As filed with the Securities and Exchange Commission on January 31, 1997
REGISTRATION NO. 333-18677
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
Pre-Effective
Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
ST. PAUL BANCORP, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 36-3504665
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
6700 W. 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.
ST. PAUL BANCORP, INC.
6700 W. NORTH AVENUE
CHICAGO, ILLINOIS 60707
(773) 804-2282
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
COPIES TO:
STUART G. STEIN, ESQ. STEPHEN A. TSORIS, ESQ.
HOGAN & HARTSON L.L.P. MCDERMOTT, WILL & EMERY
555 THIRTEENTH STREET, N.W. 227 WEST MONROE STREET
WASHINGTON, D.C. 20004-1109 CHICAGO, ILLINOIS 60606
(202) 637-8575 (312) 984-7584
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
possible 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, please check the following box. [_]
_______________
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT 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.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED JANUARY 30, 1997
- ----------
$100,000,000
ST. PAUL BANCORP, INC.
____% SENIOR NOTES DUE 2004
The ____% Senior Notes Due 2004 (the "Notes") are not subject to
redemption or repayment prior to maturity and will not be subject to any sinking
fund. The Notes will be unsecured debt obligations of St. Paul Bancorp, Inc.
("St. Paul Bancorp" or the "Company") and will rank equally with all other
unsubordinated and unsecured Indebtedness of the Company. As of September 30,
1996, the Company had $34.5 million of outstanding Indebtedness which ranked
junior to the Notes. See "Description of Notes."
The Notes will be represented by one permanent global certificate (the
"Global Security") registered in the name of a nominee of The Depository Trust
Company, as depositary (the "Depositary"). The Notes will be available for
purchase in minimum denominations of $1,000 or any amount in excess thereof
which is an integral multiple of $1,000 in book-entry form only. Beneficial
interests in the Global Security will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary and its
participants. Except as described under "Description of Notes" herein, owners
of beneficial interests in the Global Security will not be entitled to receive
Notes in definitive form.
____________________
THE NOTES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE FUND OF
THE FEDERAL DEPOSIT INSURANCE CORPORATION.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT/ (1)/ CORPORATION/(2)/
- -----------------------------------------------------------
Per Note.. ____% .__% _____%
- -----------------------------------------------------------
Total..... $__________ $_______ $__________
===========================================================
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $_______.
The Notes are offered by the several Underwriters when, as and if issued by
the Company, delivered to and accepted by the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that delivery of the
Global Security, in book-entry form, will be made through the facilities of the
Depository on or about ____________, 1997, against payment in immediately
available funds.
KEEFE, BRUYETTE & WOODS, INC. ABN AMRO CHICAGO CORPORATION
THE DATE OF THIS PROSPECTUS IS ______________ __, 1997.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files proxy statements, reports and other information
with the Securities and Exchange Commission (the "Commission"). This filed
material can be inspected and copied at the Commission's office at 450 Fifth
Street, N.W., Washington, D.C. 20549 and the Commission's Regional Offices in
New York (Seven World Trade Center, 14th Floor, New York, New York 10048) and
Chicago (500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511)
and copies of such materials can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains a web site (http:\\www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants such as the Company. In addition, the Common Stock of
the Company is quoted on the NASDAQ National Market System (symbol: SPBC),
and such reports, proxy statements, and other information concerning the
Company also may be inspected at the offices of the National Association of
Securities Dealers, Inc. at 9513 Key West Avenue, Rockville, Maryland 20850-
3389.
The Company has filed with the Commission a Registration Statement under
the Securities Act of 1933 (the "Securities Act"), with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
For further information with respect to the Company and the securities
offered hereby, reference is hereby made to the Registration Statement and
the exhibits and schedules filed therewith, which may be obtained from the
principal office of the Commission in Washington, D.C., upon payment of the
fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1995, the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996, and the Company's
Current Reports on Form 8-K dated as of January 18, 1996, March 26, 1996,
July 16, 1996, December 16, 1996 and January 15, 1997, previously filed with
the Commission by the Company, are incorporated in this Prospectus by
reference and made a part hereof. Financial information included in these
documents do not reflect the five-for-four stock split effective January 14,
1997 for stockholders of record as of December 31, 1996 (the "Stock Split").
However, the financial information presented in this Prospectus has been
restated to give effect to the Stock Split. Each document or report
subsequently filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior
to the termination of the offering of the Notes shall be deemed to be
incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such document. Any statement contained
herein, or in the document all or a portion of which is incorporated or
deemed to be incorporated by reference herein, shall be deemed to be modified
or superseded for purposes of the Registration Statement and this Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the foregoing documents incorporated by reference,
other than certain exhibits to such documents. Written requests should be
directed to St. Paul Bancorp, Inc., 6700 West North Avenue, Chicago, Illinois
60707; Attention: Clifford M. Sladnick (telephone: (773) 622-5000).
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
-2-
THE COMPANY
St. Paul Bancorp is the holding company for St. Paul Federal Bank For
Savings (the "Bank"), the largest independent savings institution in the
State of Illinois. The Company, either directly or through the Bank, also
owns financial services subsidiaries involved in discount brokerage, real
estate development, insurance and annuity product sales. For the nine months
ended September 30, 1996, the Company had consolidated net income of $15.4
million, after a pre-tax charge of $21.0 million in connection with a one-
time special assessment on the Bank's deposits to recapitalize the Savings
Association Insurance Fund of the Federal Deposit Insurance Corporation
("FDIC"). At September 30, 1996, the Company had $4.3 billion in assets and
$371.6 million in stockholders' equity.
The Bank is a FDIC insured retail depository institution that operates
through 52 branches in the Chicago metropolitan area. The Bank's branch
network includes 35 free-standing offices and 17 banking offices located in
Omni(R) and Cub(R) superstores. The Bank's expansion of its branch network
through "in-store" facilities provides access to a larger retail customer
base through offices which have relatively lower overhead. The Bank has also
recently expanded its automated teller machine ("ATM") network to 460
machines by installing 261 ATMs in White Hen Pantry(R) convenience stores in
the eight county Chicago area, including stores in Northwest Indiana. In
addition, the Bank opened a telephone banking facility in 1995 to support
customer service, as well as handle inquiries and loan applications.
The Bank services approximately 179,000 checking accounts, offering a
number of options, including special sports checking programs such as Chicago
Bulls Checking, Chicago Cubs Checking and Chicago Bears Checking. The Bank
also offers a variety of savings, money market and certificate of deposit
products. At September 30, 1996, the Bank had total deposits of $3.3
billion.
The Bank's interest earning assets primarily consist of loans secured by
mortgages on residential real estate, securities and, to a lesser extent,
consumer and commercial real estate loans. At September 30, 1996, the Bank's
mortgage loan portfolio included $2.0 billion of 1-4 family residential
mortgage loans, $961.4 million of multifamily residential mortgage loans,
$54.4 million of commercial and other mortgage loans, and $20.0 million in
consumer loans. At September 30, 1996, the Bank also held $799.2 million of
mortgage-backed securities ("MBS"), and invested in government and other
investment grade, liquid securities.
The Bank's 1-4 family residential mortgage products are originated
through its retail banking offices and telephone banking facility, as well as
a correspondent loan program in the Chicago metropolitan area and midwestern
states (including Wisconsin, Indiana, Michigan and Ohio). In the first nine
months of 1996, the Bank (either directly or through correspondents)
originated over $220.0 million of 1-4 family residential mortgage loans. In
addition to such originations, in the first nine months of 1996 the Bank
purchased $435.1 million of 1-4 family adjustable rate mortgage loans secured
by 1-4 family residential real estate located throughout the U.S.
The Bank also originates loans secured by apartment buildings in
Illinois, Wisconsin, Indiana, Minnesota and Ohio, using the same underwriting
standards throughout the area. At September 30, 1996, the Bank's portfolio
of Midwest apartment building loans totaled $111.5 million or 3.7% of the
loan portfolio.
The Bank offers a variety of consumer loan products through its retail
banking offices, telemarketing and its telephone banking facility, including
home equity loans, secured lines of credit, education and automobile loans.
The Bank has entered into agreements to sell consumer loans that do not meet
its underwriting standards to third parties, rather than retaining them.
At September 30, 1996, the Bank's loan portfolio included $909.1 million
of loans originated prior to 1990 on a nationwide basis secured by
multifamily real estate and, to a lesser extent, commercial real estate.
Approximately 38% of this portfolio is scheduled to mature between the third
quarter of 1996 and the end of
-3-
1998. The Bank intends to refinance a large portion of these loans,
depending upon the credit characteristics. The Bank was able to refinance
over 70% of the loans in this portfolio which matured in the first nine
months of 1996. The remainder of these loans was paid off or liquidated out
of foreclosed real estate.
Subsidiaries of the Bank or the Company include Investment Network,
Inc., a discount broker with over $3.8 million in commission revenue for the
nine months ended September 30, 1996; Annuity Network, Inc., which offers
customers fixed rate annuity products; and SPF Insurance Agency, Inc., which
offers homeowners, auto, life and disability insurance. The Company's real
estate development subsidiary, St. Paul Financial Development Corporation,
engages in single family real estate development and, to some extent,
commercial real estate construction financing.
The principal offices of the Company are located at 6700 West North
Avenue, Chicago, Illinois 60707, telephone (773) 622-5000.
-4-
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth certain historical selected consolidated
financial information regarding the Company and its subsidiaries at the dates
and for the periods indicated. The Financial Condition Data and Operating Data
at and for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 were
derived from the Company's consolidated financial statements which have been
audited by Ernst & Young LLP, independent auditors. This data should be read in
conjunction with the Company's consolidated financial statements and related
notes thereto and its Management's Discussion and Analysis, which are
incorporated by reference in this Prospectus. See "Incorporation of Certain
Documents by Reference." The financial data for the nine-month period ended
September 30, 1996, and 1995 are derived from unaudited financial statements.
The unaudited financial statements include all adjustments, consisting of normal
recurring accruals, which St. Paul Bancorp. Inc. considered necessary for a fair
presentation of the financial position and results of operations for these
periods. Operating results for the nine months ended September 30, 1996, are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1996. The data should be used in conjunction with the
consolidated financial statements, related notes, and other financial
information incorporated by reference herein.
AT
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------ ---------------------------------------------------------------------
1996 1995 1994 1993(a) 1992 1991
------------ ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
FINANCIAL CONDITION DATA:
Assets
Cash and investments $ 294,002 $ 279,399 $ 259,591 $ 478,382 $ 419,299 $ 340,033
Mortgage-backed securities 799,227 975,422 1,126,617 733,649 643,941 717,354
Loans receivable-net of accumulated
provision for loan losses 2,999,549 2,683,890 2,568,381 2,304,319 2,270,198 2,415,540
Other assets 183,430 177,968 176,948 189,026 166,822 190,316
---------- ---------- ---------- ---------- ---------- ----------
Total assets $4,276,208 $4,116,679 $4,131,537 $3,705,376 $3,500,260 $3,663,243
========== ========== ========== ========== ========== ==========
Liabilities and stockholders' equity
Deposits $3,288,096 $3,231,810 $3,232,903 $3,252,618 $2,985,124 $3,004,419
Borrowings 541,253 441,427 492,927 63,970 186,408 334,528
Other liabilities 75,228 59,245 54,310 41,459 41,387 59,232
Subordinated capital notes - - - - - 12,176
Stockholders' equity(b) 371,631 384,197 351,397 347,329 287,341 252,888
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity $4,276,208 $4,116,679 $4,131,537 $3,705,376 $3,500,260 $3,663,243
========== ========== ========== ========== ========== ==========
Stockholders' equity per share(c) $16.44 $16.39 $14.97 $14.12 $12.59 $11.20
Tangible book value per share(c) $16.37 $16.33 $14.89 $14.02 $12.45 $11.04
-5-
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- ---------------------------------------------------------------------
1996 1995 1995 1994 1993(a) 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
OPERATING DATA:
Interest income $220,173 $208,453 $278,750 $253,262 $256,937 $278,687 $321,291
Interest expense 127,327 121,226 162,116 135,069 132,982 165,844 222,487
-------- -------- -------- -------- -------- -------- --------
Net interest income 92,846 87,227 116,634 118,193 123,955 112,843 98,804
Provision for loan losses 1,500 1,400 1,900 5,150 10,750 10,625 11,100
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses 91,346 85,827 114,734 113,043 113,205 102,218 87,704
Net gain on assets sold 1,423 967 1,054 524 2,150 3,024 2,680
Income from real estate
operations 1,842 2,069 2,807 3,150 2,969 2,442 2,037
Other operating income 23,395 22,118 29,860 26,097 27,387 22,882 17,930
Other operating expense 72,500 67,530 90,165 87,166 82,747 71,240 64,754
SAIF recapitalization 21,000 - - - - - -
Loss on foreclosed real estate 1,245 968 1,159 2,145 2,516 1,316 1,898
Income taxes 7,860 15,391 20,737 18,991 19,061 20,325 16,507
-------- -------- -------- -------- -------- -------- --------
Net income (d) $ 15,401 $ 27,092 $ 36,394 $ 34,512 $ 41,387 $ 37,685 $ 27,192
======== ======== ======== ======== ======== ======== ========
Primary earnings per share (c)(d) $0.65 $1.11 $1.50 $1.36 $1.62 $1.60 $1.18
===== ===== ===== ===== ===== ===== =====
Dividends declared per share (c)(e) $0.26 $0.18 $0.24 $0.24 $0.22 $0.22 $0.22
===== ===== ===== ====== ===== ===== =====
Primary shares outstanding (c) 23,841,430 24,343,273 24,388,970 25,307,576 25,444,495 23,521,248 22,925,543
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
-------------------- ---------------------------------------------------------------
1996 1995 1995 1994 1993(a) 1992 1991
---------- -------- ----------- ----------- ----------- ----------- ---------
KEY OPERATING RATIOS AND OTHER
DATA (f)
(UNAUDITED)
Interest rate spread 2.75% 2.72% 2.72% 2.76% 3.30% 3.48% 2.95%
Net interest margin 3.07% 2.99% 3.01% 3.15% 3.46% 3.27% 2.84%
Return on average assets (g) 0.49% 0.89% 0.90% 0.88% 1.10% 1.05% 0.76%
Return on average
stockholders' equity (net
worth) (g) 5.35% 9.91% 9.86% 9.72% 12.77% 13.88% 11.15%
Average equity as a
percentage of average assets 9.11% 8.96% 9.10% 9.05% 8.64% 7.57% 6.78%
Weighted average rate on
loans and investment
securities 7.34% 7.28% 7.28% 6.98% 6.96% 7.74% 8.91%
Weighted average cost of funds 4.59% 4.56% 4.56% 4.22% 3.66% 4.26% 5.96%
ASSET QUALITY RATIOS: (f)
(UNAUDITED)
Allowance for loan and lease
losses to total loans
and leases 1.20% 1.50% 1.42% 1.62% 1.98% 2.10% 1.88%
Net loans and leases charged
off to average loans
and leases 0.17% 0.24% 0.21% 0.39% 0.56% 0.34% 0.45%
Nonperforming assets to total
loans and leases and other
real estate owned 0.68% 0.95% 1.07% 1.03% 2.09% 2.07% 3.19%
Allowance for loan and lease
losses to nonperforming
loans and leases 246.60% 279.80% 216.62% 424.72% 156.99% 165.81% 101.49%
CAPITAL RATIOS:
(UNAUDITED)
Tier 1 risk-based capital
ratio 15.43% 16.42% 16.18% 15.33% 15.33% 11.47% 9.27%
Total risk-based capital ratio 16.68% 17.71% 17.47% 16.65% 16.67% 12.82% 11.00%
Tier 1 leverage ratio 8.65% 9.12% 8.95% 8.51% 9.50% 7.71% 6.52%
RATIO OF EARNINGS TO FIXED CHARGES (h)
(UNAUDITED)
Excluding interest on deposits 1.99 2.86 2.94 3.66 6.64 3.81 2.23
Including interest on deposits 1.18 1.35 1.35 1.40 1.45 1.35 1.20
-6-
(a) Includes the operations of Elm Financial Services from the acquisition date
of February 23, 1993.
(b) The Company has in place a stock repurchase program which runs until July
15, 1997. Of the 1.125 million shares of common stock authorized to be
repurchased under the program (representing approximately 5% of the
outstanding shares), none had been purchased as of September 30, 1996 and
168,750 shares had been purchased as of January 15, 1997 at an average
price of $22.46 per share. There can be no assurance that any additional
shares authorized to be repurchased under the program will be repurchased,
nor can there be any assurance as to the cost of any additional shares
which may be repurchased in future periods.
(c) Restated for a five-for-four stock split effective on January 14, 1997
(with a record date of December 31, 1996). Also includes a restatement for
a three-for-two stock split on January 4, 1994.
(d) Without the one-time SAIF recapitalization charge, net income would have
been $29,303,000 or $1.23 per primary share for the first nine months of
1996.
(e) Subsequent to the five-for-four stock split, the Company's quarterly cash
dividend rate has been maintained at $0.12 per share, effective with the
dividend declared on January 15, 1997.
(f) Annualized where applicable.
(g) Without the one-time SAIF recapitalization charge, return on average assets
would have been 0.93% and return on average stockholders' equity would have
been 10.17% for the nine months ended September 30, 1996.
(h) On a pro forma basis, giving effect to the $100,000,000 principal amount
of Notes offered hereby and the redemption of the Company's outstanding
8.25% Subordinated Notes due 2000, the ratio of earnings to fixed charges
for the nine months ended September 30, 1996 would be 1.87 excluding
interest on deposits and 1.18 including interest on deposits. See
"Capitalization".
-7-
RECENT DEVELOPMENTS
-------------------
The Company's net income for the fourth quarter of 1996 was $10.9 million,
which represents an increase of 17% over the $9.3 million during the same
quarter in 1995. Earnings per share increased over 20% to 46 cents for the
current quarter, versus 38 cents per share for the same period a year ago./1/
Net interest income for the fourth quarter of 1996 rose 8% to $31.9 million,
compared to $29.4 million in the same quarter a year ago. Also during the fourth
quarter of 1996, other operating income rose 6% to $9.1 million, compared to
$8.6 million during the same quarter in 1995. These increases were partially
offset by a $1.7 million, or 7%, increase in operating expenses.
Net income for 1996 was $26.3 million, or $1.10 per share. Operating
results for the year included a $21.0 million pretax third quarter charge for a
one-time assessment to recapitalize the Savings Association Insurance Fund
("SAIF"). Excluding the SAIF charge, net income would have been $40.2 million,
or $1.69 per share, which represents a 10% increase over 1995 net income of
$36.4 million, or $1.49 per share. The improvement in operating earnings for the
year reflects the results of the Company's strategy to increase earning assets
and to continue to increase other income. The Company intends to continue this
strategy in 1997, as well as seek opportunities to expand its franchise in the
Chicago area by opening additional in-store or storefront branches.
For the year 1996, the return on average assets was 0.62% (0.95% without
the SAIF charge) versus 0.90% for the year 1995 and the return on average equity
was 6.85% (10.48% without the SAIF charge) versus 9.86% for the year 1995. Also,
at December 31, 1996, stockholders' equity was equivalent to 8.91% of total
assets or $17.04 per share.
Total assets at December 31, 1996 were $4.4 billion which represents an
increase of almost 6% over the $4.1 billion as of December 31, 1995. The
increase in assets during 1996 was primarily in mortgage loans receivable which
increased by $92.0 million and mortgage-backed securities which increased by
$187.6 million. These increases have been funded primarily by a decrease in
investment securities of $27.6 million, an increase in deposits of $105.2
million and an increase in borrowings of $119.8 million. During 1996, the
Company purchased over $600.0 million of 1-4 family adjustable-rate mortgage
loans, of which $190.0 million were purchased in the fourth quarter.
Net interest income for 1996 was $124.7 million, an increase of $8.1
million or 7% over the $116.6 million reported during 1995. The Company reported
an increase in both interest income and interest expense due to the increases in
both interest-earning assets and interest-bearing liabilities. The Company's
average earning assets grew 4.6% or $178.5 million, to $4.1 billion for 1996
from $3.9 billion for 1995. The Company's average interest-bearing liabilities
grew by $161.9 million to $3.8 billion, an increase of 4.5%. At December 31,
1996 the yield on earning assets increased to 7.36% from 7.28% at December 31,
1995. In comparison at December 31, 1996 the rate on interest-bearing
liabilities increased to 4.58% from 4.56%. As a result, the net interest spread
(equal to the yield on earning assets less the rate on interest-bearing
liabilities) increased to 2.78% at December 31, 1996 from 2.72% at December 31,
1995. The net interest margin (net yield on average earning assets) was 3.07%
in 1996, compared to 3.01% during 1995.
Other income rose 6% to $35.7 million for 1996, compared to $33.7 million
during the previous year. The increase in revenues for the year resulted from
higher revenues from discount brokerage operations and ATMs--including the
installation of 261 ATMs in White Hen Pantries during 1996.
Other operating expenses totaled $117.8 million during 1996, including the
$21.0 million SAIF charge recorded during the third quarter of the year.
Without the one-time SAIF charge, other operating expenses would have been $96.8
million, or 7% higher than the $90.2 million of G&A expenses during 1995.
Advertising and occupancy expenses showed the greatest percentage increases for
the year. The benefits from the reduction in deposit insurance premiums
resulting from the SAIF recapitalization will be realized starting in the first
quarter of 1997.
The Company reported nonperforming assets at December 31, 1996 of $12.5
million or 0.29% of total assets, the lowest level since the Company went public
in 1987. This compares with nonperforming assets of $20.6 million (0.48% of
total assets) at September 30, 1996 and $29.2 million (or 0.71% of total assets)
at December 31, 1995. Net loan and REO charge-offs were $7.0 million during
1996, compared to $6.3 million during 1995. At December 31, 1996, the general
valuation allowance for loans was $30.7 million, or 1.09% of total loans
receivable and 322% of nonperforming loans.
The Company's leverage ratio, Tier 1 capital ratio, and total risk-based
capital ratio were 8.80%, 16.02% and 17.27%, respectively, at December 31, 1996,
compared to 8.95%, 16.18% and 17.47% respectively, at December 31, 1995.
_____________________
/1/Per share amounts have been restated to reflect a five-for-four stock
split distributed on January 14, 1997 to stockholders of record as of December
31, 1996.
-8-
CERTAIN REGULATORY MATTERS
GENERAL
The Company is a "savings and loan holding company" registered with the
Office of Thrift Supervision (the "OTS") and, as such, the Company is subject
to OTS regulations, examinations, supervision and reporting. The Bank is
subject to examination and comprehensive regulation by the OTS. The Bank's
deposits are insured by the Savings Association Insurance Fund ("SAIF") of
the FDIC and the Bank is subject to regulation by the FDIC and by the Board
of Governors of the Federal Reserve System with respect to reserves
maintained against deposits and certain other matters.
RESTRICTIONS ON CAPITAL DISTRIBUTIONS AND TRANSACTIONS BY THE BANK WITH
AFFILIATES
The principal source of funds for the Company's payments of principal
and interest on the Notes (and cash dividends on its common stock) will be
dividends from the Bank and the Company's other subsidiaries. In addition,
at September 30, 1996, the Company had $22.8 million in cash and cash
equivalents.
The OTS has adopted a regulation governing capital distributions by
savings institutions, which include cash dividends, stock redemptions or
repurchases, cash-out mergers, interest payments on certain convertible debt
and other transactions charged to the capital account of a savings
institution. Generally, the regulation creates a safe harbor for specified
levels of capital distributions from institutions meeting at least their
minimum capital requirements, so long as such institutions notify the OTS and
receive no objection to the distribution from the OTS. Institutions that do
not qualify for the safe harbor are required to obtain prior OTS approval
before making any capital distributions. These regulations do not apply to
distributions from direct subsidiaries of the Company, such as Annuity
Network, Inc. and St. Paul Financial Development Corporation.
The Bank is currently a "Tier 1" institution under the OTS regulation
and, under the safe harbor, may make capital distributions of up to the
greater of 100% of its net income during a calendar year plus the amount that
would reduce by one-half its surplus capital ratio (the percentage by which
the institution's capital-to-assets ratio exceeds the ratio of its fully
phased-in capital requirements to its assets) at the beginning of the
calendar year, or 75% of its net income over the most recent four quarter
period.
The OTS has proposed to amend its regulation on capital distributions
such that the Bank would no longer have to obtain approval from the OTS in
order to make a distribution in excess of the safe harbor amount, unless such
distribution would cause the Bank to fail to meet the OTS's prompt corrective
action ("PCA") capital standards for a "well-capitalized" institution. The
OTS would, however, continue to receive prior notice of a distribution and
would retain the authority to prohibit any capital distribution upon a
determination that the making of such distribution would constitute an unsafe
or unsound practice. The Company does not anticipate that adoption of the
proposed regulation would have a material impact on the Bank's ability to
make distributions of capital.
In addition to regulation of capital distributions, there are various
statutory and regulatory limitations on the extent to which the Bank can
finance or otherwise transfer funds to the Company or its non-banking
subsidiaries, whether in the form of loans, extensions of credit, investments
or asset purchases. Such transfers by the Bank to the Company or any non-
banking subsidiary are generally limited to 10% of the Bank's capital and
surplus and, with respect to the Company and all such non-banking
subsidiaries, to an aggregate of 20% of the Bank's capital and surplus.
Furthermore, loans and extensions of credit are required to be secured in
specified amounts and are required to be on terms and conditions consistent
with safe and sound banking practices. The OTS Director may further restrict
these transactions in the interest of safety and soundness.
-9-
CAPITAL REGULATIONS
The OTS has prescribed capital regulations (the "Capital Regulations") that
establish three capital requirements which must be met by the Bank -- a "core
capital requirement," a "tangible capital requirement" and a "risk-based capital
requirement." The Capital Regulations require thrift institutions to maintain
"core" capital of at least 3% of adjusted total assets, "tangible" capital of at
least 1.5% of adjusted total assets, and "risk-based" capital of at least 8% of
risk-weighted assets. Capital standards for thrifts must be no less stringent
than the capital standards applicable to national banks (a leverage ratio of 4%
of adjusted total assets). Therefore, the Bank believes that it is required to
maintain core capital of at least 4% of adjusted total assets. The Bank exceeded
all of the capital requirements at September 30, 1996.
The OTS has also adopted separate PCA regulations that call for the OTS to
enforce certain restrictions on savings institutions that are classified as
undercapitalized. As of September 30, 1996, the Bank met the requirements of the
OTS to be categorized for PCA purposes as a "well-capitalized institution." An
institution's capital category, however, is determined solely for regulatory
purposes and may not constitute an accurate representation of the institution's
financial condition or prospects.
Under the Federal Deposit Insurance Corporation Improvement Act of 1991,
the OTS recently published regulations to ensure that its risk-based capital
standards take adequate account of concentration of credit risk, risk from
nontraditional activities, and actual performance and expected risk of loss on
multifamily mortgages. These rules allow the regulators to impose, on a case-by-
case basis, an additional capital requirement above the current requirements
where an institution has significant concentration of credit risk or risks from
nontraditional activities. The Bank is currently not subject to any additional
capital requirements under these regulations.
The OTS may establish capital requirements higher than the generally
applicable minimum for a particular savings institution if the OTS determines
the institution's capital was or may become inadequate in view of its particular
circumstances. Individual minimum capital requirements may be appropriate where
the savings institution is receiving special supervisory attention, has a high
degree of exposure to interest rate risk, or poses safety or soundness concerns.
The Bank has no such requirements.
RECENT LEGISLATION
To mitigate the disparity and any competitive disadvantage due to disparate
deposit insurance premium schedules between the Bank Insurance Fund ("BIF") and
SAIF, on September 30, 1996, President Clinton signed legislation to
recapitalize the SAIF. This legislation required members of SAIF, such as the
Bank, to pay a one-time special assessment of 65.7 cents per $100 of deposits as
of March 31, 1995, to fully capitalize SAIF to the desired levels. Beginning in
1997, annual SAIF insurance premiums will drop to about 6.4 cents per $100 of
deposits, while BIF premiums will be 1.3 cents per $100 of deposits. The
Company's third quarter operating results include a $21.0 million pre-tax charge
for the Bank's share of the special assessment. As a result, management expects
future SAIF insurance premiums to be reduced by $5.5 million annually, based
upon current deposit levels.
Recent legislation also eliminated the availability of the percentage-of-
taxable income bad debt method for federal income tax purposes. The Bank will be
required to use the specific charge-off method in the future. Previously, the
Bank had been able to use either the percentage-of-taxable income method or the
specific charge-off method. The legislation also eliminated the recapture of the
base year tax reserve (i.e., tax bad debt reserves established before 1988) if
the Bank were to fail the qualified thrift lender test. As a result of the
legislation, the base year tax reserve becomes subject to recapture if the Bank
ceased to be a bank or made distributions of the tax bad debt reserves to
shareholders. The legislation also requires the Bank to recapture, into taxable
income, $547,000 of additions made to the tax bad debt reserve since 1988. This
recapture will occur over a six year period beginning in 1996, but can be
delayed for two years if the Bank meets recently developed loan origination
tests.
-10-
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used to repurchase
or redeem, at par, all of the Company's outstanding 8.25% Subordinated Notes
due 2000 ("Subordinated Notes"), the outstanding principal balance of which
is approximately $34.5 million. The Company expects to repurchase or redeem
the Subordinated Notes within 60 days after the sale of the Notes. The
remainder of the net proceeds will be added to the general funds of the
Company to be available for any general corporate purpose.
-11-
CAPITALIZATION
The following table sets forth the capitalization including borrowings, of
the Company as of September 30, 1996, and the pro forma capitalization on a
combined basis giving effect to the proposed sale of the Notes and the
application of the estimated net proceeds therefrom, as described in "Use of
Proceeds."
St. Paul Offering Pro Forma
Bancorp Adjustments(1) as Adjusted
--------- -------------- ------------
(Dollars in thousands)
Borrowings:(2)
Short-term borrowings.................................. $280,499 $ - $280,499
Long-term borrowings................................... 260,754 (33,798) 226,956
Senior notes due 2004
offered hereby....................................... - 100,000 100,000
-------- -------- --------
Total borrowings.................................. $541,253 $ 66,202 $607,455
======== ======== ========
Stockholders' equity:(3)
Preferred stock ($.01 par value); 10,000,000
shares authorized; none issued....................... $ - $ - $ -
Common stock ($.01 par value); 40,000,000 shares
authorized; 25,309,023 shares issued and 22,602,308
shares outstanding................................... 253 - 253
Paid-in capital........................................ 144,851 - 144,851
Retained income........................................ 279,362 (465) 278,897
Less unrealized loss on securities, net of taxes....... (4,393) - (4,393)
Less borrowing by employee stock ownership plan........ (441) - (441)
Less unearned employee stock ownership plan shares
(245,438 shares)..................................... (2,883) - (2,883)
Less treasury stock (2,706,715 shares)................. (45,118) - (45,118)
-------- -------- --------
Total stockholders' equity........................ $371,631 $ (465) $371,166
======== ======== ========
- ----------------
(1) Adjusted to reflect the sale of $100,000,000 principal amount of
Notes pursuant to the offering made hereby and the application of a
portion of the net proceeds from such sale for repayment or
redemption of all of the Company's outstanding 8.25% Subordinated
Notes due 2000.
(2) For information concerning the Company's borrowings, see Note O to
the Company's Consolidated Financial Statements included in its
Annual Report on Form 10-K for the year ended December 31, 1995,
which document is incorporated herein by reference.
(3) Restated for a five-for-four stock split effective January 14,
1997, based upon a stockholder record date of December 31, 1996.
-12-
DESCRIPTION OF NOTES
The following sets forth certain general terms and provisions of the
Notes. The Notes are to be issued under an indenture (the "Indenture")
between the Company and Harris Trust and Savings Bank, as trustee (the
"Trustee"). A copy of the form of the Indenture is filed as an exhibit to
the Registration Statement of which this Prospectus is a part. See
"Available Information." The following summaries of certain provisions of
the Notes and the Indenture do not purport to be complete and are subject to,
and are qualified in their entirety by reference to all of the provisions of
the Indenture, including the definition therein of certain terms, and the
actual provisions of the Notes. Capitalized terms used herein have the
meanings attributed to them in the Indenture (unless otherwise defined
herein). Section references made herein refer to sections of the Indenture.
GENERAL
The Notes will constitute a single series of debt securities ("Debt
Securities") to be issued under the Indenture. The Notes will be limited to
$100,000,000 in aggregate principal amount, will mature on _________, 2004
and will be unsecured, unsubordinated obligations of the Company.
The Notes will bear interest at the rate set forth on the cover page of
this Prospectus. Interest on the Notes will be payable semi-annually on each
_______________ and ________________ (each an "Interest Payment Date"),
commencing ________________, 1997. Interest payable on each Interest Payment
Date will include interest accrued from _______________, 199_ or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for. Interest payable on any Interest Payment Date will be payable
to the person in whose name a Note (or any predecessor Note) is registered at
the close of business on the _______________ or _______________, as the case
may be, next preceding such Interest Payment Date. Principal of and interest
on the Notes will be payable at the office or agency of the Company
maintained for such purpose in Chicago, Illinois, which initially will be the
office of the Paying Agent, provided that payment of interest may be made
(subject to collection), at the option of the Company, by check mailed to the
person entitled thereto. Interest shall be computed on the basis of a 360-
day year comprised of twelve 30-day months.
The Notes will be issued only in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple thereof. No service
charge will be made for any registration of transfer or exchange of Notes,
except in certain circumstances for any tax or other governmental charge that
may be imposed in connection therewith. (Sections 3.1, 3.2 and 3.5)
RANKING
The Notes will be general unsecured obligations and will rank pari passu
with all other unsecured and unsubordinated senior indebtedness of the
Company.
The Company conducts its operations primarily through its subsidiaries.
The rights of the Company and its creditors, including the holders of the
Notes offered hereby, to participate in the assets of any subsidiary upon
such subsidiary's liquidation or reorganization or otherwise will be subject
to the prior claims of the subsidiary's depositors and creditors, except to
the extent that the Company may itself be a creditor with recognized claims
against the subsidiary.
OPTIONAL REDEMPTION
The Notes will not be redeemable prior to maturity. The Company may
purchase Notes in the open market, by tender or by contract. Notes so
purchased may be held, resold or surrendered to the Trustee for cancellation.
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Exchange Act and other securities laws and regulations in
connection with any such purchase.
-13-
SINKING FUND
There will be no sinking fund payments for the Notes.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Sale or Issuance of Capital Stock or Convertible
Securities of, and Merger or Sale of Assets by, a Bank. The Company will
not: (i) nor will it permit any Bank to, issue, sell, transfer, assign,
pledge or otherwise dispose of any shares of capital stock of any class of a
Bank or any securities convertible or exchangeable into shares of capital
stock of any class of a Bank unless after giving effect to such transaction
and to shares issuable upon conversion or exchange of outstanding securities
convertible or exchangeable into such capital stock (including such
securities, if any, which may be the subject of such transaction), at least
80% of the outstanding shares of capital stock of each class of such Bank
shall be owned at that time by the Company; or (ii) permit a Bank to merge or
consolidate or convey or transfer all or substantially all of its assets,
unless at least 80% of the capital stock of each class (after giving effect
to such transaction and to shares issuable upon conversion or exchange of
outstanding securities convertible or exchangeable into capital stock,
including such securities, if any, which may be issued in such transaction)
of the surviving corporation in the case of a merger or consolidation or of
the transferee corporation in the case of a conveyance or transfer, shall be
owned at that time by the Company. (Section 9.12)
Ownership of Material Subsidiary Stock. The Company will not take any
action which would result in a decrease in the percentage of the outstanding
shares of voting stock of any Material Subsidiary directly or indirectly
owned by the Company, except as a result of (i) the issuance of directors'
qualifying shares; (ii) sales or other dispositions to the Company or to one
or more Material Subsidiaries; (iii) the purchase or retirement of shares
with the proceeds of newly issued shares; or (iv) the sale of capital stock
at a price determined by the Company (which determination may be evidenced by
a resolution of the Company's Board of Directors) to be the fair value
thereof. (Section 9.10)
Limitation on Liens. Except as provided below, the Company will not
issue, assume or guarantee any indebtedness for borrowed money
("indebtedness") secured by a mortgage, encumbrance, security interest,
pledge, lien or charge (a "pledge" or "pledges") of or upon any property of
the Company, whether such property is owned at the date of the Indenture or
thereafter acquired, without effectively providing that the Notes (together
with, if the Company shall so determine, any other indebtedness issued,
assumed by the Company and then existing or thereafter created) shall be
secured equally and ratably with (or prior to) such indebtedness, so long as
such indebtedness shall be so secured.
The foregoing does not apply to: (i) pledges upon any shares of
capital stock or indebtedness acquired by the Company after the date of the
Indenture (A) to secure the payment of all or any part of the purchase price
of such shares of capital stock or indebtedness upon the acquisition thereof
by the Company, or (B) to secure any indebtedness issued, assumed or
guaranteed by the Company prior to, at the time of, or within 360 days after
the acquisition of such shares of capital stock or indebtedness, which
indebtedness is issued, assumed or guaranteed for the purpose of financing or
refinancing all or any part of the purchase price of such shares of capital
stock or indebtedness; (ii) pledges of or upon shares of capital stock or
indebtedness, which pledges exist at the time of acquisition of such shares
or indebtedness by the Company; (iii) pledges of or upon any property of a
corporation, which pledges exist at the time such corporation is merged with
or into or consolidated with the Company or which pledges exist at the time
of a sale or transfer of the properties of a corporation as an entirety or
substantially as an entirety to the Company; (iv) mortgages existing on the
date of the Indenture; and (v) any extension, renewal, substitution,
refinancing, refunding or replacement (or successive extensions, renewals,
substitutions, refinancings, refundings or replacements) (each a
"refinancing") in whole or in part of any pledge existing at the date of the
Indenture or any pledge referred to in clauses (i) through (iv) above,
-14-
inclusive, provided, however, that the principal amount of indebtedness
secured thereby may not exceed the principal amount of indebtedness so
secured at the time of the refinancing plus the aggregate amount of premiums,
other payments, costs and expenses required to be paid or incurred in
connection with the refinancing, and that the refinancing shall be limited to
all or a part of the shares of capital stock or indebtedness which was
subject to the pledge so extended, renewed, substituted, refinanced, refunded
or replaced.
The Company may, without equally and ratably securing the Debt
Securities, issue, assume or guarantee indebtedness secured by a pledge not
excepted by clauses (i) through (v) above, so long as after giving effect
thereto, the Company will own at least 80% of the capital stock of all of its
Material Subsidiaries then issued and outstanding, free and clear of any
pledge. (Section 9.9)
The Indenture does not contain any provisions other than the foregoing
which will restrict the Company form incurring, assuming or becoming liable
with respect to any indebtedness or other obligations, whether secured or
unsecured, or from paying dividends or making other distributions on its
capital stock or purchasing or redeeming its capital stock. The Indenture
does not contain any financial ratios, or specified levels of net worth or
liquidity to which the Company must adhere. In addition, the Indenture does
not contain any provision which would require that the Company repurchase or
redeem or otherwise modify the terms of any of the Notes upon a change in
control or other events involving the Company which may adversely affect the
creditworthiness of the Notes.
MERGERS, CONSOLIDATIONS AND TRANSFERS OF ASSETS
The Company may merge or consolidate with or into any other corporation
or sell, convey, transfer or otherwise dispose of all or substantially all of
its assets to any Person, if: (a) (i) in the case of a merger or
consolidation, the Company is the surviving corporation, or (ii) in the case
of a merger or consolidation where the Company is not the surviving
corporation and in the case of any such sale, conveyance, transfer or other
disposition, the successor or acquiring corporation is a corporation
organized and existing under the laws of the United States or a State thereof
and such corporation expressly assumes by supplemental indenture all the
obligations of the Company under the Debt Securities and under the Indenture
or such assumption is provided by law; (b) immediately thereafter, giving
effect to such merger or consolidation, or such sale, conveyance, transfer or
other disposition, no Default or Event of Default shall have occurred and be
continuing; and (c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such merger or
consolidation, or such sale, conveyance, transfer or other disposition
complies with the Indenture and that all conditions precedent therein
provided for relating to such transaction have been complied with. In the
event of the assumption by a successor corporation of the obligations of the
Company as provided in clause (a)(ii) of the immediately preceding sentence,
such successor corporation shall succeed to and be substituted for the
Company under the Indenture and under the Debt Securities and all obligations
of the Company thereunder shall terminate. (Section 7.1).
TRANSACTIONS WITH AFFILIATES
The Company will not enter into any transaction (including the purchase,
sale or exchange of property or the rendering of any service) with any
Affiliate of the Company or any Subsidiary, other than in the ordinary course
of business and upon fair and reasonable terms taking into account the nature
of the Company's or the Subsidiary's business. (Section 9.11).
CORPORATE EXISTENCE
Subject to the permitted actions described above in "-Mergers,
Consolidations and Transfers of Assets," the Company will at all times do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and rights and franchises; provided, however,
that the Company may abandon or terminate any right or franchise if, in the
determination of the Company, such abandonment or termination is
-15-
in the best interests of the Company and does not materially adversely affect
the ability of the Company to operate its business or to fulfill its
obligations under the Indenture. (Section 9.4).
WAIVERS OF CERTAIN COVENANTS
The Company may fail or omit in any particular instance to comply with
any of the covenants set forth in the Indenture (other than the covenants
relating to payment of principal, premium and interest, maintaining an office
or agency or preserving its corporate existence) with respect to any series
of Debt Securities if the Company shall have obtained and filed with the
Trustee prior to the time for such compliance the consent in writing of the
Holders of at least a majority in aggregate principal amount of all of the
Debt Securities of such series at the time Outstanding either waiving such
compliance in such instance or generally waiving compliance with such
covenant or covenants, but no such waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon.
(Section 9.13).
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities: (a) a default for 30 days in
the payment of any installment of interest on any Debt Security of such
series; (b) a default in the payment of any principal of, or premium, if any,
on, any such Debt Security of such series at its Maturity, upon redemption
(if applicable) or otherwise; (c) a default for 60 days after written notice
to the Company by the Trustee, or to the Company and the Trustee by the
Holders of at least 33% in principal amount of the Outstanding Debt
Securities of such series, in the performance of, or breach of, any other
covenant or warranty of the Company in respect of the Debt Securities of such
series contained in the Indenture; (d) a default under any agreement or
instrument under which there may be issued or by which there may be secured
or evidenced any indebtedness for money borrowed (excluding for such purposes
non-recourse indebtedness having in the aggregate an outstanding principal
amount of less than $25 million), whether such indebtedness now exists or
shall hereafter be created, having an outstanding principal amount of $25
million or more in the aggregate, which default shall have resulted in such
indebtedness being declared due and payable prior to the date on which it
would otherwise have become due and payable, without such declaration of
acceleration having been rescinded or annulled within a period of ten days
(or sixty days if the default is not caused by a failure to pay when due
principal or interest on such indebtedness within the applicable grace
period) after there shall have been given, by registered or certified mail,
to the Company by the Trustee, or to the Company and the Trustee by the
Holders of at least 33% in aggregate principal amount of the Outstanding Debt
Securities of such series, a written notice specifying such Event of Default,
and stating that such notice is a "Notice of Default" under the Indenture;
provided, however, that if such default under such agreement or instrument is
remedied or cured by the Company or waived by the holders of such
indebtedness, then such Event of Default by reason thereof shall be deemed
likewise to have been thereupon remedied, cured or waived without further
action upon the part of either the Trustee or any of the Holders of the Debt
Securities of that series; (e) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of
the Company or its subsidiaries; or (f) any other Event of Default provided
in or pursuant to the Officer's Certificate, the applicable resolution of the
Board of Directors, or established in the supplemental indenture under which
such series of Debt Securities is issued. (Section 5.1). No Event of
Default with respect to a particular series of Debt Securities necessarily
constitutes an Event of Default with respect to any other series of Debt
Securities issued under the Indenture.
Within 90 days after the occurrence of any Default with respect to any
series of Debt Securities which is continuing, the Trustee for such series
must give the Holders of Debt Securities of such series notice of all
Defaults of which it has knowledge and that have not been cured or waived.
Nevertheless, except in the case of a Default in payment on the Debt
Securities of any series, the Trustee may withhold notice to the Holders of
Debt Securities of any series of any Default with respect to such series if
and so long as it determines that the withholding of such notice is in the
interest of such Holders; provided, however, that, in the case of any default
or breach of the character specified,in clause (c) of the preceding paragraph
with respect to the Debt
-16-
Securities of such series, no such notice to Holders shall be given until at
least 60 days after the occurrence thereof. (Section 6.6).
If an Event of Default with respect to any series of Debt Securities at
the time Outstanding shall have occurred and is continuing, the Trustee or
the Holders of at least 33% in aggregate principal amount of the Outstanding
Debt Securities of such series may, by written notice, declare the principal
amount thereof (or, if the Debt Securities of such series are Original Issue
Discount Securities, such portion of the principal amount as may be specified
in the terms of such series) to be due and payable immediately. (Section
5.2).
The Indenture contains a provision entitling the Trustee to be
indemnified by the Holders of Debt Securities issued thereunder before
proceeding to exercise any right or power vested in the Trustee under the
Indenture at the request of any Holders. (Section 6.2). The Indenture
provides that the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of any series issued thereunder may, with certain
exceptions, direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, with respect to the Debt Securities of such
series. (Section 5.8). The right of a Holder to institute a proceeding with
respect to the Indenture is subject to certain conditions precedent,
including notice and indemnity to the Trustee, but each Holder has a right to
the receipt of payment of principal, premium, if any, and interest, if any,
at the respective Stated Maturities of the Debt Securities (or, in the case
of a redemption, on the Redemption Date) or to institute suit for the
enforcement thereof, which right shall not be impaired or affected without
the consent of such Holder. (Sections 5.9 and 5.10).
The Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of any series may, on behalf of the Holders of
all such Debt Securities, waive any past Default or Event of Default with
respect to such series and its contingencies, except (a) a Default or Event
of Default in the payment of principal of, premium, if any, or interest, if
any, on any Debt Securities of such series, or (b) in respect of any covenant
or provision of the Indenture that cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security of that series
adversely affected. (Sections 5.7 and 8.2).
The Indenture requires the Company to furnish to the Trustee annual
statements as to the fulfillment by the Company of its obligations under the
Indenture. (Section 9.7).
MODIFICATION OF THE INDENTURE
The Company, when authorized by a Board Resolution, and the Trustee may,
at any time and from time to time, without the consent of any Holders of Debt
Securities, modify and amend the Indenture, for any of the following
purposes: (a) to evidence the succession of another corporation to the
Company and the assumption by any such successor of the covenants of the
Company under the Indenture and in the Debt Securities; (b) to add to the
covenants of the Company for the benefit of the Holders of all or any series
of Debt Securities (and if such covenants are to be for the benefit of less
than all series of Debt Securities, stating that such covenants are expressly
being included solely for the benefit of such series) or to surrender any
right or power conferred by the Indenture upon the Company; (c) to add any
additional Events of Default with respect to all or any series of Debt
Securities; (d) to add to or change any of the provisions of the Indenture to
facilitate the issuance of Debt Securities in global form; (e) to add to,
change or eliminate any of the provisions of the Indenture; provided,
however, that any such addition, change or elimination shall become effective
only when there is no Debt Security Outstanding of any series created prior
to the execution of the supplemental indenture which is entitled to the
benefit of such provision; (f) to secure the Debt Securities; (g) to
establish the form or terms of Debt Securities of any series as permitted by
Sections 2.1 and 3.1 of the Indenture; (h) to evidence and provide for the
acceptance of appointment under the Indenture by a successor Trustee with
respect to the Debt Securities of one or more series and to add to or change
any of the provisions of the Indenture as shall be necessary to provide for
or facilitate the administration of the trusts under the Indenture by more
than one Trustee, pursuant to the requirements of Section 6.11 of the
Indenture; (i) to correct or supplement any provision under the
-17-
Indenture which may be inconsistent with any other provision under the
Indenture or to make any other provisions with respect to matters or
questions arising under the Indenture, provided, however, such action shall
not adversely affect the interests of the Holders of Debt Securities of any
series issued under the Indenture in any material respect; or to cure any
ambiguity or correct any mistake; or (j) to modify, eliminate or add to the
provisions of the Indenture to the extent necessary to effect the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA") or under any similar federal statute subsequently enacted and to add
to the Indenture such other provisions as may be expressly required under the
TIA. (Section 8.1).
Modifications and amendments to the Indenture may be made by the Company
and the Trustee with the written consent of the Holders of a majority of the
aggregate principal amount of each series of Debt Securities at the time
Outstanding that is adversely affected thereby; provided, however, that no
such modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security of such series adversely affected thereby: (i)
change the Stated Maturity of the principal of, or any installment of
principal of or interest on, any Debt Security of such series, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the principal of
an Original Issue Discount Security of such series that would be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant
to Section 5.2 of the Indenture, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date); (ii) reduce
the percentage in aggregate principal amount of the Outstanding Debt
Securities of such series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required for
any waiver (of compliance with certain provisions of the Indenture or certain
defaults thereunder and their consequences) provided for in the Indenture;
(iii) change any obligation of the Company to maintain an office or agency in
the Place of Payment for the Debt Securities of such series where such Debt
Securities may be presented or surrendered for payment, where such Debt
Securities of such series may be surrendered for registration of transfer or
exchange or where notices and demands to or upon the Company in respect of
the Debt Securities of such series may be served; or (iv) make any change in
Section 5.7 or Section 8.2 of the Indenture except to increase any percentage
or to provide that certain other provisions of the Indenture cannot be
modified or waived without the consent of the Holders of each Outstanding
Debt Security of such series adversely affected thereby. (Section 8.2).
SATISFACTION AND DISCHARGE; DEFEASANCE
The Indenture, with respect to any series of Debt Securities (except for
certain specified surviving obligations referred to below), will be
discharged and canceled upon the satisfaction of certain conditions,
including the following: (a) all Debt Securities of such series not
theretofore delivered to the Trustee for cancellation have become due or
payable, will become and due and payable at their Stated Maturity within one
year, or are to be called for redemption within one year; and (b) the deposit
with the Trustee of an amount sufficient to pay the principal, premium, if
any, and interest to the Maturity of all Debt Securities of such series.
Upon any such discharge of the Company's obligations, the Holders of the Debt
Securities of such series shall no longer be entitled to the benefits of the
Indenture, except for the purposes of registration of transfer and exchange
of the Debt Securities or replacement of lost, stolen or mutilated Debt
Securities and shall look only to such deposited funds or obligations for
payment. (Sections 4.1 and 4.2).
The Indenture also provides that the Company may elect:
(a) to be discharged from its obligations with respect to the Debt
Securities of or within a series on and after the date the conditions
described below regarding Section 4.6 of the Indenture are satisfied
(hereinafter "defeasance"). For this purpose, such defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by such Debt Securities which shall thereafter
be deemed to be "Outstanding" only for the purposes of Article 4 of the
Indenture, and to have satisfied all its other obligations under such
Debt Securities and the Indenture insofar as such Debt Securities are
concerned (and the Trustee, at the expense of the Company, shall on a
Company Order
-18-
execute proper instruments acknowledging the same), except the following
which shall survive until otherwise terminated or discharged hereunder:
(i) the rights of Holders of such Debt Securities to receive, solely
from the trust funds described below regarding Section 4.6(a) of the
Indenture, payments in respect of the principal of, premium, if any, and
interest, if any, on such Debt Securities when such payments are due;
(ii) the rights, powers, trusts, duties and immunities of the Trustee
under the Indenture; and (iii) Article 4 of the Indenture. Subject to
compliance with Article 4 of the Indenture, the Company may exercise
this option notwithstanding the prior exercise of its option to effect
covenant defeasance (as defined below) with respect to such Debt
Securities. (Section 4.4).
(b) to be released from its obligations with respect to the Debt
Securities of or within a series under "--Mergers, Consolidations and
Transfers of Assets" and "--Certain Covenants" above and certain other
obligations, and, if specified pursuant to provisions of the Indenture
establishing the terms of such Debt Securities, its obligations under
any other covenants with respect to such Debt Securities on and after
the date the conditions set forth below in the next paragraph are
satisfied (hereinafter "covenant defeasance"), and such Debt Securities
shall thereafter be deemed to be not "Outstanding" for the purpose of
any request, demand, authorization, direction, notice, consent, waiver
or other Act of Holders (and the consequences of any thereof) in
connection with such obligations or such other covenants, but shall
continue to be deemed "Outstanding" for all other purposes of the
Indenture. For this purpose, such covenant defeasance means that, with
respect to such Debt Securities, the Company may omit to comply with and
shall have no liability in respect of such obligations or such other
covenants, whether directly or indirectly, by reason of any reference
elsewhere in the Indenture to any such obligation or such other
covenants or by reason of any reference to any such obligation or such
other covenants to any other provision in the Indenture or in any other
document or otherwise and such omission to comply shall not constitute a
Default or an Event of Default under the Indenture or otherwise, as the
case may be, but, except as specified above, the remainder of the
Indenture and such Debt Securities shall be unaffected thereby.
(Section 4.5).
Such defeasance or covenant defeasance will take effect with respect to
any Debt Securities of or within a series at any time prior to the Stated
Maturity or redemption thereof only when:
(a) The Company shall have deposited or caused to be deposited
irrevocably with the Trustee (or another trustee satisfying the
eligibility requirements of the Indenture who shall agree to comply
with, and shall be entitled to the benefits of, certain specified
provisions of the Indenture relating to defeasance or covenant
defeasance and liability with respect to trust funds, for purposes of
such provisions also a "Trustee") as trust funds in trust for the
purpose of making the payments referred to in clauses (x) and (y) below,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Debt Securities, with instructions to the
Trustee as to the application thereof, (i) money in an amount, or (ii)
Government Obligations which through the payment of interest and
principal in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment
referred to in clause (x) or (y) below, money in an amount or (iii) a
combination thereof in an amount, sufficient, in the opinion of a
nationally recognized firm of independent certified public accountants
expressed in a written certification thereof delivered to the Trustee,
to pay and discharge, and which shall be applied by the Trustee to pay
and discharge, (x) the principal of, premium, if any, and interest, if
any, on such Debt Securities on the Maturity of such principal or
installment of principal or interest and (y) any mandatory sinking fund
payments applicable to such Debt Securities on the day on which such
payments are due and payable in accordance with the terms of the
Indenture and such Debt Securities. Before such a deposit the Company
may make arrangements satisfactory to the Trustee for the redemption of
Debt Securities at a future date or dates in accordance with the
Indenture which shall be given effect in applying the foregoing.
(b) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default or Event of Default
under the Indenture or result in a breach or violation of, or
-19-
constitute a default under, any other material agreement or instrument
to which the Company is a party or by which it is bound.
(c) No Event of Default of the type described in clause (e) of "--
Events of Default, Notice and Waiver" above with respect to such Debt
Securities shall have occurred and be continuing during the period
commencing on the date of such deposit and ending on the 91st day after
such date (it being understood that this condition shall not be deemed
satisfied until the expiration of such period).
(d) In the case of an exercise by the Company of its option to
effect a defeasance as described above, the Company shall have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel to the
effect that (i) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (ii) since the
date of execution of the Indenture, there has been a change in the
applicable Federal income tax law, in either case to the effect that,
and based thereon such opinion shall confirm that, the Holders of such
Debt Securities will not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance and will be subject
to Federal income tax on the same amount and in the same manner and at
the same times, as would have been the case if such deposit, defeasance
and discharge had not occurred.
(e) In the case of an exercise by the Company of its option to
effect a covenant defeasance as described above, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of such Debt Securities will not recognize income, gain or loss
for Federal income tax purposes as a result of such covenant defeasance
and will be subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
covenant defeasance had not occurred.
(f) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to such defeasance as described above or such covenant
defeasance as described above (as the case may be) have been complied
with and an Opinion of Counsel to the effect that either (i) as a result
of a deposit pursuant to subparagraph (a) above and the related exercise
of the Company's option to effect such defeasance as described above or
to affect such covenant defeasance as described above (as the case may
be), registration is not required under the Investment Company Act of
1940, as amended, by the Company, with respect to the trust funds
representing such deposit or by the Trustee for such trust funds or (ii)
all necessary registrations under said Act have been effected.
(g) Such defeasance or covenant defeasance shall be effected in
compliance with any additional or substitute terms, conditions or
limitations which may be imposed on the Company in connection therewith
as contemplated by the provisions of the Indenture establishing the
terms of such Debt Securities. (Section 4.6).
PAYMENT AND TRANSFER
Principal of, premium, if any, and interest, if any, on the Debt
Securities of any series are to be payable at the Place of Payment for such
series, which may be the Corporate Trust Office of the Trustee or any other
office or agency maintained by the Company for such purposes, provided that
payment of interest, if any, on Debt Securities may be made at the option of
the Company by check mailed to the persons in whose names such Debt
Securities are registered at the close of business on the day or days
specified in the applicable Prospectus Supplement. (Sections 3.7 and 9.2).
Debt Securities may be transferred or exchanged at the Place of Payment
for such series, which may be the Corporate Trust Office of the Trustee or at
any other office or agency maintained by the Company for such purposes,
subject to the limitations in the Indenture, without the payment of any
service charge except for
-20-
any tax or governmental charge incidental thereto. (Section 3.5).
SAME-DAY SETTLEMENT
Settlement for the Notes will be made by the underwriters, dealers or
agents in immediately available funds and all applicable payments of
principal, premium and interest on the Notes will be made by the Company in
immediately available funds.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS OR DIRECTORS
The Indenture provides that no recourse under or upon any obligation,
covenant or agreement of or contained in the Indenture or of or contained in
any Note, or for any claim based thereon or otherwise in respect thereof, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, officer or director, as such, past or
present of the Company or of any successor Person. Each Holder, by accepting
the Notes, waives and releases all such liability. (Section 1.13).
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. If an Event of Default has occurred and is
continuing, the Trustee will use the same degree of care and skill in its
exercise of the rights and powers vested in it by the Indenture as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs. (Section 6.1).
The Indenture and provisions of the TIA incorporated by reference
therein contain limitations on the rights of the Trustee, should it become a
creditor of the Company, to obtain payment of claims in certain cases or to
realize on certain property received by it in respect of any such claims, as
security or otherwise. The Trustee is permitted to engage in other
transactions; provided, however, that if it acquires any conflicting
interest, it must eliminate such conflict or resign. (Section 6.3).
Harris Trust and Savings Bank is the Trustee under the Indenture. The
Company maintains banking relationships in the ordinary course of business
with the Trustee.
BOOK-ENTRY SYSTEM
The Notes will be represented by one fully registered Global Security
deposited with, or on behalf of, the Depository Trust Company ("DTC") or
other successor depositary (DTC or such other depositary appointed by the
Company is herein referred to as the "Depositary") and registered in the name
of the Depositary or its nominee. The Notes will not be issuable in
definitive form, except under the limited circumstances described herein.
DTC has advised the Company and the Underwriters that it intends to
follow the procedures described below:
The Depositary will act as securities depositary for the Global
Security. The Global Security will be issued as a fully registered
security registered in the name of Cede & Co. (the Depositary's
partnership nominee).
The Depositary is a limited-purpose trust company organized under
the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the
-21-
Exchange Act. The Depositary holds securities that its participants
("Participants") deposit with the Depositary. The Depositary also
facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). The Depositary is owned by
a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the Depositary's system is also
available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The Rules applicable to the Depositary and its
Participants are on file with the Commission.
Purchases of the Notes must be made by or through Direct
Participants, which will receive a credit for the Notes on the
Depositary's records. The ownership interest of each actual purchaser
of each Note ("Beneficial Owner") is in turn recorded on the Direct and
Indirect Participant's records. Transfers of ownership interests in the
Notes are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in
the Notes, except in the event that use of the book-entry system for the
Notes is discontinued.
To facilitate subsequent transfers, all Notes deposited by
Participants with the Depositary are registered in the name of the
Depositary's partnership nominee, Cede & Co. The deposit of Notes with
the Depositary and their registration in the name of Cede & Co. effect
no change in beneficial ownership. The Depositary has no knowledge of
the actual Beneficial Owners of the Notes; the Depositary's records
reflect only the identity of the Direct Participants to whose accounts
such Notes are credited, which may or may not be the Beneficial Owners.
The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of Notes and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants,
and by Direct Participants and Indirect Participants to Beneficial
Owners are governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with
respect to the Notes. Under its usual procedures, the Depositary mails
an Omnibus Proxy to the issuer as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose accounts the Notes are
credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Principal and interest payments on the Notes will be made to the
Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the payable date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has
reason to believe that it will not receive payment on the payable date.
Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such
Participant and not of the Depositary, the Paying Agent or the Company,
subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal and interest to the Depositary
is the responsibility of the Company or the Paying Agent, disbursement
of such payments to Direct Participants shall be the responsibility of
the Depositary, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants.
-22-
So long as the Depositary for the Global Security, or its nominee, is
the registered owner of the Global Security, the Depositary or its nominee,
as the case may be, will be considered the sole owner or Holder of the Notes
represented by the Global Security for all purposes under the Indenture.
Except as set forth below, owners of beneficial interests in the Global
Security will not be entitled to have Notes represented by the Global
Security registered in their names, will not receive or be entitled to
receive physical delivery of Notes in definitive form and will not be
considered the owners or Holders thereof under the Indenture. Accordingly,
each person owning a beneficial interest in the Global Security must rely on
the procedures of the Depositary and, if such person is not a Participant,
those of the Participants through which such person owns its interest, in
order to exercise any rights of a Holder under the Indenture.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Such limits and laws may impair the ability to transfer beneficial interests
in the Global Security.
Principal and interest payments on Notes registered in the name of or
held by the Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner or the Holder of the
Global Security representing such Notes. Neither the Company, the Paying
Agent nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
If at any time the Depositary notifies the Company that it is unwilling
or unable to continue as Depositary or if at any time the Depositary shall no
longer be eligible under the Indenture, the Company shall appoint a successor
Depositary with respect to the Notes. If a successor Depositary is not
appointed by the Company within 90 days after it receives such notice or
becomes aware of such ineligibility, the Company will issue certificated
Notes of like tenor, in authorized denominations and in an aggregate
principal amount equal to the principal amount of the Global Security in
exchange for the Global Security. (Section 3.5)
The Company may at any time in its sole discretion determine that the
Notes issued in global form shall no longer be represented by the Global
Security, In such event the Company will issue certificated Notes of like
tenor, in authorized denominations and in an aggregate principal amount equal
to the principal amount of the Global Security in exchange for the Global
Security. (Section 3.5)
CERTAIN DEFINITIONS
The following terms are defined in the Indenture (Sections 1.1, 5.1).
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bank" means (a) the Bank, so long as it is a Subsidiary of the Company,
or any successor thereto so long as such successor is a Subsidiary of the
Company and (b) any bank or savings or depository institution that is or
shall become an Affiliate of the Company.
-23-
"corporation" includes corporations, associations, partnerships, limited
liability companies, joint stock companies and business trusts.
"Default" means any event which is, or after notice or passage of time,
or both, would be, an Event of Default.
"Event of Default" is defined above under "-Events of Default, Notice
and Waiver".
"Material Subsidiary" means, at any particular time, any Subsidiary
that, together with any Subsidiaries of such Subsidiary (i) accounted for
more than 5% of the consolidated revenue of the Company for its most recently
completed fiscal year, or (ii) owned more than 5% of the consolidated assets
of the Company as at the end of such fiscal year, all as calculated in
accordance with generally accepted accounting principles.
"Maturity", where used with respect to any Debt Security, means the date
on which the principal of such Debt Security or an installment of principal
thereof becomes due and payable as therein or in the Indenture provided,
whether at the Stated Maturity or by declaration of acceleration, call for
redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President, any Executive Vice President or any Senior Vice
President, signing alone, or by any Vice President signing together with the
Corporate Secretary, any Assistant Secretary, the Treasurer or any Assistant
Treasurer of the Company.
"Opinion of Counsel" means a written opinion of legal counsel, who may
be (a) counsel for the Company or (b) other counsel designated by the Company
or the Trustee. Any counsel for the Company may be an employee of the
Company.
"Stated Maturity", when used with respect to any Debt Security or any
installment of principal thereof or interest thereon, means the date
specified in such Debt Security as the fixed date on which the principal of
such Debt Security or such installment of principal or interest is due and
payable.
"Subsidiary" means any corporation or Bank of which the Company at the
time owns or controls, directly or indirectly, more than 50% of the shares of
outstanding stock having general voting power under ordinary circumstances to
elect a majority of the Board of Directors of such corporation (irrespective
of whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening
of any contingency).
-24-
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among the Company and Keefe, Bruyette & Woods,
Inc. and ABN AMRO Chicago Corporation (the "Underwriters"), the Company has
agreed to sell to the Underwriters and the Underwriters have severally agreed to
purchase, the respective principal amounts of the Notes set forth after their
names below. In the Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
of the Notes offered hereby if any of the Notes are purchased. In the event of a
default by an Underwriter, the Underwriting Agreement provides that, in certain
circumstances, purchase commitments of the nondefaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
Principal
Underwriter Amount
- ----------- ------------
Keefe, Bruyette & Woods, Inc............................... $
-----------
ABN AMRO Chicago Corporation............................... $
-----------
Total................................................. $100,000,000
============
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of ___% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of ___% of the principal amount of the Notes to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain civil liabilities, including liabilities under the
Securities Act or contribute to payments the Underwriters may be required to
make in respect thereof.
The Notes will not be listed on any securities exchange. The Company has
been advised by the Underwriters that the Underwriters currently intend to make
a market in the Notes, as permitted by applicable laws and regulations. The
Underwriters are not obligated, however, to make a market in the Notes and any
such market-making may be discontinued at any time at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Notes.
The Underwriters and their respective affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
LEGAL OPINIONS
The legality of the Notes will be passed upon for the Company by Hogan &
Hartson L.L.P., Washington, D.C., special counsel to the Company. Certain legal
matters with respect to the Notes will be passed upon for the underwriters by
McDermott, Will & Emery, Chicago, Illinois. McDermott, Will & Emery in the past
has represented, and in the future may represent, the Company on other matters.
-25-
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in the Company's Annual Report (Form 10-K) for the year ended
December 31, 1995, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
-26-
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ST. PAUL BANCORP OR ANY OF THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF ST. PAUL BANCORP SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
-----------------------------
TABLE OF CONTENTS
Page
----
Available Information.......................................................
Incorporation of Certain Documents by Reference.............................
The Company.................................................................
Selected Consolidated Financial Information.................................
Recent Developments.........................................................
Certain Regulatory Matters..................................................
Use of Proceeds.............................................................
Capitalization..............................................................
Description of Notes........................................................
Underwriting................................................................
Legal Opinions..............................................................
Experts.....................................................................
---------------------------
$100,000,000
ST. PAUL BANCORP, INC.
___% Senior Notes
Due 2004
-------------------
PROSPECTUS
-------------------
KEEFE, BRUYETTE & WOODS, INC.
ABN AMRO CHICAGO CORPORATION
____________, 199_
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated fees and expenses payable by the
Company in connection with the issuance and distribution of the securities being
registered:
Registration Fee............................................. $ 30,303.03
NASD Fees.................................................... 10,500
Printing and Duplicating Expenses............................ 30,000
Legal Fees and Expenses...................................... 15,000
Accounting Fees and Expenses................................. 25,000
Blue Sky Fees and Expenses................................... 2,500
Trustee Fees and Expenses.................................... 5,000
Miscellaneous................................................ 6,696.97
-----------
Total $125,000
===========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Article IX of the Registrant's Bylaws, as amended (incorporated by
reference to Exhibit 3(ii) of the Registrant's Form 10-K for the
fiscal year ended December 31, 1989).
(b) Section 145 of the Delaware General Corporation Law.
(c) The Registrant has in effect a policy of liability insurance covering
its directors and officers.
ITEM 16. EXHIBITS
1.0 Form of Underwriting Agreement among St. Paul Bancorp, Inc., ABN AMRO
Chicago Corporation and Keefe, Bruyette & Woods, Inc.
4.1 Form of Indenture.
4.2 Form of Supplemental Indenture (including Form of Senior Notes attached
as an exhibit thereto). *
5.0 Opinion of Hogan & Hartson L.L.P. as to the legality of the securities
registered hereunder, including consent of that firm.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5).
24.0 Power of Attorney (incorporated by reference from signature page of Form
S-3 (333-18677), filed December 23, 1996).
25.0 Statement of Eligibility of the Trustee. *
99.1 Article IX of the Registrant's Bylaws, as amended (incorporated by
reference to Exhibit 3(ii) of the Registrant's Form 10-K for the fiscal
year ended December 31, 1989).
99.2 Section 145 of the Delaware General Corporation Law. *
* Previously filed.
-1-
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes that, for the 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 that is incorporated by reference in
this registration statement shall be deemed to be a new registration
statement relating to the Securities offered herein, and the offering of
such Securities at that time shall be deemed to be the initial bona fide
offering thereof.
(2) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to
be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
(3) 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 existing provisions or arrangements whereby the
Registrant may indemnify a director, officer or controlling person of the
Registrant against liabilities arising under the Securities Act of 1933, 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 Securities Act of 1933 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
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
(4) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(5) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
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.
The undersigned Registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
Subsection (c) of Section 310 of the Trust Indenture Act (the "Act") in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Act.
-2-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Chicago, State of Illinois, on the 30th day of
January, 1997.
ST. PAUL BANCORP, INC.
By: /s/ Joseph C. Scully
--------------------
Joseph C. Scully
Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed by the following persons in
the capacities indicated.
Signature Title
- --------- -----
/s/ Joseph C. Scully Chairman and Chief Executive Officer
- -------------------- (Principal Executive Officer)
Joseph C. Scully
/s/ Patrick J. Agnew President and Chief Operating Officer
- --------------------
Patrick J. Agnew
/s/ Robert N. Parke Senior Vice President and Treasurer
- ------------------- (Principal Financial Officer)
Robert N. Parke
/s/ Paul J. Devitt First Vice President and Controller
- ------------------ (Principal Accounting Officer)
Paul J. Devitt
/s/ William A. Anderson* Director
- -----------------------
William A. Anderson
/s/ John W. Croghan* Director
- -------------------
John W. Croghan
/s/ Dr. Alan J. Fredian* Director
- -----------------------
Dr. Alan J. Fredian
/s/ Kenneth J. James* Director
- --------------------
Kenneth J. James
-3-
/s/ Dr. Jean C. Murray* Director
- ----------------------
Dr. Jean C. Murray
/s/ John J. Viera* Director
- -----------------
John J. Viera
- -----------------------
* By power-of-attorney.
-4-
INDEX TO EXHIBITS
Number Description of Exhibit
- ------ ----------------------
1.0 Form of Underwriting Agreement among St. Paul Bancorp, Inc., ABN AMRO
Chicago Corporation and Keefe, Bruyette & Woods, Inc.
4.1 Form of Indenture.
4.2 Form of Supplemental Indenture (including Form of Senior Notes attached
as an exhibit thereto).*
5.0 Opinion of Hogan & Hartson L.L.P. as to the legality of the securities
registered hereunder, including consent of that firm.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5).
24.0 Power of Attorney (incorporated by reference from signature page of Form
S-3 (333-18677), filed December 23, 1996).
25.0 Statement of Eligibility of the Trustee.*
99.1 Article IX of the Registrant's Bylaws, as amended (incorporated
by reference to Exhibit 3(ii) of the Registrant's Form 10-K for the
fiscal year ended December 31, 1989).
99.2 Section 145 of the Delaware General Corporation Law.*
* Previously filed.