Through Beverly Bank, Beverly is engaged primarily in the
business of attracting deposits from the public and using such deposits, with
other funds, to make various types of loans and investments. In addition to
traditional consumer banking products and services, Beverly Bank offers
commercial banking services, including deposit and lending products. Beverly
currently serves customers from 12 locations located in the Chicago area. Its
principal market encompasses Chicago and the south and southwest portions of the
Chicago metropolitan area. Beverly Trust Company provides a wide array of trust
services for individuals and corporations, including asset management primarily
of personal living trusts and corporate employee benefit plans, and including
administration of land trusts.
At December 31, 1997, Beverly had total consolidated assets of $669.2
million, total deposits of $590.1 million, and shareholders' equity of $68.4
million, or 10.22% of total assets. Beverly Common Stock is quoted on The Nasdaq
Stock Market under the symbol "BEVB". The address of Beverly's principal
executive offices is 16345 South Harlem Avenue, Suite 3E, Chicago, Illinois
60477, and its telephone number is (708) 614-5070. See "THE MERGER -- The
Parties."
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The Merger
General. The Merger Agreement provides for the Merger of Beverly with and
into St. Paul, with St. Paul as the surviving corporation (the "Surviving
Corporation"). Immediately after the consummation of the Merger, St. Paul
intends that Beverly Bank will be merged with and into St. Paul Bank ("the "Bank
Merger"), with St. Paul Bank as the surviving institution. Beverly Trust Company
will become a wholly owned subsidiary of St. Paul and change its name to "St.
Paul Trust Company." As a result of the Merger, St. Paul will remain a savings
association holding company, which means that, among other things, it will be
able to continue to engage in non-banking activities such as insurance and
annuity sales, and real estate development, and it will not be subject to bank
holding company regulatory capital requirements. St. Paul Bank will remain
headquartered in Chicago, Illinois as an FDIC insured federally chartered
savings bank.
At the Effective Time (as defined below) of the Merger, except as discussed
below, each outstanding share of Beverly Common Stock will be converted into the
right to receive 1.0630 shares of St. Paul Common Stock (the "Exchange Ratio").
Cash will be paid in lieu of fractional shares. Shares of Beverly Common Stock
held as treasury stock or held, directly or indirectly, by St. Paul, Beverly or
any of their subsidiaries (other than shares held in a fiduciary capacity
("Trust Account Shares") or in respect of a debt previously contracted ("DPC
Shares")) will be canceled. See "THE MERGER -- Exchange Ratio."
The assets and business of Beverly Bank's banking offices will broaden St.
Paul's existing operations in Chicago's south and southwest suburban areas and
the greater Chicago area as a whole where St. Paul currently has 53 banking
offices. The expanded operations of St. Paul will include Beverly Bank's
commercial banking and lending businesses, as well as Beverly's trust business.
The addition of Beverly Trust Company's trust offices will strengthen St. Paul's
franchise by expanding St. Paul's ability to address the financial needs of its
consumer and business banking customers. The combination of Beverly's commercial
and trust businesses with St. Paul's banking and related financial services is
expected to present opportunity for expansion of each company's operations into
the customer base of the other. St. Paul expects to achieve reductions in the
current operating expenses of Beverly Bank upon the consolidation of Beverly
Bank's operations into St. Paul Bank, which could result in the closing of
certain of Beverly Bank's or St. Paul's existing banking offices as well as
certain reductions in administrative and support personnel.
Beverly and St. Paul expect that the Merger will be consummated in the
Summer of 1998, or as soon as possible after the receipt of all regulatory and
shareholder approvals and the expiration of all regulatory waiting periods. See
"THE MERGER -- Structure."
Exchange Ratio. At the Effective Time, except as discussed below, each
issued and outstanding share of Beverly Common Stock will be converted
automatically at the 1.0630 Exchange Ratio into the right to receive St. Paul
Common Stock. Cash will be paid in lieu of fractional shares. Shares held as
treasury stock or held directly or indirectly by Beverly, St. Paul or any of
their subsidiaries (other than Trust Account Shares or DPC Shares) shall be
canceled. The Exchange Ratio is subject to customary antidilution adjustments
and may be adjusted upward at St. Paul's option in connection with the exercise
by Beverly of certain termination rights under specified circumstances if the
per share market price of St. Paul Common Stock falls below $21.25 (as reduced
to reflect changes in an index of stock prices of certain other financial
institution holding companies). See "THE MERGER -- Termination and Amendment of
the Merger Agreement." Because the market price of St. Paul Common Stock is
subject to fluctuation and the Exchange Ratio is fixed, the market value of the
shares of St. Paul Common Stock that Beverly shareholders will receive in the
Merger may materially increase or decrease prior to the Merger. No assurance can
be given as to the market price of St. Paul Common Stock at the time of the
Merger. See "MARKET PRICES AND DIVIDENDS" and "THE MERGER -- Exchange Ratio."
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<PAGE>
Options. As of the Beverly Record Date (defined below), there were
outstanding Beverly Options (as defined below) to purchase 527,728 shares of
Beverly Common Stock, at an average exercise price of $___ per share. Under the
Merger Agreement, shares of Beverly Common Stock issued prior to consummation of
the Merger upon the exercise of outstanding Beverly Options will be converted
into St. Paul Common Stock at the Exchange Ratio, and each Beverly Option that
is not exercised immediately prior to the Effective Time will be converted
automatically into an option to purchase shares of St. Paul Common Stock, with
adjustment in the number of shares and exercise price to reflect the Exchange
Ratio. See "THE MERGER -- Options."
The St. Paul Special Meeting. The St. Paul Special Meeting will be held on
June __, 1998 at ____ a.m. at _____, at which time St. Paul shareholders of
record at the close of business on the St. Paul Record Date (defined below) will
be asked to consider and vote upon: (i) a proposal to approve and adopt the
Certificate Amendment; (ii) a proposal to authorize the Share Issuance; and
(iii) such other matters as may be properly brought before the St. Paul Special
Meeting. Approval of each of the Certificate Amendment and the Share Issuance by
St. Paul stockholders is a condition to the Merger. The affirmative vote of the
holders of a majority of the issued and outstanding shares of St. Paul Common
Stock entitled to vote at the St. Paul Special Meeting is required to approve
and adopt the Certificate Amendment. The affirmative vote of the holders of a
majority of the St. Paul Common Stock represented, either in person or by proxy,
and entitled to vote at the St. Paul Special Meeting is required to approve and
adopt the Share Issuance in connection with the Merger, provided that a quorum
of at least a majority of the outstanding shares of St. Paul Common Stock is
represented, either in person or by proxy, and voting.
Directors and executive officers of St. Paul beneficially owned as of the
St. Paul Record Date an aggregate of ____ shares of St. Paul Common Stock, or
approximately ___% of the shares of St. Paul Common Stock entitled to vote at
the St. Paul Special Meeting. It is expected that each such director and
executive officer of St. Paul will vote his or her shares of St. Paul Common
Stock for approval of the Certificate Amendment and the Share Issuance. In
addition, as of the St. Paul Record Date, Beverly owned 1,000 shares of St. Paul
Common Stock and as of such date directors and executive officers of Beverly
beneficially owned an aggregate of 1,125 shares of St. Paul Common Stock, or
significantly less than one percent of the shares of St. Paul Common Stock
entitled to vote at the St. Paul Special Meeting. Also as of the St. Paul Record
Date, the banking and trust affiliates of Beverly held less than ___ percent of
the outstanding shares of St. Paul Common Stock in a fiduciary capacity. See
"THE ST. PAUL SPECIAL MEETING."
The Board of Directors of St. Paul believes that the terms of the Merger
Agreement and the Share Issuance are fair to, and in the best interests of, St.
Paul and its shareholders, and that the Certificate Amendment is in the best
interests of St. Paul and its shareholders. The Board of Directors of St. Paul
approved the Merger Agreement, the Merger, the Share Issuance and the
Certificate Amendment and recommends that holders of St. Paul Common Stock vote
"FOR" approval and adoption of the Share Issuance and the Certificate Amendment.
For a discussion of the factors considered by the Board of Directors in reaching
its decision, see "THE MERGER -- Background of the Merger" and
"-- Recommendation of the St. Paul Board of Directors and Reasons for the
Merger."
The Beverly Special Meeting. The Beverly Special Meeting will be held on
June __, 1998 at __ a.m. at ____ at which time the holders of record of Beverly
Common Stock at the close of business on the Beverly Record Date will be asked
to consider and vote upon: (i) a proposal to approve and adopt the Merger
Agreement and the Merger provided for therein, and (ii) such other matters as
may properly be brought before the Beverly Special Meeting or any adjournments
or postponements thereof. The affirmative vote of the holders of a majority of
the issued and outstanding shares of Beverly Common Stock entitled to vote at
the Beverly Special Meeting is required to approve and adopt the Merger
Agreement and the Merger provided for therein.
All of the directors and executive officers of Beverly, who beneficially
owned as of the Beverly Record Date an aggregate of ____ shares of Beverly
Common Stock (excluding all Beverly
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<PAGE>
Options) or approximately ___% of the outstanding shares of Beverly Common
Stock, have entered into a stockholder agreement with St. Paul (the "Stockholder
Agreement"), pursuant to which they have each agreed, among other things, to
certain transfer restrictions and to vote all shares of Beverly Common Stock
with respect to which they have the right to vote in favor of the Merger
Agreement, and the other transactions contemplated by the Merger Agreement and
against any third party merger proposal. No separate consideration was paid to
any of the directors or executive officers for entering into the Stockholder
Agreement. St. Paul required that the Stockholder Agreement be executed as a
condition to St. Paul entering into the Merger Agreement. See "THE BEVERLY
SPECIAL MEETING."
The Board of Directors of Beverly believes that the terms of the Merger
Agreement are fair to, and in the best interests of, Beverly and its
shareholders. The Board of Directors of Beverly approved the Merger Agreement
and the Merger and recommends that holders of Beverly Common Stock vote "FOR"
approval and adoption of the Merger Agreement and the Merger. For a discussion
of the factors considered by the Board of Directors in reaching its decision,
see "THE MERGER -- Background of the Merger" and "-- Recommendation of the
Beverly Board of Directors and Reasons for the Merger."
Opinion of St. Paul's Financial Advisor. On March 13, 1998, Merrill Lynch
& Co. ("Merrill Lynch") advised the Board of Directors of St. Paul that the
Exchange Ratio is fair, from a financial point of view, to the shareholders of
St. Paul. Merrill Lynch confirmed its opinion in writing as of March 15, 1998.
The written opinion of Merrill Lynch describes the matters considered and the
scope of the review undertaken in rendering such opinion. Merrill Lynch's
opinion and presentations to the St. Paul Board of Directors, together with a
review by the St. Paul Board of the assumptions used by Merrill Lynch, were
among the factors considered by the St. Paul Board in reaching its determination
to approve the Merger Agreement, the Share Issuance and the Merger. See "THE
MERGER -- Opinion of St. Paul Financial Advisor." A copy of Merrill Lynch's
opinion letter dated March 15, 1998 is attached as Appendix B to this Joint
Proxy Statement/Prospectus and should be read by St. Paul shareholders in its
entirety.
Opinion of Beverly's Financial Advisor. On March 15, 1998, McDonald &
Company Securities, Inc. ("McDonald") delivered its opinion to the Board of
Directors of Beverly that the Exchange Ratio is fair, from a financial point of
view, to the shareholders of Beverly. McDonald's opinion describes the matters
considered and the scope of the review undertaken in rendering such opinion.
McDonald's opinion and presentations to the Beverly Board of Directors, together
with a review by the Beverly Board of the assumptions used by McDonald, were
among the factors considered by the Beverly Board in reaching its determination
to approve the Merger Agreement and the Merger. See "THE MERGER -- Opinion of
Beverly Financial Advisor." A copy of McDonald's opinion letter dated March 15,
1998 is attached as Appendix A to this Proxy Statement/Prospectus and should be
read by Beverly shareholders in its entirety.
Regulatory Approvals. Consummation of the Merger is conditioned upon
receipt of regulatory approvals ("Required Regulatory Approvals") of the Office
of the Commissioner of Banks and Real Estate of the State of Illinois (the
"Illinois Commissioner") and the OTS, as well as the approval or waiver of
application requirements of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"). Applications as to such approvals of the Illinois
Commissioner and the OTS will be filed, and a waiver from the Federal Reserve
Board will be requested. No other regulatory approvals are required to effect
the Merger pursuant to the Merger Agreement. Neither Beverly nor St. Paul is
aware of any reason why all Required Regulatory Approvals should not be
obtained. See "THE MERGER -- Regulatory Approvals."
Accounting Treatment. The Merger is intended to qualify as a "pooling-of-
interests" for accounting and financial reporting purposes. Consummation of the
Merger is conditioned upon receipt by St. Paul of letters from each of its and
Beverly's respective independent public accountants stating their respective
opinions that the Merger so qualifies. See "THE MERGER -- Accounting Treatment."
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<PAGE>
Federal Income Tax Consequences. It is intended that the Merger will
qualify as a tax-free reorganization for federal income tax purposes and that
Beverly shareholders generally should not recognize gain or loss for federal
income tax purposes as a result of exchanging their Beverly Common Stock for the
St. Paul Common Stock issued in the Merger. See "THE MERGER -- Certain Federal
Income Tax Consequences."
Absence of Dissenters' Appraisal Rights. Neither the holders of St. Paul
Common Stock nor Beverly Common Stock have dissenters' rights in connection with
the Merger.
Effective Time. The Merger will become effective on the date and time set
forth in the certificate of merger to be filed with the Secretary of State of
the State of Delaware in accordance with applicable law (the "Effective Time").
The certificate of merger will be filed (i) on the fifth day after the last
Required Regulatory Approval is received and all applicable waiting periods have
expired, or (ii) such other time as the parties may agree. Beverly and St. Paul
expect that the Merger will be consummated in the Summer of 1998, or as soon as
possible after the receipt of all regulatory and shareholder approvals and the
expiration of all regulatory waiting periods.
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time by the mutual consent of Beverly and St. Paul and by either
of them individually under certain specified circumstances, including: by
Beverly if St. Paul's Common Stock price per share falls below a certain
threshold and St. Paul does not increase the Exchange Ratio pursuant to a
prescribed formula, and by either party if the Merger is not consummated by
December 31, 1998. See "THE MERGER -- Termination and Amendment of Merger
Agreement."
Exchange of Beverly Common Stock Certificates. Upon the Effective Time,
each holder of a certificate representing Beverly Common Stock issued and
outstanding immediately prior to the Merger will, upon the surrender thereof
(duly endorsed, if required) to St. Paul's transfer agent, Boston EquiServe, or
such other bank, trust company or transfer agent as St. Paul may select (the
"Exchange Agent"), be entitled to receive a certificate representing the number
of whole shares of St. Paul Common Stock into which such Beverly Common Stock
will have been automatically converted as part of the Merger. The Exchange Agent
will mail a letter of transmittal with instructions to all holders of record of
Beverly Common Stock immediately after the Effective Time for use in
surrendering their certificates for Beverly Common Stock in exchange for new
certificates representing St. Paul Common Stock and cash in lieu of fractional
shares. CERTIFICATES SHOULD NOT BE SURRENDERED BY BEVERLY SHAREHOLDERS UNTIL THE
LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED. See "THE MERGER -- Exchange
Ratio."
The Option Agreement. As a condition of and inducement to St. Paul's
entering into the Merger Agreement, St. Paul and Beverly entered into an option
agreement, dated as of March 15, 1998 (the "Option Agreement"). The Option
Agreement is intended to discourage persons from making alternative acquisition-
related proposals for Beverly, even if such persons were prepared to offer to
Beverly shareholders consideration that had a higher current market value than
the consideration to be received in exchange for each share of Beverly Common
Stock pursuant to the Merger Agreement.
If the Option granted pursuant to the Option Agreement becomes exercisable,
St. Paul may purchase at a price of $21.82 per share, subject to adjustment in
certain circumstances, up to 1,155,512 newly issued shares of Beverly Common
Stock or approximately 19.99% of the outstanding Beverly Common Stock at March
15, 1998. Pursuant to the terms of the Option Agreement, the number of shares
and price per share have been adjusted to reflect a 5% stock dividend paid by
Beverly on April 14, 1998 (the "Beverly Dividend"). The Option would become
exercisable primarily upon the occurrence of certain events that could result in
a third party acquiring control of Beverly. To the knowledge of Beverly, no
event that would permit exercise of the Option has occurred as of the date
hereof. If the Option becomes exercisable, St. Paul or any
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<PAGE>
permitted transferee of St. Paul may, under certain circumstances, require
Beverly to repurchase, for a formula price, the Option (in lieu of its exercise)
or any shares of Beverly Common Stock purchased upon exercise of the Option. See
"THE MERGER -- Option Agreement."
Interests of Certain Persons in the Merger. The Merger Agreement provides
that St. Paul shall amend its bylaws to increase the size of its Board of
Directors by one member and invite Beverly's Chairman, Anthony R. Pasquinelli,
to serve as an additional member of the Board of Directors of St. Paul upon
consummation of the Merger. As a director of St. Paul, Mr Pasquinelli also will
serve as a director of various St. Paul subsidiaries, and will receive fees
and benefits, including the ability to participate in St. Paul's nonqualified
retirement plan for non-employee directors, on the same basis as other
directors. Under St. Paul's 1995 Incentive Plan, upon initial election to the
Board, new directors such as Mr. Pasquinelli receive a non-qualified option to
purchase 14,063 shares of St. Paul Common Stock at a per share option price
equal to the fair market value of the shares on the date of grant. Under that
Plan, directors also are granted, on the date of each annual meeting of
shareholders, non-qualified options to purchase 2,250 shares of St. Paul Common
Stock at a per share option price equal to the fair market value of the shares
on the date of grant. As a director, Mr. Pasquinelli will be eligible for such
grants on the date of each St. Paul annual meeting subsequent to the closing of
the Merger. In addition, the members of Beverly Bank's advisory councils (none
of whom are directors or officers of Beverly or Beverly Bank) serving as of the
Effective Time will be invited promptly after the Effective Time to serve on
advisory boards of St. Paul Bank after the Bank Merger for a period of no less
than 12 months. Directors and officers of Beverly hold Beverly Options which
will be converted into options to acquire St. Paul Common Stock in connection
with the Merger. See "THE MERGER -- Interests of Certain Persons in the Merger."
St. Paul has agreed to (i) indemnify the directors, officers and employees
of Beverly as to certain matters, (ii) subject to the conditions set forth in
the Merger Agreement, purchase for the benefit of the persons serving as
executive officers and directors of Beverly immediately prior to the Effective
Time directors' and officers' liability insurance ("Tail Insurance") providing
coverage for a period of at least one year and (iii) use commercially reasonable
efforts to purchase for these same Beverly executive officers and directors Tail
Insurance for a period of one additional year. See "THE MERGER --
Indemnification."
In addition to the provisions of the Merger Agreement, severance will be
paid to employees of Beverly (including executive officers) who are not offered
positions continuing after the Effective Time. The severance will equal one
month's base compensation for each year of service with Beverly, with a minimum
of three month's severance, and a maximum of 12 months. Beverly also will pay
bonuses to certain employees, including certain executive officers, as an
incentive to remain with Beverly through the Effective Time. The bonuses
generally will be based on three months' base compensation, although two
executive officers, Messrs. Voss and Witwicki, will receive bonuses based on
nine months' base compensation. Under such severance and bonus programs, Messrs.
Van Winkle, Voss and Witwicki would receive approximately $____, $____ and
$____, respectively, assuming a June 30, 1998 Effective Time. After the
Effective Time, Messrs. Ofenloch and Stajkowski are expected to continue as
employees of St. Paul, serving as First Vice President of St. Paul Bank and
President of St. Paul Trust Company, respectively. Messrs. Ofenloch and
Stajkowski will receive compensation and benefits generally comparable with the
compensation and benefits received by them from Beverly. Messrs. Ofenloch and
Stajkowski also will be offered severance agreements in the same form as entered
into by the other Senior Vice Presidents and First Vice Presidents of St. Paul
and St. Paul Bank.
Each of the St. Paul and Beverly Boards of Directors are aware of these
interests and considered them, among other matters, in recommending the
respective shareholder approvals necessary to effect the Merger.
Description of St. Paul Capital Stock and Comparison of Shareholder Rights.
If the Merger is consummated, the holders of Beverly Common Stock will become
holders of St. Paul Common Stock. There are certain differences between the
rights of St. Paul shareholders and Beverly shareholders. For a description of
the capital stock of St. Paul and a summary of such differences in shareholder
rights, see "DESCRIPTION OF ST. PAUL CAPITAL STOCK AND COMPARISON OF SHAREHOLDER
RIGHTS."
Market Prices of Common Stock. Both St. Paul Common Stock and Beverly
Common Stock are traded on The Nasdaq Stock Market. The symbol for St. Paul
Common Stock is "SPBC". The symbol for Beverly Common Stock is "BEVB".
6
<PAGE>
The following table sets forth per share closing prices of the St. Paul
Common Stock and the Beverly Common Stock on The Nasdaq Stock Market as of the
dates specified and the pro forma equivalent market value of the St. Paul Common
Stock to be issued for the Beverly Common Stock in the Merger. See "MARKET
PRICES AND DIVIDENDS."
<TABLE>
<CAPTION>
Beverly
Last Reported Sale Price Common Stock
--------------------------- Pro Forma
St. Paul Beverly Equivalent Market
Date Common Stock Common Stock Value(a)
- ---- ------------ ------------ -----------------
<S> <C> <C> <C>
December 31, 1996...... $15.625 $16.383 $16.609
December 31, 1997...... 26.250 21.786 27.904
March 13, 1998 (b)..... 26.438 23.810 28.103
May __, 1998 (c).......
</TABLE>
- ----------
(a) Determined by multiplying the closing sales prices of St. Paul Common
Stock, as reported in the Wall Street Journal, on each date specified by
1.0630, the Exchange Ratio.
(b) Last trading date prior to announcement of the execution of the Merger
Agreement.
(c) The most recent practicable date prior to the date of this Proxy
Statement/Prospectus.
Shareholders are advised to obtain current market quotations for St. Paul
Common Stock. It is expected that the market price of St. Paul Common Stock will
fluctuate between the date of this Joint Proxy Statement/Prospectus and the date
on which the Merger is consummated. Because the market price of St. Paul Common
Stock may fluctuate and the Exchange Ratio is fixed, the market value of the
shares of St. Paul Common Stock that holders of Beverly Common Stock will
receive if the Merger is consummated may materially increase or decrease prior
to the Merger. No assurance can be given as to the market price of St. Paul
Common Stock at the time of the Merger.
7
<PAGE>
Comparative Per Share Data. Following are certain comparative selected
historical per share data of St. Paul and of Beverly, pro forma combined per
share data of St. Paul and Beverly, and equivalent pro forma per share data of
Beverly. The financial data is based on, and should be read in conjunction with,
the historical consolidated financial statements and the notes thereto of St.
Paul and of Beverly and the pro forma combined financial statements and the
notes thereto appearing in or incorporated by reference elsewhere in this Joint
Proxy Statement/Prospectus. All per share data of St. Paul, Beverly and pro
forma data are presented on a diluted basis and have been adjusted retroactively
to give effect to stock dividends and splits. The pro forma data are not
necessarily indicative of results which will be obtained on a combined basis.
The pro forma data have not been adjusted to reflect any of the improvements in
operating efficiencies that St. Paul anticipates may occur in the future due to
the Merger. The pro forma data are based upon the issuance of 6,141,554 shares
of St. Paul Common Stock at a 1.0630 Exchange Ratio.
<TABLE>
<CAPTION>
At or for the
Year Ended December 31,
----------------------------
1997 1996 1995
------ ----- -----
<S> <C> <C> <C>
Net Income per Diluted Common Share:
St. Paul - Historical................ $ 1.42 $0.74 $0.99
Beverly - Historical (a)............. 1.17 1.36 1.15
Pro Forma Combined (b)............... 1.37 0.81 1.01
Beverly Equivalent Pro Forma (c)..... 1.46 0.86 1.07
Cash Dividend per Common Share:
St. Paul - Historical................ 0.36 0.23 0.16
Beverly - Historical (a)............. 0.26 0.19 0.17
Pro Forma Combined (b)............... 0.36 0.23 0.16
Beverly Equivalent Pro Forma (c)..... 0.38 0.24 0.17
Book Value per Common Share:
St. Paul - Historical................ 12.22
Beverly - Historical (a)............. 11.86
Pro Forma Combined (b)............... 11.91
Beverly Equivalent Pro Forma (c)..... 12.66
- ----------------
</TABLE>
(a) Beverly per share data has been restated for a 5% stock dividend
distributed to shareholders on April 14, 1998.
(b) Pro forma combined amounts shown above reflect the proposed acquisition of
Beverly on a "pooling-of-interests" basis for each period shown as if the
Merger had occurred at the beginning of such period.
(c) Beverly equivalent pro forma per share amounts are calculated by
multiplying the pro forma combined amounts by the Exchange Ratio. See "THE
MERGER--Exchange Ratio".
8
<PAGE>
Summary Financial and Other Data
The following tables present summary historical financial and other data
for St. Paul and Beverly as of the dates and for the periods indicated. The
summary data are based upon, and should be read in conjunction with, the
historical and pro forma consolidated financial statements and notes thereto of
St. Paul and Beverly incorporated by reference or appearing elsewhere herein. As
to historical information, see "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE." For pro forma information, see "--Comparative Per Share Data" above
and "PRO FORMA COMBINED FINANCIAL STATEMENTS" appearing elsewhere herein. All
adjustments necessary for a fair presentation of financial position and results
of operations of interim periods have been included. The pro forma amounts are
not necessarily indicative of results which will be obtained on a combined
basis. The pro forma data have not been adjusted to reflect any of the
improvements in operating efficiencies that St. Paul anticipates may occur in
the future due to the Merger. The pro forma data are based upon the issuance of
6,141,554 shares of St. Paul Common Stock at a 1.0630 Exchange Ratio.
Selected Consolidated Financial Data - St. Paul
<TABLE>
<CAPTION>
Financial Condition Data - St. Paul: Year Ended December 31,
(Dollars in Thousands) -------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Assets
Cash and cash equivalents................... $ 204,683 $ 190,208 $ 186,621 $ 159,948 $ 336,331
Mortgage-backed and investment securitie.... 959,437 1,212,085 1,068,200 1,226,260 875,700
Loans receivable-net of accumulated
provision for loan losses.................. 3,205,443 2,782,116 2,683,890 2,568,381 2,304,319
Other assets................................ 187,773 172,761 177,968 176,948 189,026
---------- ---------- ---------- ---------- ----------
Total assets............................... $4,557,336 $4,357,170 $4,116,679 $4,131,537 $3,705,376
========== ========== ========== ========== ==========
Liabilities and stockholders' equity
Deposits.................................... 3,284,428 3,337,055 3,231,810 3,232,903 3,252,618
Borrowings.................................. 789,058 561,244 441,427 492,927 63,970
Other liabilities........................... 65,938 70,761 59,245 54,310 41,459
Stockholders' equity........................ 417,912 388,110 384,197 351,397 347,329
---------- ---------- ---------- ---------- ----------
Total liabilities and stockholders' equity. $4,557,336 $4,357,170 $4,116,679 $4,131,537 $3,705,376
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Operating Data - St. Paul: Year Ended December 31,
(Dollars in Thousands) -------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Interest income.............................. $ 315,217 $ 296,256 $ 278,750 $ 253,262 $ 256,937
Interest expense............................. 185,385 171,510 162,116 135,069 132,982
---------- ---------- ---------- ---------- ----------
Net interest income......................... 129,832 124,746 116,634 118,193 123,955
Provision for loan losses.................... -- 1,750 1,900 5,150 10,750
---------- ---------- ---------- ---------- ----------
Net interest income after provision for
loan losses................................ 129,832 122,996 114,734 113,043 113,205
Net gain on assets sold...................... 568 1,632 1,054 524 2,150
Income from real estate operations........... 4,139 2,517 2,807 3,150 2,969
Other operating income....................... 40,459 31,571 29,860 26,097 27,387
Other operating expense...................... 100,750 96,818 90,165 87,166 82,747
SAIF recapitalization........................ -- 21,000 -- -- --
Gain/(Loss) on foreclosed real estate........ 301 (1,215) (1,159) (2,145) (2,516)
Income taxes................................. 25,088 13,426 20,737 18,991 19,061
---------- ---------- ---------- ---------- ----------
Income from continuing operations (a)........ $ 49,461 $ 26,257 $ 36,394 $ 34,512 $ 41,387
========== ========== ========== ========== ==========
</TABLE>
9
<PAGE>
Significant Statistical Data - St. Paul
<TABLE>
<CAPTION>
At or for the Year Ended December 31,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
For the Period:
Income from continuing operations per
common share:
Basic (a).................................. $ 1.46 $ 0.77 $ 1.05 $ 0.96 $ 1.13
Diluted (a)................................ $ 1.42 $ 0.74 $ 0.99 $ 0.91 $ 1.08
Cash dividends paid per common share........ $ 0.36 $ 0.23 $ 0.16 $ 0.16 $ 0.14
Return on average assets (a)................ 1.10% 0.62% 0.90% 0.88% 1.10%
Return on average stockholders' equity
(net worth) (a)............................ 12.34% 6.85% 9.86% 9.72% 12.77%
Average equity as a percentage of
average assets............................. 8.90% 9.04% 9.10% 9.05% 8.64%
Net yield on average earning assets......... 3.01% 3.07% 3.01% 3.15% 3.46%
Noninterest expenses to average assets...... 2.24% 2.78% 2.22% 2.22% 2.21%
At End of Period:
Book value per common share................. $ 12.22 $ 11.36 $ 10.93 $ 9.98 $ 9.41
Tangible book value per common share........ $ 12.10 $ 11.22 $ 10.89 $ 9.93 $ 9.35
Common shares outstanding (000's)........... 34,205 34,164 35,156 35,215 36,907
Shareholders' equity to total assets........ 9.17% 8.91% 9.33% 8.51% 9.37%
Nonperforming assets to total assets........ 0.23% 0.29% 0.71% 0.66% 1.34%
Allowance for loan losses to total loans.... 1.06% 1.28% 1.42% 1.62% 1.98%
Net loan chargeoffs to average assets....... 0.03% 0.10% 0.14% 0.24% 0.37%
Allowance for loan losses to nonperforming
loans...................................... 391.88% 377.19% 216.62% 424.72% 156.99%
Number of banking offices................... 53 52 52 52 50
Capital Ratios (Bank): (b)
Tier 1 risk-based capital ratio............. 15.85% 16.02% 16.18% 15.33% 15.33%
Total risk-based capital ratio.............. 17.12% 17.27% 17.47% 16.65% 16.67%
Tier 1 Leverage ratio....................... 8.61% 8.80% 8.95% 8.51% 9.50%
</TABLE>
- ---------------------
(a) In 1996, without the $21.0 million non-recurring charge to recapitalize the
Savings Association Insurance Fund, St. Paul's net income would have been
$40.2 million, or $1.18 per basic share outstanding and $1.12 per diluted
share outstanding. In addition, return on average assets and return on
average equity would have been 0.95% and 10.48%, respectively.
(b) Capital ratios are for St. Paul Bank.
10
<PAGE>
Selected Consolidated Financial Data - Beverly
<TABLE>
<CAPTION>
Year Ended December 31,
Financial Condition Data - Beverly: -----------------------------------------------------
(Dollars in Thousands) 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Assets
Cash and cash equivalents.................... $ 32,434 $ 30,598 $ 52,710 $ 35,072 $ 24,297
Mortgage-backed and investment securities.... 188,189 206,327 207,607 213,765 208,179
Loans receivable-net of accumulated
provision for loan losses................... 423,566 368,602 308,636 287,047 263,491
Other assets................................. 25,045 24,517 22,250 25,455 23,668
-------- -------- -------- -------- --------
Total assets............................... $669,234 $630,044 $591,203 $561,339 $519,635
======== ======== ======== ======== ========
Liabilities and stockholders' equity
Deposits..................................... $590,052 $560,146 $527,131 $504,445 $459,132
Borrowings................................... 3,334 2,542 17,292 11,414 13,346
Other liabilities............................ 7,429 5,410 5,819 4,672 7,102
Stockholders' equity......................... 68,419 61,946 40,961 40,808 40,055
-------- -------- -------- -------- --------
Total liabilities and stockholders' equity. $669,234 $630,044 $591,203 $561,339 $519,635
======== ======== ======== ======== ========
Year Ended December 31,
Operating Data - Beverly: -----------------------------------------------------
(Dollars in Thousands) 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
Interest income............................... $ 45,621 $ 42,896 $ 39,970 $ 35,206 $ 33,468
Interest expense.............................. 20,119 19,446 17,184 12,949 12,805
-------- -------- -------- -------- --------
Net interest income.......................... 25,502 23,450 22,786 22,257 20,663
Provision for loan losses..................... 360 155 159 311 1,299
-------- -------- -------- -------- --------
Net interest income after provision for
loan losses................................. 25,142 23,295 22,627 21,946 19,364
Net gain on assets sold....................... 2,041 376 604 207 1,421
Income from fiduciary activity................ 2,232 2,008 1,927 1,872 1,764
Other operating income........................ 5,792 5,787 5,339 5,938 6,407
Other operating expense....................... 25,170 22,336 21,442 21,005 21,781
Gain/(Loss) on foreclosed real estate......... 82 615 26 130 (160)
Income taxes.................................. 3,118 2,956 2,877 2,672 2,143
-------- -------- -------- -------- --------
Income from continuing operations............. $ 7,001 $ 6,789 $ 6,204 $ 6,416 $ 4,872
======== ======== ======== ======== ========
</TABLE>
11
<PAGE>
Significant Statistical Data - Beverly
<TABLE>
<CAPTION>
At or for the Year Ended December 31,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
For the Period:
Income from continuing operations
per common share:
Basic (a).................................. $ 1.22 $ 1.40 $ 1.16 $ 1.22 $ 0.95
Diluted (a)................................ $ 1.17 $ 1.36 $ 1.15 $ 1.22 $ 0.95
Cash dividends paid per common share (a).... $ 0.26 $ 0.19 $ 0.17 $ 0.16 $ 0.15
Return on average assets.................... 1.09% 1.10% 1.09% 1.20% 0.95%
Return on average stockholders' equity
(net worth)................................ 10.82% 14.21% 13.37% 16.10% 12.38%
Average equity as a percentage of average
assets..................................... 10.06% 7.77% 8.17% 7.47% 7.66%
Net yield on average earning assets......... 4.46% 4.31% 4.49% 4.66% 4.52%
Noninterest expenses to average assets...... 3.91% 3.63% 3.77% 3.93% 4.24%
At End of Period:
Book value per common share (a)............. $ 11.86 $ 10.86 $ 9.39 $ 7.66 $ 7.78
Tangible book value per common share (a).... $ 11.73 $ 10.68 $ 9.09 $ 7.36 $ 7.39
Shareholders' equity to total assets........ 10.22% 9.83% 6.93% 7.27% 7.71%
Common shares outstanding (000's) (a)....... 5,769 5,706 4,364 5,328 5,147
Nonperforming assets to total assets........ 0.38% 0.33% 0.45% 0.62% 0.81%
Allowance for loan losses to total loans.... 0.98% 1.08% 1.13% 1.37% 1.51%
Net loan chargeoffs (recoveries) to average
assets..................................... 0.03% (0.06%) 0.11% 0.06% 0.34%
Allowance for loan losses to nonperforming
loans...................................... 170.58% 235.78% 197.64% 167.29% 142.46%
Number of banking offices................... 13 12 11 10 10
Capital Ratios (Bank): (b)
Tier 1 risk-based capital ratio............. 13.07% 13.06% 13.42% 14.13% 13.57%
Total risk-based capital ratio.............. 14.01% 14.09% 14.46% 15.46% 14.99%
Tier 1 Leverage ratio....................... 8.72% 8.19% 7.81% 7.60% 7.58%
</TABLE>
- ---------------------------
(a) Beverly per share data has been restated for a 5% stock dividend distributed
to shareholders on April 14, 1998.
(b) Capital ratios are computed for Beverly Bank.
12
<PAGE>
Pro Forma Combined Financial Data - Unaudited
<TABLE>
<CAPTION>
Year Ended December 31,
Financial Condition Data - Pro Forma: (a) -------------------------------------------------------------
(Dollars in Thousands) 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Assets
Cash and cash equivalents.................... $ 239,765 $ 220,806 $ 239,331 $ 195,020 $ 360,628
Mortgage-backed and investment securities.... 1,147,366 1,418,412 1,275,807 1,440,025 1,083,879
Loans receivable-net of accumulated
provision for loan losses................... 3,643,637 3,150,718 2,992,526 2,855,428 2,567,810
Other assets................................. 195,029 197,278 200,218 202,403 212,694
---------- ---------- ---------- ---------- ----------
Total assets............................... $5,225,797 $4,987,214 $4,707,882 $4,692,876 $4,225,011
========== ========== ========== ========== ==========
Liabilities and stockholders' equity
Deposits..................................... $3,874,480 $3,897,201 $3,758,941 $3,737,348 $3,711,750
Borrowings................................... 792,392 563,786 458,719 504,341 77,316
Other liabilities............................ 78,628 76,171 65,064 58,982 48,561
Stockholders' equity......................... 480,297 450,056 425,158 392,205 387,384
---------- ---------- ---------- ---------- ----------
Total liabilities and stockholders' equity. $5,225,797 $4,987,214 $4,707,882 $4,692,876 $4,225,011
========== ========== ========== ========== ==========
Year Ended December 31,
Operating Data - Pro Forma: (a) -------------------------------------------------------------
(Dollars in Thousands) 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
Interest income............................... $ 360,838 $ 339,152 $ 318,720 $ 288,468 $ 290,405
Interest expense.............................. 205,504 190,956 179,300 148,018 145,787
---------- ---------- ---------- ---------- ----------
Net interest income.......................... 155,334 148,196 139,420 140,450 144,618
Provision for loan losses..................... 360 1,905 2,059 5,461 12,049
---------- ---------- ---------- ---------- ----------
Net interest income after provision for
loan losses................................. 154,974 146,291 137,361 134,989 132,569
Net gain on assets sold....................... 2,609 2,008 1,658 731 3,571
Income from fiduciary activity................ 2,232 2,008 1,927 1,872 1,764
Income from real estate operations............ 4,139 2,517 2,807 3,150 2,969
Other operating income........................ 46,251 37,358 35,199 32,035 33,794
Other operating expense....................... 125,920 119,154 111,607 108,171 104,528
SAIF recapitalization......................... -- 21,000 -- -- --
Gain/(Loss) on foreclosed real estate......... 383 (600) (1,133) (2,015) (2,676)
Income taxes.................................. 28,206 16,382 23,614 21,663 21,204
---------- ---------- ---------- ---------- ----------
Income from continuing operations (b)......... $ 56,462 $ 33,046 $ 42,598 $ 40,928 $ 46,259
========== ========== ========== ========== ==========
</TABLE>
13
<PAGE>
Significant Statistical Data - Pro Forma Combined
<TABLE>
<CAPTION>
At or for the Year Ended December 31,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
For the Period: (a)
Income from continuing operations per
common share:
Basic (b) (c).............................. $ 1.41 $ 0.85 $ 1.06 $ 0.99 $ 1.10
Diluted (b) (c)............................ $ 1.37 $ 0.81 $ 1.01 $ 0.94 $ 1.06
Cash dividends paid per common share (c).... $ 0.36 $ 0.23 $ 0.16 $ 0.16 $ 0.14
Return on average assets (b)................ 1.10% 0.68% 0.92% 0.92% 1.09%
Return on average stockholders' equity
(net worth) (b)............................ 12.13% 7.67% 10.25% 10.36% 12.73%
Average equity as a percentage of
average assets (b)......................... 9.04% 8.88% 8.99% 8.86% 8.53%
Net yield on average earning assets......... 3.18% 3.23% 3.18% 3.32% 3.58%
Noninterest expenses to average assets...... 2.45% 2.89% 2.41% 2.43% 2.45%
At End of Period: (a)
Book value per common share (c)............. $ 11.91 $ 11.19 $ 10.68 $ 9.59 $ 9.14
Tangible book value per common share (c).... $ 11.93 $ 11.04 $ 10.61 $ 9.51 $ 9.04
Common shares outstanding (000's) (c)....... 40,337 40,229 39,795 40,879 42,378
Shareholders' equity to total assets........ 9.19% 9.02% 9.03% 8.36% 9.17%
Nonperforming assets to total assets........ 0.25% 0.29% 0.68% 0.65% 1.27%
Allowance for loan losses to total loans.... 1.05% 1.25% 1.39% 1.59% 1.93%
Net loan chargeoffs to average assets....... 0.03% 0.08% 0.13% 0.22% 0.36%
Allowance for loan losses to nonperforming
loans...................................... 343.63% 355.74% 214.89% 374.84% 155.72%
Number of banking offices................... 66 64 63 62 60
Capital Ratios (Bank): (d)
Tier 1 risk-based capital ratio............. 15.42% 15.60% 15.82% 15.19% 15.14%
Total risk-based capital ratio.............. 16.63% 16.82% 17.07% 16.51% 16.49%
Tier 1 Leverage ratio....................... 8.62% 8.72% 8.81% 8.40% 9.27%
</TABLE>
- ----------
(a) Pro Forma Combined information has been restated to assume that the Merger
had occurred at the beginning of each of the indicated periods.
(b) In 1996, without the $21.0 million non-recurring charge by St. Paul to
recapitalize the Savings Association Insurance Fund, pro forma net income
would have been $46.9 million, or $1.20 per basic share outstanding and
$1.14 per diluted share outstanding. In addition, pro forma return on
average assets and return on average equity would have been 0.97% and
10.89%, respectively.
(c) All share and per share amounts have been restated to give effect to all
stock splits and dividends.
(d) Capital ratios are computed for Pro Forma Combined St. Paul Bank and Beverly
Bank.
14
<PAGE>
THE ST. PAUL SPECIAL MEETING
General
This Joint Proxy Statement/Prospectus is first being mailed to holders of
St. Paul Common Stock on or about May __, 1998 and is accompanied by the Notice
of Special Meeting and a form of proxy that is solicited by the St. Paul Board
for use at the St. Paul Special Meeting to be held on June __, 1998, at ____
a.m., local time, at ________.
Matters to be Considered
At the St. Paul Special Meeting, holders of St. Paul Common Stock will be
asked, in accordance with the requirements of the Delaware General Corporation
Law (the "DGCL"), to consider and approve the Certificate Amendment and, in a
separate vote, the Share Issuance. Approval of the Certificate Amendment and the
Share Issuance by holders of St. Paul Common Stock is a condition to the Merger.
The holders of St. Paul Common Stock may also be asked to vote upon a proposal
to adjourn or postpone the St. Paul Special Meeting, which adjournment or
postponement could be used for the purpose, among others, of allowing additional
time for the soliciting of additional votes in connection with obtaining
approval of the Certificate Amendment or the Share Issuance.
Record Date and Voting
The Board of Directors has fixed ____, 1998 as the record date for
determination of holders St. Paul Common Stock entitled to notice of and to vote
at the St. Paul Special Meeting (the "St. Paul Record Date"). Accordingly, only
holders of shares of record at the close of business on the St. Paul Record Date
of St. Paul Common Stock will be entitled to notice of and to vote at the St.
Paul Special Meeting. The number of shares of St. Paul Common Stock entitled to
vote at the St. Paul Special Meeting is ______. Each share of St. Paul Common
Stock entitles its holder to one vote. As of the St. Paul Record Date, ____
shares of St. Paul Common Stock, or __% of the shares of St. Paul Common Stock
entitled to vote at the St. Paul Special Meeting, were beneficially owned by
directors and executive officers of St. Paul. It is currently expected that each
such director and executive officer of St. Paul will vote the shares of St. Paul
Common Stock beneficially owned by him or her for approval of the Certificate
Amendment and the Share Issuance. In addition, as of the St. Paul Record Date,
Beverly owned 1,000 shares of St. Paul Common Stock. As of the Record Date,
directors and executive officers of Beverly beneficially owned 1,125 shares of
St. Paul Common Stock, or significantly less than one percent of the shares of
St. Paul stock entitled to vote at the St. Paul Special Meeting. Also as of the
Record Date, the banking and trust affiliates of Beverly held less than ___
percent of the outstanding shares of St. Paul Common Stock in a fiduciary
capacity.
The Board of Directors of St. Paul is not aware of any matters other than
the proposals regarding the Certificate Amendment and the Share Issuance (or a
proposal to adjourn or postpone the St. Paul Special Meeting as necessary) that
may be properly brought before the St. Paul Special Meeting. If any other
matters properly come before the St. Paul Special Meeting, the persons named in
the accompanying proxy will vote the shares represented by all properly executed
proxies on such matters in such manner as shall be determined by a majority of
the Board of Directors of St. Paul.
Vote Required; Revocability of Proxies
Abstentions from voting and broker non-votes will be counted for purposes
of determining whether a quorum exists and will not be deemed to have been cast
either "for" or "against" the Certificate Amendment or the Share Issuance at the
St. Paul Special Meeting. Adoption and approval of the Certificate Amendment
requires the affirmative vote of holders of a majority of outstanding shares of
St. Paul Common Stock entitled to vote at the St. Paul Special Meeting.
Therefore, abstentions and broker non-votes will have the same effect as votes
against adoption and
15
<PAGE>
approval of the Certificate Amendment and therefore against the consummation of
the Merger. Approval of the Share Issuance requires the affirmative vote of a
majority of all shares of St. Paul Common Stock represented, in person or by
proxy, and voting at the meeting and the presence of a quorum of at least a
majority of the issued and outstanding shares of St. Paul Common Stock.
ACCORDINGLY, THE ST. PAUL BOARD URGES HOLDERS OF ST. PAUL COMMON STOCK TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
The accompanying form of proxy is for use at the meeting if a holder of St.
Paul Common Stock is unable to attend in person. The proxy may be revoked by
such holder at any time before it is exercised by submitting to the Corporate
Secretary of St. Paul written notice of revocation, a properly executed proxy of
a later date or by attending the meeting and electing to vote in person. Written
notices of revocation and other communications with respect to the revocation of
St. Paul proxies should be addressed to St. Paul Bancorp, Inc., 6700 West North
Avenue, Chicago, Illinois 60707, Attention: Corporate Secretary. All shares
represented by valid proxies received pursuant to this solicitation, and not
revoked before they are exercised, will be voted in the manner specified
therein. If no specification is made, the proxies will be voted in favor of
approval of the Certificate Amendment and the Share Issuance; provided that no
proxy that is voted against approval of the Certificate Amendment or the Share
Issuance will be voted in favor of any adjournment or postponement of the St.
Paul Special Meeting for the purpose of soliciting additional proxies in
connection with obtaining approval of the Certificate Amendment or the Share
Issuance, respectively.
Solicitation of Proxies
In addition to solicitation by mail, directors, officers and employees of
St. Paul may solicit proxies for the Special Meeting from shareholders
personally or by telephone or telegram without additional remuneration therefor.
The cost of soliciting proxies will be paid by St. Paul. In addition, St. Paul
has retained Morrow & Co., a proxy solicitation firm, to assist in such
solicitation. The fee to be paid by St. Paul to such firm is $____, plus
reasonable out-of-pocket expenses. St. Paul will also make arrangements with
brokerage firms and other custodians, nominees and fiduciaries to send proxy
materials to their principals and will reimburse such parties for their expenses
in doing so.
THE BEVERLY SPECIAL MEETING
Matters to be Considered
This Joint Proxy Statement/Prospectus is first being mailed to the holders
of Beverly Common Stock on or about May __, 1998, and is accompanied by a proxy
card furnished in connection with the solicitation of proxies by the Beverly
Board of Directors for use at the Beverly Special Meeting. The Beverly Special
Meeting is scheduled to be held on June __, 1998, at ___ a.m., at ______. At the
Beverly Special Meeting, the holders of Beverly Common Stock will consider and
vote upon: (i) the proposal to approve and adopt the Merger Agreement and the
Merger provided for therein, and (ii) such other business as may properly come
before the Beverly Special Meeting, or any adjournments or postponements thereof
including, without limitation, a motion to adjourn the Beverly Special Meeting
to another time and/or place for the purpose of soliciting additional proxies in
order to approve the Merger Agreement and the Merger or otherwise.
Record Date and Voting
The Board of Directors of Beverly has fixed the close of business on May
__, 1998 as the record date for the determination of the holders of Beverly
Common Stock entitled to receive notice of and to vote at the Beverly Special
Meeting (the "Beverly Record Date"). Only holders of record of Beverly Common
Stock at the close of business on the Beverly Record Date will be entitled to
vote
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at the Beverly Special Meeting or at any adjournment or postponement thereof. At
the close of business on the Beverly Record Date, there were ____ shares of
Beverly Common Stock outstanding and entitled to vote at the Beverly Special
Meeting, held by approximately 372 shareholders of record. No shares of
preferred stock of Beverly are issued and outstanding.
Each holder of Beverly Common Stock on the Beverly Record Date will be
entitled to one vote for each share held of record upon each matter properly
submitted at the Beverly Special Meeting or at any adjournment or postponement
thereof. The presence, in person or by proxy, of the holders of a majority of
the shares of Beverly Common Stock issued and outstanding and entitled to be
voted at the Beverly Special Meeting is necessary to constitute a quorum.
Abstentions and broker non-votes will be included in the calculation of the
number of shares represented at the Beverly Special Meeting for purposes of
determining whether a quorum has been achieved. Because approval of the Merger
Agreement requires the affirmative vote of the holders of at least a majority of
the issued and outstanding shares of Beverly Common Stock entitled to be voted
at the Special Meeting, abstentions and broker non-votes will have the same
effect as votes against the Merger Agreement.
If a quorum is not obtained, or if fewer shares of Beverly Common Stock are
voted in favor of the proposal for approval of the Merger Agreement than the
number required for approval, it is expected that the Beverly Special Meeting
will be adjourned for the purpose of allowing time for obtaining additional
proxies. In such event, proxies will be voted to approve an adjournment, except
for proxies as to which instructions have been given to vote against the Merger
Agreement. The holders of a majority of the shares present at the Beverly
Special Meeting would be required to approve any adjournment of the Beverly
Special Meeting.
If the enclosed proxy card is properly executed and received by Beverly in
time to be voted at the Special Meeting, the shares represented thereby will be
voted in accordance with the instructions marked thereon. Executed proxies with
no instructions indicated thereon will be voted "FOR" the proposal to approve
and adopt the Merger Agreement and the Merger provided for therein.
The Board of Directors of Beverly is not aware of any matters other than
the proposal to approve and adopt the Merger Agreement and the Merger (or a
proposal to adjourn or postpone the Beverly Special Meeting as necessary) that
may be properly brought before the Special Meeting. If any other matters
properly come before the Beverly Special Meeting, the persons named in the
accompanying proxy will vote the shares represented by all properly executed
proxies on such matters in such manner as shall be determined by a majority of
the Board of Directors of Beverly.
BEVERLY SHAREHOLDERS SHOULD NOT FORWARD ANY BEVERLY COMMON STOCK
CERTIFICATES WITH THEIR PROXY CARDS. IF THE MERGER IS CONSUMMATED, STOCK
CERTIFICATES SHOULD BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A
LETTER OF TRANSMITTAL WHICH WOULD BE SENT TO BEVERLY SHAREHOLDERS BY THE
EXCHANGE AGENT PROMPTLY AFTER THE EFFECTIVE TIME.
Vote Required; Revocability of Proxies
The affirmative vote of at least a majority of the issued and outstanding
shares of Beverly Common Stock entitled to be voted at the Special Meeting is
required in order to approve and adopt the Merger Agreement and the Merger
provided for therein.
THE REQUIRED VOTE OF THE BEVERLY SHAREHOLDERS WITH RESPECT TO THE MERGER
AGREEMENT IS BASED UPON THE TOTAL NUMBER OF OUTSTANDING SHARES OF BEVERLY COMMON
STOCK AND NOT UPON THE NUMBER OF SHARES WHICH ARE ACTUALLY VOTED. ACCORDINGLY,
THE FAILURE TO SUBMIT A PROXY CARD OR TO VOTE IN PERSON AT THE SPECIAL
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MEETING OR THE ABSTENTION FROM VOTING BY A SHAREHOLDER WILL HAVE THE SAME EFFECT
AS A VOTE "AGAINST" THE MERGER AGREEMENT AND THE MERGER.
All of the directors and executive officers of Beverly, who beneficially
owned, as of the Beverly Record Date, an aggregate of ____ shares of Beverly
Common Stock (excluding all Beverly Options) or approximately ___% of the
outstanding shares of Beverly Common Stock, have entered into the Stockholder
Agreement with St. Paul pursuant to which they have each agreed, among other
things, to certain transfer restrictions and to vote all shares of Beverly
Common Stock with respect to which they have the right to vote (whether owned as
of the date of the Stockholder Agreement or thereafter acquired) in favor of the
Merger Agreement, the Merger and the other transactions contemplated by the
Merger Agreement and against any third party merger proposal. No separate
consideration was paid to any of the directors or the executive officers for
entering into the Stockholder Agreement. St. Paul required that the Stockholder
Agreement be executed as a condition to St. Paul entering into the Merger
Agreement.
The presence of a shareholder at the Beverly Special Meeting will not
automatically revoke such shareholder's proxy. However, a shareholder may revoke
a proxy at any time prior to its exercise by (i) delivering to _____, Beverly
Bancorporation, Inc., 16345 South Harlem Avenue, Suite 3E, Chicago, Illinois
60477, a written notice of revocation prior to the Special Meeting, (ii)
delivering to Beverly prior to the Beverly Special Meeting a duly executed proxy
bearing a later date, or (iii) attending the Beverly Special Meeting and voting
in person.
The obligations of Beverly and St. Paul to consummate the Merger Agreement
are subject, among other things, to the condition that the Merger Agreement and
the Merger shall have been approved and adopted by the affirmative vote of the
holders of at least a majority of the issued and outstanding shares of Beverly
Common Stock entitled to vote thereon. See "The Merger -- Conditions to the
Merger."
Solicitation of Proxies
In addition to solicitation by mail, directors, officers and employees of
Beverly may solicit proxies for the Special Meeting from shareholders personally
or by telephone or telegram without additional remuneration therefor. In
addition, Beverly has retained Morrow & Co. to assist in such solicitation. The
cost of soliciting proxies will be paid by Beverly. The fee to be paid by
Beverly to Morrow & Co. is $____, plus reasonable out-of-pocket expenses.
Beverly will also make arrangements with brokerage firms and other custodians,
nominees and fiduciaries to send proxy materials to their principals and will
reimburse such parties for their expenses in doing so.
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THE MERGER
The information in this Section is a summary which is qualified in its
entirety by reference to the full text of the Merger Agreement (including each
of the exhibits thereto), the Stockholder Agreement and the Option Agreement,
all of which are incorporated herein by reference and the material features of
which are described in this Joint Proxy Statement/Prospectus. A copy of the
Merger Agreement (including each of exhibits thereto) and the other documents
described in this Joint Proxy Statement/Prospectus will be provided promptly
without charge upon oral or written request addressed to Clifford M. Sladnick,
Senior Vice President, General Counsel and Secretary, St. Paul Bancorp, Inc.,
6700 West North Avenue, Chicago, Illinois 60707, telephone (773) 804-2282.
The Parties
On March 15, 1998, St. Paul and Beverly entered into the Merger Agreement.
The Merger Agreement provides for, among other things, the merger of Beverly
with and into St. Paul.
St. Paul. St. Paul is a Delaware corporation and the holding company of St.
Paul Bank, its wholly owned federal savings bank subsidiary, both of which are
headquartered in Chicago, Illinois. Deposits at St. Paul Bank are FDIC insured.
St. Paul Bank is the largest independent savings institution in the State of
Illinois. Through St. Paul Bank, St. Paul provides a variety of checking and
savings deposit products, and single-family, consumer and income-producing
property loan products through 53 Chicago-area branches, 17 of which operate in
high-volume grocery superstores. St. Paul also operates a network of 500 ATMs in
its market. In addition to its banking and related operations, St. Paul also
operates other financial services subsidiaries. Serve Corps is a residential
mortgage broker acquired by St. Paul in early 1998. INI is a discount brokerage
operation, offering a full range of investment products including mutual funds,
equities and bonds. ANI offers a variety of annuity products and SPF Insurance
is an independent insurance agent, offering a full range of insurance products
including homeowners, automobile, recreational vehicles/boats, umbrella
liability, life/health, disability income, and business and commercial lines for
business owners. Through SPF Development, the Company engages in real estate
development projects.
St. Paul Common Stock is quoted on The Nasdaq Stock Market under the symbol
"SPBC". The address of St. Paul's principal executive offices is St. Paul
Bancorp, Inc., 6700 West North Avenue, Chicago, Illinois 60707 and its telephone
number is (773) 622-5000. Additional information regarding St. Paul is
incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
St. Paul, as a holding company, is regulated by the OTS. St. Paul Bank, as
a federal savings bank, also is regulated by the OTS and as to certain matters
by the FDIC and the Federal Reserve Board. INI is regulated by the SEC and the
National Association of Securities Dealers, Inc., and Serve Corps is regulated
by the State of Illinois.
Beverly. Beverly is a Delaware corporation and the holding company of
Beverly Bank, its wholly owned national bank subsidiary, and Beverly Trust
Company, an Illinois state-chartered trust company. Beverly is headquartered in
Tinley Park, Illinois. Deposits at Beverly Bank are FDIC insured. Through
Beverly Bank, Beverly is engaged primarily in the business of attracting
deposits from the public and using such deposits, with other funds, to make
various types of loans and investments. In addition to traditional consumer
banking products and services, Beverly Bank offers commercial banking services,
including deposit and lending products. Beverly currently serves customers from
12 locations located in the Chicago area. Its principal market encompasses
Chicago and the south and southwest portions of the Chicago metropolitan area.
Beverly Trust Company provides a wide array of trust services for individuals
and corporations, including asset management primarily of personal living trusts
and corporate employee benefit plans, and including administration of land
trusts. Beverly Common Stock is quoted on The Nasdaq Stock Market under the
symbol "BEVB". The address of Beverly's principal executive offices is 16345
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South Harlem Avenue, Suite 3E, Chicago, Illinois 60477, and its telephone number
is (708) 614-5070.
Beverly, as a holding company, is regulated primarily by the Federal
Reserve Board at the federal level and by the Illinois Commissioner. Beverly
Bank, as a national bank, is regulated by the Office of the Comptroller of the
Currency ("OCC"), the FDIC and as to certain matters, the Federal Reserve Board.
Background of the Merger
Beverly was incorporated in Delaware on June 13, 1996 as a wholly owned
subsidiary of Beverly Bancorporation, Inc., an Illinois corporation ("Beverly
Illinois"). Beverly Illinois was organized in 1969 and prior to the
reincorporation of Beverly Illinois as a Delaware corporation (the
"Reincorporation") owned all of the outstanding capital stock of Beverly Bank
and Beverly Trust Company. Pursuant to the Reincorporation, which took place on
August 16, 1996, Beverly Illinois was merged with and into Beverly and Beverly
is the surviving corporation. As a result of the Reincorporation, Beverly owns
all of the outstanding capital stock of Beverly Bank and Beverly Trust Company.
In connection with the Reincorporation, each outstanding share of common stock
of Beverly Illinois was converted into five shares of Beverly Common Stock. On
August 27, 1996, Beverly sold and issued to the public 1,150,000 shares of
Beverly Common Stock at a price of $15.00 per share.
Beginning prior to the Reincorporation, the Beverly Board of Directors has
considered various strategic alternatives consistent, in its view, with the
long-term best interests of Beverly and its shareholders, including continued
growth as an independent company, expansion of operations through an
acquisition, a merger of equals or strategic alliance transaction, and pursuit
of a transaction involving the sale of Beverly.
At various times, Beverly has been contacted by or has contacted banking
organizations and other financial services firms to determine the level of
interest of Beverly or the contacted party in a possible business combination.
Based on Beverly's ongoing evaluation of strategic alternatives, and following
such contacts, the Beverly Board of Directors has authorized senior management
and its advisors to conduct, on a case-by-case basis, exploratory discussions
concerning possible business combination transactions with third parties. Where
necessary or appropriate, Beverly required such parties to execute customary
confidentiality agreements to preserve the confidential nature of any
proprietary information of Beverly disclosed during the course of such
preliminary discussions. Through the end of 1997, senior management of Beverly
had met with several banking organizations that had contacted Beverly regarding
a possible business combination. Based upon Beverly's evaluation of price, terms
and other factors being discussed, none of the exploratory discussions resulted
in a decision by Beverly to engage in a merger or acquisition transaction, or
otherwise resulted in any agreement as to price or terms for such a transaction.
In December 1997, representatives of McDonald approached St. Paul senior
management, indicating that Beverly may be a suitable candidate for a business
combination transaction. St. Paul pursued discussions with McDonald, and
conducted a further internal evaluation. In mid-January 1998, McDonald met with
Anthony R. Pasquinelli, Chairman of the Board of Beverly, to discuss a possible
transaction with St. Paul.
In early February 1998, St. Paul indicated to McDonald its interest in
pursuing a possible transaction. On February 11, 1998, Messrs. Joseph C. Scully,
Chairman and Chief Executive of St. Paul, Patrick J. Agnew, President and Chief
Operating Officer of St. Paul, and Robert N. Parke, Senior Vice President and
Chief Financial Officer of St. Paul, met with representatives of McDonald and
Mr. Pasquinelli. At that meeting, the representatives of St. Paul and Beverly
discussed the possibility of a business combination, but no specific price or
terms were agreed upon.
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On February 13, 1998, Beverly and St. Paul executed a mutual
confidentiality agreement to preserve the confidential nature of any proprietary
information of St. Paul or Beverly disclosed during the course of discussions.
Thereafter, the parties exchanged various financial and other information
regarding each other.
On February 23, 1998, the St. Paul Board of Directors met and senior
management advised the Board of the status of discussions with Beverly regarding
the possible business combination. Management's presentation included a detailed
financial analysis and the proposed terms of the acquisition, as well as general
information concerning the transaction. The Board of Directors authorized St.
Paul management to pursue further discussions on the terms presented to the
Board meeting.
On March 6, 1998, Mr. Pasquinelli and Richard I. Polanek, a member of the
Beverly Board of Directors, along with representatives of McDonald, met with Mr.
Scully and Mr. Agnew to discuss the structure of a business combination between
Beverly and St. Paul. No substantive discussion of price and terms was held.
Later that day, St. Paul senior management presented a possible exchange ratio
and other substantive merger terms to representatives of McDonald. On March 10,
1998, Mr. Pasquinelli and Mr. Polanek, along with representatives of McDonald,
met with Messrs. Scully, Agnew and Parke, and other members of St. Paul's senior
management, to discuss the financial terms of a possible business combination
between Beverly and St. Paul. Although no definitive agreement was reached at
that meeting, the parties determined to continue discussions based on the price
and other deal terms then presented by St. Paul.
On March 11, 1998, the Beverly Board of Directors met and Messrs.
Pasquinelli and Polanek and representatives of McDonald advised the Board of the
status of discussions with St. Paul regarding a possible business combination
between Beverly and St. Paul. The Board of Directors authorized Beverly's senior
management and McDonald to pursue further discussions with St. Paul on the
financial and other terms presented and to conduct further due diligence of St.
Paul. The Board based its action on the perceived level of interest by St. Paul
in pursuing a transaction, the likelihood that a transaction with St. Paul would
be consummated if mutually acceptable terms could be agreed upon, St. Paul's
large market capitalization and excellent financial position, St. Paul's
existing presence in the Chicago area, the potential synergies resulting from a
business combination with St. Paul and the expectation that a negotiated
transaction with St. Paul would maximize Beverly shareholder value. The Beverly
Board also formally approved the retention of McDonald as Beverly's financial
advisor.
Following the March 11, 1998 Beverly Board of Directors meeting, management
of Beverly advised St. Paul of its intention to continue discussions. St. Paul
provided to Beverly draft documentation for the Merger.
On March 12, 1998, St. Paul's and Beverly's management teams and financial
advisors commenced detailed due diligence reviews of the other party. These
reviews included, among other things, (i) meetings with senior officers to
review strategic plans and objectives, (ii) analyses of financial information,
projections and pro forma projections, (iii) a review of credit reports and
other management reports, (iv) discussions with management regarding
underwriting standards and internal financial and accounting controls, (v)
sampling and review of loan files, and (vi) a review of books and records,
contracts and other legal documents of the other party.
Also during the period beginning March 12, 1998, the parties negotiated the
terms of the Merger Agreement, including the related transaction documents.
At a special meeting of the St. Paul Board of Directors held on March 13,
1998, the Board reviewed the proposed Merger Agreement and related documents, as
well as financial analyses performed by St. Paul's management, including the
results of management's due diligence, covering Beverly's asset quality, reserve
adequacy, operations, products, markets, deposits and other liabilities,
capital, historical financial performance, human resource issues, synergies,
merger
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related costs, contingent liabilities and post-Merger combined financial
performance. St. Paul's management recommended to the Board of Directors that
the Merger be approved. St. Paul also consulted with its outside financial
advisor, Merrill Lynch, as to certain issues concerning the Merger, including
whether the Exchange Ratio is fair to St. Paul from a financial point of view.
Merrill Lynch made an oral presentation to the St. Paul Board and discussed its
analysis of the Merger. Merrill Lynch also gave its oral opinion as to fairness
of the Exchange Ratio, from a financial point of view. See "-- Opinion of St.
Paul's Financial Advisor." The St. Paul Board of Directors concluded that the
Merger and the related Certificate Amendment and Share Issuance are in the best
interests of St. Paul and its shareholders and approved the terms of the
transaction.
At a special meeting of the Beverly Board of Directors held on March 15,
1998, senior management presented the St. Paul proposal to the Beverly Board of
Directors and reviewed with the Beverly Board of Directors the events leading up
to the St. Paul proposal, including senior management's negotiations with St.
Paul. Beverly's counsel reviewed the terms of the Merger Agreement and the
proposed resolutions concerning the Merger and reviewed the fiduciary duties
owed by the Beverly Board of Directors to Beverly's stockholders in connection
with the proposed transaction. McDonald also reviewed the St. Paul proposal for
the Beverly Board of Directors and provided its analyses. McDonald then formally
advised the Beverly Board of Directors as to its fairness opinion and stated
that, as set forth in its draft fairness opinion and subject to the provisions
and qualifications thereof, McDonald concluded that the Exchange Ratio was fair
to the holders of Beverly Common Stock from a financial point of view. (McDonald
provided its written opinion to the same effect dated as of March 15, 1998. The
fairness opinion of McDonald is attached hereto as Appendix A, and holders of
Beverly Common Stock are encouraged to read that opinion carefully in its
entirety. See "--Opinion of Beverly's Financial Advisor.")
Following a review and discussion of the definitive terms of the
transaction, the fairness opinion of McDonald and numerous other relevant
factors (described below in "--Recommendation of the Beverly Board of Directors
and Reasons for the Merger") the Beverly Board of Directors, by a unanimous vote
of all directors, authorized and approved the Merger Agreement and the
transactions contemplated thereby. The Board of Directors also determined that
the Merger Agreement be submitted to a vote of Beverly stockholders and
unanimously recommended that such stockholders approve and adopt the Merger
Agreement.
The parties executed the Merger Agreement following the Beverly Board
Meeting on March 15, 1998, and publicly announced the transaction that evening.
Purpose and Effects of the Merger
The purpose of the Merger is to enable St. Paul to acquire the assets and
business of Beverly, including Beverly Bank and Beverly Trust Company. If the
transactions contemplated by the Merger Agreement are completed, Beverly will be
merged with and into St. Paul with St. Paul as the Surviving Corporation,
Beverly Bank will be merged with and into St. Paul Bank with St. Paul Bank as
the surviving bank and Beverly Trust Company will become a wholly owned
subsidiary of St. Paul. Beverly Trust Company will change its name to "St. Paul
Trust Company." As a result of the Merger, St. Paul will remain a savings
association holding company, which means that, among other things, it will be
able to continue to engage in non-banking activities such as insurance and
annuity sales, and real estate development and will not be subject to bank
holding company regulatory capital requirements.
The assets and business of Beverly Bank's banking offices will broaden St.
Paul's existing operations in Chicago's south and southwest suburban areas and
the greater Chicago area as a whole where St. Paul currently has 53 banking
offices. The expanded operations of St. Paul will include Beverly Bank's
commercial banking and lending businesses, as well as Beverly's trust business.
The addition of Beverly Trust Company's trust offices will strengthen St. Paul's
franchise by expanding St. Paul's ability to address the financial needs of its
consumer and business banking customers. The combination of Beverly's commercial
and trust
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businesses with St. Paul's banking and related financial services is expected to
present opportunity for expansion of each company's operations into the customer
base of the other. St. Paul expects to achieve reductions in the current
operating expenses of Beverly Bank upon the consolidation of Beverly Bank's
operations into St. Paul Bank, which could result in the closing of certain of
Beverly Bank's or St. Paul's existing banking offices as well as certain
reductions in administrative and support personnel.
Upon consummation of the Merger, the issued and outstanding shares of
Beverly Common Stock will automatically be converted into the right to receive
St. Paul Common Stock based on the Exchange Ratio. See "--Exchange Ratio."
Recommendation of the St. Paul Board of Directors and Reasons for the Merger
The St. Paul Board has approved the Merger Agreement and has determined
that the Merger is fair to, and in the best interests of, St. Paul and its
stockholders. The St. Paul Board has also approved the Certificate Amendment and
the Share Issuance. THE ST. PAUL BOARD RECOMMENDS THAT HOLDERS OF ST. PAUL
COMMON STOCK VOTE "FOR" APPROVAL AND ADOPTION OF THE CERTIFICATE AMENDMENT AND
THE SHARE ISSUANCE. In reaching its decision to approve the Merger Agreement,
the St. Paul Board of Directors consulted with its outside counsel regarding the
legal terms of the Merger and the St. Paul Board's fiduciary obligations in its
consideration of the Merger and its financial advisor, Merrill Lynch, regarding
the financial aspects and fairness, from a financial point of view, of the
proposed Merger Agreement, as well as with management of St. Paul, and
considered the following:
(i) The St. Paul Board's familiarity with, and review of, the business,
financial condition, results of operations and prospects of St.
Paul, including, but not limited to, its potential growth,
development, productivity and profitability and the business risks
associated therewith;
(ii) The current and prospective environment in which St. Paul operates,
including national and local economic conditions, the highly
competitive environment for financial institutions generally, the
changing regulatory environment and the trend toward consolidation
in the financial services industry;
(iii) Information (including the results of its due diligence review of
Beverly) concerning the business, financial condition, results of
operations, asset quality and prospects of Beverly, including the
Beverly franchise, the future prospects of Beverly's business, the
business potential and strategic market positioning of the combined
company following the proposed Merger (in particular, taking into
consideration the acquisition of Beverly Bank's commercial banking
and lending business, and trust operations, and the opportunity to
market St. Paul's products to Beverly customers), and the potential
cost savings and synergies expected from the Merger and the
business risks associated therewith;
(iv) The terms of the Merger Agreement, the Option Agreement and the
transactions and agreements contemplated thereby, including,
without limitation, the fact that the fixed Exchange Ratio
generally provides certainty with respect to the maximum number of
shares of St. Paul Common Stock that St. Paul will be required to
issue in connection with the Merger and that the proposed Merger is
expected to qualify as a "reorganization" for purposes of Section
368 of the Internal Revenue Code of 1986, as amended (the "Code")
and as a "pooling-of-interests" for accounting and financial
reporting purposes;
(v) The fact that Beverly's Chairman is expected to become a member of
the St. Paul Board in connection with the Merger, and that Beverly
Bank's Advisory Board
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members will serve on an advisory board to St. Paul following
consummation of the Merger;
(vi) The opinion of Merrill Lynch that the Exchange Ratio pursuant to
the Merger Agreement is fair to the shareholders of St. Paul from a
financial point of view (see "-- Opinion of St. Paul's Financial
Advisor");
(vii) The likelihood of receipt of the relevant regulatory approvals;
(viii) The compatibility with respect to businesses and management
philosophies of Beverly and St. Paul;
(ix) Information concerning the businesses, earnings, operations,
financial condition, prospects, capital levels and asset quality of
Beverly and St. Paul, both individually and as a combined entity,
and the strategic fit of the operating philosophies of the two
institutions;
(x) The potential for revenue growth by cross-selling Beverly's high-
margin financial products to the combined customer base; and
(xi) The geographic advantages of a combination, including significant
additional market penetration with few overlapping branches.
The foregoing discussion of the information and factors considered by the
St. Paul Board is not intended to be exhaustive but is believed to include all
material factors considered by the St. Paul Board. In reaching its determination
to approve and recommend the Merger, the St. Paul Board did not assign any
relative or specific weights to the factors considered, and individual directors
may have given differing weights to different factors. After deliberating with
respect to the Merger and the other transactions contemplated by the Merger
Agreement, considering, among other things, the matters discussed above and the
opinion of Merrill Lynch referred to above, the St. Paul Board unanimously
approved and adopted the Merger Agreement and the transactions contemplated
thereby including the Share Issuance and the Option Agreement as being fair to
and in the best interests of St. Paul and its shareholders.
Recommendation of the Beverly Board of Directors and Reasons for the Merger
The Board of Directors of Beverly has approved the Merger Agreement and has
determined that the Merger is fair to, and in the best interests of, Beverly and
its shareholders. THE BEVERLY BOARD OF DIRECTORS RECOMMENDS THAT HOLDERS OF
BEVERLY COMMON STOCK VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT
AND THE MERGER PROVIDED FOR THEREIN. The Beverly Board of Directors believes
that the Merger will enable holders of Beverly Common Stock to realize increased
value due to the premium over market price, net income per share and book value
per share of Beverly Common Stock. The Beverly Board of Directors also believes
that the Merger may enable Beverly shareholders to participate in opportunities
for appreciation of St. Paul Common Stock. See "-- Opinion of Beverly Financial
Advisor" below. In reaching its decision to approve the Merger Agreement, the
Beverly Board consulted with its outside counsel regarding the legal terms of
the Merger and the Beverly Board's fiduciary obligations in its consideration of
the proposed merger, its financial advisor, McDonald, regarding the financial
aspects and fairness, from a financial point of view, of the proposed Merger
Agreement, as well as with the management of Beverly and, without assigning any
relative or specific weight, considered the following, which are all of the
material factors considered, both from a short-term and long-term perspective:
(i) information concerning the businesses, earnings, operations, financial
condition, prospects, capital levels and asset quality of Beverly and St. Paul,
both individually and as a combined entity, and the strategic fit of the
operating philosophies of the two institutions;
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(ii) the potential for revenue growth by cross-selling Beverly's high-
margin financial products to the combined customer base;
(iii) the potential for increased fee generation through the application
of Beverly and St. Paul's ATM fees and loan servicing fees to the combined
customer base;
(iv) the geographic advantages of a combination, including significant
additional market penetration with few overlapping branches;
(v) the current and prospective economic and competitive environments
facing Beverly and other financial institutions characterized by intensifying
competition from both banks and nonbank financial services organizations, the
increasing necessity for strong fee-based income-producing components within a
bank holding company, and the growing costs associated with regulatory
compliance in the banking industry;
(vi) the belief that the combined company would be well-positioned to grow
through possible future acquisitions or expansions, while not being so large as
to diminish its attractiveness as a possible acquisition candidate;
(vii) the opinion by McDonald to the effect that, as of the date of such
opinion, the Exchange Ratio is fair, from a financial point of view, to
Beverly's stockholders (see "--Opinion of Beverly's Financial Advisor");
(viii) a comparison of the terms and conditions of the Merger Agreement
and the other documents relating to the Merger to the terms customary in similar
transactions, which terms and conditions were viewed as providing an equitable
basis for the Merger from the standpoint of Beverly;
(ix) the continuing participation of one of Beverly's directors on the St.
Paul Board of Directors and the participation of Beverly's advisory council
members as members of advisory boards of St. Paul; and
(x) the impact of the Merger on Beverly's depositors and customers in
terms of the wider range of products and services that will be available from a
strong and sound Surviving Corporation, and on the communities which Beverly
currently serves in terms of the enhanced strength and accessibility of the
combined franchise.
The Beverly Board of Directors' analysis of the foregoing factors included
the following considerations, which the Beverly Board of Directors concluded
would present the potential for increased stockholder value in the future and
which weighed in favor of a business combination with St. Paul: (i) the belief
that the Merger would enable Beverly's stockholders to receive stock in, and
thereby participate in, a high quality combined company that should benefit from
enhanced operating efficiencies and better penetration of commercial and
consumer banking markets, and (ii) the less attractive strategic alternatives
available to Beverly in light of the continuing trend of bank consolidations
(such as an acquisition of one or more other banking institutions or continued
growth as an independent company).
The foregoing discussion of the information and factors considered by the
Beverly Board is not intended to be exhaustive but is believed to include all
material factors considered by the Beverly Board. In reaching its determination
to approve and recommend the Merger, the Beverly Board did not assign any
relative or specific weights to the factors considered, and individual directors
may have given differing weights to different factors. After deliberating with
respect to the Merger and the other transactions contemplated by the Merger
Agreement, considering, among other things, the matters discussed above and the
opinion of McDonald referred to above, the Beverly Board unanimously approved
and adopted the Merger Agreement and the transactions contemplated thereby as
being fair to and in the best interests of Beverly and its stockholders.
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Opinion of St. Paul's Financial Advisor
On March 12, 1998, St. Paul engaged Merrill Lynch to act as its exclusive
financial advisor in connection with the Merger. Pursuant to the terms of its
engagement, Merrill Lynch agreed to assist St. Paul in analyzing, structuring,
negotiating and effecting an acquisition transaction with Beverly. St. Paul
selected Merrill Lynch because Merrill Lynch is a nationally recognized
investment banking firm with substantial experience in transaction similar to
the Merger and was familiar with St. Paul and its business. As part of its
investment banking business, Merrill Lynch is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions.
As part of its engagement, representatives of Merrill Lynch were present at
the meeting of the St. Paul Board of Directors (the "St. Paul Board") held on
March 13, 1998 at which the St. Paul Board considered the Merger and approved
the Merger Agreement. At that meeting, Merrill Lynch rendered its oral opinion
that, as of such date, the Exchange Ratio was fair to St. Paul from a financial
point of view. Such opinion was reconfirmed in writing as of March 15, 1998 and
again as of the date of this Joint Proxy Statement/Prospectus.
The full text of Merrill Lynch's written opinion ( the "Merrill Lynch
Opinion"), dated as of the date of this Joint Proxy Statement/Prospectus, is
attached hereto as Appendix B and is incorporated herein by reference. The
description of the Merrill Lynch Opinion set forth herein is qualified in its
entirety by reference to the full text of the Merrill Lynch Opinion set forth in
Appendix B. St. Paul shareholders are urged to read the Merrill Lynch Opinion in
its entirety for a description of the procedures followed, assumptions made,
matters considered, and qualifications and limitations on the review undertaken,
by Merrill Lynch in connection therewith.
THE MERRILL LYNCH OPINION IS DIRECTED TO THE ST. PAUL BOARD AND ADDRESSES
ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE EXCHANGE RATIO TO ST.
PAUL. IT DOES NOT ADDRESS THE MERITS OF THE UNDERLYING BUSINESS DECISION OF ST.
PAUL TO ENGAGE IN THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY ST.
PAUL SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE ST. PAUL MEETING
WITH RESPECT TO THE MERGER OR ANY OTHER MATTER IN CONNECTION THEREWITH.
Merrill Lynch has informed St. Paul that in arriving at its written
opinion, Merrill Lynch, among other things: (1) reviewed certain publicly-
available business and financial information relating to St. Paul and Beverly;
(2) reviewed certain information, including financial forecasts related to the
businesses, earnings, assets, liabilities and prospects of St. Paul and Beverly
furnished to Merrill Lynch by senior management of St. Paul, as well as the
amount and timing of cost savings and related expenses and revenue enhancements
expected to result from the Merger (the "Expected Synergies"); (3) conducted
discussions with members of the senior management of St. Paul and Beverly
concerning the foregoing, including the respective businesses, prospects,
regulatory conditions and contingencies of St. Paul and Beverly before and after
giving effect to the Merger and the Expected Synergies; (4) reviewed the market
prices and valuation multiples for St. Paul Common Stock and Beverly Common
Stock and compared them with those of certain publicly-traded companies which
Merrill Lynch deemed to be relevant; (5) reviewed the results of operations of
St. Paul and Beverly and compared them with those of certain publicly-traded
companies which Merrill Lynch deemed to be relevant; (6) compared the proposed
financial terms of the Merger with the financial terms of certain other
transactions which Merrill Lynch deemed to be relevant; (7) reviewed the
potential pro forma impact of the Merger; (8) reviewed a draft of the Merger
Agreement; and (9) reviewed such other financial studies and analyses and took
into account such other matters as Merrill Lynch deemed necessary, including an
assessment of general economic, market and monetary conditions.
In connection with rendering the Merrill Lynch Opinion, Merrill Lynch
performed a variety of financial analyses, including those summarized below. The
summary set forth below does not
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purport to be a complete description of the analyses performed by Merrill Lynch
in this regard, although it describes all material analyses performed by Merrill
Lynch in connection therewith. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to a
partial analysis or summary description. Accordingly, notwithstanding the
separate analyses summarized below, Merrill Lynch believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
factors considered by it, without considering all such analyses and factors, or
attempting to ascribe relative weights to some or all such analyses and factors,
could create an incomplete view of the evaluation process underlying the Merrill
Lynch Opinion.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of St. Paul or Beverly. The
analyses performed by Merrill Lynch are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely as
part of Merrill Lynch's analysis of the fairness of the Exchange Ratio to St.
Paul from a financial point of view and were provided to the St. Paul Board in
connection with the delivery of the Merrill Lynch Opinion. Merrill Lynch gave
the various analyses described below similar weight and did not draw any
specific conclusions from or with regard to any one method or analysis. With
respect to the comparison of selected comparable companies analysis and the
analysis of selected bank merger transactions summarized below, no public
company utilized as a comparison is identical to St. Paul or Beverly and no
transaction is identical to the Merger. Accordingly, an analysis of publicly-
traded comparable companies and comparable business combinations is not
mathematical; rather it involves complex considerations and judgments concerning
the differences in financial and operating characteristics of the companies and
other factors that could affect the public trading values or announced merger
transaction values, as the case may be, of St. Paul, Beverly and the companies
to which they are being compared. The analyses do not purport to be appraisals
or to reflect the prices at which St. Paul or Beverly might actually be sold or
the prices at which any securities may trade at the present time or at any time
in the future. In addition, as described below, the Merrill Lynch Opinion was
one of many factors taken into consideration by the St. Paul Board in making its
determination to approve the Merger Agreement. Consequently, the Merrill Lynch
analyses described below should not be viewed as determinative of the decision
of the St. Paul Board or St. Paul's management with respect to the Merger.
In preparing the Merrill Lynch Opinion, Merrill Lynch assumed and relied on
the accuracy and completeness of all information supplied or otherwise made
available to Merrill Lynch, discussed with or reviewed by or for Merrill Lynch,
or publicly available. Merrill Lynch has not assumed responsibility for
independently verifying such information, has not undertaken an independent
evaluation or appraisal of the assets or liabilities, contingent or otherwise,
of St. Paul or Beverly or any of their subsidiaries and was not furnished with
any such evaluation or appraisal. Merrill Lynch is not an expert in the
evaluation of allowances for credit or loan losses and has not made an
independent evaluation of the adequacy of the allowances for credit or loan
losses of St. Paul or Beverly, nor has Merrill Lynch reviewed any individual
credit or loan files relating to St. Paul or Beverly and, as a result, Merrill
Lynch has assumed that the aggregate allowance for credit or loan losses for
both of St. Paul and Beverly is adequate to cover such losses and will be
adequate on a pro forma basis for the combined entity. In addition, Merrill
Lynch has not assumed any obligation to conduct, nor has it conducted, any
physical inspection of the properties or facilities of St. Paul or Beverly. With
respect to financial forecast information, including, without limitation,
financial forecasts, evaluations of contingencies and projections of under-
performing and non-performing assets, net charge-offs, adequacy of reserves and
future economic conditions and Expected Synergies, furnished to or discussed
with Merrill Lynch by St. Paul or Beverly, Merrill Lynch has, with St. Paul's
consent, assumed that they have been reasonably prepared and reflect the best
currently available estimates, allocations and judgments of the senior
management of St. Paul and Beverly as to the expected performance of St. Paul,
Beverly or the combined entity, as the case may be, and the Expected Synergies
and expressed no opinion as to such financial forecast
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information or the Expected Synergies or the assumptions upon which they were
based. The Merrill Lynch Opinion is predicated on the Merger receiving the tax
and accounting treatment contemplated in the Merger Agreement and was
necessarily based on economic, market and other conditions as in effect on, and
the information made available to Merrill Lynch, as of the date thereof.
Merrill Lynch has also assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any amendments or modifications, will
be imposed that will have a material adverse affect on the contemplated benefits
of the Merger, including the Expected Synergies. The Merrill Lynch Opinion was
also rendered without regard to the necessity for, or level of, any obligations,
undertakings or divestitures which may be imposed or required in the course of
obtaining regulatory approvals for the Merger.
The projections furnished to Merrill Lynch and used by it in certain of its
analyses were prepared by the senior management of St. Paul. St. Paul does not
publicly disclose internal management projections of the type provided to
Merrill Lynch in connection with its review of the Merger, and as a result, such
projections were not prepared with a view towards public disclosure. The
projections were based on numerous variables and assumptions which are
inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions, and accordingly, actual results could vary
significantly from those set forth in such projections.
The following is a summary of the material analyses of Merrill Lynch in
connection with the Merrill Lynch Opinion.
Summary of Proposal. Merrill Lynch reviewed the terms of the proposed
transaction, including the Exchange Ratio and the aggregate transaction value.
Based upon the closing price of St. Paul Common Stock of $26.625 on March 12,
1998, Merrill Lynch calculated an implied transaction value per share of Beverly
of $28.30 and an implied total transaction value of $171.4 million. Based on
this implied transaction value, Merrill Lynch calculated the price to fully
diluted adjusted book value (adjusted for the elimination of $2.648 million in
officers stockholders note receivable), price to fully diluted adjusted tangible
book value (adjusted for the elimination of $2.648 million in officers
stockholders note receivable), implied deposit premium (defined as the
transaction value minus the adjusted tangible book value divided by total
deposits), price to 1998 and 1999 estimated earnings (based on St. Paul
management estimates) multiples, price to trailing twelve months earnings per
share, price as premium to March 12, 1998 closing price, price to 30-day average
price and price as premium to 52-week high price for Beverly in the Merger. This
analysis yielded a price to fully diluted adjusted book value multiple of 2.40x,
a price to fully diluted adjusted tangible book value multiple of 2.42x, an
implied deposit premium of 17.13%, a price to projected 1998 and 1999 earnings
(based on St. Paul management estimates) multiple of 22.18x and 21.17x,
respectively, a price to trailing twelve months earnings per share multiple of
24.40x, a price as a premium to March 12, 1998 closing price of 23.5%, a price
as a premium to 30-day average price of 19.7% and a price as a premium to 52-
week high price of 11.5%.
Pro Forma Merger Analysis. Based on projections provided by St. Paul,
Merrill Lynch analyzed certain pro forma effects of the Merger. Assuming a price
per share of St. Paul Common Stock of $26.625, this analysis indicated that the
transaction would be accretive to projected earnings per share of St. Paul
Common Stock in the 12 month period following the closing, and that the Merger
would be dilutive to St. Paul's book value and tangible book value per share. In
this analysis, Merrill Lynch assumed that St. Paul performed in accordance with
the earnings forecasts and Expected Synergies provided to Merrill Lynch by St.
Paul's senior management. Merrill Lynch also assumed fully phased-in Expected
Synergies of $5.80 million in 1999.
Discounted Dividend Stream Analysis - Beverly. Using a discounted dividend
stream analysis, Merrill Lynch estimated the present value of the future streams
of after-tax cash flows
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that Beverly could produce on a stand-alone basis from 1998 through 2003 and
distribute to shareholders ("dividendable net income") assuming pre-tax Expected
Synergies of $5.8 million in 1999 and an pre-tax restructuring charge of $11.5
million in 1998. Merrill Lynch assumed that Beverly performed in accordance with
earnings forecasts provided to Merrill Lynch by St. Paul's senior management and
that Beverly's tangible common equity to tangible asset ratio would be
maintained at a minimum 5.5% level. Merrill Lynch estimated the terminal values
for the Beverly's Common Stock at 14.00 to 16.00 times Beverly's 2003 estimated
operating income (defined as net income before amortization of intangibles). The
dividendable net income streams and terminal values were then discounted to
present values using different discount rates (ranging from 12.0% to 13.0%)
chosen to reflect different assumptions regarding required rates of return of
holders or prospective buyers of Beverly Common Stock. This discounted dividend
stream analysis indicated a net present value per share of Beverly Common Stock
reference range of $28.23 to $31.95. As indicated above, this analysis was based
on St. Paul senior management estimates and is not necessarily indicative of
actual values or actual future results and does not purport to reflect the
prices at which any securities may trade at the present or at any time in the
future. Merrill Lynch noted that the discounted dividend stream analysis was
included because it is a widely used valuation methodology, but noted that the
results of such methodology are highly dependent upon the numerous assumptions
that must be made, including earnings growth rates, dividend payout rates,
terminal values and discount rates.
Analysis of Selected Bank Merger Transactions - Beverly. Merrill Lynch
reviewed publicly available information regarding selected bank merger
transactions with a value greater than $100 million and less than $500 million
which had occurred in the United States since January 1, 1998 that it deemed to
be relevant. Merrill Lynch compared the price to book value, price to tangible
book value, price to trailing twelve months' earnings and the implied deposit
premium paid in the Merger and in such selected bank merger transactions. This
analysis yielded a range of (i) price to book value multiples of 1.73x to 4.88x
with a mean of 3.20x (compared with a transaction multiple of 2.40x for Beverly
in the Merger), (ii) price to tangible book value multiples of 1.73x to 4.88x
with a mean of 3.42x (compared with a transaction multiple of 2.42x for Beverly
in the Merger), (iii) price to trailing twelve months' earnings multiples of
15.26x to 31.25x with a mean of 23.20x (compared with a transaction multiple of
24.40x for Beverly in the merger), and (iv) implied deposit premiums paid in the
merger of 15.84% to 49.05% with a mean of 29.87% (compared with an implied
deposit premium of 17.13% for Beverly in the Merger).
No company or transaction used in the above analysis as a comparison is
identical to Beverly or the Merger, respectively. Accordingly, an analysis of
the results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading values or
announced merger transaction values, as the case may be, of the companies to
which they are being compared.
Comparison of Selected Comparable Companies - Beverly. In connection with
the Merrill Lynch Opinion, Merrill Lynch reviewed and compared selected
operating and stock market results of Beverly to the publicly available
corresponding data of certain other companies which Merrill Lynch deemed to be
relevant, including Allegiant Bancorp Inc., ANB Corp., Capitol Bancorp Ltd.,
CoVest Bancshares Inc., Franklin Bank NA, German American Bancorp, Lakeland
Financial Corp., Northern States Financial Corp., Princeton National Bancorp,
Peoples Bank of Indianapolis, Southside Bancshares Corp., and UnionBancorp Inc.
(collectively, the "Beverly Composite"). This comparison showed, among other
things, that as for the quarter ended December 31, 1997 (i) Beverly's net
interest margin was 4.61% compared to a mean 4.35% for the Beverly Composite,
(ii) Beverly's efficiency ratio (defined as noninterest expense divided by the
sum of noninterest income and net interest income before provision for loan
losses) was 67.71% compared to a mean of 60.15% for the Beverly Composite, (iii)
Beverly's return on average assets was 1.05% compared to a mean of 1.03% for the
Beverly Composite, and (iv) Beverly's return on average equity was 10.24%
compared to a mean of 11.80% for the Beverly Composite. This comparison also
indicated that (i) at December 31, 1997, (A) Beverly's ratio of tangible equity
to tangible assets was 10.13% compared to
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a mean of 8.20% for the Beverly Composite, (B) Beverly's ratio of equity to
assets was 10.23% compared with a mean of 8.76% for the Beverly Composite, (C)
Beverly's Tier I Capital ratio was 15.52% compared with a mean of 13.13% for the
Beverly Composite, (D) Beverly's ratio of nonperforming loans to total loans was
0.50% compared with a mean of 0.43% for the Beverly Composite, (E) Beverly's
ratio of nonperforming assets to total assets was 0.37% compared with a mean of
0.45% for the Beverly Composite, (F) Beverly's ratio of loan loss reserves to
nonperforming assets was 171.51% compared with a mean of 280.88% for the Beverly
Composite, (G) Beverly's ratio of loan loss reserves to nonperforming loans was
201.04% compared with a mean of 304.03% for the Beverly Composite, (ii) assuming
a Beverly stock price of $22.919 (A) the ratio of Beverly's market price to
estimated earnings for the twelve month period ending December 31, 1998 was
17.96x compared to a mean of 18.54x and for the Beverly Composite (assuming
reported average earnings estimates based on data from First Call for the
Beverly Composite and assuming management estimates for Beverly), (B) Beverly's
ratio of market price to estimated earnings for the twelve month period ending
December 31, 1999 was 17.14x compared to a mean of 16.58x for the Beverly
Composite, (C) Beverly's ratio of market price to book value per share at
December 31, 1997 was 1.98x compared to a mean of 2.25x for the Beverly
Composite, (D) Beverly's ratio of market price to tangible book value per share
at December 31, 1997 was 2.00x compared to a mean of 2.48x for the Merrill
Lynch -Beverly Composite, and (E) Beverly's dividend yield was 1.52% compared to
a mean of 1.49% for the Beverly Composite.
Discounted Dividend Stream Analysis - St. Paul. Using a discounted
dividend stream analysis, Merrill Lynch estimated St. Paul's dividendable net
income. In this analysis, Merrill Lynch assumed that St. Paul performed in
accordance with the earnings forecasts provided to Merrill Lynch by St. Paul's
senior management and that St. Paul's tangible common equity to tangible asset
ratio would be maintained at a minimum 5.50% level. Merrill Lynch estimated the
terminal values for the St. Paul Common Stock at 14.00 to 16.00 times St. Paul's
2003 estimated operating income (defined as net income before amortization of
intangibles). The dividendable net income streams and terminal values were then
discounted to present values using different discount rates (ranging from 12.0%
to 13.0%) chosen to reflect different assumptions regarding required rates of
return of holders or prospective buyers of St. Paul Common Stock. This
discounted dividend stream analysis indicated a net present value per share
reference range of $23.36 to $26.32. As indicated above, this analysis was based
on St. Paul senior management estimates and is not necessarily indicative of
actual values or actual future results and does not purport to reflect the
prices at which any securities may trade at the present or at any time in the
future. Merrill Lynch noted that the discounted dividend stream analysis was
included because it is a widely used valuation methodology, but noted that the
results of such methodology are highly dependent upon the numerous assumptions
that must be made, including earnings growth rates, dividend payout rates,
terminal values and discount rates.
Comparison of Selected Comparable Companies - St. Paul. Merrill Lynch
compared selected operating and stock market results of St. Paul to the publicly
available corresponding data of certain other companies which Merrill Lynch
deemed to be relevant, including ALBANK Financial Corp., Washington Federal
Inc., Sovereign Bancorp Inc., Peoples Bank (MHC), People's Heritage Financial
Group, Charter One Financial, Commercial Federal, MAF Bancorp, and Webster
Financial Corp.(collectively the "St. Paul Composite"). This comparison showed,
among other things, that as for the quarter ended December 31, 1997 (i) St.
Paul's net interest margin was 2.82% compared with a mean 3.29% for the St. Paul
Composite, (ii) St. Paul's efficiency ratio (defined as noninterest expenses
divided by the sum of noninterest income and net interest income before
provision for loan losses) was 61.85% compared with a mean of 54.27% for St.
Paul Composite, (iii) St. Paul's return on average assets was 1.07% compared to
a mean of 1.10% for the St. Paul Composite, and (iv) St. Paul's return on
average equity was 11.87% compared to a mean of 14.40% for the St. Paul
Composite. This comparison also indicated that (i) at December 31, 1997, (A) St.
Paul's ratio of tangible equity to tangible assets was 9.15% compared to a mean
of 6.83% for the St. Paul Composite, (B) St. Paul's ratio of equity to assets
was 9.17% compared with a mean of 7.69% for the St. Paul Composite, (C) St.
Paul's Core Capital ratio was 15.86% compared with a mean of 12.66% for the St.
Paul Composite, (D) St. Paul's ratio of nonperforming loans to total loans
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was 0.20% compared with a mean of 0.72% for the St. Paul Composite, (E) St.
Paul's ratio of nonperforming assets to total assets was 0.17% compared with a
mean of 0.60% for the St. Paul Composite, (F) St. Paul's ratio of loan loss
reserves to nonperforming assets was 431.88% compared with a mean of 124.49% for
the St. Paul Composite, (G) St. Paul's ratio of loan loss reserves to
nonperforming loans was 533.34% compared with a mean of 150.45% for the St. Paul
Composite, (ii) assuming a St. Paul share price of $26.625 (A) the ratio of St.
Paul's market price to estimated earnings for the twelve month period ending
December 31, 1998 was 18.36x compared to a mean of 15.77x for the St. Paul
Composite (assuming reported average earnings estimates based on data from First
Call for the St. Paul Composite and assuming management estimates for St. Paul),
(B) St. Paul's ratio of market price to estimated earnings for the twelve month
period ending December 31, 1999 was 17.18x compared to a mean of 14.25x for the
St. Paul Composite), (C) St. Paul's ratio of market price to book value per
share at December 31, 1997 was 2.18x compared to a mean of 2.41x for the St.
Paul Composite, (D) St. Paul's ratio of market price to tangible book value per
share at December 31, 1997 was 2.18x compared to a mean of 2.76x for the St.
Paul Composite, and (E) St. Paul's dividend yield was 1.50% compared to a mean
of 1.49% for the St. Paul Composite.
In connection with the Merrill Lynch Opinion (dated as of the date of this
Proxy Statement), Merrill Lynch performed procedures to update, as necessary,
certain of the analyses described above and reviewed the assumptions on which
such analyses described above were based and the factors considered in
connection therewith. Merrill Lynch did not perform any analyses in addition to
those described above in updating the Merrill Lynch Opinion.
Merrill Lynch has been retained by the St. Paul Board as an independent
contractor to act as financial advisor to St. Paul in connection with the
Merger. Merrill Lynch is a nationally recognized investment banking firm which,
among other things, regularly engages in the valuation of businesses and
securities, including financial institutions, in connection with mergers and
acquisitions. In addition, within the past two years, Merrill Lynch has provided
financial advisory, investment banking and other services to St. Paul and has
received fees of approximately $50,000 for rendering such services. Merrill
Lynch and its affiliates may trade debt and/or equity securities of St. Paul or
Beverly for their own accounts and for the accounts of customers and,
accordingly, may from time to time hold a long or short position in such
securities.
St. Paul and Merrill Lynch have entered into a letter agreement dated
February 12, 1998 relating to the services to be provided by Merrill Lynch in
connection with the Merger. St. Paul has agreed to pay Merrill Lynch fees as
follows: (i) a cash fee of $200,000, which was paid upon the execution of the
Merger Agreement and, (ii) a cash fee of $200,000 payable upon the mailing of
this Joint Proxy Statement/Prospectus. In such letter agreement, St. Paul also
agreed to reimburse Merrill Lynch for its reasonable out-of-pocket expenses
incurred in connection with its advisory work, including the reasonable fees and
disbursements of its legal counsel, and to indemnify Merrill Lynch against
certain liabilities relating to or arising out of the Merger, including
liabilities under the securities laws.
Opinion of Beverly's Financial Advisor
Merger - General. Pursuant to an engagement letter dated March 11, 1998
between Beverly and McDonald, Beverly retained McDonald to act as its financial
advisor in connection with the Merger and related matters. As part of its
engagement, McDonald agreed, if requested by Beverly, to render an opinion with
respect to the fairness, from a financial point of view, to Beverly shareholders
of the consideration to be received by Beverly in the Merger. McDonald is a
nationally recognized specialist in the financial services industry, in general,
and in Midwestern banks and thrifts in particular. McDonald is regularly engaged
in evaluations of similar businesses and in advising institutions with regard to
mergers and acquisitions, as well as raising debt and equity capital for such
institutions. Beverly selected McDonald as its financial advisor based upon its
qualifications, expertise and reputation in such capacity.
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At the March 15, 1998 meeting of the Beverly Board, McDonald delivered its
opinion that the consideration to be received by Beverly in the Merger (the
amount of which was determined by Beverly and St. Paul on the basis of arm's-
length negotiation between Beverly and St. Paul), was fair to Beverly
shareholders, from a financial point of view, as of March 15, 1998. McDonald
also delivered to the Beverly Board a written opinion dated as of March 15, 1998
and has included as part of this Joint Proxy Statement/Prospectus a letter
confirming its opinion as of the date of this Joint Proxy Statement/Prospectus.
No limitations were imposed by Beverly on McDonald with respect to the
investigations made or the procedures followed in rendering its opinion.
The full text of McDonald's written opinion to the Beverly Board, dated as
of March 15, 1998, which sets forth the assumptions made, matters considered and
extent of review by McDonald, is attached hereto as Appendix A and is
incorporated herein by reference and should be read carefully and in its
entirety in conjunction with this Joint Proxy Statement/Prospectus. The
following summary of McDonald's opinion is qualified in its entirety by
reference to the full text of the opinion. McDonald's opinion is addressed to
the Beverly Board and does not constitute a recommendation to any shareholder of
Beverly as to how such shareholder should vote at the Beverly Special Meeting.
In connection with its opinion, McDonald has, among other things: (i)
reviewed the Merger Agreement and other related documents and this Joint Proxy
Statement/Prospectus; (ii) reviewed certain historical business and financial
information relating to Beverly and St. Paul; (iii) reviewed other pertinent
internally generated reports with regard to the separate businesses and
prospects of Beverly and St. Paul including, among other things, the strategic
objectives of each corporation and the potential benefits which might be
realized through consummation of the Merger; (iv) participated in senior
management discussions between Beverly and St. Paul with regard to said
strategic objectives which might be realized through consummation of the Merger;
(v) reviewed public information regarding other selected comparable publicly
traded companies deemed relevant to the proposed business combination; (vi)
reviewed the financial terms and data of selected comparable combinations
between banks and bank or thrift holding companies deemed relevant to the
proposed business combination; (vii) reviewed the historical market performance
and trading volume of Beverly Common Stock and St. Paul Common Stock; (viii)
reviewed certain information pertaining to prospective cost savings and/or
revenue enhancements relative to the proposed business combination; (ix)
reviewed and evaluated the current stock distribution and ownership of Beverly
Common Stock and St. Paul Common Stock, as well as the pro forma distribution
and ownership following consummation of the Merger, based upon the contribution
of, among other things, Beverly's assets, liabilities, shareholders' equity and
earnings to the combined entity; and (x) conducted such other financial studies,
analyses and investigations as McDonald deemed appropriate. The oral and written
opinions provided by McDonald to Beverly were necessarily based upon economic,
monetary, financial market and other relevant conditions as of the dates
thereof.
In connection with its review and arriving at its opinion, McDonald relied
upon the accuracy and completeness of the financial information and other
pertinent information provided by Beverly to McDonald for purposes of rendering
its opinion. McDonald did not assume any obligation to independently verify any
of the provided information as being complete and accurate in all material
respects. With regard to the financial forecasts established and developed for
Beverly and St. Paul with the input of the respective managements, as well as
projections of cost savings, revenue enhancements and operating synergies,
McDonald assumed that these materials had been reasonably prepared on bases
reflecting the best available estimates and judgments of Beverly and St. Paul as
to the future performance of the separate and combined entities and that the
projections provided a reasonable basis upon which McDonald could formulate its
opinion. Neither Beverly nor St. Paul publicly discloses such internal
management projections of the type utilized by McDonald in connection with
McDonald's role as financial advisor to Beverly with respect to review of the
Merger. Therefore, such projections cannot be assumed to have been prepared with
a view towards public disclosure. The projections were based upon numerous
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variables and assumptions that are inherently uncertain, including, but
notwithstanding, factors relative to the general economic and competitive
conditions facing Beverly and St. Paul. Accordingly, actual results could vary
significantly from those set forth in the respective projections.
McDonald does not claim to be an expert in the evaluation of loan
portfolios or the allowance for loan losses with respect thereto and therefore
assumes that such allowances for Beverly and St. Paul are adequate to cover such
losses. In addition, McDonald does not assume responsibility for the review of
individual credit files, did not make an independent evaluation, appraisal or
physical inspection of the assets or individual properties of Beverly or St.
Paul, nor was McDonald provided with such appraisals. Furthermore, McDonald
assumes that the Merger will be consummated in accordance with the terms set
forth in the Merger Agreement, without any waiver of any material terms or
conditions by Beverly and that obtaining the necessary regulatory approvals for
the Merger will not have an adverse effect on either separate institution or
combined entity. Moreover, in each analysis that involves per share data for
Beverly, McDonald adjusted the data to reflect full dilution, i.e., the exercise
of all outstanding options and/or warrants (utilizing the treasury stock
method). In particular, McDonald assumes that the Merger will be recorded as a
"pooling-of-interests" in accordance with generally accepted accounting
principles.
In connection with rendering its opinion to the Beverly Board, McDonald
performed a variety of financial and comparative analyses which are briefly
summarized below. Such summary of analyses does not purport to be a complete
description of the analyses performed by McDonald. Moreover, McDonald believes
that these analyses must be considered as a whole and that selecting portions of
such analyses and the factors considered by it, without considering all such
analyses and factors, could create an incomplete understanding of the scope of
the process underlying the analyses and, more importantly, the opinion derived
from them. The preparation of a financial advisor's opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analyses or a summary description of such analyses. In its full analysis,
McDonald also accounted for the assessment of general economic, financial market
and other financial conditions. Furthermore, McDonald drew from its past
experience in similar transactions, as well as its experience in the valuation
of securities and its general knowledge of the banking industry as a whole. Any
estimates in McDonald's analyses were not necessarily indicative of future
results or values which may significantly diverge more or less favorably from
such estimates. Estimates of company valuations do not purport to be appraisals
or necessarily reflect the prices at which companies or their respective
securities actually may be sold. Most notably, none of the analyses performed by
McDonald was assigned a greater significance by McDonald than any other in
deriving its opinion.
The following is a summary of the material analyses presented by McDonald
to the Beverly Board of Directors on March 15, 1998 in connection with its
fairness opinion.
Comparable Company Analysis. McDonald reviewed and compared actual stock
market data and actual and estimated selected financial information for Beverly
with corresponding information for 21 publicly traded Midwestern banks with
assets between $500 million and $1 billion (the "Beverly Peer Group"). The
Beverly Peer Group included: Independent Bank Corporation, Ionia, MI; Wintrust
Financial Corporation, Lake Forest, IL; Old Second Bancorp, Inc., Aurora, IL;
National City Bancorporation, Minneapolis, MN; Second Bancorp, Incorporated,
Warren, OH; Shoreline Financial Corporation, Benton Harbor, MI; Merchants
Bancorp, Inc., Aurora, IL; First Oak Brook Bancshares, Inc., Oak Brook, IL;
Michigan Financial Corporation, Marquette, MI; Mahoning National Bancorp Inc.,
Youngstown, OH; Ambanc Corp., Vincennes, IN; Peoples Bancorp Inc., Marietta, OH;
Lakeland Financial Corporation, Warsaw, IN; Capitol Bancorp Ltd., Lansing, MI;
UnionBancorp, Inc., Ottawa, IL; Peoples Bank of Indianapolis, Indianapolis, IN;
CoVest Bancshares, Inc., Des Plaines, IL; Allegiant Bancorp, Inc., Clayton, MO;
Southside Bancshares Corp., St. Louis, MO; ANB Corporation, Muncie, IN; and
Franklin Bank, N.A., Southfield, MI.
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The analysis of the Beverly Peer Group indicated, among other things, that,
based on market prices as of March 13, 1998 and the latest publicly available
financial data based on December 31, 1997 or September 30, 1997: (i) the mean
and median multiples of price to respective last twelve months' earnings were
21.1x and 20.4x, respectively, as compared to 22.8x for Beverly; (ii) the mean
and median multiples of price to estimated 1998 earnings were 17.8x and 17.9x,
respectively, as compared to 18.8x for Beverly; (iii) the mean and median
multiples of price to estimated 1999 earnings were 16.7x and 17.1x,
respectively, as compared to 17.6x for Beverly, based on a McDonald estimate;
(iv) the mean and median multiples of price to book value were 231% and 228%,
respectively, as compared to 215% for Beverly; (v) the mean and median multiples
of price to tangible book value were 257% and 240%, respectively, as compared to
218% for Beverly; (vi) the mean and median dividend yields were 1.5% and 1.6%,
respectively, as compared to 1.4% for Beverly; (vii) the mean and median return
on average assets ("ROAA") for the last twelve months were 1.00% and 1.03%,
respectively, as compared to 1.02% for Beverly; (viii) the mean and median
return on average equity ("ROAE") for the last twelve months were 11.56% and
11.96%, respectively, as compared to 10.26% for Beverly; (ix) the mean and
median ratios of tangible equity to tangible assets were 8.28% and 8.16%,
respectively, as compared to 10.26% for Beverly; (x) the mean and median ratios
of non-performing assets to assets were both 0.39%, as compared to 0.37% for
Beverly; (xi) the mean and median ratios of loan loss reserves to non-performing
loans were 302% and 227%, respectively, as compared to 201% for Beverly; and
(xii) the mean and median efficiency ratios for the last twelve months were
63.7% and 62.4%, respectively, as compared to 72.1% for Beverly.
McDonald also reviewed and compared actual stock market data and actual and
estimated selected financial information for St. Paul with corresponding
information for 10 publicly traded Midwestern thrifts with assets between $1
billion and $10 billion (the "St. Paul Peer Group"). The St. Paul Peer Group
included: Commercial Federal Corporation, Omaha, NE; MAF Bancorp, Inc.,
Clarendon Hills, IL; Flagstar Bancorp, Inc., Bloomfield Hills, MI; Anchor
BanCorp Wisconsin, Inc., Madison, WI; D & N Financial Corporation, Hancock, MI;
First Indiana Corporation, Indianapolis, IN; St. Francis Capital Corporation,
Brookfield, WI; First Federal Capital Corp., La Crosse, WI; Alliance Bancorp,
Inc., Hinsdale, IL; and Jefferson Savings Bancorp, Inc., Ballwin, MO.
The analysis of the St. Paul Peer Group indicated, among other things,
that, based on market prices as of March 13, 1998 and the latest publicly
available financial data based on December 31, 1997 or September 30, 1997: (i)
the mean and median multiples of price to respective last twelve months'
earnings were both 18.6x, as St. Paul was also 18.6x; (ii) the mean and median
multiples of price to estimated 1998 earnings were 17.1x and 16.4x,
respectively, as compared to 18.2x for St. Paul; (iii) the mean and median
multiples of price to estimated 1999 earnings were 16.0x and 15.2x,
respectively, as compared to 17.1x for St. Paul; (iv) the mean and median
multiples of price to book value were 231% and 237%, respectively, as compared
to 216% for St. Paul; (v) the mean and median multiples of price to tangible
book value were 248% and 253%, respectively, as compared to 217% for St. Paul;
(vi) the mean and median dividend yields were both 1.1%, as compared to 1.5% for
St. Paul; (vii) the mean and median ROAA for the last twelve months were 0.95%
and 0.92%, respectively, as compared to 1.09% for St. Paul; (viii) the mean and
median ROAE for the last twelve months were 13.32% and 13.85%, respectively, as
compared to 12.25% for St. Paul; (ix) the mean and median ratios of tangible
equity to tangible assets were 7.05% and 6.75%, respectively, as compared to
9.17% for St. Paul; (x) the mean and median ratios of non-performing assets to
assets were 0.83% and 0.50%, respectively, as compared to 0.17% for St. Paul;
(xi) the mean and median ratios of loan loss reserves to non-performing loans
were 166% and 181%, respectively, as compared to 533% for St. Paul; and (xii)
the mean and median efficiency ratios for the last twelve months were 58.4% and
59.0%, respectively, as compared to 56.6% for St. Paul.
Comparable Transactions Analysis. McDonald reviewed and compared actual
information for comparable pending or closed transactions it deemed pertinent to
the Merger, including: (i) 27 bank merger and/or acquisition transactions with
seller's assets between $500 million and $1 billion (the "Nationwide
Transactions"); and (ii) six Midwestern bank merger and/or
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acquisition transactions with seller's assets between $500 million and $1
billion (the "Midwestern Transactions").
The Nationwide Transactions were (seller in italics): First Security Corp,
Salt Lake City, UT/ California State Bank, West Covina, CA; Cullen/Frost
Bankers, San Antonio, TX/Overton Bancshares, Fort Worth, TX; Union Planters
Corp, Memphis, TN/Merchants Bancshares, Houston, TX; BB&T Corp, Winston-Salem,
NC/Franklin Bancorp, Washington, DC; Regions Financial, Birmingham, AL/First
State Corp, Albany, GA; F&M Bancorporation, Kaukauna, WI/BancSecurity Corp.,
Marshalltown, IA; FirstMerit Corp, Akron, OH/CoBancorp, Inc., Elyria, OH; United
Bankshares, Charleston, WV/George Mason Bankshares, Fairfax, VA; Fulton
Financial Corp, Lancaster, PA/Keystone Heritage Group, Lebanon, PA; Commercial
Federal, Omaha, NE/Liberty Financial, West Des Moines, IA; Mercantile
Bancorporation, St. Louis, MO/Horizon Bancorp, Arkadelphia, AR; Hibernia
Corporation, New Orleans, LA/ArgentBank, Thibodaux, LA; Western Bancorp, Laguna
Niguel, CA/Santa Monica Bank, Santa Monica, CA; Zions Bancorp, Salt Lake City,
UT/Vectra Banking Corp, Denver, CO; Zions Bancorp, Salt Lake City, UT/GB
Bancorporation, San Diego, CA; Wachovia Corp, Winston-Salem, NC/1st United
Bancorp, Boca Raton, FL; Western Bancorp, Laguna Niguel, CA/SC Bancorp, Downey,
CA; Area Bancshares Corp, Owensboro, KY/Cardinal Bancshares, Lexington, KY;
Pacific Century Financial, Honolulu, HI/CU Bancorp, Encino, CA; Citizens Banking
Corp, Flint, MI/CB Financial Corp, Jackson, MI; Popular, Inc., San Juan, PR/Roig
Commercial Bank, Humacao, PR; First Virginia Banks, Falls Church, VA/Premier
Bankshares, Bluefield, VA; First Commercial Corp, Little Rock, AR/Southwest
Bancshares, Jonesboro, AR; Park National Corp, Newark, OH/First-Knox Banc Corp,
Mount Vernon, OH; Huntington Bancshares, Columbus, OH/Citi-Bancshares, Leesburg,
FL; Summit Bancorp, Princeton, NJ/BMJ Financial, Bordentown, NJ; and Regions
Financial, Birmingham, AL/Allied Bankshares, Thomson, GA.
The analysis of the Nationwide Transactions indicated, among other things,
that, based on the announced transaction value: (i) the mean and median
multiples of transaction value to the last twelve months' earnings were 21.7x
and 21.4x, respectively, as compared to an implied valuation of 24.4x for
Beverly earnings in this transaction; (ii) the mean and median ratios of
transaction value to book value were 277% and 258%, respectively, as compared to
an implied valuation of 249% of Beverly stated book value; (iii) the mean and
median ratios of transaction value to tangible book value were 303% and 263%,
respectively, as compared to an implied valuation of 252% of Beverly stated
tangible book; and (iv) the mean and median ratios of transaction value to total
assets were 25.4% and 24.3%, respectively, as compared to an implied valuation
of 25.5% of Beverly total assets.
The Midwestern Transactions were (seller in italics): F&M Bancorporation,
Kaukauna, WI/ BancSecurity Corp., Marshalltown, IA; FirstMerit Corp, Akron,
OH/CoBancorp, Inc, Elyria, OH; Commercial Federal, Omaha, NE/Liberty Financial,
West Des Moines, IA; Area Bancshares Corp, Owensboro, KY/Cardinal Bancshares,
Lexington, KY; Citizens Banking Corp, Flint, MI/CB Financial Corp, Jackson, MI;
and Park National Corp, Newark, OH/First-Knox Banc Corp, Mount Vernon, OH.
The analysis of Midwestern Transactions indicated, among other things,
that, based on the announced transaction value: (i) the mean and median
multiples of transaction value to respective last twelve months' earnings were
20.2x and 20.5x, respectively, as compared to an implied valuation of 24.4x
Beverly earnings in this transaction; (ii) the mean and median ratios of
transaction value to book value were 234% and 247%, respectively, as compared to
an implied valuation of 249% of Beverly stated book value; (iii) the mean and
median ratios of transaction value to tangible book value were 249% and 250%,
respectively, as compared to an implied valuation of 252% of Beverly stated
tangible book; and (iv) the mean and median ratios of transaction value to total
assets were 20.7% and 20.0%, respectively, as compared to an implied valuation
of 25.5% of Beverly total assets.
Contribution Analysis. McDonald analyzed the contribution of each of
Beverly and St. Paul to the pro forma assets, gross loans, deposits, equity,
tangible equity, earnings for the last
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twelve months, 1998 estimated earnings, 1999 estimated earnings and current
market value. This analysis demonstrated that Beverly contributed approximately
12.8% of assets, 11.7% of gross loans, 15.2% of deposits, 14.1% of total stated
equity, 14.0% of stated tangible equity, 12.5% of earnings for the last twelve
months, 13.2% of 1998 estimated earnings, 13.1% of 1999 estimated earnings, and
13.3% of current aggregate market value. The Exchange Ratio implies that Beverly
shareholders will own approximately 15.3% of pro forma shares outstanding upon
completion of the Merger.
Accretion/Dilution Analysis. On the basis of long-term financial
projections prepared by McDonald, with the assistance of both of the management
teams, and estimates of on-going cost savings accruing to the pro forma company
provided to McDonald by management, as well as estimated one-time costs related
to the transaction, McDonald compared pro forma earnings, cash dividends, book
value and tangible book value to the stand-alone projections of both Beverly and
St. Paul.
The accretion/dilution analysis demonstrated, among other things, that the
Merger would result in (i) accretion to pro forma company earnings from 1998
through 2002 and accretion to Beverly shareholders ranging from 20% to 25% over
the same time period; (ii) zero dilution to pro forma company estimated cash
dividends from 1998 through 2002 and accretion to Beverly shareholders ranging
from 22% to 26% over the same time period; (iii) modest dilution to pro forma
company book value from 1998 through 2002 and accretion to Beverly shareholders
ranging from 8% to 12% over the same time period; and (iv) similarly modest
dilution to pro forma company tangible book value from 1998 through 2002 and
accretion to Beverly shareholders ranging from 9% to 13% over the same time
period.
Discounted Cash Flow Analysis. McDonald performed a discounted cash flow
analysis with regard to Beverly on a stand-alone basis, as based on the above-
mentioned long-term projections. This analysis utilized a discount rate of 14%
and two estimated earnings terminal multiples of 21.7x based on the mean of the
Nationwide Transactions and 21.1x based on the mean of the Beverly Peer Group .
The analysis resulted in a range of present values of $23.99 to $24.55 per share
for Beverly on a stand-alone basis, based on the number of shares outstanding on
March 15, 1998, prior to giving effect to a five percent stock dividend paid on
April 14, 1998.
Other Analyses. McDonald also reviewed certain other information including
selected pro forma industry rankings, pro forma estimated balance sheet
composition and pro forma financial performance.
No other company used as a comparison in the above analyses is identical to
Beverly, St. Paul or the combined entity and no other transaction is identical
to the Merger. Accordingly, an analysis of the results of the foregoing is not
purely mathematical; rather, it involves complex considerations and judgments
concerning differences in financial market and operating characteristics of the
companies and other factors that could affect the public trading volume of the
companies to which Beverly, St. Paul and the combined entity are being compared.
For its financial advisory services provided to Beverly, McDonald was paid
a fee of $250,000 upon delivering its opinion and $200,000 upon the mailing of
its Joint Proxy Statement/Prospectus. These fees are nonrefundable and will be
applied against a total fee of 1.0% of the transaction value (including the
value of Beverly Stock Options) due upon closing of the Merger. In addition,
Beverly has agreed to reimburse McDonald for all reasonable out-of-pocket
expenses, not to exceed $10,000, incurred by it on Beverly's behalf, as well as
indemnify McDonald against certain liabilities, including any which may arise
under the federal securities laws.
McDonald is a member of all principal securities exchanges in the United
States; and in its conduct of its broker-dealer activities has from time to time
purchased securities from, and sold securities to, Beverly and/or St. Paul. As a
market maker, McDonald may also have purchased and sold the securities of St.
Paul for McDonald's own account and for the accounts of its customers.
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Structure
The Merger will be effected by merging Beverly with and into St. Paul, with
St. Paul being the Surviving Corporation. Pursuant to the Merger Agreement,
immediately after the consummation of the Merger, Beverly Bank will be merged
with and into St. Paul Bank, with St. Paul Bank as the surviving federal savings
bank, and Beverly Trust Company will become a wholly owned subsidiary of St.
Paul.
At the Effective Time, except as discussed below, each share of Beverly
Common Stock issued and outstanding as of the Effective Time, will, by virtue of
the Merger Agreement and without any action on the part of the holder thereof,
be converted into the right to receive 1.0630 shares, of St. Paul Common Stock.
All of the shares of Beverly Common Stock converted to St. Paul Common Stock
will be automatically canceled and shall cease to exist, and each certificate
(each a "Certificate") previously representing any such shares of Beverly Common
Stock shall thereafter represent the right to receive (i) the number of whole
shares of St. Paul Common Stock and (ii) cash in lieu of fractional shares into
which the shares of Beverly Common Stock represented by such Certificate have
been converted. At the Effective Time, all shares of Beverly Common Stock that
are owned by Beverly as treasury stock and all shares of Beverly Common Stock
that are owned directly or indirectly by St. Paul or Beverly or any of their
respective subsidiaries (other than Trust Account Shares and DPC Shares) shall
be canceled and shall cease to exist and no stock of St. Paul or other
consideration shall be delivered in exchange therefor. All shares of St. Paul
Common Stock that are owned by Beverly or any of its subsidiaries (other than
Trust Account Shares and DPC Shares) shall become treasury stock of St. Paul.
Subject to the terms and conditions of the Merger Agreement, the closing of
the Merger will take place on (i) the fifth day after receipt of the last
Requisite Regulatory Approval and shareholder approvals are received and all
applicable waiting periods have expired, or (ii) such other date, place and time
as the parties may agree. If the Merger is not consummated by December 31, 1998,
the Merger Agreement may be terminated by St. Paul or Beverly, unless the
failure of the Merger to be consummated by that date is due to the failure of
the party seeking to terminate the Merger Agreement to perform its covenants and
agreements under the Merger Agreement.
St. Paul may elect to modify the structure of the Merger so long as (i)
there are no material adverse federal income tax consequences to the Beverly
shareholders as a result of such modification, (ii) the consideration to be paid
to the Beverly shareholders is not changed or reduced, and (iii) such
modification will not be reasonably likely to delay materially or jeopardize
receipt of any required regulatory approvals. As of the date of this Joint Proxy
Statement/Prospectus, St. Paul does not intend to modify the structure of the
Merger described herein.
Exchange Ratio
The Merger Agreement provides that at the Effective Time, except as
discussed below, each issued and outstanding share of Beverly Common Stock will
be converted automatically into the right to receive 1.0630 shares of St. Paul
Common Stock. Shares of Beverly Common Stock held as treasury stock by Beverly
and shares held directly or indirectly by Beverly, St. Paul or any of their
subsidiaries (other than Trust Account Shares and DPC Shares) will be canceled.
Based on 5,777,567 outstanding shares of Beverly Common Stock on May ___, 1998,
and options to purchase 527,728 shares at that date, subject to possible
antidilution adjustments and St. Paul's right to increase the Exchange Ratio in
the event certain termination rights of Beverly are triggered by a fall in the
market price of St. Paul Common Stock during a defined period prior to
consummation of the Merger (see "-- Termination and Amendment of the Merger
Agreement") and certain other possible adjustments, no more than 6,141,554
shares of St. Paul Common Stock (the "Maximum Share Amount") will be issued or
will become issuable in connection with the Merger.
Because the market price of St. Paul Common Stock is subject to fluctuation
and the Exchange Ratio is fixed, the market value of the shares of St. Paul
Common Stock that Beverly
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shareholders will receive in the Merger may materially increase or decrease
prior to the Merger. No assurance can be given as to the market price of St.
Paul Common Stock at the time of the Merger. See "MARKET PRICES AND DIVIDENDS"
and "THE MERGER -- Exchange Ratio."
Certificates representing fractions of shares of St. Paul Common Stock will
not be issued. Under the Merger Agreement, in lieu of a fractional share of St.
Paul Common Stock, each Beverly shareholder will be entitled to receive an
amount of cash equal to (i) the fraction of a share of the St. Paul Common Stock
to which such holder would otherwise be entitled, multiplied by (ii) the actual
market value of the St. Paul Common Stock, which shall be deemed to be the
average of the daily closing prices per share for St. Paul Common Stock for the
fifteen consecutive trading days on which shares of St. Paul Common Stock are
actually traded (as reported on The Nasdaq Stock Market) ending on the third
trading day preceding the closing date.
The conversion of Beverly Common Stock held by shareholders of Beverly into
the right to receive shares of St. Paul Common Stock at the Exchange Ratio (and
cash in lieu of fractional shares) will occur automatically upon consummation of
the Merger. Pursuant to the Merger Agreement, at or prior to the Effective Time,
St. Paul will deposit or cause to be deposited with the Exchange Agent, for the
benefit of the holders of the certificates representing shares of Beverly Common
Stock to be exchanged pursuant to the Merger, certificates representing the
shares of St. Paul Common Stock to be issued and the cash in lieu of fractional
shares to be paid in the Merger.
As soon as practicable after the Effective Time, the Exchange Agent will
mail to each holder of record of Beverly Common Stock a form letter of
transmittal and instructions for use in surrendering the Certificates in
exchange for certificates representing the shares of St. Paul Common Stock and
the cash in lieu of fractional shares into which the shares of Beverly Common
Stock represented by such Certificate or Certificates will have been converted
pursuant to the Merger Agreement. Beverly shall have the right to review both
the letter of transmittal and the instructions prior to such documents being
finalized. Upon the surrender of a Certificate for exchange and cancellation to
the Exchange Agent, together with the letter of transmittal, duly executed, the
holder of such Certificate will be entitled to receive in exchange for such
Certificate (i) a certificate representing that number of whole shares of St.
Paul Common Stock to which such Beverly shareholder will have become entitled
pursuant to the Merger Agreement and (ii) a check representing the amount of
cash in lieu of fractional shares, if any, that such Beverly shareholder has the
right to receive in respect of the Certificate surrendered pursuant to the
Merger Agreement. The Certificate surrendered will be canceled. No interest will
be paid or accrued on the cash in lieu of fractional shares and unpaid dividends
and distributions, if any, payable to holders of Certificates. No dividends or
distributions with respect to St. Paul Common Stock payable to any such Beverly
shareholder will be paid until such Beverly shareholder surrenders such
Certificate or Certificates for exchange.
If any certificate representing shares of St. Paul Common Stock is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed (or accompanied
by an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes required by reason of the issuance
of a certificate representing shares of St. Paul Common Stock in any name other
than that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
Any portion of the certificates representing shares of St. Paul Common
Stock or cash that St. Paul made available to the Exchange Agent that remains
unclaimed by the Beverly stockholders for six months after the Effective Time
will be returned to St. Paul. Any Beverly stockholder who has not exchanged
shares of Beverly Common Stock in accordance with the Merger Agreement prior to
that time shall thereafter look only to St. Paul for the shares of St. Paul
Common Stock to which they may be entitled, cash in lieu of fractional shares
and any unpaid dividends and distributions in respect of such shares.
Notwithstanding the foregoing, none of St. Paul, Beverly,
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the Exchange Agent or any other person will be liable to any Beverly stockholder
for any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
In the event any Certificate representing shares of Beverly Common Stock
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such certificate has been lost, stolen or
destroyed, and if required by St. Paul, the posting by such person of a bond in
such amount as St. Paul may reasonably direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed certificate the shares
of St. Paul Common Stock and cash in lieu of fractional shares to which such
person would otherwise be entitled as a result of the Merger.
CERTIFICATES SHOULD NOT BE RETURNED TO BEVERLY WITH THE ENCLOSED PROXY CARD AND
SHOULD ONLY BE FORWARDED TO THE EXCHANGE AGENT AFTER RECEIPT OF THE LETTER OF
TRANSMITTAL.
Conversion of Beverly Stock Options
At the Effective Time, each option granted by Beverly to purchase shares of
Beverly Common Stock which is outstanding and unexercised immediately prior
thereto shall be converted automatically into an option to purchase shares of
St. Paul Common Stock in an amount and at an exercise price determined as
provided below (and otherwise subject to the terms of the Beverly Bancorporation
1994 Incentive Stock Option Plan (the "1994 Plan") and the 1997 Long-Term Stock
Incentive Plan (the "1997 Plan" and collectively with the 1994 Plan, the
"Beverly Stock Plans"). The number of shares of St. Paul Common Stock to be
subject to a Beverly option immediately after the Effective Time shall be equal
to the product of the number of shares of Beverly Common Stock subject to the
option immediately before the Effective Time, multiplied by the Exchange Ratio,
provided that any fractional shares of St. Paul Common Stock resulting from such
multiplication shall be rounded down to the nearest share. The exercise price
per share of St. Paul Common Stock under the option immediately after the
Effective Time shall be equal to the exercise price per share of Beverly Common
Stock under the option immediately before the Effective Time divided by the
Exchange Ratio, provided that such exercise price shall be rounded down to the
nearest cent. The adjustment described above shall be and is intended to be
effected in a manner which is consistent with Section 424(a) of the Code.
Regulatory Approvals
Under the Merger Agreement, the obligations of both St. Paul and Beverly to
consummate the Merger are conditioned upon the receipt of the Requisite
Regulatory Approval. Each of St. Paul and Beverly has agreed to use its best
efforts to obtain the Requisite Regulatory Approval. Consummation of the Merger
is conditioned upon receipt of required regulatory approvals of the OTS and the
Illinois Commissioner and the approval or waiver of the Federal Reserve Board.
The Bank Merger is subject to the approval of the OTS under the Home
Owner's Loan Act of 1933 and the Bank Merger Act provisions of the Federal
Deposit Insurance Act, and related OTS regulations. These approvals require
consideration by the OTS of various factors, including assessments of the
competitive effect of the contemplated transactions, the managerial and
financial resources and future prospects of the resulting institutions, and the
effect of the contemplated transactions on the convenience and needs of the
communities to be served. The Community Reinvestment Act of 1977, as amended
(the "CRA"), also requires that the OTS, in deciding whether to approve the
Merger and the Bank Merger, assess the records of performance of St. Paul Bank
and Beverly Bank in meeting the credit needs of the communities they serve,
including low and moderate income neighborhoods. As part of the review process,
it is not unusual for the OTS to receive protests and other adverse comments
from community groups and others. Both St. Paul Bank and Beverly Bank currently
have at least satisfactory CRA ratings from the OTS and the Office of the
Comptroller of the Currency ("OCC"), respectively. The regulations of the OTS
require publication of notice of, and an opportunity for public comment with
respect to, the applications
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filed in connection with the Bank Merger, and authorize the OTS to hold oral
arguments in connection therewith if the OTS, after reviewing the application or
other materials, determines it desirable to do so. Any such hearing, meeting or
comments provided by third parties could prolong the period during which the
Merger and the Bank Merger are subject to review by the OTS. The OTS also will
review compliance with the provisions of the Federal Deposit Insurance Act which
permit the merger of an insured depository institution that is a member of the
Bank Insurance Fund, such as Beverly Bank, with a member of the Savings
Association Insurance Fund, such as St. Paul Bank, provided that the transaction
does not result in the transfer of any insured institution's federal deposit
insurance from one deposit insurance fund to the other without the prior
approval of the Federal Deposit Insurance Corporation and the payment of
prescribed entrance and exit fees. The Bank Merger may not be consummated for a
period of 15 to 30 days following OTS approval (the precise length of the period
to be determined by the OTS with the concurrence of the Department of Justice
("DOJ")), during which time the DOJ has authority to challenge the Bank Merger
on antitrust grounds. The commencement of an antitrust action would stay the
effectiveness of any approval granted by the OTS unless a court specifically
orders otherwise. If the DOJ does not commence a legal action during the waiting
period, it may not thereafter challenge the transaction, except in an action
commenced under Section 2 of the Sherman Antitrust Act.
St. Paul will file a change in control application with the Illinois
Commissioner for the acquisition of Beverly Trust Company. In reviewing that
application, the Illinois Commissioner will consider St. Paul's financial and
managerial resources, and whether the business affairs of St. Paul have been
conducted in a safe, sound and lawful manner.
St. Paul also will request from the Federal Reserve Board a waiver of any
application filing requirement under the Bank Holding Company Act of 1956, as
amended, that would otherwise apply to the Merger.
St. Paul and Beverly are not aware of any other material governmental
approvals that are required for consummation of the Merger except as described
above. Should any other approval or action be required, it is presently
contemplated that such approval would be sought.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS, WHICH APPROVALS HAVE NOT YET BEEN RECEIVED. THERE CAN BE NO ASSURANCE
THAT SUCH APPROVALS WILL BE OBTAINED OR AS TO THE DATE OF SUCH APPROVALS. THERE
CAN LIKEWISE BE NO ASSURANCE THAT THE DOJ WILL NOT CHALLENGE THE MERGER, OR, IF
SUCH A CHALLENGE IS MADE, AS TO THE RESULT THEREOF.
Conditions to the Merger
The respective obligations of St. Paul and Beverly to consummate the Merger
are conditioned upon the satisfaction at or prior to the Effective Time of each
of the following: (i) approval and adoption of the Merger Agreement and the
Merger by the affirmative vote of at least a majority of the outstanding shares
of Beverly Common Stock entitled to vote thereon; (ii) approvals of the
Certificate Amendment and Share Issuance by the requisite votes of the
shareholders of St. Paul; (iii) authorization for quotation on Nasdaq of the
shares of St. Paul Common Stock to be issued in the Merger (or on such other
exchange on which the St. Paul Common Stock may become listed); (iv) receipt of
the Requisite Regulatory Approvals; (v) the Registration Statement of which this
Joint Proxy Statement/Prospectus is a part shall have become effective under the
Securities Act, and no stop order suspending the effectiveness of such
registration statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC; (vi) no order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the Merger
or any of the other transactions contemplated by the Merger Agreement or the
Certificate of Merger included therein shall be in effect and no statute, rule,
regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any governmental entity which prohibits, restricts or
makes illegal consummation of the Merger; (vii) St.
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Paul shall have received from Hogan & Hartson, L.L.P., its counsel, an opinion
substantially to the effect set forth under "--Certain Federal Income Tax
Consequences"; (viii) with respect to the obligations of each party, the
representations and warranties of the other party contained in the Merger
Agreement will be true and correct at the time of the Merger Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the date of the closing of the Merger; provided, however, that such
representations and warranties will be deemed to be true unless the failure or
failures of such representations and warranties to be true and correct,
individually or in the aggregate, would have a Material Adverse Effect (as
defined below) on the party by whom such representations and warranties were
made or on such party's ability to perform its obligations under the Merger
Agreement or to consummate the Merger (and each party will have received from
the President and the Chief Financial Officer of the other party a signed
certificate to such effect); and (ix) St. Paul shall have received as of the
Effective Time, a written opinion of each of Ernst & Young LLP and Grant
Thornton LLP to the effect that the Merger will be accounted for as a "pooling-
of-interests."
Also, (i) St. Paul and Beverly respectively, shall have performed in all
material respects all covenants and agreements required to be performed by each
of them under the Merger Agreement at or prior to the closing date and each of
St. Paul and Beverly shall have received a certificate from the other signed on
behalf of each of the President and the Chief Financial Officer of the other
party to such effect; (ii) St. Paul shall have obtained the consent or approval
or waiver of each person (other than certain governmental entities) whose
consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument to which St. Paul is
a party or is otherwise bound; (iii) Beverly shall have obtained the consent,
approval or waiver of each person (other than certain governmental entities)
whose consent or approval shall be required in order to permit the succession by
the Surviving Corporation pursuant to the Merger to any obligation, right or
interest of Beverly under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument except for those, the
failure of which to obtain, will not result in a Material Adverse Effect on the
Surviving Corporation and the consent, approval or waiver of each person (other
than certain governmental entities) whose consent or approval shall be required
in order to permit the succession by the Surviving Bank pursuant to the Bank
Merger to any obligation, right or interest of Beverly Bank under any loan or
credit agreement, note, mortgage, indenture, lease, license or other agreement
or instrument except for those, the failure of which to obtain, will not result
in a Material Adverse Effect on the Surviving Bank; (iv) no proceeding initiated
by any governmental entity seeking an injunction shall be pending; (v) no
changes in the business, operations, conditions, assets or liabilities of either
party has occurred that individually, or in the aggregate has had or would have
a Material Adverse Effect on either of the parties; (vi) St. Paul shall have
received from Beverly's counsel a legal opinion as to matters reasonably
requested by St. Paul; (vii) St. Paul shall have furnished Beverly a legal
opinion as to the securities being issued and as to other matters reasonably
requested by Beverly; (viii) Beverly shall deliver to St. Paul "comfort letters"
from Grant Thornton LLP, with respect to Beverly's financial data presented in
this Joint Proxy Statement/Prospectus; (ix) Beverly shall have terminated its
data processing agreement with Midwest Payment Systems, Inc. with no liability
whatsoever to Beverly or any of its subsidiaries, or any of their respective
successors or assigns; and (x) certain demand loans of Beverly and Beverly Bank
shall be paid in full.
A "Material Adverse Effect": with respect to St. Paul or Beverly, as the
case may be, means a condition, event, change or occurrence that is reasonably
likely to have a material adverse effect upon (A) the financial condition,
results of operations, business or properties of St. Paul or Beverly (other than
as a result of (i) changes in laws or regulations or accounting rules of general
applicability or interpretations thereof, or (ii) decreases in capital under
Financial Accounting Standards No. 115 (attributable to general changes in
interest rates), or (B) the ability of St. Paul or Beverly to perform its
obligations under, and to consummate the transactions contemplated by the Merger
Agreement, the Certificate of Merger and, in the case of Beverly, the Option
Agreement.
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Conduct of Business Pending The Merger
The Merger Agreement contains certain restrictions on the operations of
Beverly and the subsidiaries of Beverly prior to the Effective Time. In general,
the Merger Agreement obligates Beverly and each of its subsidiaries to carry on
their respective businesses in the ordinary course consistent with past
practices and consistent with prudent banking practices and to preserve intact
Beverly and each of its subsidiaries' business organizations, employees'
services and goodwill. Without limiting Beverly's general obligations concerning
its business, and except as disclosed to St. Paul prior to the execution of the
Merger Agreement, consented to in writing by St. Paul or expressly contemplated
or permitted by the Merger Agreement, the Bank Merger agreement or the Option
Agreement, Beverly will not, and Beverly will not permit any of its subsidiaries
to: (i) declare or pay any dividends on, or make any other distributions in
respect of, any of Beverly's capital stock other than the payment of regular
quarterly cash dividends not to exceed $0.09 per share on Beverly Common Stock,
provided, however, that under no circumstances shall Beverly declare, set aside
or pay any dividends if it would result in the holders of Beverly Common Stock
receiving more than four cash dividend payments in fiscal 1998, when considered
with anticipated St. Paul dividends based on past practice, nor shall Beverly be
prohibited from declaring, setting aside or paying dividends if the closing date
is such that holders of Beverly Common Stock would receive fewer than four cash
dividends in fiscal 1998, when considered with anticipated St. Paul dividends
based on past practice it being understood that the parties intend for Beverly
to pay its regular quarterly cash dividends to shareholders as to any completed
fiscal quarter prior to the Effective Time; (ii) split, combine or reclassify
any shares of its capital stock or issue, authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock (except upon the exercise or fulfillment of rights or options
issued and outstanding pursuant to the Beverly Stock Plans in accordance with
their present terms or pursuant to the Option Agreement), or repurchase, redeem
or otherwise acquire (except for the acquisition of Trust Shares and DPC Shares)
any shares of the capital stock of Beverly or any Beverly subsidiary, or any
securities convertible into or exercisable for any such shares; (iii) issue,
deliver or sell, or authorize or propose the issuance, delivery or sale of, any
shares of its capital stock or any securities convertible into or exercisable
for, or any rights, warrants or options to acquire, any such shares, or enter
into any agreement with respect to any of the foregoing, other than: (1) the
issuance of Beverly Common Stock pursuant to stock options or similar rights to
acquire Beverly Common Stock granted pursuant to Beverly's Stock Plans and
outstanding prior to March 15, 1998 and (2) pursuant to the Option Agreement; or
(iv) amend its Certificate of Incorporation, Bylaws or other similar governing
documents.
In addition, subject to the same conditions above, Beverly (i) will not
authorize or permit any of its officers, directors, employees or agents to,
directly or indirectly: (1) solicit, initiate or encourage any inquiries
relating to, or the making of any proposal from, (2) engage in substantive
discussions or negotiations with or (3) provide any information to, any person,
entity or group (other than St. Paul) concerning any Acquisition Transaction (as
defined below), however, Beverly may enter into discussions or negotiations or
provide information in connection with a possible Acquisition Transaction if the
Board of Directors of Beverly, following receipt of a written opinion of
counsel, reasonably determines in the exercise of its fiduciary duties that such
discussions or negotiations must be commenced or such information must be
furnished. Beverly shall promptly communicate to St. Paul the material terms of
any proposal, whether written or oral, which it may receive in respect of any
such Acquisition Transaction and whether it is having discussions or
negotiations with a third party about an Acquisition Transaction with, or
providing information in connection with, or which may lead to, an Acquisition
Transaction with a third party. Beverly will promptly cease and cause to be
terminated any existing activities, discussions or negotiations previously
conducted with any parties other than St. Paul with respect to any of the
foregoing; (As used in the Merger Agreement, Acquisition Transaction shall mean
any offer, proposal or expression of interest relating to (I) any tender or
exchange offer, (II) merger, consolidation or other business combination
involving Beverly or any Beverly subsidiary, or (III) the acquisition in any
manner of a substantial equity interest in, or a substantial portion of the
assets, out of the ordinary course of business, of, Beverly or Beverly Bank
other than the transactions contemplated or permitted by the Merger Agreement,
the Bank Merger Agreement and the Option Agreement.) (ii) make
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capital expenditures aggregating in excess of $25,000; (iii) enter into any new
line of business; acquire or agree to acquire, whether by merger, consolidation,
purchase or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire any assets, other than in connection with foreclosures, settlements in
lieu of foreclosure or troubled loan or debt restructuring, or in the ordinary
course of business consistent with prudent banking practices; (iv) take any
action that is intended or may reasonably be expected to result in any of
Beverly's representations or warranties being or becoming untrue or in any of
the conditions to the Merger set forth in Article VII of the Merger Agreement
not being satisfied or in a violation of any provision of the Merger Agreement
or the merger agreement to govern the merger of St. Paul Bank and Beverly Bank,
except as required by applicable law; (v) change its methods of accounting in
effect at December 31, 1997, except as required by changes in generally accepted
accounting principles or regulatory accounting principles as concurred to by St.
Paul's independent auditors; (vi) except as required by applicable law or to
maintain qualification pursuant to the Code (a) adopt, amend, renew or terminate
any Plan or any agreement, arrangement, plan or policy between Beverly or any
Beverly Subsidiary and one or more of its current or former directors or
officers, (b) increase in any manner the compensation of any employee or
director or pay any benefit not required by any plan or agreement as in effect
as of the date of the Merger Agreement (including, without limitation, the
granting of stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares), (c) enter into, modify
or renew any contract, agreement, commitment or arrangement providing for the
payment to any director, officer or employee of compensation or benefits, other
than normal annual increases in pay, consistent with past practice, (d) hire any
new employee at an annual compensation in excess of $40,000, (e) pay expenses of
any employees or directors for attending conventions or similar meetings which
conventions or meetings are held after the date of the Merger Agreement, (f)
promote to a rank of vice president or more senior any employee, or (g) pay any
retention or other bonuses to any employees; (vii) except for short-term
borrowings with a maturity of one year or less in the ordinary course of
business consistent with past practices, incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or other
entity; (viii) sell, purchase, enter into a lease, relocate, open or close any
banking or other office, or file an application pertaining to such action with
any governmental entity; (ix) make any equity investment or commitment to make
such an investment in real estate or in any real estate development project,
other than in connection with foreclosure, settlements in lieu of foreclosure,
or troubled loan or debt restructuring, in the ordinary course of business
consistent with past banking practices; (x) make any new loans to, modify the
terms of any existing loan to, or engage in any other transactions (other than
routine banking transactions) with, any affiliated person of Beverly or any
Beverly Subsidiary; (xi) make any investment, or incur deposit liabilities,
other than in the ordinary course of business consistent with past practices, or
make any equity investments; (xii) purchase any loans or sell, purchase or lease
any real property, except for the sale of real estate that is the subject of a
casualty loss or condemnation or the sale of real estate owned on a basis
consistent with past practices; (xiii) originate (a) any loans except in
accordance with existing Beverly Bank lending policies, (b) residential mortgage
loans in excess of $500,000, (c) unsecured consumer loans in excess of $25,000,
(d) commercial business loans in excess of $250,000 as to any loan or $250,000
in the aggregate as to related loans, or loans to related persons, (e)
commercial real estate first mortgage loans in excess of $500,000 as to any loan
or $500,000 in the aggregate as to related loans, or loans to related persons,
or (f) land acquisition loans to borrowers who intend to construct a residence
on such land in excess of the lesser of 75% of the appraised value of such land
or $150,000, except in each case for loans for which written applications have
been received by Beverly Bank; (xiv) make any investments in any equity or
derivative securities or engage in any forward commitment, futures transaction,
financial options transaction, hedging or arbitrage transaction or covered asset
trading activities or make any investment in any investment security with a
maturity of greater than one year; (xv) sell or purchase any mortgage loan
servicing rights; or (xvi) agree or commit to do any of the actions discussed in
clauses (i) through (xvi) of this paragraph or clauses (i) through (iv) of the
previous paragraph.
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Expenses
All costs and expenses incurred in connection with the Merger shall be paid
by the party incurring such expense, except that all filing and other fees paid
to the SEC, the Illinois Commissioner and the OTS in connection with the Merger
Agreement shall be borne by St. Paul. Except as set forth in the next sentence,
in the event that the Merger Agreement is terminated by either St. Paul or
Beverly by reason of a material breach or failure by the other party to fulfill
certain obligations under the Merger Agreement, the other party shall pay all
documented, reasonable costs and expenses up to $500,000 incurred by the
terminating party in connection with the Merger Agreement and the transactions
contemplated hereby. In the event the Merger Agreement is terminated by St. Paul
because Beverly shareholders have not given any required approval, or in the
event the Merger Agreement is terminated by St. Paul by reason of a willful
material breach, Beverly shall pay all documented, reasonable costs and expenses
up to $500,000 incurred by St. Paul in connection with the Merger Agreement and
the transactions contemplated thereby, plus a breakup fee of $1.0 million. In
the event that the Merger Agreement is terminated by St. Paul by reason of
Beverly having agreed to enter into an Acquisition Transaction other than as
contemplated in the Merger Agreement, Beverly shall pay all documented,
reasonable costs and expenses up to $500,000 incurred by St. Paul in connection
with the Merger Agreement and the transactions contemplated thereby, plus a
breakup fee of $1.0 million. In the event that the Merger Agreement is
terminated by Beverly by reason of St. Paul shareholders not having given any
required approval, St. Paul shall pay Beverly $1.0 million.
Representations and Warranties
Under the Merger Agreement, Beverly has made certain representations and
warranties to St. Paul, including those with regard to (i) the organization,
existence, good standing and status of Beverly, Beverly Bank and Beverly Trust
Company; (ii) capitalization and subsidiaries; (iii) corporate power and
authority, the enforceability of the Merger Agreement and Option Agreement, and
absence of violation of law, organizational documents or agreements in respect
thereof; (iv) consents and approvals required for the Merger and the Bank
Merger; (v) loan portfolio and reports; (vi) financial statements, Exchange Act
filings, and books and records; (vii) broker's fees; (viii) absence of any
material adverse change in Beverly; (ix) legal proceedings; (x) tax matters;
(xi) employee benefit plans; (xii) certain contracts; (xiii) certain regulatory
matters; (xiv) environmental matters; (xv) loan loss reserves; (xvi) properties
and assets; (xvii) insurance matters; (xviii) compliance with applicable laws;
(xix) loan information; (xx) ownership of St. Paul Common Stock; (xxi) the
Stockholder Agreement and affiliates; (xxii) receipt of the fairness opinion of
McDonald, (xxiii) the truth and completeness of the information supplied by
Beverly for inclusion in this Joint Proxy Statement/Prospectus; (xxiv) Beverly
Trust Company's fiduciary relationships; and (xxv) state takeover laws.
Under the Merger Agreement, St. Paul has made certain representations and
warranties to Beverly, including those with regard to (i) the organization,
existence, good standing and status of St. Paul and St. Paul Bank; (ii)
capitalization and subsidiaries; (iii) the corporate power and authority; (iv)
consents and approvals required for the Merger and the Bank Merger; (v)
financial statements, Exchange Act filings and books and records; (vi) the
absence of any material adverse change in St. Paul; (vii) ownership of Beverly
Common Stock; (viii) certain regulatory matters; (ix) broker's fees; (x) legal
proceedings; (xi) compliance with applicable laws; (xiii) receipt of the
fairness opinion of Merrill Lynch; and (xiv) the truth and completeness of the
information supplied by St. Paul for inclusion in this Joint Proxy
Statement/Prospectus.
Compensation and Benefits
To the extent permissible under the applicable provisions of the Code and
ERISA, for purposes of crediting periods of service for eligibility to
participate, but not for vesting and benefit accrual purposes, under employee
pension benefit plans (within the meaning of ERISA Section 3(2)) maintained by
St. Paul or St. Paul Bank, as applicable, (other than St. Paul's Employee Stock
Ownership Plan), individuals who are employees of Beverly or any Beverly
subsidiary at the Effective Time will be credited with periods of
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service with Beverly or any Beverly subsidiary before the Effective Time as if
such service had been with St. Paul or St. Paul Bank, as applicable. Similar
service credit shall also be given by St. Paul or St. Paul Bank in determining
eligibility to participate in other retirement, vacation and similar benefits
provided to such employees of Beverly, Beverly Trust Company or Beverly Bank
after the Merger.
St. Paul Bank will merge the existing 401(k) plan of Beverly Bank with the
St. Paul 401(k) Plan after the Merger in accordance with the applicable
provisions of the Code and ERISA, subject to St. Paul having obtained before
such merger of plans a favorable determination letter from the Internal Revenue
Service with respect thereto. St. Paul Bank will not be obligated to make any
matching or other employer contributions to either 401(k) plan after the Merger.
After the Effective Time, employees of Beverly or its subsidiaries who
continue to be employed by St. Paul or any of its subsidiaries, will be eligible
for benefits that St. Paul or such Subsidiary, as the case may be, provides to
its employees generally and on substantially the same basis to such employees.
St. Paul will or will cause St. Paul Bank to give credit to employees of Beverly
and its subsidiaries, with respect to the satisfaction of the limitations as to
pre-existing condition exclusions and waiting periods for participation and
coverage which are applicable under the welfare benefit plans of St. Paul or St.
Paul Bank, equal to the credit that any such employee had received as of the
Effective Time towards the satisfaction of any such limitations and waiting
periods under the comparable welfare benefit plans of Beverly or its
subsidiaries.
See also "Interests of Certain Persons in the Merger-Arrangements with and
Payments to Beverly Directors and Executive Officers."
Other Agreements
Pursuant to the Merger Agreement, St. Paul and Beverly reached agreement
with respect to various other matters, including, but not limited to: (i) filing
the appropriate documents with all third parties and federal and state
governmental entities necessary or advisable to consummate the transactions
contemplated in connection with the Merger Agreement; (ii) providing information
and access to information; (iii) taking all steps necessary to duly call, give
notice of, convene and hold a meeting of Beverly and St. Paul's respective
shareholders, recommend the approval of the proposals in connection with the
Merger and in the case of Beverly, oppose certain third party proposals; (iv)
indemnification; (v) Beverly's transaction expenses; (vi) St. Paul's
registration under the Securities Act of St. Paul Common Stock that will be
subject to issuance pursuant to the Beverly Stock Plans after the Effective
Time; and (vii) certain other agreements.
Termination and Amendment of the Merger Agreement
St. Paul or Beverly may terminate the Merger Agreement at any time prior to
the Effective Time, and the Merger may be abandoned, as summarized below:
(i) by the mutual written consent of the parties, if the Board of
Directors of each so determines by vote of a majority of the members
of its entire Board of Directors;
(ii) by either party upon written notice to the other 30 days after the
date on which any request or application for a Regulatory Approval
has been denied or withdrawn at the request or recommendation of the
governmental entity that must grant such Requisite Regulatory
Approval unless within 30 days following such denial or withdrawal
the parties agree to file and have filed a petition for rehearing or
an amended application (provided that such denial or recommendation
for withdrawal shall not be due to the failure of the party seeking
to terminate the Merger Agreement to perform or observe the
covenants and agreements of such party set forth in the Merger
Agreement);
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(iii) by either party, if the Merger has not been consummated on or before
December 31, 1998 (unless the failure to consummate the Merger shall
be due to the failure of the terminating party to perform or observe
the covenants and agreements of such party set forth in the Merger
Agreement);
(iv) by either party (provided that such party is not in breach of its
obligations under the Merger Agreement in respect of obtaining
stockholder approval), if either party is unable to obtain its
required shareholder approval;
(v) by either party if (provided the terminating party is not in breach
of certain terms of the Merger Agreement) there shall have been a
breach of any of the representations or warranties set forth in the
Merger Agreement on the part of the other party, if such breach,
individually or in the aggregate, has had or is likely to have a
Material Adverse Effect on the breaching party, and such breach
shall not have been cured within 30 days following receipt by the
breaching party of written notice of such breach from the other
party hereto or such breach, by its nature, cannot be cured prior to
the Closing;
(vi) by either party if (provided the terminating party is not in breach
of certain terms of the Merger Agreement) there shall have been a
material breach of any of the covenants or agreements set forth in
the Merger Agreement on the part of the other party, and such breach
shall not have been cured within 30 days following receipt by the
breaching party of written notice of such breach from the other
party hereto or such breach, by its nature, cannot be cured prior to
the Closing; and
(vii) by St. Paul, if the management of Beverly or its Board of Directors,
for any reason, (i) fails to call and hold within 35 days of the
effectiveness of the Registration Statement of which the Joint Proxy
Statement/Prospectus is a part, a special meeting of Beverly's
shareholders to consider and approve the Merger Agreement and the
transactions contemplated hereby; (ii) fails to recommend to
shareholders the approval of the Merger Agreement and the
transactions contemplated thereby, (iii) fails to oppose any third
party proposal that is inconsistent with the transactions
contemplated by the Merger Agreement or (iv) violates certain
covenants relating to negotiations or discussions with, proposals
from, or the providing of information to, third parties; and by
Beverly, if the management of St. Paul or its Board of Directors,
for any reason, (i) fails to call and hold within 35 days of the
effectiveness of the Registration Statement a special meeting of St.
Paul's shareholders to consider and approve the Share Issuance and
the Certificate Amendment, or (ii) fails to recommend to
shareholders the approval of the Share Issuance and the Certificate
Amendment.
Beverly may terminate the Merger Agreement if (either before or after its
approval by the shareholders of Beverly) both (A) its Board of Directors so
determines by a vote of at least two-thirds of the members of its entire Board,
at any time during the ten-day period commencing with the Determination Date
(defined below), and (B) the St. Paul Common Stock Average Price (defined below)
on the Determination Date (defined below) shall be less than the lesser of
$21.25, or $21.25 multiplied by the Index Ratio (defined below).
If Beverly elects to exercise its termination right, it shall give prompt
written notice to St. Paul (provided that such notice of election to terminate
may be withdrawn at any time within the aforementioned ten-day period). During
the seven-day period commencing with its receipt of such notice, St. Paul shall
have the option of increasing the consideration to be received by the holders of
Beverly Common Stock hereunder by increasing the Exchange Ratio to equal the
lesser of (A) a number (rounded to four decimals) equal to a quotient, the
numerator of which is $21.25 multiplied by the Exchange Ratio (as then in
effect) and the denominator of which is the St. Paul Common Stock Average Price,
and (B) a number equal to a quotient, the numerator of which is the Index Ratio
less 0.20, multiplied by the Exchange Ratio (as then in effect) and the
denominator of which is the St. Paul Ratio (defined below). If St. Paul makes
an election contemplated by the preceding sentence, within such seven-day
period, it
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shall give prompt written notice to Beverly of such election and the
revised Exchange Ratio, whereupon no termination shall have occurred and the
Merger Agreement shall remain in effect in accordance with its terms (except as
the Exchange Ratio shall have been so modified), and any references to "Exchange
Ratio" shall thereafter be deemed to refer to the Exchange Ratio as adjusted.
The following terms have the meanings indicated:
"St. Paul Common Stock Average Price" means the average of the daily
closing sales prices of St. Paul Common Stock as reported on The Nasdaq Stock
Market (as reported in The Wall Street Journal or, if not reported thereby,
another authoritative source as chosen by St. Paul) for the 20 consecutive full
trading days in which such shares are reported on the Nasdaq Stock Market ending
at the close of trading on the Determination Date.
"Determination Date" means the date on which the approval of the OTS
required for consummation of the Merger shall be received or, if no OTS approval
is required, then the date of the last federal banking approval required of St.
Paul is received.
"Index Price" on a given date means the weighted average (weighted in
accordance with the factors listed below) of the closing prices on such date of
the companies composing the Index Group (as defined below). If any company
belonging to the Index Group or St. Paul declares or effects a stock dividend,
reclassification, recapitalization, split-up, combination, exchange of share or
similar transaction between the Starting Date and the Determination Date, the
prices for the common stock of such company or St. Paul will be appropriately
adjusted for use in the Index.
"Starting Date" means the first Nasdaq Stock Market trading day
preceding the date of the Merger Agreement.
"St. Paul Ratio" means the number obtained by dividing the St. Paul
Common Stock Average Price on the Determination Date by the Starting Date
Closing Price.
"Index Ratio" means the number obtained by dividing the Index Price at
the close of business on the Determination Date by the Index Price at close of
business on the Starting Date.
47
<PAGE>
"Index Group" means the 23 financial institution holding companies
listed below, the common stock of all of which will be publicly traded and as to
which there will not have been, since the Starting Date and before the
Determination Date, any public announcement of a proposal for such company to be
acquired or for such company to acquire another company or companies in
transactions with a value exceeding 25% of the acquiror's market capitalization
as of the Starting Date. In the event that the common stock of any such company
ceases to be publicly traded or such an announcement is made, such company will
be removed from the Index Group, and the weights (which were determined based on
the number of outstanding shares of common stock) redistributed proportionately
for the purposes of determining the Index Price. The 23 holding companies and
the weights attributed to them are as set forth:
Financial Institution Holding Companies Weighting
--------------------------------------- ---------
Dime Bancorp Inc. 12.85%
Sovereign Bancorp Inc. 10.32%
GreenPoint Financial Corp. 9.35%
Charter One Financial 7.05%
People's Bank (MHC) 6.75%
Golden West Financial 6.30%
Washington Federal Inc. 5.77%
Northwest Bancorp Inc. (MHC) 5.17%
Roslyn Bancorp Inc. 4.82%
Harris Financial Inc. (MHC) 3.73%
Bank United Corp. 3.49%
Downey Financial Corp. 2.95%
Westcorp 2.90%
Astoria Financial Corp. 2.89%
Long Island Bancorp Inc. 2.65%
New York Bancorp Inc. 2.36%
TR Financial Corp. 1.94%
Queens County Bancorp Inc. 1.67%
MAF Bancorp Inc. 1.66%
Webster Financial Corp. 1.51%
ALBANK Financial Corp. 1.43%
Bay View Capital Corp. 1.33%
JSB Financial Inc. 1.09%
Tax Treatment
It is intended that the Merger shall constitute a reorganization within the
meaning of Section 368(a) of the Code, and that the Merger Agreement shall
constitute a "plan of reorganization" for the purposes of the Code.
Accounting Treatment
The Merger is intended to qualify as a pooling-of-interests for accounting
and financial reporting purposes. Under the pooling-of-interests method of
accounting, the recorded assets and liabilities of Beverly will be carried
forward to St. Paul at their recorded amounts. Revenues and expenses of St.
Paul will include revenues and expenses of Beverly for the entire fiscal year of
St. Paul in which the Merger occurs, and the reported revenues and expenses of
Beverly for prior periods will be combined with those of St. Paul, whose
financial statements will then be restated.
It is a condition to the Merger that St. Paul receive an opinion of its and
Beverly's independent accountants, Ernst & Young LLP and Grant Thornton LLP,
respectively, to the
48
<PAGE>
effect that the Merger will be accounted for as a pooling-of-interests. See
"--Conditions to the Merger."
Resales of St. Paul Common Stock Received in the Merger
The shares of St. Paul Common Stock to be issued in the Merger will be
registered under the Securities Act and will be freely transferable under the
Securities Act, except for shares issued to any Beverly shareholder who may be
deemed to be an "affiliate" of Beverly for purposes of Rule 145 under the
Securities Act. Affiliates may not sell their shares of St. Paul Common Stock
acquired in connection with the Merger, except pursuant to an effective
registration statement under the Securities Act covering such shares, or in
compliance with Rule 145 or another applicable exemption from the registration
requirements of the Securities Act. This Joint Proxy Statement/Prospectus does
not cover any resales of St. Paul Common Stock received by persons who may be
deemed to be affiliates of Beverly. Persons who may be deemed to be affiliates
of Beverly generally include individuals or entities who control, are controlled
by or are under common control with Beverly, and may include certain officers or
directors, as well as principal shareholders of Beverly.
Interests of Certain Persons in the Merger -- Arrangements with and Payments to
Beverly Directors and Executive Officers
The Merger Agreement provides that St. Paul shall amend its bylaws to
increase the size of its Board of Directors by one member and invite Beverly's
Chairman, Anthony R. Pasquinelli, to serve as an additional member of the Board
of Directors of St. Paul upon consummation of the Merger. As a director of St.
Paul, Mr. Pasquinelli also will serve as a director of various St. Paul
subsidiaries, and will receive fees and benefits, including the ability to
participate in St. Paul's nonqualified retirement plan for non-employee
directors, on the same basis as other directors. Under St. Paul's 1995 Incentive
Plan, upon initial election to the Board, new directors such as Mr. Pasquinelli
receive a non-qualified option to purchase 14,063 shares of St. Paul Common
Stock at a per share option price equal to the fair market value of the shares
on the date of grant. Under that Plan, directors also are granted, on the date
of each annual meeting of shareholders, non-qualified options to purchase 2,250
shares of St. Paul Common Stock at a per share option price equal to the fair
market value of the shares on the date of grant. As a director, Mr. Pasquinelli
will be eligible for such grants on the date of each St. Paul annual meeting
subsequent to the closing of the Merger. In addition, the members of Beverly
Bank's advisory councils, as defined in a schedule to the Merger Agreement,
serving as of the Effective Time will be invited promptly after the Effective
Time to serve on advisory boards of St. Paul Bank after the Bank Merger for a
period of no less than 12 months. Directors and officers of Beverly hold options
issued pursuant to the Beverly Stock Plans which will be converted into options
to acquire St. Paul Common Stock in connection with the Merger.
St. Paul has agreed to (i) indemnify the directors, officers and employees
of Beverly as to certain matters, (ii) subject to the conditions set forth in
the Merger Agreement, purchase for the benefit of the persons serving as
executive officers and directors of Beverly immediately prior to the Effective
Time Tail Insurance providing coverage for a period of at least one year, and
(iii) use commercially reasonable efforts to purchase for these same Beverly
executive officers and directors Tail Insurance for a period of one additional
year. See "-- Indemnification."
In addition to the provisions of the Merger Agreement, severance will be
paid to employees of Beverly (including executive officers) who are not offered
positions continuing after the Effective Time. The severance will equal one
month's base compensation for each year of service with Beverly, with a minimum
of three month's severance, and a maximum of 12 months. Beverly also will pay
bonuses to certain employees, including certain executive officers, as an
incentive to remain with Beverly through the Effective Time. The bonuses
generally will be based on three months' base compensation, although two
executive officers, Messrs. Voss and Witwicki, will receive bonuses based on
nine months' base compensation. Under such severance and bonus programs,
Messrs. Van Winkle, Voss and Witwicki would receive approximately $____, $____
and $____, respectively, assuming a June 30, 1998 Effective Time.
After the Effective Time, Messrs. Ofenloch and Stajkowski are expected to
continue as employees of St. Paul, serving as First Vice President of St. Paul
Bank and President of St. Paul Trust Company, respectively. Messrs. Ofenloch
and Stajkowski will receive compensation and benefits generally comparable with
the compensation and benefits received by them from Beverly. Messrs. Ofenloch
and Stajkowski also will be offered severance agreements in the same form as
entered into by the other Senior Vice Presidents and First Vice Presidents of
St. Paul and St. Paul Bank. Under those agreements, each officer is entitled to
receive a severance payment in the event
49
<PAGE>
his employment is terminated (except by reason of normal retirement, disability,
death or for cause) within two years of a change of control. The severance
payment is one year's then-current compensation, including any bonuses paid and
any deferred compensation credited during the past twelve months, if the officer
voluntarily terminates his employment without "good reason" (as defined in the
agreements). In the event the officer is voluntarily terminated with good
reason, or is involuntarily terminated, the severance is three times average
annual compensation for the five-year period before termination. In addition,
the officers will be entitled, subject to certain limitations, to continue to
participate in retirement and other benefit plans to be funded by an irrevocable
trust. 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.
Each of the St. Paul and Beverly Boards of Directors are aware of these
interests and considered them, among other matters, in recommending the
respective shareholder approvals necessary to effect the Merger.
Option Agreement
As a condition of and inducement to St. Paul's entering into the Merger
Agreement, St. Paul and Beverly entered into the Option Agreement immediately
after the execution of the Merger Agreement. Pursuant to the Option Agreement,
and as adjusted for the Beverly stock dividend in April 1998, Beverly granted
St. Paul the Option, which entitles St. Paul to purchase, subject to the terms
thereof, up to 1,155,512 or approximately 19.99% of the shares of Beverly Common
Stock then outstanding, under the circumstances described below, at a price per
share of $21.82, subject to adjustment in certain circumstances. The Option is
intended to discourage the making of alternative acquisition-related proposals
and to significantly increase the cost to a potential third party of acquiring
Beverly, under specified circumstances, compared to its cost had Beverly not
entered into the Option Agreement and, therefore, is likely to discourage third
parties from proposing a competing offer to acquire Beverly, even if such offer
involves a higher price per share for the Beverly Common Stock than the per
share consideration to be paid pursuant to the Merger Agreement.
The following brief summary of certain provisions of the Option Agreement
is qualified in its entirety by reference to the Option Agreement. A copy of
the Option Agreement, as well as the other documents described in this Proxy
Statement/Prospectus, will be provided without charge upon oral or written
request to Clifford M. Sladnick, Senior Vice President, General Counsel and
Secretary of St. Paul Bancorp, Inc., 6700 West North Avenue, Chicago, Illinois
60707.
Subject to applicable law and regulatory restrictions, St. Paul may
exercise the Option, in whole or in part, following the occurrence of a
"Purchase Event" (as defined below), provided that the Option shall not have
first terminated upon the occurrence of an "Exercise Termination Event" (as
defined below). "Purchase Event" means, in substance, either (i) the
acquisition by any third party of beneficial ownership of 25% or more of the
outstanding Beverly Common Stock or (ii) the entry by Beverly into a letter of
intent or definitive agreement to engage in an Acquisition Transaction (as
defined below) with any third party, or the recommendation by the Board of
Directors of Beverly that its shareholders approve or accept any Acquisition
Transaction with any third party.
For purposes of the Option Agreement, "Acquisition Transaction" means (x) a
merger, consolidation or other business combination, involving Beverly, (y) a
purchase, lease or other acquisition of all or substantially all of the assets
of Beverly, or (z) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of beneficial ownership of 25% or
more of the voting power of Beverly as to a Purchase Event (described above) or
10% as to a Preliminary Purchase Event (defined below).
50
<PAGE>
The Option Agreement defines an "Exercise Termination Event" to mean the
earliest to occur of the following: (i) the time immediately prior to the
Effective Time of the Merger; (ii) 18 months after the first occurrence of a
Purchase Event; (iii) 18 months after the termination of the Merger Agreement
following the occurrence of a Preliminary Purchase Event (unless clause (vii) is
applicable); (iv) upon the termination of the Merger Agreement, prior to the
occurrence of a Purchase Event or Preliminary Purchase Event, (A) by Beverly, if
St. Paul has breached the Merger Agreement or failed to obtain shareholder
approval, or if its per share price has fallen below specified levels; (B) by
both parties, if the Merger Agreement is terminated by mutual consent; (C) by
either St. Paul or Beverly, if the Merger Agreement has been terminated as a
result of regulatory denial or requested withdrawal of a regulatory application,
or if the Merger has not occurred by December 31, 1998; or (D) by Beverly, if
the Merger Agreement is terminated as a result of a material breach of any
representation, warranty, covenant or other agreement by St. Paul; (v) 18 months
after the termination of the Merger Agreement, if the Beverly shareholders have
failed to approve the Merger Agreement and no Purchase Event or Preliminary
Purchase Event has occurred prior to the Special Meeting; (vi) 18 months after
the termination of the Merger Agreement by St. Paul as a result of a material
breach of any representation, warranty, covenant or other agreement by Beverly,
if such breach was not willful or intentional by Beverly; or (vii) 24 months
after the termination of the Merger Agreement by St. Paul (A) as a result of a
willful or intentional material breach of any representation, warranty, covenant
or agreement by Beverly; or (B) as a result of a failure of Beverly or its Board
of Directors to hold the Special Meeting on a timely basis, to recommend to
Beverly's shareholders that they approve the Merger Agreement, or to oppose any
third party takeover proposal, or as a result of Beverly agreeing to enter into
an Acquisition Transaction other than with St. Paul.
"Preliminary Purchase Event", as defined in the Option Agreement, includes
(i) the entry by Beverly into a letter of intent or definitive agreement to
engage in an Acquisition Transaction with any third party, or the recommendation
by the Board of Directors of Beverly that its shareholders approve or accept any
Acquisition Transaction with any third party; (ii) an acquisition by any third
party of beneficial ownership of 10% or more of the outstanding shares of
Beverly Common Stock; (iii) the making of a bona fide proposal for an
Acquisition Transaction by any third party to Beverly, or a public announcement
or written communication that is publicly disclosed to Beverly's shareholders as
to a third party engaging in an Acquisition Transaction and the shareholders of
Beverly do not approve the Merger; (iv) a willful or intentional material breach
by Beverly of any representation, warranty, covenant or agreement that would
entitle St. Paul to terminate the Merger Agreement; (v) a failure by the Beverly
shareholders to approve the Merger Agreement, a failure to recommend or a
withdrawal or modification in any manner adverse to St. Paul by Beverly's Board
of Directors of its approval or recommendation as to the Merger Agreement, or a
failure by Beverly or its Board of Directors to oppose any third party takeover
proposal; or (vi) a filing by any third party of an application or notice with
any regulatory authority for approval to engage in an Acquisition Transaction.
The Option may not be assigned by St. Paul to any other person without the
express written consent of Beverly, except that St. Paul may assign its rights
under the Option Agreement to a wholly-owned subsidiary or may assign its rights
in whole or in part after the occurrence of a Preliminary Purchase Event.
Beverly also has agreed to prepare and file a registration statement if the
Option is exercised with respect to the shares to be issued upon exercise of the
Option under applicable federal and state securities laws. Upon the occurrence
of a Purchase Event prior to an Exercise Termination Event, at the request of
St. Paul, Beverly will be obligated to repurchase the Option, and any shares of
Beverly Common Stock theretofore purchased pursuant to the Option, at prices
determined as set forth in the Option Agreement, except to the extent prohibited
by applicable law, regulation or administrative policy.
In the event that prior to an Exercise Termination Event, Beverly enters
into a letter of intent or definitive agreement (i) to consolidate or merge with
any third party, and Beverly is not the continuing or surviving corporation in
such consolidation or merger; (ii) to permit any third party to merge into
Beverly, and Beverly is the continuing or surviving corporation, but, in
51
<PAGE>
connection with such merger, the then outstanding shares of Beverly Common Stock
will be changed into or exchanged for stock or other securities of any third
party or cash or any other property or the then outstanding shares of Beverly
Common Stock will after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company; or (iii) to sell or
otherwise transfer all or substantially all of its assets to any third party,
then, and in each such case, the agreement governing such transaction must make
proper provision so that the Option shall, upon the consummation of such
transaction, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of St. Paul, of either (x) the acquiring corporation
or (y) any person that controls the acquiring corporation. The Substitute Option
will be exercisable for shares of the issuer's common stock in such number and
at such exercise price as is set forth in the Option Agreement and will
otherwise have the same terms as the Option, except that the number of shares
subject to the Substitute Option may not exceed 19.99% of the issuer's
outstanding shares of common stock.
PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Pro Forma Combined Statement of Condition as of December 31,
1997 combines the historical consolidated statements of financial condition of
St. Paul and Beverly as if the Merger had occurred on December 31, 1997, after
giving effect to the pro forma adjustments described in the accompanying notes.
The Pro Forma Combined Statements of Operations for the years ended December 31,
1997, 1996 and 1995 are presented as if the Merger had been consummated at the
beginning of each period presented. The pro forma combined statement of
operations has not been adjusted to reflect any of the improvements in operating
efficiencies that St. Paul anticipates may occur in the future due to the
Merger. The pro forma data are based upon the issuance of 6,141,554 shares of
St. Paul Common Stock at a 1.0630 Exchange Ratio.
The pro forma combined financial statements should be read in conjunction
with the separate historical consolidated financial statements and notes of St.
Paul and Beverly incorporated by reference herein. See "Incorporation of Certain
Documents by Reference." The pro forma combined financial statements are not
necessarily indicative of the consolidated financial position or results of
future operations of the combined entity or of the actual results that would
have been achieved had the Merger been consummated prior to the periods
indicated.
52
<PAGE>
St. Paul Bancorp, Inc.
and Beverly Bancorporation, Inc.
Pro Forma Combined Statement of Condition
December 31, 1997
<TABLE>
<CAPTION>
Historical
---------------------
Pro Forma Pro Forma
St. Paul Beverly Adjustments Combined
---------- -------- ----------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents................... $ 204,683 $ 32,434 $ 2,648 (c) $ 239,765
Mortgage-backed and investment
securities................................. 959,437 188,189 (260)(b) 1,147,366
Loans receivable (including held for sale).. 3,256,866 427,740 3,684,606
Less: allowance for loan losses............ (34,395) (4,174) (2,400)(b) (40,969)
---------- -------- ------- ----------
3,222,471 423,566 (2,400) 3,643,637
Foreclosed real estate...................... 1,358 82 -- 1,440
Real estate held for development or
investment................................. 15,287 -- -- 15,287
Office properties and equipment............. 52,135 17,344 (136)(b) 69,343
Other assets................................ 101,965 7,619 (625)(b) 108,959
---------- -------- ------- ----------
Total assets.............................. $4,557,336 $669,234 $ (773) $5,225,797
========== ======== ======= ==========
Liabilities:
Deposits.................................... $3,284,428 $590,052 $ -- $3,874,480
Short-term borrowings....................... 370,203 3,334 -- 373,537
Long-term borrowings........................ 418,855 -- -- 418,855
Advance payments by borrowers for taxes
and insurance.............................. 21,232 -- -- 21,232
Other liabilities........................... 44,706 7,429 5,261 (b) 57,396
---------- -------- ------- ----------
Total liabilities......................... 4,139,424 600,815 5,261 4,745,500
Stockholders' Equity:
Preferred stock............................. -- -- -- --
Common stock................................ 354 58 4 (a) 416
Paid-in capital............................. 114,648 40,360 (4)(a) 155,004
Retained income, substantially restricted... 324,937 29,856 (8,682)(b) 346,111
Unrealized gain on securities,
net of taxes............................... 1,887 793 -- 2,680
Borrowings by employee stock ownership
plan....................................... (221) -- -- (221)
Unearned employee stock ownership
plan shares................................ (2,858) -- -- (2,858)
Treasury stock.............................. (20,835) -- -- (20,835)
Officers notes receivable................... -- (2,648) 2,648 (c) --
---------- -------- ------- ----------
Total stockholders' equity................. 417,912 68,419 (6,034) 480,297
---------- -------- ------- ----------
Total liabilities and stockholder's
equity................................... $4,557,336 $669,234 $ (773) $5,225,797
========== ======== ======= ==========
</TABLE>
See accompanying notes to pro forma combined financial statements.
53
<PAGE>
St. Paul Bancorp, Inc.
and Beverly Bancorporation, Inc.
Pro Forma Combined Statement of Operations
December 31, 1997
<TABLE>
<CAPTION>
Historical
-------------------
Pro Forma
St. Paul Beverly Combined
---------- ------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Interest Income:
Loans receivable........................................ $229,360 $33,616 $262,976
Investment securities:
Taxable................................................ 80,871 9,629 90,500
Tax Exempt............................................. -- 2,025 2,025
Federal funds and interest-bearing bank balances........ 4,986 351 5,337
-------- ------- --------
Total interest income................................. 315,217 45,621 360,838
Interest Expense:
Deposits................................................ 142,213 19,744 161,957
Short-term borrowings................................... 24,430 375 24,805
Long-term borrowings.................................... 18,742 -- 18,742
-------- ------- --------
Total interest expense................................ 185,385 20,119 205,504
-------- ------- --------
Net interest income................................... 129,832 25,502 155,334
Provision for loan losses............................... -- 360 360
-------- ------- --------
Net interest income after provision for loan losses... 129,832 25,142 154,974
Other Income:
Loan servicing fees..................................... 1,711 90 1,801
Other fee income........................................ 28,606 5,570 34,176
Net gain on asset sales................................. 568 2,041 2,609
Income from fiduciary activities........................ -- 2,232 2,232
Discount brokerage commissions.......................... 6,775 -- 6,775
Income from real estate development..................... 4,139 -- 4,139
Insurance and annuity commissions....................... 3,367 132 3,499
-------- ------- --------
Total other income.................................... 45,166 10,065 55,231
General and Administrative Expense:
Salaries and employee benefits.......................... 56,015 11,654 67,669
Occupancy, equipment and other office expense........... 29,688 6,777 36,465
Advertising............................................. 5,654 1,157 6,811
Federal deposit insurance............................... 2,761 69 2,830
Other................................................... 6,632 5,513 12,145
-------- ------- --------
General and administrative expense..................... 100,750 25,170 125,920
Gain on foreclosed real estate........................... 301 82 383
-------- ------- --------
Income from continuing operations before income taxes.. 74,549 10,119 84,668
Income tax expense....................................... 25,088 3,118 28,206
-------- ------- --------
Income from continuing operations...................... $ 49,461 $ 7,001 $ 56,462
======== ======= ========
Income From Continuing Operations Per Share:
Basic (d)............................................... $ 1.46 $ 1.22 $ 1.41
======== ======= ========
Diluted (d)............................................. $ 1.42 $ 1.17 $ 1.37
======== ======= ========
</TABLE>
The pro forma combined statement of operations has not been adjusted to reflect
any of the improvements in operating efficiencies that St. Paul anticipates may
occur in the future due to the Merger.
See accompanying notes to pro forma combined financial statements.
54
<PAGE>
St. Paul Bancorp, Inc.
and Beverly Bancorporation, Inc.
Pro Forma Combined Statement of Operations
December 31, 1996
<TABLE>
<CAPTION>
Historical
-------------------- Pro Forma
St. Paul Beverly Combined
---------- ------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Interest Income:
Loans receivable........................................ $229,639 $28,810 $258,449
Investment securities:
Taxable................................................ 63,883 11,733 75,616
Tax Exempt............................................. -- 1,826 1,826
Federal funds and interest-bearing bank balances........ 2,734 527 3,261
-------- ------- --------
Total interest income.................................. 296,256 42,896 339,152
Interest Expense:
Deposits................................................ 139,433 18,613 158,046
Short-term borrowings................................... 14,598 338 14,936
Long-term borrowings.................................... 17,479 495 17,974
-------- ------- --------
Total interest expense................................. 171,510 19,446 190,956
-------- ------- --------
Net interest income.................................... 124,746 23,450 148,196
Provision for loan losses............................... 1,750 155 1,905
-------- ------- --------
Net interest income after provision for loan losses.... 122,996 23,295 146,291
Other Income:
Loan servicing fees..................................... 1,369 207 1,576
Other fee income........................................ 22,221 5,373 27,594
Net gain on asset sales................................. 1,632 376 2,008
Income from fiduciary activities........................ -- 2,008 2,008
Discount brokerage commissions.......................... 5,176 -- 5,176
Income from real estate development..................... 2,517 -- 2,517
Insurance and annuity commissions....................... 2,805 207 3,012
-------- ------- --------
Total other income..................................... 35,720 8,171 43,891
General and Administrative Expense:
Salaries and employee benefits.......................... 52,155 10,693 62,848
Occupancy, equipment and other office expense........... 26,007 6,145 32,152
Advertising............................................. 5,065 975 6,040
Federal deposit insurance............................... 7,551 7 7,558
SAIF recapitalization................................... 21,000 -- 21,000
Other................................................... 6,040 4,516 10,556
-------- ------- --------
General and administrative expense..................... 117,818 22,336 140,154
Gain (Loss) on foreclosed real estate.................... (1,215) 615 (600)
-------- ------- --------
Income from continuing operations before income taxes.. 39,683 9,745 49,428
Income tax expense....................................... 13,426 2,956 16,382
-------- ------- --------
Income from continuing operations...................... $ 26,257 $ 6,789 $ 33,046
======== ======= ========
Income from Continuing Operations Per Share:
Basic (d)............................................... $ 0.77 $ 1.40 $ 0.85
======== ======= ========
Diluted (d)............................................. $ 0.74 $ 1.36 $ 0.81
======== ======= ========
</TABLE>
The pro forma combined statement of operations has not been adjusted to reflect
any of the improvements in operating efficiencies that St. Paul anticipates may
occur in the future due to the Merger.
See accompanying notes to pro forma combined financial statements.
55
<PAGE>
St. Paul Bancorp, Inc.
and Beverly Bancorporation, Inc.
Pro Forma Combined Statement of Operations
December 31, 1995
<TABLE>
<CAPTION>
Historical
--------------------
Pro Forma
St. Paul Beverly Combined
---------- ------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Interest Income:
Loans receivable........................................ $201,630 $26,972 $228,602
Investment securities:
Taxable................................................ 74,734 11,168 85,902
Tax Exempt............................................. -- 1,352 1,352
Federal funds and interest-bearing bank balances........ 2,386 478 2,864
-------- ------- --------
Total interest income.................................. 278,750 39,970 318,720
Interest Expense:
Deposits................................................ 132,741 16,726 149,467
Short-term borrowings................................... 10,389 379 10,768
Long-term borrowings.................................... 18,986 79 19,065
-------- ------- --------
Total interest expense................................. 162,116 17,184 179,300
-------- ------- --------
Net interest income.................................... 116,634 22,786 139,420
Provision for loan losses............................... 1,900 159 2,059
-------- ------- --------
Net interest income after provision for loan losses.... 114,734 22,627 137,361
Other Income:
Loan servicing fees..................................... 1,560 206 1,766
Other fee income........................................ 21,985 4,923 26,908
Net gain on asset sales................................. 1,054 604 1,658
Income from fiduciary activities........................ -- 1,927 1,927
Discount brokerage commissions.......................... 3,177 -- 3,177
Income from real estate development..................... 2,807 -- 2,807
Insurance and annuity commissions....................... 3,138 210 3,348
-------- ------- --------
Total other income..................................... 33,721 7,870 41,591
General and Administrative Expense:
Salaries and employee benefits.......................... 48,292 10,730 59,022
Occupancy, equipment and other office expense........... 23,268 5,547 28,815
Advertising............................................. 4,067 952 5,019
Federal deposit insurance............................... 8,907 570 9,477
Other................................................... 5,631 3,643 9,274
-------- ------- --------
General and administrative expense..................... 90,165 21,442 111,607
Gain (Loss) on foreclosed real estate.................... (1,159) 26 (1,133)
-------- ------- --------
Income from continuing operations before income taxes.. 57,131 9,081 66,212
Income tax expense....................................... 20,737 2,877 23,614
-------- ------- --------
Income from continuing operations...................... $ 36,394 $ 6,204 $ 42,598
======== ======= ========
Income From Continuing Operations Per Share:
Basic (d)............................................... $ 1.05 $ 1.16 $ 1.06
======== ======= ========
Diluted (d)............................................. $ 0.99 $ 1.15 $ 1.01
======== ======= ========
</TABLE>
The pro forma combined statement of operations has not been adjusted to reflect
any of the improvements in operating efficiencies that St. Paul anticipates may
occur in the future due to the Merger.
See accompanying notes to pro forma combined financial statements.
56
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
a. Represents the issuance of St. Paul Common Stock at the aggregate $0.01 per
share par value and the elimination of Beverly Common Stock and the net
effect on paid-in capital.
b. Represents the estimated Merger costs that will be incurred by St. Paul and
Beverly. These costs are not reflected in the Pro Forma Combined Statements
of Operations since these items do not have a continuing impact upon St.
Paul. The following table summarizes the financial impact of the additional
accruals as reflected in the Pro Forma Combined Statement of Condition (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Credit related:
Additions to allowance for loan losses $ 2,400
Merger related costs
Compensation (severance and related costs) 2,309
Writedown of assets in preparation for sale 885
Transaction costs (including investment banker,
legal and accounting fees) 2,777
Conversion and other expenses 3,154
-------
Total Merger related costs 9,125
-------
Total pre-tax adjustments 11,525
Income tax effect (2,843)
-------
Net after tax adjustments $ 8,682
=======
</TABLE>
c. Represents the repayment of notes receivable from certain Beverly officers,
the proceeds of which were used to purchase Beverly Common Stock.
d. Beverly earnings per share amounts have been restated for a 5% stock dividend
distributed to shareholders on April 14, 1998.
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Certain Federal Income Tax Consequences
The following summary discusses the material federal income tax
consequences of the Merger. The summary is based upon the Code, applicable U.S.
Treasury Regulations thereunder, administrative rulings and judicial authority,
all as of the date hereof. All of the foregoing are subject to change, and any
such change could affect the continuing validity of this summary. The summary
assumes that the holders of shares of Beverly Common Stock hold such shares as
capital assets. The summary does not address the tax consequences that may be
applicable to a particular Beverly shareholder subject to special tax rules,
such as tax-exempt organizations, dealers in securities, financial institutions,
insurance companies, non-United States persons, shareholders who acquired shares
of Beverly Common Stock pursuant to the exercise of options or otherwise as
compensation or through a qualified retirement plan and shareholders who hold
shares of Beverly Common Stock as part of a "straddle," "hedge," or "conversion
transaction." This summary also does not address any consequences arising under
the tax laws of any state, locality, or foreign jurisdiction.
Consummation of the Merger is subject to the prior receipt by St. Paul of
an opinion from Hogan & Hartson L.L.P., its special counsel, that the Merger
will be treated for federal income tax purposes as a tax-free reorganization
within the meaning of Section 368 of the Code. The opinion of Hogan & Hartson
L.L.P. will be based on the Code, the U.S. Treasury Regulations promulgated
thereunder, the administrative interpretations thereof and the judicial
decisions with respect thereto, all as in effect as of the Effective Time of the
Merger, on the assumption that the Merger takes place as described in the Merger
Agreement, and on certain representations provided and to be provided by St.
Paul and Beverly regarding the satisfaction of certain requirements applicable
to a reorganization within the meaning of Section 368(a) of the Code. Unlike a
ruling from the Internal Revenue Service ("IRS"), an opinion of counsel is not
binding on the IRS and there can be no assurance that the IRS will not take a
position contrary to one or more of the positions reflected in such opinion or
that such positions will be upheld by the courts if challenged by the IRS. If
such opinion is not received, or if the material tax consequences described
therein materially differ from those as stated below, Beverly will resolicit
shareholders.
If, as concluded in the opinion of counsel, the Merger qualifies as a tax-
free reorganization within the meaning of Section 368 of the Code, then:
(1) Except as discussed in (4) below with respect to cash received in
lieu of a fractional share of St. Paul Common Stock, a Beverly
shareholder will recognize no gain or loss upon the exchange of
Beverly Common Stock for St. Paul Common Stock pursuant to the
Merger.
(2) The tax basis of the St. Paul Common Stock received by a Beverly
shareholder in the Merger will be the same as the shareholder's
tax basis in the Beverly Common Stock surrendered in exchange
therefor.
(3) The holding period of the St. Paul Common Stock received by a
Beverly shareholder in the Merger will include the holding period
of the Beverly Common Stock surrendered in exchange therefor
(assuming the Beverly Common Stock was held as a capital asset).
(4) The receipt by a Beverly shareholder of cash in lieu of
fractional shares of St. Paul Common Stock will be treated as if
the fractional shares were distributed as part of the Merger and
then were redeemed by St. Paul. These cash payments will be
treated as distributions in full payment in exchange for the
stock redeemed, as provided in Section 302(a) of the Code.
(5) Neither St. Paul nor Beverly will recognize any gain or loss as a
result of the Merger.
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The shareholders of Beverly are urged to consult their own tax advisors as
to the specific tax consequences to them of the Merger, including tax return
reporting requirements, the applicability and effect of federal, state, local
and other applicable tax laws, and the effect of any proposed changes in the tax
laws.
As described above (see "--Options"), holders of Beverly Options will have
such Beverly Options converted into options to purchase shares of St. Paul
Common Stock. The assumption of the options by St. Paul should not be a taxable
event and former holders of Beverly Options who hold options to purchase St.
Paul Common Stock after the Merger should be subject to the same federal income
tax treatment upon exercise of such options as would have applied had they
exercised their Beverly Options.
Holders of Beverly Options are urged to consult their own tax advisors as
to the specific tax consequences to them of the Merger, including tax return
reporting requirements, available elections, the applicability and effect of
federal, state, local and other applicable tax laws, and the effect of any
proposed changes in the tax laws.
MARKET PRICES AND DIVIDENDS
St. Paul Common Stock
The following sets forth the range of high and low sale prices of St. Paul
Common Stock as reported on The Nasdaq Stock Market, as well as cash dividends
paid during the periods indicated:
<TABLE>
<CAPTION>
Market Price
------------------ Cash
High Low Dividends Paid
------- ------- --------------
<S> <C> <C> <C>
Quarter Ended:
March 31, 1996 $13.750 $12.750 $0.053
June 30, 1996 13.250 12.188 0.053
September 30, 1996 14.688 11.875 0.064
December 31, 1996 16.313 13.750 0.064
March 31, 1997 19.313 15.188 0.080
June 30, 1997 23.063 17.500 0.080
September 30, 1997 25.375 21.813 0.100
December 31, 1997 29.000 22.500 0.100
March 31, 1998 27.125 21.750 0.100
</TABLE>
On March 13, 1998, the last trading day prior to the public announcement of
the Merger, the closing price of St. Paul Common Stock on The Nasdaq Stock
Market was $26.438. On _____, 1998 (the most recent practicable date prior to
the printing of this Proxy Statement/Prospectus), the closing price of St. Paul
Common Stock on The Nasdaq Stock Market was $____.
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<PAGE>
Beverly Common Stock
The following sets forth the range of high and low sale prices of Beverly
Common Stock as reported on The Nasdaq Stock Market, as well as cash dividends
paid during the periods indicated, after Beverly completed its initial public
offering of securities which occurred during the third quarter of 1996:
<TABLE>
<CAPTION>
Market Price
------------------ Cash
High Low Dividends Paid
------- ------- --------------
<S> <C> <C> <C>
Quarter Ended:
September 30, 1996* $14.966 $13.605 $0.0454
December 31, 1996 16.533 14.286 0.0544
March 31, 1997 18.934 16.099 0.0544
June 30, 1997 20.476 18.095 0.0571
September 30, 1997 20.476 18.333 0.0571
December 31, 1997 24.167 19.167 0.0857
March 31, 1998 26.304 20.409 0.0857
</TABLE>
- ---------------------
* Beginning August 22, 1996.
On March 13, 1998, the last trading day prior to the public announcement of
the Merger, the closing price of Beverly Common Stock on The Nasdaq Stock Market
was $23.81. On May __, 1998 (the most recent practicable date prior to the
printing of this Proxy Statement/Prospectus), the closing price of Beverly
Common Stock on The Nasdaq Stock Market was $__.
DESCRIPTION OF ST. PAUL CAPITAL STOCK AND
COMPARISON OF SHAREHOLDER RIGHTS
Set forth below is a description of St. Paul's capital stock. If the Merger
Agreement is approved and adopted and the Merger is consummated, the holders of
Beverly Common Stock will become holders of St. Paul Common Stock. As a result,
St. Paul's Certificate of Incorporation and Bylaws, and the applicable
provisions of the DGCL, will govern the rights of current holders of Beverly
Common Stock. The Certificate of Incorporation and Bylaws of Beverly and the
same applicable provisions of the DGCL currently govern the rights of Beverly
shareholders.
The following comparison is based on the current terms of the governing
documents of St. Paul and Beverly. The discussion is intended to highlight
important similarities and differences between the rights of holders of St. Paul
Common Stock and Beverly Common Stock.
St. Paul Common Stock
St. Paul is authorized currently to issue 40,000,000 shares of St. Paul
Common Stock and will be authorized to issue 80,000,000 shares if the
Certificate Amendment is approved. As of the St. Paul Record Date, ____ shares
of St. Paul Common Stock were issued and outstanding and St. Paul had
outstanding stock options granted to directors, officers and other employees for
_____ shares of St. Paul Common Stock. Each share of St. Paul Common Stock has
the same relative rights and is identical in all respects to each other share of
St. Paul Common Stock. The St. Paul Common Stock is non-withdrawable capital, is
not of an insurable type and is not insured by the FDIC or any other
governmental entity.
Holders of St. Paul Common Stock are entitled to one vote per share on each
matter properly submitted to shareholders for their vote, including the election
of directors. Holders of St.
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Paul Common Stock do not have the right to cumulate their votes for the election
of directors, and they have no preemptive or conversion rights with respect to
any shares that may be issued. St. Paul Common Stock is not subject to
additional calls or assessments by St. Paul, and all shares of St. Paul Common
Stock currently outstanding are fully paid and non-assessable. For a discussion
of the voting rights of St. Paul Common Stock, classification of St. Paul's
Board of Directors and provisions of St. Paul's Certificate of Incorporation and
Bylaws that may prevent a change in control of St. Paul or that would operate
only with respect to an extraordinary corporate transaction involving St. Paul
or its subsidiaries, see "--Certificate of Incorporation and Bylaw Provisions."
Holders of St. Paul Common Stock and any class or series of stock entitled
to participate therewith are entitled to receive dividends when and as declared
by the Board of Directors of St. Paul out of any assets legally available for
distribution. No such dividends or other distributions may be declared or paid,
however, unless all accumulated dividends and any sinking fund, retirement fund
or other retirement payments have been paid, declared or set aside on any class
of stock having preference as to payments of dividends over the St. Paul Common
Stock.
In the unlikely event of any liquidation, dissolution or winding up of St.
Paul, the holders of St. Paul Common Stock and any class or series of stock
entitled to participate therewith would be entitled to receive, after payment or
provision for payment of all debts and liabilities of St. Paul and after the
liquidation preferences of all outstanding shares of any class of stock having
preference over the St. Paul Common Stock have been fully paid or set aside, all
remaining assets of St. Paul available for distribution, in cash or in kind.
St. Paul Preferred Stock
St. Paul's Certificate of Incorporation authorizes its Board of Directors,
without further shareholder approval, to issue up to 10,000,000 shares of serial
preferred stock for any proper corporate purpose. In approving any issuance of
serial preferred stock, the Board of Directors has broad authority to determine
the rights and preferences of the serial preferred stock, which may be issued in
one or more series. These rights and preferences may include voting, dividend,
conversion and liquidation rights that may be senior to the St. Paul Common
Stock.
In connection with the 1992 adoption of a Shareholder Rights Plan that is
designed to strengthen the Board's ability to act for the shareholders in the
event of an unsolicited bid to acquire control of the Company, the St. Paul
Board of Directors has authorized a class of preferred stock designated "Series
A Junior Participating Preferred Stock," consisting of 400,000 shares. Though
none of these shares have been issued, shares of this class of preferred
securities have certain preferential rights and privileges over shares of St.
Paul Common Stock as to dividends, distributions and voting rights and in a
liquidation, dissolution or winding up of St. Paul. Also, if St. Paul enters
into any consolidation, merger, combination or other transaction in which the
shares of St. Paul Common stock are exchanged for securities, cash and/or any
other property, then the shares of Series A Junior Participating Preferred Stock
shall be similarly exchanged in an amount per share equal to 100 times the
aggregate amount of securities, cash and/or any other property for which each
share of St. Paul Common Stock is changed or exchanged. The issuance of shares
of Series A Junior Participating Preferred Stock or other preferred shares
having special rights or preferences could have the effect of delaying or
preventing a change in control of St. Paul even if such a change in control
would be in the best interest of the holders of St. Paul Common Stock.
Certificate of Incorporation and Bylaw Provisions
General. Certain provisions included in St. Paul's Certificate of
Incorporation and Bylaws may serve to entrench current management and to prevent
a change in control of St. Paul even if desired by a majority of shareholders.
These provisions are designed to encourage potential acquirors to negotiate
directly with the Board of Directors of St. Paul and to discourage other
takeover attempts. The following discussion is a general summary of certain
provisions of St. Paul's Certificate of Incorporation and Bylaws, and a
comparison of those provisions to similar types of
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<PAGE>
provisions in the Certificate of Incorporation and Bylaws of Beverly. The
discussion is necessarily general and, with respect to provisions contained in
St. Paul's Certificate of Incorporation and Bylaws, reference should be made to
the document in question.
Directors. Certain provisions of St. Paul's Certificate of Incorporation
and Bylaws will impede changes in majority control of St. Paul's Board of
Directors. The Certificate of Incorporation provides that the Board of Directors
will be divided into three classes, with directors in each class elected for
three-year staggered terms. The Certificate of Incorporation further provides
that the size of the Board of Directors must be within a range of seven to 15.
The St. Paul Bylaws currently provide that there shall be nine directors. If the
Merger is consummated, the number of directors will be increased by one member
to allow Anthony R. Pasquinelli, Beverly's Chairman, to become a St. Paul
director. The Bylaws of Beverly provide that the number of directors shall be
seven.
St. Paul's Certificate of Incorporation and Bylaws provide that a vacancy
occurring in the Board of Directors, including a vacancy created by any increase
in the number of directors, shall be filled for the remainder of the unexpired
term by a majority vote of the directors then in office, whether a quorum or
not. St. Paul's Certificate of Incorporation provides that a director may be
removed only for cause and then only by the affirmative vote of at least two-
thirds of the total votes eligible to be voted at a duly constituted meeting of
shareholders called for that purpose and that 30 days' written notice must be
provided to any director or directors whose removal is to be considered at a
shareholders' meeting.
St. Paul's Bylaws and Beverly's Certificate of Incorporation each impose
certain notice requirements on the nomination by shareholders of candidates for
election to the Board of Directors and the proposal by shareholders of business
to be acted upon at an annual meeting of shareholders. Both parties' bylaws also
contain provisions prohibiting certain contracts and transactions between St.
Paul and Beverly, respectively, and their respective directors and officers and
certain other entities unless certain procedural requirements are satisfied. St.
Paul's Bylaws impose certain restrictions on who may be nominated as director.
St. Paul's Bylaws provide that to be eligible for nomination as a director, a
nominee must have been a resident of the State of Illinois for at least one year
at the time of his nomination or, if not then a resident, have been previously a
resident for at least three years. St. Paul's Bylaws further provide that each
director is required to beneficially own not less than 1,000 shares of St. Paul
Common Stock, unless in the case of a director, two-thirds of the other
directors waive such ownership requirement. St. Paul's Bylaws also provide that
more than three consecutive absences from regular meetings of the Board of
Directors, unless excused by a Board resolution, shall automatically constitute
a resignation. Beverly's Certificate of Incorporation and Bylaws do not have
similar provisions.
Call of Special Meetings. St. Paul's Certificate of Incorporation provides
that a special meeting of shareholders may be called at any time but only by the
Chairman, the President or by the Board of Directors. Shareholders are not
authorized to call a special meeting. The Bylaws of Beverly provide that a
special meeting of shareholders may be called by the Chairman, the President or
the Secretary at the request of a majority of the Board of Directors.
Shareholder Action Without a Meeting. St. Paul's Certificate of
Incorporation provides that shareholders may act by written consent only if they
are unanimous. The Certificate of Incorporation of Beverly provides that any
action required or permitted to be taken by shareholders must be taken at a duly
called annual or special meeting and not by any consent in writing.
Limitation on Liability of Directors. St. Paul's and Beverly's Certificate
of Incorporation provide that no director shall be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director other than liability (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for any payment of a dividend or approval of a stock
repurchase that is illegal under Section 174 of the DGCL, or (iv) for any
transaction from which a director derived an improper personal benefit.
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<PAGE>
The Certificates of Incorporation provide that St. Paul and Beverly,
respectively, shall indemnify each of its officers, directors, employees and
other persons, if he or she acts in good faith and in a manner he or she
believes to be in the best interests of St. Paul and Beverly, respectively, and,
with respect to a criminal proceeding, had no reasonable cause to believe his or
her conduct was unlawful. Also, St. Paul and Beverly are permitted by their
Certificates of Incorporation to obtain insurance on behalf of directors,
officers, employees and other persons.
Cumulative Voting. St. Paul's Certificate of Incorporation denies
cumulative voting rights in the election of directors. The Beverly Bylaws state
that directors are to be elected by a plurality vote, and neither Beverly's
Certificate of Incorporation or Bylaws provide for cumulative voting. See
"--Amendment of Certificate of Incorporation and Bylaws."
Notice of Shareholder Meetings. St. Paul's Bylaws require that notice be
given not less than 20 nor more than 50 days prior to each annual or special
meeting of shareholders. The Bylaws of Beverly require that notice of each
annual or special meeting be mailed or delivered no less than 10 nor more than
60 days prior to a meeting.
Quorum. St. Paul's Bylaws provide that the holders of one-third of the
capital stock issued and outstanding and entitled to vote at a meeting
constitutes a quorum. The Bylaws of Beverly provide that the holders of a
majority of the shares of issued and outstanding stock entitled to vote at a
meeting constitutes a quorum.
General Vote. Except as otherwise required by law or St. Paul's
Certificate of Incorporation or Bylaws, St. Paul's Bylaws provide that any
matter brought before a meeting of shareholders shall be decided by the
affirmative vote of a majority of the votes cast on the matter. The Bylaws of
Beverly provide that except as otherwise provided by law or the Certificate of
Incorporation, all questions shall be decided by vote of the holders of a
majority of the shares present at a meeting.
Record Date. St. Paul's Bylaws provide that the record date for
determination of shareholders entitled to notice of or to vote at a meeting and
for certain other specified purposes shall not be less than 20 nor more than 50
days before the date of such meeting or other action. The Bylaws of Beverly
provide that the record date shall be not less than 10 nor more than 60 days
prior to the date of the meeting or other action.
Authorized and Outstanding Serial Preferred Stock. See "--St. Paul
Preferred Stock" as to the authorized shares of serial preferred stock of St.
Paul. The Certificate of Incorporation of Beverly authorizes 1,000,000 shares of
serial preferred stock, par value $0.01, of which no shares have been issued and
are outstanding.
Dividend and Liquidation Rights. For a description of the provisions of
St. Paul's Certification of Incorporation with respect to dividends and
liquidation rights, see "-- St. Paul Common Stock." The Certificate of
Incorporation of Beverly provides that dividends on outstanding shares of
preferred stock shall be paid, declared or set aside prior to the payment of any
dividends on Beverly Common Stock with respect to the same dividend period. In
the event of a liquidation, dissolution or winding up, the Certificate of
Incorporation of Beverly provides that after distributions are made to holders
of shares of preferred stock in accordance with the respective preferential
amounts payable with respect thereto, the remaining assets shall be distributed
among the holders of shares of Beverly Common Stock.
Approvals for Acquisitions of Control and Offers to Acquire Control. St.
Paul's Certificate of Incorporation prohibits any person (whether an individual,
company or group acting in concert) from acquiring beneficial ownership of 10%
or more of St. Paul's voting stock, unless the acquisition has received the
prior approval of at least two-thirds of the outstanding shares of voting stock
at a duly called meeting of shareholders held for such purpose and of all
required federal regulatory authorities. Furthermore, no person may make an
offer to acquire 10% or more of St.
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<PAGE>
Paul's voting stock without obtaining prior approval of the offer by at least
two-thirds of St. Paul's Board of Directors or, alternatively, before the offer
is made, obtaining approval of the acquisition from the OTS. These provisions do
not apply to the purchase of shares by underwriters in connection with a public
offering or employee stock ownership plan or other employee benefit plan of St.
Paul or any of its subsidiaries, and the provisions remain effective only so
long as an insured institution is a majority-owned subsidiary of St. Paul.
Shares acquired in excess of these limitations are not entitled to vote or take
other shareholder action or be counted in determining the total number of
outstanding shares in connection with any matter involving shareholder action.
These excess shares are also subject to transfer to a trustee, selected by St.
Paul, for the sale on the open market or otherwise, with the expenses of the
trustee to be paid out of the proceeds of such sale. The Certificate of
Incorporation of Beverly does not contain a similar provision.
Procedures for Certain Business Combinations. St. Paul's Certificate of
Incorporation requires that certain business combinations between St. Paul (or
any majority-owned subsidiary thereof) and a five percent or more shareholder or
its affiliates or associates (collectively, the "Interested Shareholder") either
(i) be approved by at least 80% of the total number of outstanding shares of
voting stock of St. Paul, or (ii) be approved by at least two-thirds of St.
Paul's continuing directors (persons unaffiliated with the Interested
Shareholder and serving prior to the Interested Shareholder becoming such) or
meet certain price and procedure requirements that provide for consideration per
share generally equal to that paid by the Interested Shareholder when it
acquired its block of stock. The types of business combinations with an
Interested Shareholder covered by this provision include: any merger,
consolidation and share exchange; any sale, lease, exchange, mortgage, pledge or
other transfer of assets other than in the usual and regular course of business;
an issuance or transfer of equity securities having an aggregate market value in
excess of five percent of aggregate market value of St. Paul's outstanding
shares; the adoption of any plan or proposal of liquidation proposed by or on
behalf of an Interested Shareholder; and any reclassification of securities,
recapitalization of St. Paul or any merger or consolidation of St. Paul with any
of its subsidiaries or any other transaction which has the effect of increasing
the proportionate ownership interest of the Interested Shareholder. St. Paul's
Certificate of Incorporation excludes employee stock purchase plans and other
employee benefit plans of St. Paul and any of its subsidiaries from the
definition of "Interested Shareholder." The Certificate of Incorporation of
Beverly does not contain a similar provision.
Anti-Greenmail. St. Paul's Certificate of Incorporation requires approval
by a majority of the outstanding shares of voting stock before St. Paul may
directly or indirectly purchase or otherwise acquire any voting stock
beneficially owned by a holder of 5% percent or more of St. Paul's voting stock,
if such holder has owned the shares for less than two years. Any shares
beneficially held by such person are required to be excluded in calculating
majority shareholder approval. This provision would not apply to a pro rata
offer made by St. Paul to all of its shareholders in compliance with the
Exchange Act and the rules and regulations thereunder or a purchase of voting
stock by St. Paul if the Board of Directors has determined that the purchase
price per share does not exceed the fair market value of such voting stock. The
Certificate of Incorporation of Beverly does not contain a similar provision.
Criteria for Evaluating Offers. St. Paul's Certificate of Incorporation
provides that the Board of Directors, when evaluating any acquisition offers,
shall give due consideration to all relevant factors, including, without
limitation, the economic effects of acceptance of the offer on depositors,
borrowers and employees of its insured institution subsidiaries and on the
communities in which such subsidiaries operate or are located, as well as on the
ability of such subsidiaries to fulfill the objectives of insured institutions
under applicable federal statutes and regulations. The Certificate of
Incorporation of Beverly does not contain a similar provision.
Amendment to Certificate of Incorporation and Bylaws. Amendments to St.
Paul's Certificate of Incorporation must be approved by at least two-thirds of
St. Paul's Board of Directors at a duly constituted meeting called for such
purpose and also by shareholders by the affirmative vote of at least a majority
of the shares entitled to vote thereon at a duly called annual or special
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<PAGE>
meeting; provided, however, that approval by the affirmative vote of at least
two-thirds of the shares entitled to vote thereon is generally required for
certain provisions. In addition, the provisions regarding certain business
combinations may be amended only by the affirmative vote of at least 80% of the
shares entitled to vote thereon. St. Paul's Bylaws may be amended by the
affirmative vote of at least two-thirds of the Board of Directors or by
shareholders by at least two-thirds of the total votes eligible to be voted, at
a duly constituted meeting called for such purpose. The Certificate of
Incorporation of Beverly provides that Beverly reserves the right to amend any
of the Certificate of Incorporation's provisions as prescribed by statute. The
Beverly Bylaws state that the shareholders or the Board of Directors may amend
them at any regular or special meeting.
Delaware Takeover Statute. Section 203 of the DGCL (the "Delaware Takeover
Statute") applies to Delaware corporations with a class of voting stock listed
on a national securities exchange, authorized for quotation on The Nasdaq Stock
Market, or held of record by 2,000 or more persons, and restricts transactions
which may be entered into by such a corporation and certain of its shareholders.
The Delaware Takeover Statute provides, in essence, that a shareholder acquiring
more than 15%, but less than 85%, of the outstanding voting stock of a
corporation subject to the statute and such person's affiliates and associates
(each, an "Interested Person") may not engage in certain "Business Combinations"
(as defined therein) with the corporation for a period of three years subsequent
to the date on which the shareholder became an Interested Person unless (i)
prior to such date the corporation's board of directors approved either the
Business Combination or the transaction in which the shareholder became an
Interested Person or (ii) the Business Combination is approved by the
corporation's board of directors and authorized by a vote of at least two-thirds
of the outstanding voting stock of the corporation not owned by the Interested
Person.
The Delaware Takeover Statute defines the term "Business Combination" to
include a wide variety of transactions with or caused by an Interested Person in
which the Interested Person receives or could receive a benefit on other than a
pro rata basis with other shareholders, including mergers, certain asset sales,
certain issuances of additional shares to the Interested Person, transactions
with the corporation which increase the proportionate interest of the Interested
Person or transactions in which the Interested Person receives certain other
benefits.
Federal Law. Federal law provides that, subject to certain exemptions, no
person acting directly or indirectly or through or in concert with one or more
other persons may acquire "control" of an insured institution or holding company
thereof, without giving at least 60 days prior written notice providing
specified information to the appropriate federal banking agency (i.e., the OTS
in the case of St. Paul and St. Paul Bank, the Federal Reserve Board in the case
of Beverly and the OCC in the case of Beverly Bank). "Control" is defined for
this purpose as the power, directly or indirectly, to direct the management or
policies of an insured institution or to vote 25 percent or more of any class of
voting securities of an insured institution. Control is presumed to exist where
the acquiring party has voting control of at least 10 percent of any class of
the institution's voting securities which is registered under Section 12 of the
Exchange Act and is actively traded. The term "actively traded" is defined in
the regulation to mean securities that are either listed on a securities
exchange or quoted on The Nasdaq Stock Market. The OTS, the Federal Reserve
Board or the OCC may prohibit the acquisition of control if such agency finds,
among other things, that (i) the acquisition would result in a monopoly or
substantially lessen competition; (ii) the financial condition of the acquiring
person might jeopardize the financial stability of the institution; or (iii) the
competence, experience or integrity of any acquiring person or any of the
proposed management personnel indicates that it would not be in the interest of
the depositors or the public to permit the acquisition of control by such
person.
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THE CERTIFICATE AMENDMENT
The St. Paul Board of Directors has unanimously approved the Certificate
Amendment. The St. Paul Board of Directors has determined that the proposed
amendment to the Certificate of Incorporation is advisable and in the best
interests of St. Paul and its stockholders, and unanimously recommends that the
holders of St. Paul Common Stock vote to approve the amendment. Approval of the
Certificate Amendment is a condition to the Merger. If the Certificate Amendment
is not approved, the Merger cannot be consummated.
St. Paul's Certificate of Incorporation currently provides that the total
number of shares of all classes of capital stock that St. Paul has authority to
issue is 50,000,000, consisting of 40,000,000 shares of St. Paul Common Stock
and 10,000,000 shares of serial preferred stock, par value $0.01 per share. The
Certificate Amendment's purpose is to increase the number of authorized shares
of St. Paul 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 St. Paul'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 St. Paul Common Stock,
34,310,608 shares were outstanding as of March 31, 1998 and 3,539,307 shares
were reserved for issuance with respect to the St. Paul's stock option plans. As
of _____, 1998, no shares of preferred stock were outstanding. St. Paul 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 15,876,199 shares of St. Paul
Common Stock being issued during 1997 for these purposes. Accordingly, as of
________, 1998, only 2,150,085 shares of authorized but not outstanding and
unreserved shares of St. Paul Common Stock remained available for future
issuance. Under the terms of the Merger Agreement, St. Paul will issue 6,141,554
shares of St. Paul Common Stock, subject to adjustment, to the holders of
Beverly Common Stock, and 560,931 options to purchase St. Paul Common Stock in
exchange for 527,686 Beverly stock options. Approval of the Certificate
Amendment is therefore a condition to the Merger. The St. Paul Board has
determined that the Merger and the Stock Issuance in connection with the Merger
are advisable and in the best interests of St. Paul and its shareholders.
Therefore, the St. Paul Board is unanimously recommending that shareholders
approve the Certificate Amendment.
The Board of Directors has determined that the Certificate Amendment is
advisable and in the best interests of St. Paul and its stockholders, and
unanimously recommends that shareholders approve it, regardless of the Merger.
The Certificate Amendment will provide St. Paul with 42,150,805 shares of St.
Paul Common Stock available for issuance (35,447,600 shares if the Merger is
consummated at the 1.0630 Exchange Rate). Other than securities that would be
issued in connection with the Merger, St. Paul has no present intention of
issuing any other authorized but unissued and unreserved shares of St. Paul
capital stock. However, the Board of Directors believes that the increased
number of shares of St. Paul Common Stock, regardless of whether the Merger is
consummated or not, will benefit St. Paul and its shareholders. It will make a
sufficient number of shares available in the future for use in connection with
possible stock dividends or splits, raising 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 St. Paul Common Stock will be
available for any proper corporate purpose, as authorized by the Board of
Directors, without further approval by the
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St. Paul shareholders, except as otherwise required by law or the rules of The
Nasdaq Stock Market. St. Paul shareholders do not have any preemptive or other
rights to purchase additional shares of St. Paul Common Stock. Issuances of
additional shares of St. Paul Common Stock or securities convertible into St.
Paul Common Stock, therefore, may have a dilutive effect on existing
shareholders of St. Paul.
In the event of a proposed merger, tender offer or other attempt to gain
control of St. Paul, it may be possible for the Board of Directors to approve
the issuance of shares of St. Paul 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 St. Paul's Common Stock in order to obtain
control of St. Paul by means of merger, tender offer or otherwise.
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ADJOURNMENT OF THE SPECIAL MEETINGS
The holders of Beverly Common Stock will be asked to approve, if necessary,
the adjournment of the Beverly Special Meeting to solicit further votes in favor
of the Merger Agreement. The proxies of Beverly shareholders voting against the
Merger Agreement may not be used by management to vote in favor of an
adjournment pursuant to its discretionary authority.
The holders of St. Paul Common Stock will be asked to approve, if
necessary, the adjournment of the St. Paul Special Meeting to solicit further
votes in favor of the Certificate Amendment and the Share Issuance. The proxies
of St. Paul shareholders voting against the Merger Agreement may not be used by
management to vote in favor of an adjournment pursuant to its discretionary
authority.
SHAREHOLDER PROPOSALS
Any proposal which a St. Paul shareholder wishes to have included in the
proxy materials of St. Paul with respect to St. Paul's 1999 Annual Meeting must
be received by St. Paul at St. Paul's principal executive offices at 6700 West
North Avenue, Chicago, Illinois 60707 no later than November 27, 1998.
Any proposal which a Beverly shareholder wishes to have included in the
proxy materials of Beverly with respect to Beverly's 1999 Annual Meeting, in the
event the Merger is not consummated, must be received by Beverly at Beverly's
principal executive offices at 16345 South Harlem Avenue, Suite 3E, Tinley Park,
Illinois 60477 no later than _______, 1998.
OTHER MATTERS
It is not expected that any matters other than those described in this
Joint Proxy Statement/Prospectus will be brought before either of the Special
Meetings. If any other matters are presented, however, it is the intention of
the respective persons named in the respective Beverly and St. Paul proxies to
vote such respective proxies in accordance with the respective determinations of
a majority of the respective Boards of Directors of the two parties, including,
without limitation, motions to adjourn or postpone the respective Special
Meetings to another time and/or place for the purpose of soliciting additional
proxies in order to approve the Merger Agreement, the Certificate Amendment and
Stock Issuance, or otherwise.
EXPERTS
The consolidated financial statements of St. Paul Bancorp, Inc.
incorporated by reference in St. Paul's Annual Report (Form 10-K) for the year
ended December 31, 1997, and incorporated by reference in this Joint Proxy
Statement/Prospectus, which is referred to and made a part of this Joint Proxy
Statement/Prospectus and Registration Statement, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon
incorporated by reference therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of Beverly at December 31, 1997 and
1996, and for each of the years in the three year period ended December 31,
1997, incorporated by reference into this Joint Proxy Statement/Prospectus, have
been so incorporated in reliance on the report of Grant Thornton LLP independent
accountants, given upon the authority of that firm as experts in accounting and
auditing.
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LEGAL MATTERS
The validity of the St. Paul Common Stock to be issued in the Merger has
been passed upon by Clifford M. Sladnick, Senior Vice President, General Counsel
and Corporate Secretary of St. Paul. Hogan & Hartson L.L.P., Washington, D.C.,
will be passing upon certain tax matters in connection with the Merger.
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APPENDIX A
McDonald & Company
SECURITIES, INC.
SUITE 2020
311 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
312-360-3882
FAX: 312-360-3884
WATTS: 800-390-2122
March 15, 1998
Board of Directors
Beverly Bancorporation, Inc.
16345 S. Harlem Avenue
Tinley Park, IL 60477
Attention: Mr. Anthony R. Pasquinelli
Chairman
Gentlemen:
You have requested our opinion with respect to the fairness, from a
financial point of view, as of the date hereof, to the holders of the common
stock, par value $.01 per share ("Beverly Common"), of Beverly Bancorporation,
Inc. ("Beverly"), of the Exchange Ratio, as set forth in Section 1.4(a) of the
Agreement and Plan of Merger (the "Agreement"), between Beverly and St. Paul
Bancorp, Inc. ("St. Paul").
The Agreement provides for the merger (the "Merger") of Beverly with and
into St. Paul, pursuant to which, among other things, at the Effective Time (as
defined in the Agreement), each outstanding share of Beverly Common, other than
shares held in the treasury of Beverly, and after giving effect to the
previously announced 5% stock dividend payable on April 14th, will be converted
into the right to receive 1.063 shares of the common stock, $.01 par value ("St.
Paul Common") of St. Paul, as set forth in Section 1.4(a) of the Agreement. The
terms and conditions of the Merger are more fully set forth in the Agreement.
McDonald & Company Securities, Inc., as part of its investment banking
business, is customarily engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
We have acted as Beverly's financial advisor in connection with, and have
participated in certain negotiations leading to, the Agreement. In connection
with rendering our opinion set forth herein, we have among other things:
(i) Reviewed Beverly's Annual Reports to Shareholders and Annual Reports
on Form 10-K for each of the years ended December 31, 1996, December
31, 1995 and December 31, 1994, including the audited financial
statements contained therein, and Beverly's Quarterly Reports on Form
10-Q for each of the first three quarters of 1997 and Beverly's draft
financial reports for the year ended December 31, 1997, including the
unaudited financial statements contained therein;
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(ii) Reviewed St. Paul's Annual Reports to Shareholders and Annual Reports
on Form 10-K for each of the years ended December 31, 1997, December
31, 1996 and December 31, 1995, including the audited financial
statements contained therein, and St. Paul's Quarterly Reports on Form
10-Q for each of the first three quarters of 1997;
(iii) Reviewed certain other public and non-public information, primarily
financial in nature, relating to the respective businesses, earnings,
assets and prospects of Beverly and St. Paul provided to us or
publicly available;
(iv) Participated in meetings and telephone conferences with members of
senior management of Beverly and St. Paul concerning the financial
condition, business, assets, financial forecasts and prospects of the
respective companies, as well as other matters we believed relevant to
our inquiry;
(v) Reviewed certain stock market information for Beverly Common and St.
Paul Common, and compared it with similar information for certain
companies, the securities of which are publicly traded;
(vi) Compared the results of operations and financial condition of Beverly
and St. Paul with that of certain companies which we deemed to be
relevant for purposes of this opinion;
(vii) Reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions which we deemed to be relevant for
purposes of this opinion;
(viii) Reviewed the Agreement dated March 15, 1998 and its schedules and
exhibits and certain related documents; and
(ix) Performed such other reviews and analyses as we have deemed
appropriate.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information reviewed by us and have relied upon the accuracy and completeness of
the representations, warranties and covenants of Beverly and St. Paul contained
in the Agreement. We have not been engaged to undertake, and have not assumed
any responsibility for, nor have we conducted, an independent investigation or
verification of such matters. We have not been engaged to and we have not
conducted a physical inspection of any of the assets, properties or facilities
of either Beverly or St. Paul, nor have we made or obtained or been furnished
with any independent valuation or appraisal of any of such assets, properties or
facilities or any of the liabilities of either Beverly or St. Paul. With
respect to financial forecasts used in our analysis, we have assumed that such
forecasts have been reasonably prepared by management of Beverly and St. Paul,
as the case may be, on a basis reflecting the best currently available estimates
and judgments of the management of Beverly and St. Paul, as to the future
performance of Beverly, St. Paul, and Beverly and St. Paul combined, as the case
may be. We have not been engaged to and we have not assumed any responsibility
for, nor have we conducted any independent investigation or verification of such
matters, and we express no view as to such financial forecasts or the
assumptions on which they are based. We have also assumed that all of the
conditions to the consummation of the Merger, as set forth in the Agreement,
including the tax-free treatment of the Merger to the holders of Beverly Common,
would be satisfied and that the Merger would be consummated on a timely basis in
the manner contemplated by the Agreement.
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We will receive a fee for our services as financial advisor to Beverly, a
substantial portion of which is contingent upon closing of the Merger. We will
also receive a fee for our services in rendering this opinion.
In the ordinary course of business, we may actively trade securities of St.
Paul and Beverly for our own account and for the accounts of customers and
accordingly, we may at any time hold a long or short position in such
securities.
This opinion is based on economic and market conditions and other
circumstances existing on, and information made available as of, the date
hereof. In addition, our opinion is, in any event, limited to the fairness, as
of the date hereof, from a financial point of view, of the Exchange Ratio, to
the holders of Beverly Common, and does not address the underlying business
decision by Beverly's Board of Directors to effect the Merger, does not compare
or discuss the relative merits of any competing proposal or any other terms of
the Merger, and does not constitute a recommendation to any Beverly shareholder
as to how such shareholder should vote with respect to the Merger. This opinion
does not represent an opinion as to what the value of Beverly Common or St. Paul
Common may be at the Effective Time of the Merger or as to the prospects of
Beverly's business or St. Paul's business.
This opinion is directed to the Board of Directors of Beverly and may not
be reproduced, summarized, described or referred to or given to any other person
without our prior written consent. Notwithstanding the foregoing, this opinion
may be included in the proxy statement to be mailed to the holders of Beverly
Common in connection with the Merger, provided that this opinion will be
reproduced in such proxy statement in full, and any description of or reference
to us or our actions, or any summary of the opinion in such proxy statement,
will be in a form reasonably acceptable to us and our counsel.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of Beverly Common from a
financial point of view.
Very truly yours,
/s/ McDONALD & COMPANY SECURITIES, INC.
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Appendix B
March 15, 1998
Board of Directors
St. Paul Bancorp, Inc.
6700 W. North Avenue
Chicago, IL 60638
Members of the Board:
We understand that St. Paul Bancorp, Inc. ("SPBC") and Beverly
Bancorporation ("Beverly") propose to enter into an Agreement and Plan of Merger
(the "Agreement") dated March 15, 1998 pursuant to which Beverly is to be merged
with and into SPBC in a transaction (the "Merger") in which each outstanding
share of Beverly's common stock, par value $0.01 per share (the "Beverly
Shares"), will be converted into the right to receive 1.063 (the "Exchange
Ratio") of the common stock, par value $0.01 per share, of SPBC (the "SPBC
Shares"), all as set forth more fully in the Agreement.
You have asked us whether, in our opinion, the Exchange Ratio is fair
to SPBC from a financial point of view.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed certain publicly-available business and financial information
relating to SPBC and Beverly that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the businesses, earnings, assets, liabilities and prospects of
Beverly and SPBC furnished to us by senior management of SPBC and
Beverly, as well as the amount and timing of the cost savings and
related expenses and revenue enhancements expected to result from the
Merger furnished to us by the senior management of SPBC (the "Expected
Synergies");
(3) Conducted discussions with members of senior management of SPBC and
Beverly concerning the foregoing, including the respective businesses,
prospects, regulatory condition and contingencies of SPBC and Beverly
before and after giving effect to the Merger and the Expected
Synergies;
(4) Reviewed the market prices and valuation multiples for the SPBC Shares
and Beverly Shares and compared the SPBC Shares and the Beverly Shares
with those of certain publicly-traded companies which we deemed to be
relevant;
(5) Reviewed the results of operations of Beverly and SPBC and compared
them with those of certain publicly-traded companies which we deemed
to be relevant;
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(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions which we deemed to be relevant;
(7) Reviewed the potential pro forma impact of the Merger;
(8) Reviewed a draft of the Agreement; and
(9) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed, with your consent, and
relied on the accuracy and completeness of all information supplied or otherwise
made available to us, discussed with or reviewed by or for us, or publicly
available, and we have not assumed responsibility for independently verifying
such information or undertaken an independent evaluation or appraisal of the
assets or liabilities of SPBC or Beverly, nor have we been furnished any such
evaluation or appraisal. We are not experts in the evaluation of allowances for
credit or loan losses and we have neither made an independent evaluation of the
adequacy of the allowance for credit or loan losses of SPBC or Beverly, nor
reviewed any individual credit or loan files relating to SPBC or Beverly and, as
a result, we have assumed that the aggregate allowance for credit or loan losses
for both SPBC and Beverly is adequate to cover such losses and will be adequate
on a pro forma basis for the combined entity. In addition, we have not assumed
any obligation to conduct, nor have we conducted, any physical inspection of the
properties or facilities of SPBC or Beverly. With respect to the financial
forecast information, including, without limitation, financial forecasts,
evaluation of contingencies and projections regarding under-performing and non-
performing assets, net charge-offs, adequacy of reserves and future economic
conditions and the Expected Synergies, furnished to or discussed with us by SPBC
or Beverly, we have assumed that they have been reasonably prepared and reflect
the best currently available estimates, allocations and judgments of the senior
management of SPBC and Beverly as to the expected future financial performance
of SPBC, Beverly or the combined entity, as the case many be, and the Expected
Synergies. We express no opinion as to such financial forecast information or
the Expected Synergies or the assumptions upon which they were based. We have
further assumed that the Merger will qualify as a tax-free reorganization for
U.S. federal income tax purposes. We have also assumed that the final form of
the Agreement will be substantially similar the last drafts reviewed by us.
Our opinion is necessarily based upon market, economic and other
conditions as in effect, and on the information made available to us as of, the
date hereof. For the purposes of rendering this opinion, we have assumed, in
all respects material to our analysis, that the representations and warranties
of each party in the Agreement and all related documents and instruments
(collectively, the "Documents") contained therein are true and correct, that
each party to the Documents will perform all of the covenants and agreements
required to be performed by such party under such Documents, and that all
conditions to the consummation of the Merger will be satisfied without waiver
thereof. We have also assumed that in the course of obtaining the necessary
regulatory or other consents or approvals (contractual or otherwise) for the
Merger, no restrictions, including any divestiture requirements or amendment or
modifications, will be imposed that will have a material adverse affect on the
contemplated benefits of the Merger, including the Expected Synergies.
We are acting as financial advisor to SPBC in connection with the
Merger and will receive a fee from SPBC for our services, a significant portion
of which is contingent upon the consummation of the Merger. In addition, SPBC
has agreed to indemnify us for certain liabilities arising out of our
engagement. We have in the past provided financial advisory, investment banking
and other services to SPBC, and may continue to do so, and have received, and
may receive, customary fees for the rendering of such services. In addition, in
the ordinary course of our business, we also may actively trade debt and/or
equity securities of SPBC, Beverly and their respective affiliates for our own
account and the accounts of our customers, and therefore we may from time to
time hold a long or short position in such securities.
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This opinion is for the use and benefit of the Board of Directors of
SPBC. Our opinion does not address the merits of the underlying decision by
SPBC to engage in the Merger, and does not constitute a recommendation to any
stockholder as to how such stockholder should vote on the proposed Merger.
We are not expressing any opinion herein as to the prices at which SPBC
Shares or Beverly shares will trade following the announcement or consummation
of the Merger.
On the basis of and subject to the foregoing, we are of the opinion
that, as the date hereof, the Exchange Ratio is fair to SPBC from a financial
point of view.
Very truly yours,
/s/ MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the DGCL sets forth certain circumstances under which
directors, officers, employees and agents may be indemnified against liability
that they may incur in their capacity as such. Section 145 of the DGCL, which
is filed as Exhibit 99.1 to this Registration Statement, is incorporated herein
by reference.
Article IX of St. Paul's Bylaws, entitled "Indemnification," provides for
indemnification of St. Paul's directors, officers, trustees, employees and
agents under certain circumstances.
St. Paul also has the power to purchase and maintain insurance on behalf of
its directors and officers. St. Paul has in effect a policy of liability
insurance covering its directors and officers, the effect of which is to
reimburse the directors and officers of St. Paul against certain damages and
expenses resulting from certain claims made against them caused by their
negligent act, error or omission.
The foregoing indemnity and insurance provisions have the effect of
reducing directors' and officers' exposure to personal liability for actions
taken in connection with their respective positions.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of St. Paul
pursuant to the foregoing provisions, or otherwise, St. Paul has been advised
that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by St. Paul of expenses incurred or paid by a director, officer or
controlling person of St. Paul in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, St. Paul will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
Exhibit
No. Exhibit
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2.1 Agreement and Plan of Merger, dated as of March 15, 1998 by and
between St. Paul Bancorp, Inc. ("St. Paul") and Beverly
Bancorporation, Inc. ("Beverly) (incorporated herein by reference to
Exhibit 2.1 to St. Paul's Current Report on Form 8-K filed with the
SEC on March 20, 1998).
2.2 Option Agreement, dated as of March 15, 1998, between Beverly and St.
Paul (incorporated herein by reference to Exhibit 2.2 to St. Paul's
Current Report on Form 8-K filed with the SEC on March 20, 1998).
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2.3 Form of Stockholder Agreement, dated as of March 15, 1998 by and among
St. Paul, Beverly and certain stockholders of Beverly included at
Exhibit D of the Agreement and Plan of Merger at Exhibit 2.1 hereof.
5 Opinion of Clifford M. Sladnick, Esq. as to the validity of the
securities registered hereunder, including the consent of Mr.
Sladnick.
8 Form of opinion of Hogan & Hartson L.L.P. as to certain tax matters,
including consent of that firm.
23.1 Consent of Clifford M. Sladnick, Esq. (included at Exhibit 5).
23.2 Consent of Hogan & Hartson L.L.P. (included at Exhibit 8).
23.3 Consent of Ernst & Young LLP
23.4 Consent of Grant Thornton LLP
23.5 Consent of Merrill Lynch & Co.
23.6 Consent of McDonald & Company Securities, Inc.
99.1 Section 145 of the Delaware General Corporation Law.
99.2 Form of Beverly proxy card.
99.3 Form of St. Paul proxy card.
99.4 Consent of Anthony R. Pasquinelli
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Item 22. Undertakings.
(a) St. Paul hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of the securities offered would not exceed
that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC
pursuant to Rule 424(b) ((S) 230.424(b) of this chapter)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum
aggregate
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offering price set forth in the "Calculation of the
Registration Fee" table in the effective Registration
Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) St. Paul hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of St. Paul's annual
report pursuant to section 13(a) or section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) St. Paul hereby undertakes as follows: that prior to any public
reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any
person or party who is deemed to be an underwriter within the meaning
of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration
form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other
Items of the applicable form.
(d) St. Paul undertakes that every prospectus (i) that is filed pursuant
to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415 ((S)
230.415 of this chapter), will be filed as a part of an amendment to
the Registration Statement and will not be used until such amendment
is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(e) The undertaking concerning indemnification is included as part of the
response to Item 20.
(f) St. Paul hereby undertakes to respond to requests for information that
is incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
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(g) St. Paul hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 15th day of April, 1998.
ST. PAUL BANCORP, INC.
By: /s/ Joseph C. Scully
--------------------
Joseph C. Scully
Chairman and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below appoints Joseph C. Scully, Patrick J. Agnew or Clifford M.
Sladnick, jointly and severally, each in his own capacity, his true and lawful
attorneys-in-fact, with full power of substitution for him and in his name,
place and stead, in any and all capacities to sign any amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 15th day of April, 1998.
Signature Title
- --------- -----
/s/ Joseph C. Scully Chairman and Chief Executive Officer
- ----------------------- (Principal Executive Officer)
Joseph C. Scully
/s/ Robert N. Parke Senior Vice President and Chief Financial Officer
- ----------------------- (Principal Financial Officer)
Robert N. Parke
/s/ Paul J. Devitt First Vice President and Controller
- ----------------------- (Principal Accounting Officer)
Paul J. Devitt
/s/ Patrick J. Agnew Director
- -----------------------
Patrick J. Agnew
/s/ William A. Anderson Director
- -----------------------
William A. Anderson
/s/ John W. Croghan Director
- -----------------------
John W. Croghan
II-5
<PAGE>
/s/ Alan J. Fredian Director
- ------------------------
Alan J. Fredian
/s/ Paul C. Gearen Director
- ------------------------
Paul C. Gearen
/s/ Kenneth J. James Director
- ------------------------
Kenneth J. James
/s/ Jean C. Murray, O.P. Director
- ------------------------
Jean C. Murray, O.P.
/s/ John J. Viera Director
- ------------------------
John J. Viera
II-6
<PAGE>
EXHIBIT INDEX
Exhibit
No. Exhibit
------- -------
2.1 Agreement and Plan of Merger, dated as of March 15, 1998 by and
between St. Paul Bancorp, Inc. ("St. Paul") and Beverly
Bancorporation, Inc. ("Beverly) (incorporated herein by reference to
Exhibit 2.1 to St. Paul's Current Report on Form 8-K filed with the
SEC on March 20, 1998).
2.2 Option Agreement, dated as of March 15, 1998, between Beverly and St.
Paul (incorporated herein by reference to Exhibit 2.2 to St. Paul's
Current Report on Form 8-K filed with the SEC on March 20, 1998).
2.3 Form of Stockholder Agreement, dated as of March 15, 1998 by and among
St. Paul, Beverly and certain stockholders of Beverly included at
Exhibit D of the Agreement and Plan of Merger at Exhibit 2.1 hereof.
5 Opinion of Clifford M. Sladnick, Esq. as to the validity of the
securities registered hereunder, including the consent of Mr.
Sladnick.
8 Form of opinion of Hogan & Hartson L.L.P. as to certain tax matters,
including consent of that firm.
23.1 Consent of Clifford M. Sladnick, Esq. (included at Exhibit 5).
23.2 Consent of Hogan & Hartson L.L.P. (included at Exhibit 8).
23.3 Consent of Ernst & Young LLP
23.4 Consent of Grant Thornton LLP
23.5 Consent of Merrill Lynch & Co.
23.6 Consent of McDonald & Company Securities, Inc.
99.1 Section 145 of the Delaware General Corporation Law.
99.2 Form of Beverly proxy card.
99.3 Form of St. Paul proxy card.
99.4 Consent of Anthony R. Pasquinelli
- -----------
<PAGE>
Exhibit 2.3
Exhibit D
BEVERLY BANCORPORATION, INC.
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of March 15, 1998, is entered into by
and among St. Paul Bancorp, Inc., a Delaware corporation ("St. Paul"), Beverly
Bancorporation, Inc., a Delaware corporation ("Beverly Corp.") and the
stockholders of Beverly Corp. named on Schedule I hereto (collectively, the
"Stockholders") who are directors, executive officers or other affiliates of
Beverly Corp. (for purposes of Rule 145 under the Securities Act of 1933, as
amended, and for purposes of qualifying the Merger (defined below) for "pooling-
of-interests" accounting treatment).
WHEREAS, St. Paul and Beverly Corp. have entered into an Agreement and
Plan of Merger, dated as of March 15, 1998 (the "Agreement"), which is
conditioned upon, and requires, the execution of this Stockholder Agreement and
which provides for, among other things, the acquisition of Beverly Corp. by St.
Paul, to be effected by the merger of Beverly Corp. with and into St. Paul, in a
stock-for-stock transaction (the "Merger"); and
WHEREAS, in order to induce St. Paul to enter into or proceed with the
Agreement, Beverly Corp. represents and warrants as to that the facts provided
herein are accurate as to each of the Stockholders set forth herein, and each of
the Stockholders agrees to, among other things, vote in favor of the Agreement,
the Merger and the other transactions contemplated by the Agreement in his/her
capacity as a stockholder of Beverly Corp.;
NOW, THEREFORE in consideration of the premises, the mutual covenants
and agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Ownership of Beverly Corp. Common Stock. Beverly Corp. and each
Stockholder represents and warrants that the number of shares of Beverly Corp.
common stock, par value $.01 per share ("Beverly Corp. Common Stock"), set forth
opposite such Stockholder's name on Schedule I hereto is the total number of
shares of Beverly Corp. Common Stock over which such person has "beneficial
ownership" within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended, except that the provisions of Rule 13d-3(d)(1)(i) shall be
considered without any limit as to time.
2. Agreements of the Stockholders. Each Stockholder covenants and
agrees that:
(a) Such Stockholder shall, at any meeting of the holders of Beverly
Corp. Common Stock called for the purpose, vote or cause to be voted all shares
of Beverly Corp. Common Stock with respect to which such Stockholder has the
right to vote (whether owned as of the date hereof or hereafter acquired) (i) in
favor of the Agreement, the Merger and the other transactions contemplated by
the Agreement and (ii) against any Acquisition Transaction (as defined in the
Agreement) with any party other than St. Paul or one of its Subsidiaries (as
defined in the Agreement) or affiliates, or any other transaction inconsistent
with the Agreement or the transactions contemplated thereby.
<PAGE>
(b) Except as otherwise expressly permitted hereby, such Stockholder
shall not, during the risk sharing period as interpreted by the Securities and
Exchange Commission ("SEC"), sell, pledge, transfer or otherwise dispose of
his/her shares of Beverly Corp. Common Stock; provided, however, that this
Section 2(b) shall not apply to a pledge existing as of March 12, 1998.
(c) Such Stockholder shall not in his/her capacity as a stockholder of
Beverly Corp. directly or indirectly encourage or solicit or hold discussions or
negotiations with, or provide any information to, any person, entity or group
(other than St. Paul or an affiliate thereof) concerning any merger, sale of all
or substantially all of the assets or liabilities not in the ordinary course of
business, sale of shares of capital stock or similar transaction involving
Beverly Corp. or any other transaction inconsistent with the Agreement or the
transactions contemplated thereby. Nothing herein shall impair such
Stockholder's fiduciary obligations as a director of Beverly Corp.
(d) Such Stockholder shall use his/her best efforts to take or cause
to be taken all action, and to do or cause to be done all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the Merger contemplated by this Stockholder Agreement.
(e) Such Stockholder shall not, prior to the public release by St.
Paul of an earnings report to its stockholders covering at least one month of
operations after consummation of the Merger (the "Restricted Period"), sell,
pledge (other than the replacement of a pledge existing on March 12, 1998 of
Beverly Corp. Common Stock), transfer or otherwise dispose of the shares of St.
Paul common stock, par value $.01 per share (the "St. Paul Common Stock"), to be
received by him/her for his/her shares of Beverly Corp. Common Stock upon
consummation of the Merger.
(f) Such Stockholder shall comply with all applicable federal and
state securities laws in connection with any sale of St. Paul Common Stock
received in exchange for Beverly Corp. Common Stock in the Merger, including the
trading and volume limitations as to sales by affiliates contained in Rule 145
under the Securities Act of 1933, as amended.
(g) During the Restricted Period, such Stockholder shall not sell or
otherwise dispose of a number of shares of his/her Beverly Corp. Common Stock,
or shares of St. Paul Common Stock which are exchanged for said shares, (i)
which is greater than 10% of his/her total beneficial ownership of said shares
as of the date of the first such sale and (ii) which in the aggregate with
shares sold or otherwise disposed of by all other Stockholders will be greater
than 1% of the issued and outstanding shares of Beverly Corp. as of the date of
the first such sale. For purposes of this computation, outstanding stock
options that currently are exercisable would be considered as outstanding or
beneficially owned after such options are converted to common stock equivalents
using the treasury stock method in accordance with generally accepted accounting
principles.
(h) Such Stockholder has no present plan or intent and, as of the
effective time of the Merger, shall have no present plan or intent, to engage in
any sale, exchange, transfer, distribution (including a distribution by a
corporation to its shareholders), redemption, or reduction in any way of such
Stockholder`s risk of ownership by short sale or otherwise, or other
disposition, directly or indirectly (collectively a "Sale"), with respect to any
of the shares of St. Paul Common Stock to be received by such Stockholder upon
the Merger (except for cash received for fractional shares) that would
constitute a "related person acquisition" described in (S) 1.368-1(e)(2) of the
Regulations issued pursuant to the Internal Revenue Code of 1986, as amended
(the "Regulations") or that would otherwise cause the Merger to fail to satisfy
the continuity of interest requirement set
-2-
<PAGE>
out in (S) 1.368-1(e) of the Regulations (a "Disqualifying Transfer"). Such
Stockholder is not aware of, or participating in, any plan or intent on the part
of Beverly Corp. stockholders to engage in one or more Disqualifying Transfers
of the St. Paul Common Stock to be issued in the Merger.
3. Successors and Assigns. A Stockholder may sell, pledge, transfer
or otherwise dispose of his/her shares of Beverly Corp. Common Stock, provided
that such Stockholder obtains the prior written consent of St. Paul and that any
acquirer of such Beverly Corp. Common Stock agrees in writing to be bound by
this Stockholder Agreement.
4. Specific Performance; Termination. The parties agree and intend
that this Stockholder Agreement be a valid and binding agreement enforceable
against the parties hereto and that damages and other remedies at law for the
breach of this Stockholder Agreement are inadequate. Beverly Corp. and each of
the Stockholders agree that irreparable damage to St. Paul would occur in the
event that the provisions of this Stockholder Agreement were not performed in
accordance with its specific terms or were otherwise breached by Beverly Corp.
or any of the Stockholders. It is accordingly agreed that St. Paul shall be
entitled to an injunction or injunctions to prevent breaches of this Stockholder
Agreement by Beverly Corp. or any of the Stockholders and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which St. Paul is entitled at law or in equity. This Stockholder Agreement may
be terminated at any time prior to the consummation of the Merger by the mutual
written consent of the parties hereto and shall be automatically terminated in
the event that the Agreement is terminated in accordance with its terms;
provided, however, that if the holders of Beverly Corp. Common Stock fail to
approve the Agreement or Beverly Corp. fails to hold a stockholders' meeting to
vote on the Agreement, then (i) Section 2(a) clause (ii) hereof shall continue
in effect as to any plan or proposal received by Beverly Corp. from any person,
entity or group (other than St. Paul or any affiliate thereof) prior to the
termination of the Agreement or within 180 days after such termination and (ii)
Section 2(b) hereof shall continue in effect to preclude a sale other than
pursuant to normal brokers transactions on the Nasdaq Stock Market, pledge other
than to a bona fide financial institution or recognized securities dealer,
transfer or other disposition directly or indirectly to any such person, entity
or group in connection with any such plan or proposal, except upon consummation
of such plan or proposal.
5. Notices. Notices may be provided to St. Paul and the Stockholders
in the manner specified in the Agreement, with all notices to the Stockholders
being provided to them at the addresses set forth at Schedule I.
6. Governing Law. This Stockholder Agreement shall be governed by the
laws of the State of Delaware, without giving effect to the principles of
conflicts of laws thereof.
7. Counterparts. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. Headings. The Section headings contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Stockholder Agreement.
9. Regulatory Approval. If any provision of this Stockholder
Agreement requires the approval of any regulatory authority in order to be
enforceable, then such provision shall not be effective until such approval is
obtained; provided, however, that the foregoing shall not affect the
enforceability of any other provision of this Stockholder Agreement.
-3-
<PAGE>
IN WITNESS WHEREOF, St. Paul and Beverly Corp., by their respective duly
authorized officers, and each of the Stockholders have caused this Stockholder
Agreement to be executed and delivered as of the day and year first above
written.
ST. PAUL BANCORP, INC.
By:
--------------------------------
Name:
Title:
BEVERLY BANCORPORATION, INC.
By:
--------------------------------
Name:
Title:
STOCKHOLDERS:
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
<PAGE>
SCHEDULE I
Number of Shares of Beverly Corp. Common
Name and Address of Stockhold Stock Beneficially Owned
- ------------------------------- ----------------------------------------
<PAGE>
Exhibit 5
Clifford M. Sladnick, Esq.
St. Paul Bancorp, Inc.
6700 West North Avenue
Chicago, Illinois 60707
April 15, 1998
Board of Directors
St. Paul Bancorp, Inc.
6700 West North Avenue
Chicago, Illinois 60707
Ladies and Gentlemen:
I am Senior Vice President, Corporate Secretary and General Counsel to
St. Paul Bancorp, Inc. (the "Corporation"), a Delaware corporation. This
opinion letter has been prepared in connection with the Corporation's
registration statement on Form S-4 (the "Registration Statement") filed with the
Securities and Exchange Commission relating to the proposed offering of shares
of common stock, par value $.01 per share, all of which shares (the "Shares")
are to be issued by the Corporation in accordance with the terms of the
Agreement and Plan of Merger, dated as of March 15, 1998, by and between the
Corporation and Beverly Bancorporation, Inc. (the "Agreement"). This opinion
letter is furnished to you at your request to enable you to fulfill the
requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. (S) 229.601(b)(5),
in connection with the Registration Statement.
For purposes of this opinion letter, I have examined copies of the
following documents:
1. An executed copy of the Registration Statement;
2. An executed copy of the Agreement;
3. The Certificate of Incorporation of the Corporation, with
amendments thereto;
4. The Bylaws of the Corporation, as amended to date; and
<PAGE>
5. Resolutions of the Board of Directors of the Corporation adopted
at a meeting held on March 13, 1998, relating to, among other
things, the issuance of the Shares and arrangements in connection
therewith.
In my examination of the aforesaid documents, I have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity, accuracy and completeness of all documents submitted to me, and
the conformity with the original documents of all documents submitted to me as
certified, telecopied, photostatic, or reproduced copies. This opinion letter
is given, and all statements herein are made, in the context of the foregoing.
This opinion letter is based as to matters of law solely on the
General Corporation Law of the State of Delaware. I express no opinion herein
as to any other laws, statutes, regulations, or ordinances.
Based upon, subject to and limited by the foregoing, I am of the
opinion that following (i) effectiveness of the Registration Statement, (ii)
effectiveness of the Certificate Amendment (as defined in the Registration
Statement) under the DGCL; (iii) issuance of the Shares pursuant to the terms of
the Agreement, and (iv) receipt by the Corporation of the consideration for the
Shares specified in the Agreement and resolutions of the Board of Directors, the
Shares will be validly issued, fully paid and nonassessable under the General
Corporation Law of the State of Delaware.
I assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion letter. This opinion letter has been
prepared solely for your use in connection with the filing of the Registration
Statement on the date of this opinion letter and should not be quoted in whole
or in part or otherwise be referred to, nor filed with or furnished to any
governmental agency or other person or entity, without my prior written consent.
I hereby consent to the filing of this opinion letter as Exhibit 5 to
the Registration Statement. In giving this consent, I do not thereby admit that
I am an "expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Clifford M. Sladnick
Senior Vice President, Corporate
Secretary and General Counsel
<PAGE>
Exhibit 8
FORM OF TAX OPINION
_______________ __, 1998
Board of Directors
St. Paul Bancorp, Inc.
6700 West North Avenue
Chicago, Illinois 60707
Board of Directors
Beverly Bancorporation, Inc.
16345 South Harlem Avenue, Suite 3E
Tinley Park, Illinois 60477
Dear Board Members:
On March 15, 1998, St. Paul Bancorp, Inc., a Delaware corporation
("St. Paul") and Beverly Bancorporation, Inc., a Delaware corporation
("Beverly") entered into an agreement and plan of merger (the "Merger
Agreement") pursuant to which Beverly will be merged with and into St. Paul (the
"Merger"), with St. Paul surviving. On _________ __, 1998, St. Paul Federal
Bank for Savings, a federally chartered savings bank and a wholly owned
subsidiary of St. Paul ("St. Paul Bank") and Beverly National Bank, a National
banking association ("Beverly Bank") entered into the articles of combination
and bank merger agreement (the "Bank Merger Agreement") pursuant to which
Beverly Bank will be merged with and into St. Paul Bank (the "Bank Merger").
You have requested that we render to you our opinion with respect to certain
Federal income tax consequences of the Merger.
Documents Reviewed
In connection with the preparation of this opinion, we have examined
and relied upon the following documents (including all exhibits and schedules
thereto) (the "Reviewed Documents"): (1) the Merger Agreement; (2)
representations and certifications made to us by St. Paul; (3) representations
and certifications made to us by Beverly; (4) the covenants and agreements made
by certain holders of Beverly Common Stock in paragraph 2(h) of that certain
Beverly Bancorporation,
<PAGE>
St. Paul Bancorp, Inc.
Beverly Bancorporation, Inc.
_________ __, 1998
Page 2
Inc. Stockholder Agreement, the form of which is attached to the Merger
Agreement as Exhibit D thereto; (5) the Registration Statement on Form S-4 of
St. Paul (No. 333-_______) as filed with the Securities and Exchange Commission
(the "SEC") on _____ __, 1998, as amended by Pre-Effective Amendment No. 1
thereto filed with the SEC on _____ __, 1998 (the "Registration Statement"); and
(6) such other instruments and documents related to the formation, organization
and operation of St. Paul and Beverly or to the consummation of the Merger as we
have deemed necessary or appropriate./1/
The Merger
Based solely upon our review of the documents set forth above, and upon
such information as St. Paul, Beverly, St. Paul Bank, and Beverly Bank have
provided to us (which we have not attempted to verify in any respect), and in
reliance upon such documents and information, we understand that the proposed
transaction and the relevant facts with respect thereto are as follows:
St. Paul is a Delaware corporation and the holding company of St. Paul
Bank, its wholly owned federal savings bank subsidiary, both of which are
headquartered in Chicago, Illinois. Deposits in St. Paul Bank are insured by
the Federal Deposit Insurance Corporation ("FDIC") to applicable limits.
Through St. Paul Bank, St. Paul provides checking, savings, mortgage and
consumer loan products through 54 Chicago-area branches. St. Paul also operates
the second largest network of automated teller machines in its market. In
addition to its banking and related operations, St. Paul also operates other
financial services subsidiaries: Investment Network, Inc. is a discount
brokerage operation; Annuity Network, Inc. offers a variety of annuity products;
SPF Insurance Agency is an independent insurance agent and St. Paul Financial
Development Corp. engages in real estate development projects. St. Paul, as a
holding company, is regulated by the Office of Thrift Supervision (the "OTS").
St. Paul has one class of equity securities outstanding, its Common Stock, par
value $.01 per share ("St. Paul Common Stock"), which Common Stock is quoted on
The Nasdaq Stock Market. St. Paul Bank, as a federal savings bank, also is
regulated by the OTS and as to certain matters by the FDIC and the Federal
Reserve Board.
- -----------------
/1/ All capitalized terms used herein and not otherwise defined shall have the
same meaning as they have in the Registration Statement. All section
references, unless otherwise indicated, are to the Internal Revenue Code of
1986, as amended (the "Code").
<PAGE>
St. Paul Bancorp, Inc.
Beverly Bancorporation, Inc.
_________ __, 1998
Page 3
Beverly is a Delaware corporation and the holding company of Beverly
Bank, its wholly owned national bank subsidiary, and Beverly Trust Company
("Beverly Trust"), an Illinois state-chartered trust company, each of which is
headquartered in Tinley Park, Illinois. Deposits at Beverly Bank are FDIC-
insured. Beverly Bank is engaged primarily in the business of attracting
deposits from the public and using such deposits, with other funds, to make
various types of loans and investments. In addition to traditional consumer
banking products and services, Beverly Bank offers commercial banking services,
including deposit and lending products. Beverly Trust provides a wide array of
trust services for individuals and corporations, primarily in the areas of
personal living trusts and corporate employee benefit plans. Beverly has one
class of equity securities outstanding, its Common Stock, par value $.01 per
share ("Beverly Common Stock"), which Common Stock is quoted on The Nasdaq Stock
Market. Beverly, as a holding company, is regulated primarily by the Federal
Reserve Board at the federal level and by the Illinois Commissioner. Beverly
Bank, as a national bank, is regulated by the Office of the Comptroller of the
Currency, the FDIC and as to certain matters, the Federal Reserve Board.
The purpose of the Merger is to enable St. Paul to acquire the assets
and business of Beverly, including Beverly Bank and Beverly Trust Company. The
Merger will result in an expansion of St. Paul's primary market area to include
Beverly's banking offices and trust offices. The expanded operations of St.
Paul will include Beverly Bank's commercial banking and lending businesses. The
addition of Beverly Trust Company's trust offices will strengthen St. Paul's
franchise by increasing market share and by the addition of trust and investment
management services, which will expand St. Paul's ability to address the
financial needs of its consumer and business banking customers. The combination
of Beverly's commercial and trust businesses with St. Paul's banking and related
financial services is expected to present opportunity for expansion of each
company's operations into the customer base of the other. St. Paul expects to
achieve reductions in the current operating expenses of Beverly Bank upon the
consolidation of Beverly Bank's operations into St. Paul Bank, which could
result in the closing of certain of Beverly Bank's or St. Paul's existing
banking offices as well as certain reductions in administrative and support
personnel.
The Merger Agreement provides for Beverly to be acquired by St. Paul
through a merger of Beverly with and into St. Paul. As part of the Merger
(except as described below), each issued and outstanding share of Beverly Common
Stock will be converted into the right to receive 1.0630 shares of St. Paul
Common Stock (the "Exchange Ratio"). Based on the 5,777,567 outstanding shares
of Beverly Common Stock on May __, 1998, a total of approximately 6,141,554
shares of St.
<PAGE>
St. Paul Bancorp, Inc.
Beverly Bancorporation, Inc.
_________ __, 1998
Page 4
Paul Common Stock would be issued in the Merger. Cash will be paid in lieu of
fractional shares. The Merger Agreement also provides that each outstanding
stock option to purchase Beverly Common Stock (527,728 options as of May __,
1998) will be converted into the right to receive options to purchase 1.0630
shares of St. Paul Common Stock (a total of 560,976 shares). In connection with
the Merger Agreement, Beverly has granted St. Paul an irrevocable option (the
"Option") to purchase up to 1,155,512 newly issued shares of Beverly Common
Stock at a purchase price of $21.83 per share (which price is subject to
adjustment) upon the occurrence of certain events.
Shares of Beverly Common Stock held as treasury stock or held, directly or
indirectly, by St. Paul, Beverly or any of their subsidiaries (other than shares
held in a fiduciary capacity or in respect of a debt previously contracted) will
be canceled.
Certificates representing fractions of shares of St. Paul Common Stock will
not be issued. Under the Merger Agreement, in lieu of a fractional share of St.
Paul Common Stock, each Beverly shareholder will be entitled to receive an
amount of cash equal to (i) the fraction of a share of the St. Paul Common Stock
to which such holder would otherwise be entitled, multiplied by (ii) the actual
market value of the St. Paul Common Stock, which shall be deemed to be the
average of the daily closing prices per share for St. Paul Common Stock for the
fifteen consecutive trading days on which shares of St. Paul Common Stock are
actually traded (as reported on The Nasdaq Stock Market) ending on the third
trading day preceding the closing date.
As of __________ __, 1998, there were outstanding options (the
"Beverly Options") to purchase 527,728 shares of Beverly Common Stock, at an
average exercise price of $___ per share. Under the Merger Agreement, shares of
Beverly Common Stock issued prior to consummation of the Merger upon the
exercise of outstanding Beverly Options will be converted into St. Paul Common
Stock at the Exchange Ratio, and each Beverly Option that is not exercised
immediately before the time at which the Merger becomes effective (the
"Effective Time") will be converted automatically into an option to purchase
shares of St. Paul Common Stock, with adjustment in the number of shares and
exercise price to reflect the Exchange Ratio.
Neither the holders of St. Paul Common Stock nor Beverly Common Stock
have dissenters' rights in connection with the Merger.
<PAGE>
St. Paul Bancorp, Inc.
Beverly Bancorporation, Inc.
_________ __, 1998
Page 5
The Bank Merger Agreement provides for the merger of Beverly Bank with
and into St. Paul Bank. St. Paul Bank will be the surviving institution and
will remain headquartered in Chicago, Illinois as an FDIC-insured federally
chartered savings bank. Beverly Trust will become a wholly owned subsidiary of
St. Paul and change its name to "St. Paul Trust Company." As a result of the
Merger, St. Paul will remain a savings association holding company, which means
that, among other things, it will not be subject to bank holding company
regulatory capital requirements, and it will be able to continue to engage in
non-banking activities such as insurance and annuity sales, and real estate
development.
Assumptions and Representations
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:
1. All information contained in the Reviewed Documents is accurate.
2. The information presented in the Reviewed Documents or otherwise
furnished to us accurately and completely describes all material facts relevant
to our opinion.
3. There has been (or will be by the Effective Time) due execution
and delivery of the Reviewed Documents where due execution and delivery are
prerequisites to effectiveness thereof.
4. All of the Reviewed Documents are authentic, all copies of
original documents conform to the originals, and all such original documents are
authentic.
5. All of the obligations imposed by the Reviewed Documents have been
and will continue to be performed or satisfied in accordance with their terms.
6. The Merger will be effective under the applicable state law.
7. All representations made in the exhibits hereto are true, correct,
and complete in all material respects. Any representation or statement made "to
the best of knowledge" or similarly qualified is correct without such
qualification.
<PAGE>
St. Paul Bancorp, Inc.
Beverly Bancorporation, Inc.
_________ __, 1998
Page 6
Opinion - Federal Income Tax Consequences
Based upon and subject to the assumptions and qualifications set forth
herein, it is our opinion that for Federal income tax purposes the following
will result:
(a) For federal income tax purposes, the Merger will qualify as a tax-
free reorganization under the provisions of Code Section 368(a).
(b) No gain or loss will be recognized to the Beverly shareholders on
the exchange of their Beverly Common Stock solely for St. Paul Common Stock in
the Merger (Code Section 354(a)(1)).
(c) The tax basis of the St. Paul Common Stock to be received by the
shareholders of Beverly in the Merger will be the same as the basis of the
Beverly Common Stock to be surrendered in exchange therefor (Code Section
358(a)(1)).
(d) The holding period of the St. Paul Common Stock received by the
shareholders of Beverly in the Merger will include the period during which
Beverly Common Stock surrendered was held, provided the Beverly Common Stock
surrendered was held as a capital asset by the shareholders of Beverly at the
Effective Time (Code Section 1223(1)).
(e) The payment of cash to a Beverly shareholder in lieu of fractional
share interests of St. Paul Common Stock will be treated for Federal income tax
purposes as if the fractional shares were distributed as part of the exchange
and then redeemed by St. Paul. These cash payments will be treated as
distributions in full payment in exchange for the stock redeemed, as provided in
Code Section 302(a).
(f) Neither St. Paul, nor Beverly will recognize any gain or loss as a
result of the Merger.
Our opinion set forth herein is based upon the description of the
Merger as set forth above in the section captioned "The Merger," in the Merger
Agreement, and in the Registration Statement. For purposes of rendering our
opinion, we have not made an independent investigation of the facts set forth in
any of the Reviewed Documents. If the actual facts relating to any aspect of
the Merger differ from this description in any material respect, our opinion may
become inapplicable. Our opinion is not intended to address the tax
consequences to a
<PAGE>
St. Paul Bancorp, Inc.
Beverly Bancorporation, Inc.
_________ __, 1998
Page 7
holder of a Beverly Option who receives an option to purchase shares of St. Paul
Common Stock in exchange therefor pursuant to the Merger.
Our opinion is based upon the Code, Treasury Regulations thereunder
(including proposed and temporary Treasury Regulations), and interpretations of
the foregoing as expressed in court decisions, administrative determinations,
and legislative history as of the date hereof. These provisions and
interpretations are subject to changes, which may or may not be retroactive in
effect, that might result in material modifications of our opinion.
We hereby consent to the use of this opinion letter as an exhibit to
the Registration Statement and to the use of our name in the Registration
Statement. In addition, we hereby consent to making this opinion letter
available to the shareholders of Beverly
Sincerely yours,
HOGAN & HARTSON L.L.P.
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the Joint
Proxy Statement of St. Paul Bancorp, Inc. and Beverly Bancorporation, Inc. that
is made a part of the Registrations Statement (Form S-4) and Prospectus of St.
Paul Bancorp, Inc. for the registration of 6,702,530 shares of its common stock
and to the incorporation by reference therein of our report dated January 14,
1998 (except Note BB, as to which the date is March 16, 1998), with respect to
the consolidated financial statements of St. Paul Bancorp, Inc. incorporated by
reference in its Annual Report (Form 10-K) for the year ended December 31, 1997,
filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
April 15, 1998
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 23, 1998, except for Note 18 as to which
the date is March 15, 1998, accompanying the consolidated financial statements
included in the Annual Report of Beverly Bancorporation, Inc. and Subsidiaries
on Form 10-K for the year ended December 31, 1997. We hereby consent to the
incorporation by reference of said report in the Registration Statement of St.
Paul Bancorp, Inc. on Form S-4 dated April 15, 1998, and to the use of our name
as it appears under the caption "Experts."
/s/ GRANT THORNTON LLP
Chicago, Illinois
April 15, 1998
<PAGE>
Exhibit 23.5
CONSENT OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
We hereby consent to the use of our opinion letter dated March 15, 1998 to
the Board of Directors of St. Paul Bancorp, Inc. included as Appendix B to the
Joint Proxy Statement which forms a part of the Registration Statement on Form
S-4 relating to the proposed merger of Beverly Bancorporation, a wholly owned
subsidiary of St. Paul Bancorp, Inc. with and into Beverly Bancorporation and to
the references to our firm and to such opinion in such Joint Proxy Statement
under the captions "The Merger - Opinion of St. Paul's Financial Advisor", "The
Merger-Background of the Merger" and "Opinions of Financial Advisors-Opinion of
Merrill Lynch".
In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder, nor do we thereby admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "experts" as used in the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
/s/ Merrill Lynch , Pierce, Fenner & Smith Incorporated
April 15, 1998
<PAGE>
Exhibit 23.6
CONSENT OF McDONALD & COMPANY SECURITIES, INC.
We hereby consent to the use in the Joint Proxy Statement/Prospectus
constituting part of this Registration Statement on Form S-4 of our fairness
opinion dated March 15, 1998. Our consent should not be construed as an
admission that this firm is a person from whom a consent is required under
Section 7 of the Securities Act of 1933, as amended
/s/ McDONALD & COMPANY SECURITIES, INC.
Chicago, Illinois
April 15, 1998
<PAGE>
Exhibit 99.1
(S) 145 Indemnification of officers, directors, employees and agents;
insurance.
(a) A corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that the person's conduct was unlawful.
(b) A corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because the person has
met the applicable standard of conduct set forth in subsections (a) and (b) of
this section. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be
<PAGE>
determined that he is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).
<PAGE>
REVOCABLE PROXY Exhibit 99.2
BEVERLY BANCORPORATION, INC.
This Proxy is Solicited on Behalf of The Board of Directors
The undersigned shareholder of Beverly Bancorporation, Inc.
("Beverly") hereby appoints ________________________, or any 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 special meeting of
shareholders (the "Beverly Meeting") to be held at ___ a.m. on June __, 1998 at
__________, Illinois, 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: (1) TO APPROVE AND
ADOPT AN AGREEMENT AND PLAN OF MERGER, DATED AS OF MARCH 15, 1998, AND THE
MERGER PROVIDED FOR THEREIN, BETWEEN ST. PAUL BANCORP, INC. ("ST. PAUL") AND
BEVERLY, PURSUANT TO WHICH BEVERLY WILL BE ACQUIRED BY ST. PAUL, AND (2)
OTHERWISE IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE BOARD OF
DIRECTORS OF BEVERLY. The undersigned shareholder may revoke this proxy at any
time before it is voted by (i) delivering to the Corporate Secretary of Beverly
a written notice of revocation prior to the Beverly Meeting, (ii) delivery to
Beverly prior to the Beverly Meeting a duly executed proxy bearing a later date,
or (iii) attending the Beverly Meeting and voting in person. The undersigned
shareholder hereby acknowledges receipt of Beverly's Notice of Special Meeting
and Joint Proxy Statement/Prospectus.
If you receive more than one proxy card, please sign and return all
cards in the accompanying envelope.
(continued and to be signed and dated on reverse side)
------------
See
Reverse Side
------------
<PAGE>
[X]
Please mark your
votes as this.
-------------
Shares of Common Stock
Proposal 1: To approve and adopt an Agreement and Plan of Merger, dated as of
March 15, 1998, between St. Paul and Beverly, and the Merger
provided for therein, pursuant to which Beverly will be acquired by
St. Paul.
FOR AGAINST ABSTAIN
[_] [_] [_]
Other Matters: The proxies are authorized to vote upon such other business as
may properly come before the meeting, or any adjournments or
postponements thereof, in accordance with the determination of
the proxies.
Date:
--------------------------------
--------------------------------
--------------------------------
Signature of Shareholder or
Authorized Representative
Please date and sign exactly as name appears hereon. Each executor,
administrator, trustee, guardian, attorney-in-fact and other fiduciary should
sign and indicate his or her full title. When stock has been issued in the name
of two or more persons, all should sign.
<PAGE>
REVOCABLE PROXY Exhibit 99.3
ST. PAUL BANCORP, INC.
This Proxy is Solicited on Behalf of The Board of Directors
The undersigned shareholder of St. Paul Bancorp, Inc. ("St. Paul")
hereby appoints ______________________, or any 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 special meeting of shareholders (the "St.
Paul Meeting") to be held at ___ a.m. on June __, 1998, at __________, Illinois,
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: (1) TO APPROVE
THE AMENDMENT OF ST. PAUL'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF ST. PAUL COMMON STOCK FROM 40,000,000 TO 80,000,000, (2)
TO APPROVE THE ISSUANCE OF ADDITIONAL SHARES OF ST. PAUL COMMON STOCK TO
SHAREHOLDERS OF BEVERLY BANCORPORATION, INC. ("BEVERLY") AS PART OF ST. PAUL'S
ACQUISITION OF BEVERLY, AND (3) IN ACCORDANCE WITH THE DETERMINATION OF A
MAJORITY OF THE BOARD OF DIRECTORS OF ST. PAUL AS TO OTHER MATTERS. The
undersigned shareholder may revoke this proxy at any time before it is voted by
(i) delivering to the Corporate Secretary of St. Paul a written notice of
revocation prior to the St. Paul Meeting, (ii) delivery to St. Paul prior to the
St. Paul Meeting a duly executed proxy bearing a later date, or (iii) attending
the St. Paul Meeting and voting in person. The undersigned shareholder hereby
acknowledges receipt of St. Paul's Notice of Special Meeting and Joint Proxy
Statement/Prospectus.
If you receive more than one proxy card, please sign and return all
cards in the accompanying envelope.
(continued and to be signed and dated on reverse side)
------------
See
Reverse Side
------------
<PAGE>
[X]
Please mark your
votes as this.
-----------
Shares of Common Stock
Proposal 1: To approve the amendment of St. Paul's Certificate of Incorporation
to increase the number of authorized shares of St. Paul Common
Stock from 40,000,000 to 80,000,000.
FOR AGAINST ABSTAIN
[_] [_] [_]
Proposal 2: To approve the issuance of additional shares of St. Paul Common
Stock to shareholders of Beverly as part of St. Paul's acquisition
of Beverly.
Other Matters: The proxies are authorized to vote upon such other business as
may properly come before the St. Paul Meeting, or any
adjournments or postponements thereof, in accordance with the
determination of a majority of St. Paul's Board of Directors.
Date:
-------------------------------------
-------------------------------------
-------------------------------------
Signature of Shareholder or
Authorized Representative
Please date and sign exactly as name appears hereon. Each executor,
administrator, trustee, guardian, attorney-in-fact and other fiduciary should
sign and indicate his or her full title. When stock has been issued in the name
of two or more persons, all should sign.
<PAGE>
Exhibit 99.4
CONSENT OF ANTHONY R. PASQUINELLI
In accordance with Rule 438 promulgated under the Securities Act of
1933, as amended, the undersigned hereby consents to reference in the
Registration Statement on Form S-4 filed by St. Paul Bancorp, Inc., a Delaware
corporation ("St. Paul"), to the undersigned being named as a director of St.
Paul upon the consummation of the Merger described in such Registration
Statement.
/s/ Anthony R. Pasquinelli
-------------------------------------
