As filed with the Securities and Exchange Commission on November 20, 2003
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
- --------------------------------------------------------------------------------
FIDELITY FEDERAL BANCORP
(Exact name of registrant as specified in its charter)
INDIANA 35-1894432
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
18 N.W. Fourth Street, Evansville, Indiana 47706-1347
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Donald R. Neel, President Timothy M. Harden, Esq.
Fidelity Federal Bancorp John W. Tanselle, Esq.
18 N.W. Fourth Street Krieg DeVault LLP
P. O. Box 1347 One Indiana Square, Suite 2800
Evansville, Indiana 47706-1347 Indianapolis, Indiana 46204-2079
(812) 424-0921 (317) 636-4341
(Name, address, including zip code, (Copy to)
of agent for service)
- --------------------------------------------------------------------------------
Approximate date of commencement of the proposed sale of the
securities to the public:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
CALCULATION OF REGISTRATION FEE
==================================================================================================
Title of each class Amount Proposed maximum Proposed maximum Amount of
of securities to be offering price aggregate offering registration
to be registered registered per unit (1) price (1) fee
9% Senior
Subordinated Notes
due _________, 2009 $2,500,000 $1,000 $2,500,000 $202.25
==================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
--------------------
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.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion November 20, 2003
Prospectus
FIDELITY FEDERAL BANCORP
----------------------------------
9.00% SENIOR SUBORDINATED NOTES DUE , 2009
-------------------------------
MATERIAL TERMS OF THE RIGHTS OFFERING
We are distributing subscription rights to persons who own our common stock
as of the close of business on ______________ to purchase $2,500,000 principal
amount of our 9.00% unsecured senior subordinated notes due . The subscription
rights for the notes are exercisable beginning on the date of this prospectus
and will expire at 5:00 p.m., Central time, on .
You will receive one basic subscription right, rounded down to the nearest
whole number, for every 3,847 shares of our common stock that you own on the
close of business on , , the record date. Each basic subscription right will
entitle you to purchase $1,000 principal amount of the notes. To the extent that
you do not have a sufficient amount of shares to otherwise receive a basic
subscription right, you will still receive one basic subscription right to
subscribe for the purchase of a note in the minimum $1,000 principal issuance
amount. The basic subscription right also includes the right to over-subscribe,
subject to availability and proration, for additional notes if not all of the
notes offered are purchased pursuant to the basic subscription rights. Your
subscription, once made, is irrevocable.
MATERIAL TERMS OF THE NOTES
Interest on the senior notes accrues at the rate of 9.00% per year, based
upon a 360-day year, and is payable in cash or by check every and , with the
first payment on , . The notes will mature on , 2009. We have the option to
redeem the notes in whole or in part at any time prior to maturity with no
redemption premium. The redemption price will be equal to the principal amount
of the note being redeemed, plus accrued but unpaid interest. The notes are
unsecured, senior subordinated obligations of Fidelity Federal.
-------------------------------
Neither the notes nor the subscription amounts are savings or deposit
accounts or other obligations of United Fidelity Bank or any non-bank affiliate
of Fidelity and they are not insured by the Federal Deposit Insurance
Corporation or any other governmental agency.
-------------------------------
See "Risk Factors" beginning on page 7 to read about factors you should
consider before exercising your subscription privileges to purchase notes.
-------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is ___________, 2003.
Table of Contents
Prospectus Summary....................................................................................1
Questions and Answers About the Rights Offering..............................................1
Questions and Answers About Fidelity Federal Bancorp.........................................5
Risk Factors..........................................................................................7
Risk Factors Relating to the Rights Offering and the Notes...................................7
We may not be able to pay interest on or repay the notes............................7
There is no public market for the notes.............................................8
Our secured and other unsecured debt and the liabilities of our operating
company may be effectively senior to the notes.............................8
Once you exercise your subscription rights, you may not revoke the exercise.........8
United Fidelity Bank is subject to the restrictions and conditions of a
Supervisory Agreement with the Office of Thrift Supervision................8
Risk Factors Related to Fidelity Federal.....................................................9
We compete with many larger financial institutions that have far greater
financial resources than we have...........................................9
We must achieve sufficient earnings in order to realize our $6.0 million
deferred income tax receivable.............................................9
Our accomplishments are largely dependent upon the skill and experience of our
senior management team.....................................................9
United Fidelity Bank's consumer loan concentration increases the risk of
defaults by our borrowers, which may result in increased expenses and
the need for additional capital............................................9
We may need additional funds for debt service, which could result in dilution
of your ownership position or result in additional interest expense.......10
Special Note Regarding Forward-Looking Statements....................................................10
United Fidelity Bank is Subject to a Supervisory Agreement with the Office of Thrift Supervision.....11
Use of Proceeds......................................................................................12
We Do Not Anticipate Paying Dividends................................................................12
Ratio of Earnings to Fixed Charges...................................................................12
Price Range of Common Stock..........................................................................13
Capitalization.......................................................................................14
The Rights Offering..................................................................................15
Material Federal Income Tax Considerations...........................................................21
Description of the Notes.............................................................................21
Description of Capital Stock.........................................................................23
Plan of Distribution.................................................................................24
Legal Matters........................................................................................25
Experts ............................................................................................25
Where You Can Find More Information..................................................................25
Fidelity has not authorized any person to give you information that differs
from the information in this prospectus. You should rely solely on the
information contained in this prospectus. This prospectus is not an offer to
sell these securities, and we are not soliciting offers to buy these securities,
in any state where the offer or sale of these securities is not permitted. The
information in this prospectus is accurate only as of the date of this
prospectus, even if the prospectus is delivered to you after the prospectus
date, or you buy our common stock after the prospectus date.
Until , all dealers that effect transactions in these securities, whether
or not participating in this offering, may be required to deliver a prospectus.
TO CALIFORNIA RESIDENTS ONLY: The exemption afforded by Section 2104(h) has
been withheld by the Commissioner of Corporations.
PROSPECTUS SUMMARY
This section answers in summary form some questions you may have about
Fidelity Federal Bancorp and this rights offering and highlights some of the
information in this prospectus. Because this section is a summary, it does not
contain all of the information that you should consider before exercising your
subscription rights. You should read the entire prospectus carefully, including
the "Risk Factors" section and the documents listed under "Where You Can Find
More Information."
Questions and Answers About the Rights Offering
-----------------------------------------------
Q: What is the rights offering?
A: The rights offering is an opportunity for you to purchase $1,000
principal amount notes for every 3,847 shares of Fidelity common stock
you own.
Q: Why are we engaging in a rights offering?
A: Because United Fidelity Bank is restricted in its ability to pay
dividends to us, we believe it is in our best interests to raise
additional capital. We have $1.8 million of senior subordinated debt
which matures in June 2005. We are undertaking this rights offering to
raise additional capital, without paying underwriting commissions and
expenses, for the purposes set forth under the following question
entitled "What will we do with the proceeds of the rights offering?".
Q: How many notes will directors and executive officers of Fidelity
purchase?
A: The directors, executive officers of Fidelity and their affiliates
currently beneficially own approximately 7,181,408 of our outstanding
shares of our common stock (not including stock options exercisable
within 60 days) and intend to purchase notes in the amount of at least
$2.0 million. As a result, we expect to receive subscriptions for at
least $2.0 million of the $2.5 million principal amount of the notes
being offered.
Q: How much money will Fidelity receive from the rights offering?
A: The gross proceeds from the rights offering will depend on the
principal amount of the notes purchased. If we sell all notes which may
be purchased upon exercise of the rights offered by this prospectus,
then we will receive proceeds of $2,500,000, before deducting expenses
payable by us, which are estimated to be approximately $36,250.
Q: What will we do with the proceeds of the rights offering?
A: We anticipate that we will use a portion of the proceeds to repay $1.0
million of the $1.8 million in senior subordinated debt currently
outstanding that matures in June 2005. We also anticipate that we will
contribute $1.0 million of capital to our subsidiary, United Fidelity
Bank. The remainder will be utilized to make interest payments on this
and other outstanding debt, and to fund the limited operations of
Fidelity. Although we expect to use the proceeds in the manner
discussed above, we reserve the right to use the proceeds in any manner
which we consider appropriate.
1
Q: What are the material terms of the notes?
A: The notes have an interest rate of 9.00% per annum beginning on , ,
based upon a 360-day year, and mature on , 2009. We have the option to
redeem the notes in whole or in part at any time prior to maturity. If
we redeem the notes in part, we will select the notes for redemption on
a pro rata basis, by lot or by such other method as we in our sole
discretion deem fair and appropriate.
Q: What is a basic subscription right?
A: We are distributing to you, at no charge, one basic subscription right,
rounded down to the nearest whole number, for every 3,847 shares of
common stock that you owned on , the record date. Each basic
subscription right entitles you to purchase $1,000 principal amount of
the notes.
Q: What does it mean to exercise a basic subscription right?
A: When you "exercise" a subscription right, that means that you choose to
purchase the principal amount of the notes which that subscription
right entitles you to purchase. You may exercise any number of your
subscription rights, or you may choose not to exercise any subscription
right. The basic subscription right carries with it an
over-subscription privilege. You must, however, fully exercise your
basic subscription right if you wish to exercise your over-subscription
privileges. You cannot give or sell your subscription rights to anybody
else; only you can exercise them.
Q: What if I don't own enough shares to entitle me to a basic subscription
right?
A: If you do not own a sufficient number of shares to otherwise receive a
basic subscription right, you will still receive a basic subscription
right to allow you to purchase one note in the principal amount of
$1,000.
Q: What is the over-subscription privilege?
A: This privilege is available only if you fully exercise your basic
subscription privilege. We do not expect that all of our shareholders
will exercise all of their basic subscription rights. By extending
over-subscription privileges to our shareholders, we are providing for
the purchase of those notes which are not purchased through exercise of
basic subscription rights. The over-subscription privilege entitles
you, if you fully exercise your basic subscription right, to subscribe
for additional notes, in $1,000 increments, not acquired by other
holders of basic subscription rights. As described below, there are
limitations on your over-subscription privilege.
Q: What are the limitations on the over-subscription privilege?
A: We will issue up to $2,500,000 aggregate principal amount of the notes.
The principal amount of notes available for over-subscription
privileges will be $2,500,000 minus the aggregate principal amount of
the notes purchased upon exercise of all basic subscription rights.
If the principal amount of the notes available for sale pursuant to the
exercise of all over-subscription privileges is not sufficient to
satisfy in full all over-subscription privileges, the additional
principal amount of the notes that you will be entitled to purchase if
you exercise your over-subscription privilege will be limited.
2
In this situation, you will be entitled to purchase upon the exercise
of your over-subscription privilege a principal amount of the notes
equal to the product, rounded down to the nearest $1,000, of:
o the number of shares of our common stock owned by you on the
close of business on , divided by the total number of shares
of our common stock owned by all shareholders exercising their
over-subscription privileges to purchase notes on the close of
business on ; and
o the principal amount of notes available for sale pursuant to
the exercise of all over-subscription privileges.
For example, if we sell $2,000,000 principal amount of the notes
pursuant to the exercise of basic subscription rights, we then would
have remaining $500,000 principal amount of the notes available for
purchase by individuals exercising over-subscription privileges. If
individuals exercising over-subscription privileges subscribe for
$500,000 or less in principal amount of the notes by use of their
over-subscription privileges, then all over-subscription privileges
would be honored.
If individuals exercising over-subscription privileges subscribe for
more than $500,000 in principal amount of the notes by use of their
over-subscription privileges, then over-subscription privileges would
be limited. For example, assume that individuals exercising
over-subscription privileges subscribe for $600,000 principal amount of
the notes by use of their over-subscription privileges, you own 10,000
shares of our common stock and shareholders who are exercising their
over-subscription privileges own 100,000 shares. In this example, your
over-subscription privilege would be equal to $50,000 principal amount
of the notes. This was calculated by dividing the number of shares you
own, or 10,000, by the total number of shares owned by all shareholders
exercising their over-subscription privileges with respect to the
notes, or 100,000, and then multiplying this by the principal amount of
the notes available for sale pursuant to the exercise of all
over-subscription privileges, or $500,000.
In certain circumstances, in order to comply with applicable state
securities laws, we may not be able to honor all over-subscription
privileges.
Q: Must all holders of rights pay the subscription price in cash?
A: All shareholders granted rights, who wish to participate in the rights
offering, must timely pay the subscription price by wire transfer,
certified or cashier's check drawn on a U.S. bank, or personal check
that clears before expiration of the rights.
Q: Has the board of directors made a recommendation regarding this rights
offering?
A: Our board of directors does not make any recommendation to you about
whether you should exercise any rights.
Q: How long will the rights offering last?
A: You will be able to exercise your subscription rights only during a
limited period. If you do not exercise your subscription rights before
5:00 p.m., Central time, on , , your basic subscription rights will
expire.
3
Q: After I exercise my subscription rights, can I change my mind?
A: No. Once you send in your shareholder rights agreement and payment, you
cannot revoke the exercise of either your basic subscription rights,
even if you later learn information about us that you consider to be
unfavorable, and we will have immediate use of the funds sent as
payment. You should not exercise your subscription rights unless you
are certain that you wish to purchase the notes.
Q: When will I receive my notes?
A: If you purchase the notes through the rights offering, you will receive
the notes as soon as practicable after . Subject to state securities
laws and regulations, we have the discretion to delay allocation and
distribution of any notes you may elect to purchase by exercise of your
basic subscription right or any over-subscription privileges in order
to comply with state securities laws.
Q: How and by what date must I exercise my subscription rights?
A: You must properly complete the attached shareholder rights agreement
and deliver it to us before 5:00 p.m., Central time, on
__________________________. Our address, for delivery purposes, is on
page ___. Your shareholder rights agreement must be accompanied by
proper payment for the notes that you wish to purchase.
Q: What should I do if I want to participate in the rights offering but my
shares are held in the name of my broker or a custodian bank?
A: If you hold shares of Fidelity common stock through a broker, dealer or
other nominee, we will ask your broker, dealer or nominee to notify you
of the rights offering. If you wish to exercise your rights, you will
need to have your broker, dealer or nominee act for you. To indicate
your decision with respect to your rights, you should complete and
return to your broker, dealer or nominee the form entitled "Beneficial
Owner Election Form." You should receive this form from your broker,
dealer or nominee with the other rights offering materials.
Q: Is exercising my subscription rights risky?
A: The exercise of your subscription rights involves certain risks.
Exercising your subscription rights means buying the notes and should
be carefully considered as you would view other investments. Among
other things, you should carefully consider the risks described under
the heading "Risk Factors," beginning on page 7.
Q: Can I sell or give away my subscription rights?
A: No. The basic subscription rights are not transferable.
Q: Must I exercise any subscription rights?
A: No.
Q: What are the federal income tax consequences of owning the notes?
4
A: You should review the tax opinion of our legal counsel, Krieg DeVault
LLP, under the heading "Material Federal Income Tax Considerations,"
beginning on page 22. You should seek specific tax advice from your
personal tax advisor.
Q: Can Fidelity cancel the rights offering?
A: Yes. Our board of directors may cancel the rights offering in its
discretion at any time on or before . We don't expect to cancel the
rights offering and are not aware of any facts or circumstances which
would cause us to do so. We have reserved this right in the event we
determine that facts of which we are currently unaware or future events
would cause us to determine that the rights offering is not in the best
interests of Fidelity. These reasons may include the institution or
threat of litigation against us with respect to the rights offering.
Q: Will Fidelity return money received from shareholders if it cancels the
rights offering?
A: If we cancel the rights offering, any money received from shareholders
will be refunded promptly, without interest. However, there is no
guarantee that we will have funds available to return to shareholders
who have submitted payment for notes. In this event, we expect to draw
upon an existing line of credit to borrow funds for this purpose.
Q: Will interest accrue on amounts that I submit as payment for notes
prior to the date that the notes are issued?
A: Yes. Interest will accrue beginning on the date of our receipt of
amounts submitted as payment for the notes at the rate of 9% per year,
based upon a 360-day year. However, if we cancel the rights offering,
any money received from shareholders will be refunded promptly, without
interest. Further, if you exercise your over-subscription privilege and
are allocated less than all of the principal amount of notes for which
you wished to subscribe, the excess funds you paid for the notes will
be returned to you as soon as practicable, without interest.
Q: What if I have more questions?
A: If you have more questions about the rights offering, please contact
Mark A. Isaac, Vice President, at (812) 424-0921.
Questions and Answers About Fidelity Federal Bancorp
----------------------------------------------------
Q: What is Fidelity Federal Bancorp?
A: Fidelity is a savings and loan holding company which owns all of the
issued and outstanding stock of United Fidelity Bank, fsb, its
federally-chartered savings bank subsidiary. United Fidelity Bank
maintains four locations in Evansville, Indiana and one in Newburgh,
Indiana.
Q: Where are we located?
A: Our principal executive offices are located at 18 NW Fourth Street,
Evansville, Indiana 47708. Our telephone number is (812) 424-0921.
5
Q: When were we formed?
A: We were incorporated as a savings and loan holding company under the
laws of the State of Indiana in 1993. United Fidelity Bank was formed
in 1914.
Q: When did we last raise capital?
A: We last raised capital in February 2002. In that month, we closed our
previous rights offering of junior subordinate notes and warrants to
purchase our common stock. In that offering, we sold 1,002 notes and
500,000 warrants, and raised total proceeds, after expenses, of
approximately $1,225,000.
Q: What are the provisions of the Supervisory Agreement with the OTS?
A: We describe the Supervisory Agreement in more detail at page 11 under
"We Are Subject to a Supervisory Agreement with the Office of Thrift
Supervision". In general, the supervisory agreement imposes operating
restrictions on United Fidelity Bank and restricts its ability to grow
and pay dividends without prior approval of the OTS. United Fidelity
Bank believes that it currently is in compliance with the Supervisory
Agreement, including the capital targets established in its strategic
plan.
6
RISK FACTORS
You should carefully consider the risks and uncertainties described
below and the other information in this prospectus before deciding whether to
invest in the rights offering. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations. If any of the following risks identified actually occur, our
business, financial condition and operating results could be materially
adversely affected. In such case, we may be unable to satisfy the notes or the
trading price of our common stock could decline and you may lose part or all of
your investment.
Risk Factors Relating to the Rights Offering and the Notes
----------------------------------------------------------
We may not be able to pay interest on or repay the notes.
o We are a holding company and our operating company has no
obligations to the holders of the notes.
We conduct substantially all of our business through our
operating company, United Fidelity Bank. Although we have the ability
to raise capital, such as through the sale of additional shares of
stock or the issuance of additional debt, our cash flow and,
consequently, our ability to pay interest in cash to service our debt,
including the notes, are largely dependent upon the cash flow of United
Fidelity Bank and the payment of funds by United Fidelity Bank to us.
United Fidelity Bank is a separate and distinct legal entity and has no
obligation, contingent or otherwise, to pay any amounts due on the
notes or to make cash available for that purpose.
o Our operating company is restricted in making dividends to us.
The terms of the Supervisory Agreement require Office of
Thrift Supervision approval for United Fidelity Bank to pay us
dividends. The OTS may agree to allow the payment of dividends from
United Fidelity Bank to us to assist in debt service, although it has
no obligation to do so and we cannot and do not offer any assurances
that the OTS will do so. Also, the OTS could continue to prohibit the
payment of dividends to us in the future if it considers such action
necessary for the safety and soundness of United Fidelity Bank. If we
do not receive any dividends from United Fidelity Bank, we may not be
able to make payments on the notes.
o We cannot assure you that we will be able to meet our debt
obligations.
We cannot assure you that we will be able to meet our debt
obligations. If we are unable to generate sufficient cash to meet our
obligations or if we fail to satisfy the requirements of our debt
agreements, we will be in default. A default would permit certain debt
holders to require payment before the scheduled due date of the debt,
resulting in further financial strain on us and causing additional
defaults under our other indebtedness.
Our ability to meet our debt and other obligations and to reduce our
total debt depends on our future operating performance and on economic,
financial, competitive, regulatory and other factors. In addition, we may need
to incur additional indebtedness in the future. Many of these factors are beyond
our control. Although we believe that our existing current assets combined with
working capital from our operations and proceeds of future equity or debt
financings will be adequate to meet our existing financial
7
obligations, we cannot assure you that our business will generate sufficient
cash flow or that future financings will be available to provide sufficient
proceeds to meet these obligations.
There is no public market for the notes.
There is no existing market for the notes. We cannot be sure that any
trading market for the notes will develop. If such a market were to develop, the
notes could trade at a discount from their initial offering price, depending on
prevailing interest rates, the market for similar securities and other factors,
including general economic conditions and our financial condition, performance
and prospects.
Our secured and other unsecured debt and the liabilities of our operating
company may be effectively senior to the notes.
The payment of principal and interest on the notes will be senior to
our 9% junior subordinated notes due February 1, 2009, and will rank PARI PASSU
with our senior subordinated debt due June 2005. In addition, the notes are
unsecured obligations of Fidelity and are senior to all other unsecured
indebtedness of Fidelity, including any future issues of subordinated notes or
debentures of Fidelity but not to common stock or preferred stock of Fidelity.
Fidelity anticipates that it will use a portion of the proceeds to repay $1.0
million of the $1.8 million in senior subordinated notes currently outstanding
that matures in June 2005. United Fidelity Bank has no obligation to pay amounts
due on the notes. At September 30, 2003, we had approximately $4.3 million of
long-term, unsecured indebtedness. We repaid $1.5 million of our 10% senior
notes outstanding in late October 2003. We and United Fidelity Bank may incur
additional debt, subject to limitations, and that additional debt may rank
senior to the notes. United Fidelity Bank may use the earnings it generates, as
well as its existing assets, to fulfill its own direct debt service
requirements, particularly because certain agreements may restrict its ability
to pay dividends to us or because the debt of United Fidelity Bank may be
secured by its assets.
Once you exercise your subscription rights, you may not revoke the exercise.
Once you exercise your subscription rights, you may not revoke the
exercise, even if less than all of the notes that we are offering are actually
purchased.
United Fidelity Bank is subject to the restrictions and conditions of a
Supervisory Agreement with the Office of Thrift Supervision.
United Fidelity Bank entered into a Supervisory Agreement with the OTS
on February 3, 1999, which requires it to take certain actions and restricts
certain of its operations, including its ability to pay dividends. If United
Fidelity Bank is unable to comply with the terms and conditions of the
Supervisory Agreement, the OTS could take additional regulatory action,
including the issuance of a cease and desist order requiring further corrective
action. Such corrective action could include, among other things, increasing the
allowance for loan and lease losses or valuation allowance for letters of
credit, obtaining additional or new management, and further restrictions on
dividends. Because we are dependent upon United Fidelity Bank for our income, we
may not be able to make payments on the notes and this could negatively impact
the price of our stock and prohibit the payment of future dividends.
8
Risk Factors Related to Fidelity Federal
----------------------------------------
We compete with many larger financial institutions that have far greater
financial resources than we have.
We encounter strong competition from other financial institutions
operating in our market and elsewhere. We compete with other competitors which
are larger than us and have greater financial and personnel resources than we
have. Because of this competition, we may have to pay higher rates of interest
to attract deposits. In addition, because of our smaller size, the amount we can
loan to one borrower is less than that for most of our competitors. This may
impact our ability to seek relationships with larger businesses in our market
area. Trends toward the consolidation of the banking industry and the lifting of
interstate banking and branching restrictions may make it more difficult for us
to compete effectively with large national and super-regional banking
institutions.
We must achieve sufficient earnings in order to realize our $6.0 million
deferred income tax receivable.
We currently have a deferred income tax receivable of approximately
$6.0 million net of a valuation allowance. In order to be able to utilize this
asset within the federal and state carryforward periods, we must execute our
current business plan and achieve sufficient annual earnings. If we are unable
to achieve a sufficient level of net income, we may need to establish an
additional valuation allowance for this deferred tax asset. This allowance would
be the estimate of future expirations of existing federal and state tax
carryforwards. Such an allowance would reduce the receivable and increase our
expenses, thus reducing our earnings.
Our accomplishments are largely dependent upon the skill and experience of our
senior management team.
The success of our business will depend upon the services of our senior
management team. Our business may suffer if we lose the services of any of these
individuals, including Bruce A. Cordingley and Donald R. Neel. We have entered
into a three year contract employment agreement with Mr. Neel, which expires on
May 19, 2004, subject to renewal. Mr. Cordingley's role with Fidelity is not
full time. He receives board fees, but he has no employment agreement with us,
does not receive a salary and has substantial business interests other than
Fidelity. Our future success also depends on our ability to identify, attract
and retain qualified senior officers and other employees in our identified
market.
United Fidelity Bank's consumer loan concentration increases the risk of
defaults by our borrowers, which may result in increased expenses and the need
for additional capital.
United Fidelity Bank makes various types of loans. Currently,
approximately 21.2% of our assets are comprised of consumer loans. These types
of loans are more risky than residential mortgage lending because of the impact
on these types of loans of unemployment rates and the general economy. For
example, delinquencies are typically low on these types of loans when
unemployment rates are low, and increase when unemployment rates increase.
Because of this, the OTS may require United Fidelity Bank to maintain a higher
level of capital than a similarly sized institution with a smaller exposure to
this type of loan.
9
We may need additional funds for debt service, which could result in dilution of
your ownership position or result in additional interest expense.
We may need additional funds for servicing our debt, which could result
in dilution of your ownership position or result in additional interest expense,
because United Fidelity Bank is restricted from paying dividends without prior
approval of the OTS. As of September 30, 2003 we had $1.6 million available cash
for debt service and other needs. Debt service for the remainder of calendar
year 2003, is expected to be approximately $1.7 million which includes $1.5
million in principal in connection with the early retirement of our 10% senior
subordinated notes. Required debt service for calendar year 2004, consists of
interest payments of $90,000. It is anticipated that proceeds from the offering
will be used to repay $1.0 million in senior subordinated debt and paydown all
or a portion of any amounts outstanding on our line of credit.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus, including the risk factors
section, contains or incorporates by reference certain forward-looking
statements, within the meaning of the Private Securities Litigation Reform Act
of 1995, about our financial condition, results of operations and business that
are based on our current and future expectations. You can find many of these
statements by looking for words such as "may," "will," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts," "potential," or
"continue," or the negative of such terms and other comparable terminology. Such
statements reflect our current views with respect to future events and are
subject to risks and uncertainties, including those discussed under "Risk
Factors" and elsewhere in this prospectus that could cause actual results to
differ materially from those contemplated in such forward-looking statements. A
few uncertainties which could affect our future performance include, without
limitation, the effects of competition, technological changes and regulatory
developments; changes in fiscal, monetary and tax policies; market, economic
conditions, either nationally or regionally, resulting in, among other things,
credit quality deterioration; and changes in the securities markets. Investors
should consider these risks, uncertainties, and other factors in addition to
those mentioned by us in other filings from time to time when considering any
forward-looking statement.
We believe it is important to communicate our expectations to our
investors. However, you are cautioned that no forward-looking statement is a
guarantee of future performance and you should not place undue reliance on these
forward-looking statements, which speak only as of the date of this prospectus.
There may be events in the future that we are not able to predict accurately or
over which we have no control. We do not undertake any obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date of this prospectus or to reflect the occurrence of
unanticipated events which may cause actual results to differ from those
expressed or implied by the forward-looking statements contained in this
prospectus.
The risk factors listed above, as well as any cautionary language in
this prospectus, provide examples of risks, uncertainties and events that may
cause our actual results to differ materially from the expectations we describe
in our forward-looking statements.
10
UNITED FIDELITY BANK IS SUBJECT TO A SUPERVISORY AGREEMENT WITH THE
OFFICE OF THRIFT SUPERVISION
United Fidelity Bank entered into a supervisory agreement with the OTS
on February 3, 1999. The supervisory agreement currently requires United
Fidelity Bank to:
o maintain its level of classified assets and letters of credit
to core capital and allowance for loan and lease losses to 50%
or less;
o refrain from engaging in any "sub prime" lending activity;
o not increase the size of the consumer loan portfolio in excess
of 28% of United Fidelity's assets;
o refrain from paying dividends without OTS approval;
o adopt and adhere to a strategic plan including:
oo capital targets for tangible, leverage, core and
total risk-based capital,
oo establishment of concentration limits for all assets,
and
oo development of a plan to reduce its concentration of
high risk assets;
o refrain from making additional investments in equity
securities or real estate for development without OTS
approval;
o develop a plan to divest real estate held for development;
o develop a plan to reduce employee turnover and obtain OTS
approval before hiring any additional or replacing any
directors or senior executive officers;
o develop a conflicts of interests policy and refrain from
engaging in any transaction with or distribution of funds to
Fidelity or its subsidiaries or selling any assets to an
affiliate without OTS approval;
o develop a plan to increase liquidity and manage liquidity and
cash flow;
o refrain from increasing the level of executive compensation in
excess of the greater of $5,000 or the annual cost of living;
o not increase its assets in excess of net interest credited on
its deposit liabilities without OTS approval;
o not engage in new activities not included in its strategic
plan without OTS approval;
o maintain a fully-staffed and functioning internal audit
department and loan review process;
o adopt a policy to administer the general partnerships held by
the subsidiaries of United Fidelity; and
11
o adopt a policy to administer its mortgage brokerage
activities.
United Fidelity Bank believes that it currently is in compliance with
all provisions of the supervisory agreement.
USE OF PROCEEDS
Our net proceeds from the rights offering will depend upon the
principal amount of the notes that are purchased. If we sell all of the notes
which may be purchased upon exercise of the rights offered by this prospectus,
then we will receive proceeds of $2,500,000, before deducting expenses payable
by us, which are estimated to be approximately $36,250. Since our directors,
executive officers and their affiliates, who currently own approximately 67.8%
of our outstanding shares of common stock, without giving effect to the shares
that may be issued upon the exercise of outstanding warrants and stock options,
have agreed to exercise certain of their basic and over-subscription
subscription privileges, we expect to issue at least $2.0 million principal
amount of the notes and to receive proceeds of at least approximately $2.0
million from the rights offering, before deducting expenses.
We anticipate that we will use a portion of the proceeds to repay $1.0
million of the $1.8 million in senior subordinated debt currently outstanding
that matures in June 2005. We also anticipate that we will contribute $1.0
million of capital to our subsidiary, United Fidelity Bank. The remainder will
be utilized to make interest payments on this and other outstanding debt, and to
fund the limited operations of Fidelity. Although we expect to use the net
proceeds in the manner discussed above, we reserve the right to use the net
proceeds in any manner which we consider appropriate.
WE DO NOT ANTICIPATE PAYING DIVIDENDS
We have not paid any cash dividends on our common stock since July 6,
1998 and do not anticipate paying cash dividends in the foreseeable future,
since we are dependent upon United Fidelity Bank for funds for dividends and,
under the terms of the supervisory agreement, United Fidelity cannot pay a
dividend to us without approval of the OTS. For the foreseeable future, we
anticipate that United Fidelity Bank will retain any earnings which it generates
or, subject to OTS approval, pay a portion of these earnings to us in order for
us to service our existing debt. The declaration and payment in the future of
any cash dividends will be at the discretion of our board of directors and will
depend upon the receipt of dividends from United Fidelity Bank, earnings,
capital requirements and the financial position of Fidelity, general economic
conditions and other pertinent factors.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth certain information regarding our
consolidated ratios of earnings to fixed charges. Fixed charges represent
interest expense.
12
- ----------------------------------------------------------------------------------------------------------------------
Nine months Year ended Year ended Year ended Six months Year ended
ended December 31, December 31, December 31, ended June 30,
September 30, 2002 2001 2000 December 31, 1999
2003 1999
(unaudited)
- ----------------------------------------------------------------------------------------------------------------------
Earnings to fixed 1.01 .49 .98 .70 .12 1.03
charges
- ----------------------------------------------------------------------------------------------------------------------
Income before taxes $23 $(3,048) $(160) $(2,525) $(3,741) $287
- ----------------------------------------------------------------------------------------------------------------------
Fixed charges:
- ----------------------------------------------------------------------------------------------------------------------
Other interest 708 1,637 2,007 2,015 1,117 2,263
- ----------------------------------------------------------------------------------------------------------------------
Deposit Interest 2,263 4,385 6,494 6,442 3,151 7,467
- ----------------------------------------------------------------------------------------------------------------------
$2,971 $6,022 $8,501 $8,457 $4,268 $9,730
- ----------------------------------------------------------------------------------------------------------------------
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the Nasdaq SmallCap Market under the
symbol "FFED". The following table sets forth the reported high and low bid
prices of our common stock for the periods indicated:
2001 High Low
----
First Quarter $ 1.81 $ 1.31
Second Quarter 1.75 1.50
Third Quarter 3.70 1.75
Fourth Quarter 2.55 2.00
2002
----
First Quarter $ 3.15 $ 2.30
Second Quarter 2.95 2.15
Third Quarter 2.50 1.75
Fourth Quarter 2.15 1.30
2003
----
First Quarter $ 1.75 $ 1.21
Second Quarter 1.53 1.12
Third Quarter (through 2003) 1.75 1.25
The closing price of our common stock was $_______on _____2003. We urge
you to obtain a current stock quote for our common stock.
13
CAPITALIZATION
The following table shows our indebtedness and capitalization as of
September 30, 2003. The table also shows our capitalization as adjusted for the
completion of the rights offering and assuming that all subscription rights are
exercised.
September 30, 2003
Actual As Adjusted
(dollars in thousands)
(unaudited)
Borrowings
- ----------
Junior subordinated notes, unsecured $ 1,002 1,002
Senior subordinated notes, unsecured 3,300 4,800
Line of credit, $500,000 secured by 59,700
shares of United Fidelity Bank stock -0- -0-
-------- --------
Total Borrowings $ 4,302 5,802
-------- --------
Shareholders' Equity
- --------------------
Common Stock $ 9,619 9,619
Stock Warrants 261 261
Additional paid-in capital 16,635 16,635
Retained earnings (12,969) (12,969)
-------- --------
Total shareholders' equity 13,546 13,546
-------- --------
Total capitalization $ 17,848 $ 19,348
======== ========
14
THE RIGHTS OFFERING
Before exercising any subscription rights, you should read carefully
the information set forth under "Risk Factors."
What is a Subscription Right?
We are distributing non-transferable subscription rights to
shareholders who owned shares of our common stock on , 2003, the record date, at
no cost to the shareholders. We will give you one basic subscription right,
rounded down to the nearest whole number, for every 3,847 shares of common stock
that you owned on the record date.
What is the Basic Subscription Privilege?
Each subscription right will entitle you, for $1,000, to purchase
$1,000 principal amount of the notes. If you do not have a sufficient number of
shares to entitle you to otherwise receive a basic subscription right, you will
still receive a basic subscription right to purchase a note in the principal
amount of $1,000. You are not required to exercise any or all of your rights
unless you wish to purchase notes under your over-subscription privilege
described below, in which case you must exercise all of your basic subscription
rights.
What is the Over-Subscription Privilege?
Subject to the limitations described below, each basic subscription
right also grants you an over-subscription privilege to purchase additional
notes that are not purchased by other shareholders. You are entitled to exercise
your over-subscription privilege only if you exercise your basic subscription
right in full. If you wish to exercise your over-subscription privilege, you
should indicate the principal amount of the notes that you would like to
purchase in the space provided on your shareholder rights agreement.
You may not be able to purchase any additional principal amount of the
notes as you requested on your shareholder rights agreement if the principal
amount of the notes available for sale pursuant to the exercise of all
over-subscription privileges is not sufficient to satisfy in full all
over-subscription privileges. If this occurs, we will reallocate the amount of
additional notes that you will be entitled to purchase if you exercise your
over-subscription privilege on a pro rata basis with other shareholders
exercising their over-subscription privileges. In this situation, your
over-subscription privilege will entitle you to purchase a principal amount of
the notes equal to the product of:
o the number of shares of our common stock owned by you on the
close of business on ________________________ , divided by the
total number of shares of our common stock owned by all
shareholders exercising their over-subscription privileges on
the close of business on ________________________; and
o the principal amount of notes available for sale pursuant to
the exercise of all over-subscription privileges.
If this results in a principal amount of notes greater than you
requested, you will receive only the principal amount of notes that you
requested, and the excess will be reallocated one or more times among those
shareholders whose over-subscription privileges are not fully satisfied on the
same principle, until all available notes have been allocated or all exercises
of over-subscription privileges are satisfied.
15
In certain circumstances, in order to comply with applicable state
securities laws, we may not be able to honor all over-subscription privileges.
How Do I Exercise My Subscription Rights?
You may exercise your subscription rights by delivering to us on or
prior to :
o A properly completed and duly executed shareholder rights
agreement;
o Any required signature guarantees; and
o Payment in full for the notes subscribed for by exercising
your basic subscription right and, if desired, your
over-subscription privileges.
You should deliver your shareholder rights agreement and payment to us
at the address shown on page 26. We will not pay you interest on funds delivered
to us pursuant to the exercise of rights.
How Do I Exercise My Over-Subscription Privileges?
When you send in your shareholder rights agreement, you must also send
the full purchase price for the principal amount of notes that you have
requested to purchase, in addition to the payment due for the principal amount
of notes requested through your over-subscription privileges. If the principal
amount of additional notes you are eligible to purchase exceeds the principal
amount of notes you requested, you will receive only the principal amount of
notes that you requested, and the remaining principal amount of notes will be
divided among other shareholders exercising their over-subscription privileges.
To determine if you have fully exercised your basic subscription right,
we will consider only the rights held by you in the same capacity. For example,
suppose you were granted rights for shares of Fidelity common stock you own
individually and for shares of Fidelity common stock you own jointly with your
spouse. You only need to fully exercise your basic subscription right with
respect to your individually owned rights in order to exercise your
over-subscription privilege with respect to your individually owned rights. You
do not have to subscribe for any notes under the rights owned jointly with your
spouse to exercise your individual over-subscription privileges.
When you complete the portion of the shareholder rights agreement to
exercise the over-subscription privilege, you will be representing and
certifying that you have fully exercised your basic subscription rights received
in respect of shares of Fidelity common stock you hold in that capacity. You
must exercise your over-subscription privilege at the same time you exercise
your basic subscription right in full.
If you own your shares of Fidelity common stock through your broker,
dealer or other nominee holder who will exercise your over-subscription
privileges on your behalf, the nominee holder will be required to certify to us:
o the number of shares held on _________________________, the
record date, on your behalf;
o the number of rights you exercised under your basic
subscription right; and
o that your entire basic subscription right held in the same
capacity has been exercised in full.
16
Your nominee holder must also disclose to us certain other information
received from you.
If you exercised your over-subscription privilege and are allocated
less than all of the principal amount of notes for which you wished to
subscribe, the excess funds you paid for notes that are not allocated to you
will be returned in full by mail, without interest or deduction, as soon as
practicable after the expiration date of the rights.
How Do I Exercise My Rights if I Am a Beneficial Owner but not a Record Holder?
If you are a beneficial owner of shares of Fidelity common stock that
you hold through a nominee holder, we will ask your broker, dealer or other
nominee to notify you of this rights offering. If you wish to exercise your
rights, you will need to have your broker, dealer or other nominee act for you.
To indicate your decision with respect to your rights, you should complete and
return to your broker, dealer or other nominee the form entitled "Beneficial
Owner Election Form." You should receive this form from your broker, custodian
bank or other nominee with the other rights offering materials.
How Long Do I Have to Exercise My Rights?
The rights will expire at 5:00 p.m., Central time, on . If you do not
exercise your subscription rights prior to that time, your basic subscription
rights will expire and will no longer be exercisable. We will not be required to
issue notes to you if we receive your shareholder rights agreement or your
payment after that time, regardless of when you sent the shareholder rights
agreement and payment.
You May Not Revoke the Exercise of a Subscription Right.
After you have exercised your basic subscription right or
over-subscription privilege, you may not revoke that exercise. You should not
exercise your subscription rights and over-subscription privilege unless you are
certain that you wish to purchase the notes.
When Do I Need to Obtain a Signature Guarantee?
Signatures on the shareholder rights agreement do not need to be
guaranteed if either the shareholder rights agreement provides that the notes to
be purchased are to be delivered directly to the record owner of such
subscription rights, or the shareholder rights agreement is submitted for the
account of a member firm of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc., or a commercial
bank or trust company having an office or correspondent in the United States. If
a signature guarantee is required, signatures on the shareholder rights
agreement must be guaranteed by a commercial bank, broker, dealer, credit union,
national securities exchange or savings association.
Are the Subscription Rights and Over-Subscription Privileges Transferable?
The basic subscription rights and over-subscription privileges are
non-transferable and non-assignable. Only you may exercise these subscription
rights and over-subscription privileges.
How Can I Pay for the Notes I Purchase?
Payment for the notes must be made in United States dollars. We will
consider payment to have been received only upon:
17
o actual receipt of any certified check or cashier's check drawn
upon a U.S. bank or of any postal, telegraphic or express
money order payable to the order of Fidelity Federal Bancorp;
o actual receipt of any funds transferred by wire transfer; or
o actual receipt of any funds through an alternative payment
method which we may approve.
Payment for notes also may be effected through wire transfer as
follows:
Wire to: Federal Home Loan Bank of Indianapolis
ABA#: 074 001 019
Further Credit: United Fidelity Bank, fsb
Account #: 8166-9994
Further Credit: Fidelity Federal Bancorp - Rights Offering
Account #: 0-01-45004609
What if There Are Ambiguities in the Exercise of Subscription Rights?
If you do not specify the number of subscription rights and
over-subscription privileges being exercised on your shareholder rights
agreement, or if your payment is not sufficient to pay the total purchase price
for all of the notes that you indicated you wished to purchase, you will be
deemed to have exercised the maximum number of subscription rights and
over-subscription privileges that could be exercised for the amount of the
payment that we receive from you. If your payment exceeds the total purchase
price for all of the subscription rights shown on your shareholder rights
agreement, your payment will be applied, until depleted, to subscribe for notes
in the following order:
o to subscribe for the principal amount of notes that you
indicated on the shareholder rights agreement that you wished
to purchase through your basic subscription right, until your
basic subscription right has been fully exercised; and
o to subscribe for additional principal amount of notes pursuant
to the over-subscription privilege, subject to any applicable
limitations.
Any excess payment remaining after the foregoing allocation will be returned to
you as soon as practicable by mail, without interest or deduction.
Our Decision Is Binding on You.
All questions concerning the timeliness, validity, form and eligibility
of any exercise of subscription rights and over-subscription privileges will be
determined by us, and our determinations will be final and binding. In our sole
discretion, we may waive any defect or irregularity, or permit a defect or
irregularity to be corrected within such time as we may determine, or reject the
purported exercise of any subscription right and over-subscription privilege by
reason of any defect or irregularity in such exercise. Subscription rights and
over-subscription privileges will not be deemed to have been received or
accepted until all irregularities have been waived or cured within such time as
we determine in our sole discretion. We will be under no duty to notify you of
any defect or irregularity in connection with the submission of a shareholder
rights agreement or incur any liability for failure to give such notification.
18
Notice to Nominee Holders.
If you are a broker, a trustee or a depositary for securities who holds
shares of Fidelity common stock for the account of others as a nominee holder,
you should notify the respective beneficial owners of such shares of the
issuance of the rights as soon as possible to find out such beneficial owners'
intentions. You should obtain instructions from the beneficial owner with
respect to the rights, as set forth in the instructions we have provided to you
for your distribution to beneficial owners. If the beneficial owner so
instructs, you should complete the appropriate shareholder rights agreements
and, in the case of the over-subscription privilege, the related nominee holder
certification, and submit them to us with the proper payment. A nominee holder
that holds shares for the account(s) of more than one beneficial owner may
exercise the number of rights to which all such beneficial owners in the
aggregate otherwise would have been entitled if they had been direct record
holders of Fidelity common stock on the record date, so long as the nominee
submits the appropriate shareholder rights agreements and certifications and
proper payment to the subscription agent.
We Are Making No Recommendation to Rights Holders.
Neither Fidelity nor its board of directors is making any
recommendations to you as to whether or not you should exercise your
subscription rights or over-subscription privileges. You should make your
decision based on your own assessment of your best interests after reading this
prospectus.
Fidelity Has Reserved the Right to Withdraw or Cancel the Rights Offering.
Our board of directors may withdraw the rights offering in its sole
discretion at any time prior to or on ______________________. We don't expect to
withdraw the rights offering. We reserve the right to do so in the event we
later determine that facts of which we are currently unaware or future events
would cause us to believe that the rights offering is not in the best interests
of Fidelity. These reasons may include the institution or threat of litigation
against us with respect to the rights offering. We currently are not aware of
any facts or circumstances which would cause us to withdraw the rights offering.
If we cancel the rights offering, any money received from shareholders
will be refunded promptly, without interest. Because we will have immediate use
of funds received in the rights offering, if we withdraw the rights offering
there is no guarantee that we will have funds available to return to
shareholders who have submitted payment for shares. In the event that we would
have no funds available to return to shareholders, we expect to draw upon an
existing line of credit to obtain the funds for this purpose.
Will interest accrue on amounts submitted as payment for notes during the period
prior to the date that the notes are issued?
Interest will accrue beginning on the date of our receipt of amounts
submitted as payment for the notes at the rate of 9% per annum, based upon a
360-day year. However, if we cancel the rights offering, any money received from
shareholders will be refunded promptly, without interest. Further, if you
exercise your over-subscription privilege and are allocated less than all of the
principal amount of notes for which you wished to subscribe, the excess funds
you paid for the notes will be returned to you as soon as practicable, without
interest.
19
How Much Will Directors and Management Purchase?
Mr. Cordingley and his affiliates, and the other directors of Fidelity
and their respective affiliates, who currently own of record approximately 64.1%
and 3.7%, respectively, and beneficially own approximately 65.9% and 3.9%,
respectively, of our outstanding shares of common stock, have agreed to exercise
their basic subscription rights, and over-subscription privileges in the amount
of at least $2.0 million principal amount of the notes. As a result, we expect
that at least $2.0 million principal amount of the notes offered will be
subscribed for and sold.
Regulatory Limitation.
We will not be required to issue you notes pursuant to the rights
offering if, in our opinion, you would be required to obtain prior clearance or
approval from any state or federal regulatory authorities to own or control such
notes if, at the time the subscription rights expire, you have not obtained such
clearance or approval.
State and Foreign Securities Laws.
The rights offering is not being made in any state or other
jurisdiction in which it is unlawful to do so, nor are we selling or accepting
any offers to purchase any notes to you if you are a resident of any such state
or other jurisdiction. We may delay the commencement of the rights offering in
certain states or other jurisdictions in order to comply with the securities law
requirements of such states or other jurisdictions. In certain circumstances, in
order to comply with applicable state securities laws, we may not be able to
honor all over-subscription privileges even if we have notes available. It is
not anticipated that there will be any changes in the terms of the rights
offering. In our sole discretion, we may decline to make modifications to the
terms of the rights offering requested by certain states or other jurisdictions,
in which case shareholders who live in those states or jurisdictions will not be
eligible to participate in the rights offering.
Fees and Expenses.
You are responsible for paying any commissions, fees, taxes or other
expenses incurred in connection with the exercise of the subscription rights. We
will not pay such expenses.
If You Have Questions.
If you have questions or need assistance concerning the procedure for
exercising subscription rights or if you would like additional copies of this
prospectus, the instructions, or forms for use in connection with the rights
offering, you should contact Deb Merritt, Assistant Vice President, Shareholder
Relations, of Fidelity, at:
Fidelity Federal Bancorp
18 NW Fourth Street, PO Box 1347
Evansville, Indiana 47706-1347
Telephone: (812) 424-0921, extension 2226
(800) 280-8280, extension 2226
Important: Please carefully read the instructions accompanying the
shareholder rights agreement and follow those instructions in detail. You are
responsible for choosing the payment and delivery method for your shareholder
rights agreement, and you bear the risks associated with such delivery. If you
choose to deliver your shareholder rights agreement and payment by mail, we
recommend that you
20
use registered mail, properly insured, with return receipt requested. We also
recommend that you allow a sufficient number of days to ensure delivery to us
prior to .
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is the opinion of our tax counsel, Krieg
DeVault LLP, as to the application of existing material federal income tax law
to the facts as presented in this prospectus relating to the rights offering.
Krieg DeVault's opinion is based on the Internal Revenue Code of 1986, as
amended, the Treasury regulations thereunder, judicial authority and
administrative rulings and practice, all of which are subject to change at any
time, possibly with retroactive effect. Moreover, there can be no assurance that
this opinion will not be challenged by the Internal Revenue Service or that a
court considering the issues will not hold contrary to such opinion.
This discussion may not address federal income tax consequences
applicable to shareholders subject to special treatment under federal income tax
law, such as financial institutions, broker-dealers, life insurance companies or
traders in securities that elect to mark to market. Also, this discussion does
not address applicable tax consequences if you hold Fidelity common stock as
part of a hedging, straddle, constructive sale, conversion or other risk
reduction transaction. This summary assumes that investors will hold their notes
as "capital assets" (generally property held for investment) under the Internal
Revenue Code of 1986. In addition, this discussion does not address the tax
consequences of the rights offering under applicable state, local or foreign tax
laws.
You should consult your tax advisor to determine the tax consequences
to you of the rights offering in light of your particular circumstances,
including any state, local and foreign tax consequences.
A holder will recognize capital gain or loss upon the sale, exchange or
other disposition of a note equal to the difference between the amount realized
from such sale and the holder's tax basis in the security that was sold. Such
gain or loss will be long-term if the security disposed of has been held for
more than one year.
DESCRIPTION OF THE NOTES
Principal, Interest Rate and Maturity
The notes will mature on __________________. The aggregate principal
amount of the notes is $2,500,000. However, we may issue additional notes from
time to time, without the consent of the holders of the notes.
Interest on the notes will:
o accrue at the rate of 9.00% per year, beginning on
_______________________ 2004, based upon a 360-day year;
o be payable semiannually, in arrears, on each
_______________________ and _______________________ , with the
initial interest payment payable on _______________________ ,
_______________________ ; and
21
o be payable to the person in whose name the notes are
registered at the close of business on _______________________
and _______________________ preceding the applicable interest
payment date, which we refer to as "regular record dates."
Optional Redemption
We may redeem the notes, in whole or in part, at any time with no
redemption premium.
If we redeem the notes in part, we will select the notes for redemption
on a pro rata basis, by lot or by such other method as we in our sole discretion
deem fair and appropriate. We will only redeem the notes in multiples of $1,000
in original principal amount. A note in principal amount equal to the unredeemed
portion of the original note will be issued upon the cancellation of the
original note.
Ranking of the Notes
The notes rank senior to Fidelity's 9% junior subordinated notes due
February 2009, and rank and are PARI PASSU with the senior subordinated notes
due June 2005. In addition, the notes are unsecured obligations of Fidelity and
are senior to all other unsecured indebtedness of Fidelity, including any future
issues of subordinated notes or debentures of Fidelity but not to common stock
or preferred stock of Fidelity.
We presently have the following unsecured debt as of September 30,
2003:
Junior subordinated notes, 9.00%, interest paid
semi-annually, due February 2004 unsecured 1,002,000*
Senior subordinated notes, 10.00%, interest paid
semi-annually, due June 2005, unsecured 3,300,000*
----------------
Total unsecured debt $4,302,000*
================
*Unaudited.
The notes are not directly subordinated to indebtedness of United
Fidelity Bank or its subsidiaries. However, there are no contractual limitations
on the amount of indebtedness which may be incurred by United Fidelity Bank or
its subsidiaries which could impact the ability of United Fidelity Bank to pay
dividends to us, from which we would make payments on the notes.
Sinking Fund
We are not obligated to make mandatory redemption or sinking fund
payments with respect to the notes.
Payment
We will pay interest on the notes to the persons in whose names the
notes are registered at the close of business on the regular record date for
each interest payment. However, we will pay the interest payable on the notes at
their stated maturity to the persons to whom we pay the principal amount of the
notes. The initial payment of interest on the notes will be payable on
_________________, ____ .
22
We will pay principal and interest on the notes at the offices of
Fidelity or at any other office maintained by us for such purposes. We may pay
interest by cash or by check mailed to the address of the person entitled to the
payment as it appears in the security register.
Non-Payment
If we fail to pay the interest on, or principal of the notes when due,
and which failure continues for thirty days, the principal and interest of the
notes may be declared due and payable by the holder and payment may be enforced
in accordance with Indiana law.
Waiver
No holder of any note and no director, officer, employee, agent,
manager, partner or other interest holder of Fidelity shall have any liability
for any obligation of Fidelity under the notes or for any claim based on, in
respect of or by reason of such obligations. Each holder, by accepting a note,
waives and releases all such liability. Such waiver and release shall be part of
the consideration for the issuance of the notes. Notwithstanding the foregoing,
this shall not be construed as a waiver or release of any claim under the
federal securities laws.
Form, Exchange and Transfer of the Notes
We will issue the notes in registered form, without coupons. We will
only issue the notes in denominations of integral multiples of $1,000.
Holders may present the notes for exchange or for registration of
transfer at our principal executive offices or at any other office or agency
maintained by Fidelity for such purpose. We will exchange or transfer the notes
if the notes are duly endorsed by, or accompanied by a written instrument of
transfer in a form satisfactory to us. We will not charge a service charge for
any exchange or registration of transfer of the notes. However, we may require
payment of a sum sufficient to cover any tax or other governmental charge
payable for the registration of transfer or exchange.
Title
We may treat the person in whose name a note is registered on the
applicable record date as the owner of the note for all purposes, whether or not
it is overdue.
DESCRIPTION OF CAPITAL STOCK
The following is a summary of the terms of our capital stock and
highlights some of the provisions of our amended and restated articles of
incorporation and by-laws. Since we are only providing a general summary of
certain terms of our amended and restated articles of incorporation and by-laws,
you should only rely on the actual provisions of the amended and restated
articles of incorporation or the by-laws. If you would like to read the articles
of incorporation or by-laws, they are on file with the Securities and Exchange
Commission.
23
Authorized and Outstanding Capital Stock
Our authorized capital stock consists of 15,000,000 shares of common
stock, no par value, and 5,000,000 shares of preferred stock. As of September
30, 2003, there were 9,618,658 shares of common stock outstanding and
approximately 440 beneficial holders of common stock of record. All outstanding
shares of common stock are fully paid and non-assessable. We have two issues of
outstanding warrants to purchase 18,282 and 9,471 shares of our common stock at
a price of $6.22 and $8.93 per share, respectively. The warrants expire on April
30, 2004 and January 31, 2005, respectively. The warrants may be exercised in
whole or in part at any time prior to expiration. Fidelity has reserved 27,753
shares of common stock for the possible exercise of these warrants. None of the
warrants have been exercised as of September 30, 2003. As of September 30, 2003,
we also had outstanding, under our stock option plans, options to purchase
381,996 shares of our common stock. We have reserved 470,279 shares of common
stock for the possible exercise of options under these option plans.
Common Stock
The holders of common stock are entitled to dividends in such amounts
and at such times as may be declared by the board of directors out of funds
legally available therefore. Holders of common stock are entitled to one vote
per share for the election of directors and other corporate matters. Such
holders are not entitled to vote cumulatively for the election of directors. In
the event of liquidation, dissolution or winding up of Fidelity, holders of
common stock would be entitled to share ratably in all of our assets available
for distribution to the holders of common stock. The common stock carries no
preemptive rights.
Preferred Stock
Our board of directors is authorized to issue from time to time,
without shareholder authorization, in one or more designated series, shares of
preferred stock with such dividend, redemption, conversion and exchange
provisions as are provided in the particular series. The issuance of preferred
stock could have the effect of delaying or preventing a change in control of
Fidelity. Your rights as a holder of our common stock may be affected by any
preferred stock that we may issue. Our board of directors has no present plans
to issue any preferred stock.
Transfer Agent
We act as our own transfer agent for our common stock.
PLAN OF DISTRIBUTION
On or about _______________________, we will distribute the
subscription rights, shareholder rights agreements and copies of this prospectus
to individuals who owned shares of common stock on _______________________. We
have not employed any brokers, dealers or underwriters in connection with the
rights offering and will not pay any underwriting commissions, fees or discounts
in connection with the rights offering. Certain of our directors or officers may
assist in the rights offering. These individuals will not receive any
commissions or compensation other than their normal directors' fees or
employment compensation and will not register with the Securities and Exchange
Commission as brokers in reliance on certain safe harbor provisions contained in
Rule 3a4-1 under the Securities Exchange Act of 1934.
24
If you wish to exercise your subscription rights and purchase the
notes, you should complete the shareholder rights agreement and return it with
payment for the notes, to us, at the address below. If you have any questions,
you should contact Deb Merritt, Assistant Vice President, Shareholder Relations,
of Fidelity at:
Fidelity Federal Bancorp
18 NW Fourth Street, PO Box 1347
Evansville, Indiana 47706-1347
Telephone: (812) 424-0921, extension 2226
(800) 280-8280, extension 2226
LEGAL MATTERS
The validity of the notes offered by this prospectus and the tax
matters discussed under "Material Federal Income Tax Considerations" has been
passed upon for us by Krieg DeVault LLP, Indianapolis, Indiana.
EXPERTS
BKD LLP (formerly known as Olive LLP), independent auditors, have
audited our financial statements and schedule included in our Annual Report on
Form 10-K for the year ended December 31, 2002, as set forth in their report,
which is incorporated by reference into this prospectus and elsewhere in the
registration statement. Our financial statements are incorporated by reference
in reliance on the report of BKD LLP (formerly known as Olive LLP), given on
their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file reports and other information with the SEC. You may read and
copy any document we file with the SEC at the SEC's public reference room
located at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
further information regarding the operation of the SEC's Public Reference Room
by calling the SEC at 1-800-SEC-0330. Our filings are also available to the
public on the SEC's Internet site located at http://www.sec.gov.
The SEC allows us to "incorporate by reference" into this prospectus
information we file with the SEC. This means we can disclose important
information to you by referring you to the documents containing such
information. The information we incorporate by reference is considered to be
part of this prospectus, unless we update or supersede that information by the
information contained in this prospectus or information we file subsequently
that is incorporated by reference into this prospectus. We are incorporating by
reference into this prospectus the following documents that we have filed with
the SEC, and our future filings with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until the rights offering is
completed:
o our annual report on Form 10-K for the fiscal year ended
December 31, 2002;
o our quarterly report on Form 10-Q for the fiscal quarter ended
March 31, 2003;
o our quarterly report on Form 10-Q for the fiscal quarter ended
June 30, 2003;
o our quarterly report on Form 10-Q for the fiscal quarter ended
September 30, 2003;
25
o our definitive proxy statement filed April 1, 2003 in
connection with our 2003 annual shareholder meeting.
Our SEC file number is 0-22880.
This prospectus is part of a registration statement on Form S-3 we have
filed with the SEC relating to the securities that we are offering under this
prospectus. As permitted by SEC rules, this prospectus does not contain all of
the information included in the registration statement and the accompanying
exhibits and schedules we file with the SEC. You should read the registration
statement and the exhibits and schedules for more information about us and the
notes and the warrants. The registration statement, exhibits and schedules are
also available at the SEC's Public Reference Room or through its Internet site.
This document incorporates by reference important business, financial
and other information about us that is not included in or delivered with this
document. Documents incorporated by reference and any other copies of our
filings with the SEC are available from us upon written or oral request and
without charge to each person, including any beneficial owner, to whom a
prospectus is delivered, excluding all exhibits unless specifically incorporated
by reference as exhibits in this document.
Written and telephone requests for any of these documents should be
directed to us as indicated below:
Fidelity Federal Bancorp
18 NW Fourth Street
P.O. Box 1347
Evansville, Indiana 47706-1347
Attn.: Mark A. Isaac, Vice President
Telephone: (812) 424-0921
26
PART II
-------
INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
Item 14. Other Expenses of Issuance and Distribution.
- -------- -------------------------------------------
The following are actual or estimated expenses incurred or to be
incurred by the Company in connection with this offering:
Fees Amount (in $)
---- -------------
Filing Fee 750
Printing Expenses 2,000*
Legal Fees, Blue Sky Fees and Expenses 30,000*
Accounting Fees and Expenses 3,000*
Miscellaneous Expenses 500*
Total 36,250*
*Estimated.
Item 15. Indemnification of Directors and Officers.
- ------- -----------------------------------------
Chapter 23-1-37 of the Indiana Business Corporation Law gives
corporations the power to indemnify officers and directors under certain
circumstances.
The Company's Articles of Incorporation provide that the Company will
indemnify any person who is or was a director or officer of the Company or of
any other corporation for which such director or officer is or was serving in
any capacity at the request of the Company against all liability and expense
that may be incurred in connection with any claim, action, suit or proceeding
with respect to which such director or officer is wholly successful or acted in
good faith in a manner such director or officer reasonably believed to be in, or
not opposed to, the best interests of the Company or such other corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe that such conduct was unlawful. A director or officer of the Company is
entitled to be indemnified as a matter of right with respect to those claims,
actions, suits or proceedings in which such director or officer has been wholly
successful. In all other cases, such director or officer, shall be entitled to
indemnification as a matter of right unless (i) the director or officer has
breached or failed to perform the person's duties in compliance with the
standard of conduct set forth above and (ii) such breach of failure to perform
constituted willful misconduct or recklessness as determined by the Board of
Directors of the Company, a committee of the Board of Directors, independent
legal counsel, or a committee of disinterested persons selected by the Board of
Directors. The foregoing is a summary of detailed provisions for indemnification
found at Article VI, Section 2 of the Articles of Incorporation of the Company
which are incorporated by reference into this Registration Statement as Exhibit
3.1.
The Company also has policies insuring its officers and directors
against certain liabilities for action taken in such capacities, including
liabilities under the Securities Act of 1933, as amended.
27
See "Item 17. Undertakings" for a description of the SEC's position
regarding the indemnification of directors and officers for liabilities arising
under the Securities Act of 1933, as amended.
Item 16. Exhibits.
- ------- --------
The exhibits to this registration statement are listed in the attached
Exhibit Index.
Item 17. Undertakings.
- -------- ------------
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) 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.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant 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, the registrant 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 Act and will
be governed by the final adjudication of such issue.
28
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Evansville, State of Indiana, on November 20,
2003.
FIDELITY FEDERAL BANCORP
By: /s/ DONALD R. NEEL
-----------------------------
Donald R. Neel, President and
Chief Executive Officer
POWER OF ATTORNEY
-----------------
Each person signing below hereby makes, constitutes and appoints Bruce A.
Cordingley and Donald R. Neel, and each of them, his true and lawful
attorneys-in-fact to execute and file any and all amendments (including
post-effective amendments) to this Registration Statement on Form S-3 as such
attorney-in-fact may deem appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated below as of November 20, 2003.
By: /s/ BRUCE A. CORDINGLEY By: /s/ PAUL E. BECKER
------------------------------------- ---------------------------------
Bruce A. Cordingley, Director and Paul E. Becker, Director
Chair of the Executive Committee
By: /s/ DONALD R. NEEL By: /s/ BARRY A. SCHNAKENBURG
------------------------------------- ---------------------------------
Donald R. Neel, Director, Barry Schnakenburg, Director
President and Chief Executive
Officer (Principal Executive Officer)
By: /s/ GERALD K. PEDIGO By: /s/ PHILLIP J. STOFFREGEN
------------------------------------- ---------------------------------
Gerald K. Pedigo, Director Phillip J. Stoffregen, Director
By: /s/ JACK CUNNINGHAM
---------------------------------
Jack Cunningham, Director
29
EXHIBIT INDEX
-------------
Exhibit Number Document Description Report or Registration Statement
- ----------------------------------------------------------------------------------------------------------
* 3.1 Articles of Incorporation; Articles of Annual Report on Form 10-K for the fiscal
Amendment of the Articles of Incorporation year ended June 30, 1995; Registration
Statement on Form S-3, dated January
12, 2001, SEC File No. 333-53668
* 3.2 By-Laws of the Company Registration Statement on Form S-3, dated
January 12, 2001, SEC File No. 333-53668
** 5.1 Opinion of Krieg DeVault LLP regarding
legality of shares
** 8.1 Opinion of Krieg DeVault LLP regarding tax
matters
** 23.1 Consent of Krieg DeVault LLP (contained in
Exhibits 5.1 and 8.1)
** 23.2 Consent of BKD LLP
** 24.1 Power of Attorney (included on the
signature page of the registration
statement)
** 99.1(a) Shareholder Rights Agreement
** 99.1(b) Instructions for Use of Shareholders
Rights Agreement
** 99.2 Letter to Record Shareholders
** 99.3 Letter to Nominee Holders
** 99.4 Letter to Clients of Nominee Holders
** 99.5 Beneficial Owner Election Form
** 99.6 Nominee Holder Certification
** 99.7 Substitute Form W-9
** 99.8 Form of 9.00% Senior Subordinated Note
due ________, 2009
* Incorporated herein by reference as indicated.
** Filed herewith.
30