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ST. PAUL BANCORP LOGO
6700 West North Avenue
Chicago, Illinois 60707
(773) 622-5000
March 27, 1998
Dear Shareholder:
You are invited to attend the annual meeting of shareholders (the "Annual
Meeting") of St. Paul Bancorp, Inc. (the "Corporation") to be held on Wednesday,
May 6, 1998 at 10:00 a.m. at the Drury Lane Oakbrook, 100 Drury Lane, Oakbrook
Terrace, Illinois 60181.
The Annual Meeting has been called for the following purposes: (1) to elect
each of four directors for a three-year term; (2) to consider and vote upon a
proposed amendment to the Corporation's 1995 Incentive Plan to increase by
1,500,000 the number of shares of Common Stock reserved for issuance thereunder;
and (3) to transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS THAT YOU VOTE "FOR"
ELECTION OF THE FOUR NOMINEES OF THE BOARD OF DIRECTORS AS DIRECTORS AND "FOR"
THE AMENDMENT TO THE 1995 INCENTIVE PLAN. The accompanying proxy statement
provides detailed information concerning the matters to be voted on at the
Annual Meeting. Also enclosed is our 1997 annual report to shareholders, which
reviews results for the 1997 fiscal year.
It is important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, you are requested to
complete, date, sign and return the enclosed proxy card in the enclosed
postage-paid envelope.
On behalf of the Board of Directors, thank you for returning your proxy and
for your continued interest and support.
Sincerely yours,
JOSEPH C. SCULLY
Joseph C. Scully
Chairman of the Board and
Chief Executive Officer
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ST. PAUL BANCORP LOGO
6700 West North Avenue
Chicago, Illinois 60707
(773) 622-5000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, MAY 6, 1998
------------------------
NOTICE IS HEREBY GIVEN that the 1998 annual meeting of shareholders (the
"Annual Meeting") of St. Paul Bancorp, Inc. (the "Corporation") will be held on
Wednesday, May 6, 1998 at 10:00 a.m. at the Drury Lane Oakbrook, 100 Drury Lane,
Oakbrook Terrace, Illinois 60181 for the following purposes:
(1) To elect each of four directors for a three-year term (Proposal 1);
(2) To consider and vote upon a proposed amendment to the Corporation's
1995 Incentive Plan to increase by 1,500,000 the number of shares of
Common Stock reserved for issuance thereunder (Proposal 2); and
(3) To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Pursuant to the Corporation's Bylaws, the Board of Directors has fixed the
close of business on March 17, 1998 as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. Only
holders of common stock of record at the close of business on that date will be
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
In the event that there are not sufficient votes to approve any one or more
of the foregoing proposals at the time of the Annual Meeting, the Annual Meeting
may be adjourned in order to permit further solicitation of proxies by the
Corporation.
By Order of the Board of Directors
JOSEPH C. SCULLY
Joseph C. Scully
Chairman of the Board and
Chief Executive Officer
Chicago, Illinois
March 27, 1998
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE
AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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ST. PAUL BANCORP LOGO
6700 West North Avenue
Chicago, Illinois 60707
(773) 622-5000
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1998
------------------------
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This proxy statement is furnished to shareholders of St. Paul Bancorp, Inc.
(the "Corporation") in connection with the solicitation by the Board of
Directors of the Corporation of proxies to be used at the 1998 annual meeting of
shareholders (the "Annual Meeting") to be held on Wednesday, May 6, 1998 at
10:00 a.m. at the Drury Lane Oakbrook, 100 Drury Lane, Oakbrook Terrace,
Illinois 60181, and at any adjournments thereof. This proxy statement and the
accompanying proxy are initially being mailed to shareholders on or about March
27, 1998.
The Annual Meeting has been called for the following purposes: (1) to elect
each of four directors for a three-year term; (2) to consider and vote upon a
proposed amendment to the Corporation's 1995 Incentive Plan to increase by
1,500,000 the number of shares of the Corporation's common stock, par value $.01
per share (the "Common Stock") reserved for issuance thereunder; and (3) to
transact such other business as may properly come before the Annual Meeting or
any adjournments thereof.
If the enclosed form of proxy is properly executed and returned to the
Corporation in time to be voted at the Annual Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
EXECUTED BUT UNMARKED PROXIES WILL BE VOTED (A) FOR PROPOSAL 1 TO ELECT EACH OF
THE FOUR NOMINEES TO THE BOARD OF DIRECTORS AND (B) FOR PROPOSAL 2 TO AMEND THE
CORPORATION'S 1995 INCENTIVE PLAN. Except for procedural matters incident to the
conduct of the Annual Meeting, the Corporation does not know of any matters
other than those described in the Notice of Annual Meeting that are to come
before the Annual Meeting. If any other matters are properly brought before the
Annual Meeting, the persons named in the accompanying proxy will vote the shares
represented by the proxies on such matters as determined by a majority of the
Board of Directors.
The presence of a shareholder at the Annual Meeting will not automatically
revoke such shareholder's proxy. Shareholders may, however, revoke a proxy at
any time prior to its exercise by delivering to the Corporation a duly executed
proxy bearing a later date, by attending the Annual Meeting and voting in
person,
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or by filing a written notice of revocation with Clifford M. Sladnick, Senior
Vice President, General Counsel and Corporate Secretary, at 6700 West North
Avenue, Chicago, Illinois 60707.
The cost of soliciting proxies in the form enclosed herewith will be borne
by the Corporation. In addition to the solicitation of proxies by mail, the
Corporation and its wholly-owned subsidiary, St. Paul Federal Bank For Savings
(the "Bank" or "St. Paul Federal"), through their directors, officers and
employees, may also solicit proxies personally or by telephone or
telecommunication. The Corporation also will request persons, firms and
corporations holding shares in their names or in the name of their nominees,
which are beneficially owned by others, to send proxy materials to and obtain
proxies from such beneficial owners and will reimburse such holders for their
reasonable expenses in doing so. The Corporation also has retained Morrow & Co.
to assist in the solicitation of proxies at a fee of $7,500, plus reimbursement
of certain out-of-pocket expenses.
The securities which can be voted at the Annual Meeting consist of shares
of Common Stock of the Corporation, with each share entitling its owner to one
vote on all matters. There is no cumulative voting of shares. The close of
business on March 17, 1998 has been fixed by the Board of Directors as the
record date for the determination of shareholders entitled to vote at the Annual
Meeting. The number of shares of the Corporation's Common Stock outstanding on
March 17, 1998 was 34,310,608. There were approximately 6,305 record holders of
the Corporation's Common Stock as of that date. The presence, in person or by
proxy, of at least one-third of the total number of issued and outstanding
shares of Common Stock of the Corporation is necessary to constitute a quorum at
the Annual Meeting.
Votes cast, either in person or by proxy, will be tabulated by BankBoston,
N.A. Under Delaware corporate law and the Corporation's Bylaws, directors are
elected by plurality of votes of shares present (in person or by proxy) and
entitled to vote. Unless otherwise required by law or the Corporation's
Certificate of Incorporation or Bylaws, any other matter put to a shareholder
vote will be decided by the affirmative vote of a majority of the votes cast on
the matter. Abstentions and broker non-votes will be treated as shares that are
present, or represented, and entitled to vote for purposes of determining the
presence of a quorum. Abstentions and broker non-votes will not be counted as
shares present and entitled to vote, nor as a vote cast, on any matter presented
at the Annual Meeting.
THE CORPORATION IS REQUIRED TO FILE AN ANNUAL REPORT/FORM 10-K FOR ITS
FISCAL YEAR ENDED DECEMBER 31, 1997 WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE "SEC"). A COPY OF THE ANNUAL REPORT/FORM 10-K, EXCLUDING EXHIBITS,
ACCOMPANIES THIS PROXY STATEMENT. FOR A REASONABLE FEE, THE CORPORATION WILL
PROVIDE COPIES OF THE EXHIBITS TO THE ANNUAL REPORT/FORM 10-K UPON WRITTEN
REQUEST DIRECTED TO CLIFFORD M. SLADNICK, SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY, ST. PAUL BANCORP, INC., 6700 WEST NORTH AVENUE,
CHICAGO, ILLINOIS 60707.
ELECTION OF DIRECTORS
(PROPOSAL 1)
Under the Corporation's Bylaws, the number of directors is set at nine. The
directors are divided into three classes. The term of office of only one class
of directors expires in each year, and their successors are elected for terms of
three years and until their successors are elected and qualified.
At the 1998 Annual Meeting, each of four directors will be elected for a
three-year term. Unless otherwise specified on the proxy, it is the intention of
the persons named in the proxy to vote the shares represented by each properly
executed proxy for the election as director of the persons named below as
nominees. The Board of Directors believes that each of the nominees will stand
for election and will serve if
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elected as directors. However, if any of the persons nominated by the Board of
Directors fails to stand for election or will be unable to accept election, the
proxies will be voted for the election of such other person or persons as the
Board of Directors may nominate.
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth the names of the Board of Directors' four
nominees for election as directors and those directors who will continue to
serve as such after the 1998 Annual Meeting. Also set forth is certain other
information, some of which has been obtained from the Corporation's records and
some of which has been supplied by the nominees and continuing directors, with
respect to each such person's age at March 17, 1998, the periods during which
such person has served as a director of the Bank, and positions currently held
with the Corporation. Each person has been a director of the Corporation since
its formation in 1987, except for Patrick J. Agnew, who joined the Board in
1989, John W. Croghan and Jean C. Murray, O.P., who joined the Board in 1993,
and Paul C. Gearen, who joined the Board in 1997.
DIRECTOR OF
THE BANK POSITIONS HELD WITH EXPIRATION
AGE SINCE THE CORPORATION OF TERM
--- ----------- -------------------------- ----------
NOMINEES FOR 3-YEAR TERM:
Patrick J. Agnew (a)(b)(c)(d)(e)(f)... 55 1989 President, Chief Operating 2001
Officer and Director
William A. Anderson (b)(c)(d)(g)...... 72 1985 Director 2001
Alan J. Fredian (d)(e)(h)(i).......... 67 1977 Director 2001
Jean C. Murray, O.P. (e)(f)........... 70 1993 Director 2001
CONTINUING DIRECTORS:
John W. Croghan (b)(g)(i)............. 67 1993 Director 1999
Kenneth J. James (a)(c)............... 65 1987 Director 1999
Paul C. Gearen (a).................... 46 1997 Director 2000
Joseph C. Scully (a)(b)(c)(d)(e)(f)... 57 1980 Chairman of the Board, 2000
Chief Executive Officer
and Director
John J. Viera (d)(f)(g)(h)(i)......... 66 1978 Director 2000
- ---------------
(a) Member of the Loan Committee of the Bank.
(b) Member of the Investment Committee of the Bank.
(c) Member of the Loan Loss Reserve Committee of the Bank.
(d) Member of the Executive Committees of the Corporation and the Bank.
(e) Member of the Profit Sharing, Pension and ESOP Trust Committee of the Bank.
(f) Member of the Corporate Responsibility Committee of the Bank.
(g) Member of the Audit and Accounting Committees of the Corporation and the
Bank.
(h) Member of the Organizational Planning Committees of the Corporation and the
Bank.
(i) Member of the Stock Option Committee of the Corporation.
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The principal occupation of each nominee and continuing director of the
Corporation for the past five years is set forth below.
PATRICK J. AGNEW joined the Bank in 1979 as General Counsel. He was
appointed President, Chief Operating Officer and a Director in December 1989.
Prior to joining the Bank, he was a partner in the law firm of Righeimer, Martin
and Cinquino. Mr. Agnew holds a juris doctor degree from DePaul University
College of Law. He serves on the boards of directors of the Oak Park Development
Corporation and the Oak Park YMCA. Mr. Agnew is a board member of the
Chicagoland Association of Savings Institutions and the Illinois League of
Financial Institutions. He is also a member of the President's Council of
Dominican University (formerly Rosary College), the Advisory Council of DePaul
University College of Law and the Operations Committee of Loyola University
Medical Center.
WILLIAM A. ANDERSON is a Certified Public Accountant and a retired partner
of Ernst & Young LLP. While with that firm, he specialized in providing
professional accounting services to the savings and loan industry. Since his
retirement, he has provided consulting services to financial institutions and
other companies. He is Secretary, Treasurer of the Mason Foundation, Inc., a
private charitable foundation, and a member of the board of trustees of the
Fourth Presbyterian Church of Chicago. He is a member of the American Institute
of Certified Public Accountants and the Illinois CPA Society. Mr. Anderson holds
a bachelor's degree in accounting from the University of Illinois.
ALAN J. FREDIAN is an organizational psychologist and president of Alan J.
Fredian and Associates, management consultants. Dr. Fredian is a retired
Professor of the Institute of Human Resources and Industrial Relations at Loyola
University and has been affiliated with the University since 1967. He has
authored several books and publications. He is a member of the Academy of
Management and the American Psychological Association's Division of Industrial
and Organizational Psychology. Dr. Fredian is a life member of the board of
directors of Building Owners and Managers Institute International. He holds a
doctorate degree in industrial psychology from the Illinois Institute of
Technology.
JEAN C. MURRAY, O.P., is the retired President of Dominican University
(formerly Rosary College) in River Forest, Illinois. She has been affiliated
with the University since 1961, serving as a professor and an administrator in
various capacities prior to her appointment as President in 1981. She is
currently an Associate Professor of French and a senior advisor to the President
of the University. Dr. Murray has been a member of the Sinsinawa Dominicans
since 1952. She holds an undergraduate degree in French from Rosary College and
a doctorate degree in French from the University of Fribourg, Switzerland. She
also holds a certificate from the Institute of Educational Management at Harvard
University. Dr. Murray is a member of the Board of Governors of the American
Heart Association of Metropolitan Chicago and a trustee of North Central College
in Naperville.
JOHN W. CROGHAN is President of Lincoln Partners, a division of Lincoln
Capital Management Company, a Chicago-based investment management firm of which
he was a founder in 1967. Mr. Croghan is a graduate of Loyola University and
holds a Masters of Business Administration degree from Harvard University. He is
a director of Lindsay Manufacturing Company and Morgan Stanley's public
closed-end funds. Mr. Croghan serves on several non-profit boards, including
Northwestern University, Evanston Hospital and The Chicago Historical Society.
PAUL C. GEAREN is the President of Nicolson, Porter & List, Inc., a
corporate real estate brokerage and management company, specializing in
industrial real estate. He is a director of Motion Engineering, Inc., a software
company in Santa Barbara, California that manufactures motion control boards for
computerized manufacturing. Mr. Gearen is a member of the Chicago Council on
Foreign Relations and has been involved
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in fundraising for various organizations, including Horizons for Youth, ACORN,
Link Unlimited and DePorres House. Mr. Gearen holds a BA degree from the
University of Wisconsin, Madison.
KENNETH J. JAMES is Chairman of the Board of James Investment Company, real
estate developers. He is a director of the Illinois Masonic Medical Center and
the Robert R. McCormick unit of the Chicago Boys' and Girls' Clubs. Mr. James is
also a director and Senior Vice President of the Homebuilders Association of
Greater Chicago. He holds an A.B. degree in economics from Stanford University
and a juris doctor degree from Northwestern Law School. Mr. James is a member of
the Illinois Bar.
JOSEPH C. SCULLY joined the Bank in 1963 as a real estate appraiser. He was
appointed Assistant Vice President in 1965, Vice President in 1968, Corporate
Secretary in 1971 and Senior Vice President in 1974. He was elected President,
Chief Operating Officer and a Director in 1980. He was elected Chief Executive
Officer in 1982. Mr. Scully held the dual roles of President and Chief Executive
Officer from 1982 to 1989, when he relinquished the role of President to become
Chairman and Chief Executive Officer. He holds undergraduate and graduate
degrees from Loyola University. In 1981, Loyola University named him alumnus of
the year. He serves as a trustee of Loyola University and chairs its investment
committee. Mr. Scully serves on the board of the Austin Career Education Center
Corp., the advisory board of Goodwill Industries, and the Leadership Committee
of the Central Board of Neighborhood Housing Services. He also serves on the
Board of Link Unlimited, a group devoted to obtaining high school scholarships
for deserving youths. Mr. Scully has served as a member of the Thrift
Institutions Advisory Council, a panel established by the Federal Reserve Board.
He is also the past chairman of the Community Investment Corporation of Chicago,
the Institute of Financial Education of the United States League, the Federal
Savings and Loan Council and the Chicagoland Association of Savings
Institutions.
JOHN J. VIERA is a retired Vice President of Commonwealth Edison Company.
He holds an undergraduate degree in electrical engineering from Marquette
University and a graduate degree in business administration from the Illinois
Institute of Technology. After joining Commonwealth Edison Company in 1957, he
held several engineering and administrative positions. Mr. Viera is a member of
the Economic and Serra Clubs of Chicago, a Northwestern Associate and a member
of the advisory boards for Marquette University and the Local Initiatives
Support Corporation. He is a member of the Illinois Housing Development
Authority and a trustee of Roosevelt University and the Chicago Architecture
Foundation. He is on the boards of Children's Memorial Hospital, Urban Gateways,
Neighborhood Housing Services and Catholic Charities.
DIRECTOR COMPENSATION
Directors of the Corporation are not paid for attending meetings of the
Board of Directors of the Corporation. Each director of the Corporation is also
a director of the Bank. Non-employee directors of the Bank are paid an annual
director's fee of $24,000. In addition to the annual fee, non-employee directors
receive board and committee meeting fees of $500 per meeting ($600 for committee
chairpersons), based upon attendance. Non-employee directors also receive
monthly meeting fees of $500 per month from St. Paul Financial Development
Corporation and $200 per month from Annuity Network, Inc., which are both
wholly-owned subsidiaries of the Corporation, as well as $300 per month from SPF
Insurance Agency, Inc., a wholly-owned subsidiary of the Bank. Directors who are
employees of the Bank do not receive any such fees.
Under the terms of the Corporation's 1995 Incentive Plan, each non-employee
director is automatically granted, on the date of each annual meeting of
shareholders, a non-qualified option to purchase 2,250 shares of the
Corporation's Common Stock at an option price per share equal to the fair market
value of a share of Common Stock on the date of grant.
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The Corporation and the Bank have adopted a nonqualified retirement plan,
as amended (the "Retirement Plan") for non-employee directors of the Corporation
and the Bank. Under the Retirement Plan, eligible directors receive annual
benefits consisting of a minimum of 60% (increasing to 70% for eleven or more
years of service and increasing by an additional 1% for each year of service in
excess of 20 years) of the regular annual compensation paid for services as a
director of the Corporation, the Bank or any of their subsidiaries during the
12-month period immediately preceding a termination of service (or, if greater,
during any 12 consecutive month period occurring during the three-year period
immediately preceding a termination of service). The Retirement Plan provides
that benefits are paid once a director reaches age 70; after the director's
permanent and total disability; after a director nominated by the Corporation is
not reelected; or after termination following a change in control. For the
definition of "change in control," see "Executive Compensation--Employment
Agreements." Benefits are not paid if the director is removed from the board for
"cause," as defined.
Monthly payments are made under the Retirement Plan for the number of
months equal to the number of full months the eligible director has served as a
director. Directors have the right to elect to receive a lump-sum payment, as
calculated based upon an actuarial determination of the present value of the
plan's benefits. The Retirement Plan provides for a spouse's benefit if the
director is married at the time of death. Eligible directors must agree not to
become an employee of any financial institution located within 50 miles of the
Bank's headquarters for a one-year period after termination of service as a
director in order to receive benefits. The Retirement Plan provides that the
obligation of the Corporation and the Bank to each eligible director will be
funded as each such director becomes entitled to receive payment of benefits.
The Retirement Plan may be amended or terminated at any time, but without
affecting the vested rights of directors to receive benefits.
CORPORATE GOVERNANCE AND OTHER MATTERS
The Board of Directors of the Corporation acts as a nominating committee
for selecting nominees for election as directors and has made its nominations
for the 1998 Annual Meeting. The Corporation's Bylaws also permit shareholders
eligible to vote at the Annual Meeting to make nominations for directors, but
only if such nominations are made pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, notice must be delivered to, or
mailed to and received at, the principal executive offices of the Corporation
not less than 30 days nor more than 90 days prior to the date of the meeting,
provided that at least 45 days' notice or prior public disclosure of the date of
the meeting is given or made to shareholders. Public disclosure of the date of
the 1998 Annual Meeting was made on March 16, 1998 by the issuance of a press
release followed by a filing of a Current Report on Form 8-K under the
Securities Exchange Act of 1934, as amended (the "1934 Act") with the SEC. A
shareholder's notice of nomination must also set forth certain information
specified in Article III, Section 13 of the Corporation's Bylaws concerning each
person the shareholder proposes to nominate for election and the nominating
shareholder. Prior to printing this proxy statement, the Corporation had
received no such nominations.
The Boards of Directors of the Corporation and the Bank have each appointed
a standing audit committee. During the year ended December 31, 1997, the audit
committees each conducted five meetings. The current members of the audit
committees are Messrs. Anderson, Croghan and Viera. The duties of the committees
include reviewing with management and the Corporation's independent auditors the
annual financial statements, significant accounting policies, audit conclusions
regarding significant accounting estimates and the independent auditors' letter
to management concerning the effectiveness of financial and accounting controls.
In addition, the committees review the scope of the annual independent auditors'
audit and recommend to the Board of Directors the firm to be engaged as the
independent auditor. The committees
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also oversee the Corporation's internal audit function and review with the
Director of Internal Audit his conclusions regarding the adequacy of the
organization's internal controls. The committees may also examine and consider
other matters relating to the financial affairs of the Corporation and the Bank
as they determine appropriate.
The Boards of Directors of the Corporation and the Bank have each appointed
a standing organizational planning committee. During the year ended December 31,
1997, the organizational planning committees each conducted four meetings. The
current members of the organizational planning committees are Dr. Fredian and
Mr. Viera. The organizational planning committees function as compensation
committees. The duties of such committees include making recommendations to the
Boards of Directors concerning compensation of executive officers and employee
benefit plans. See "Executive Compensation--Report of the Organizational
Planning and Stock Option Committees on Executive Compensation."
The Boards of Directors of the Corporation and the Bank have each appointed
a standing executive committee. The Bylaws of the Corporation and the Bank give
the executive committees certain powers and authority in the management of the
business and affairs of the Corporation and the Bank when the Boards of
Directors are not in session. During the year ended December 31, 1997, no
executive committee meetings were conducted. The current members of the
executive committees are Dr. Fredian and Messrs. Agnew, Anderson, Scully and
Viera.
The Board of Directors of the Corporation has appointed a standing stock
option committee. The duties of the committee include making recommendations to
the Board of Directors concerning eligible persons to whom options will be
granted under the Corporation's 1995 Incentive Plan and the Corporation's
Employee Incentive Plan. During the year ended December 31, 1997, the stock
option committee conducted three meetings. The current members of the stock
option committee are Dr. Fredian, Mr. Viera and Mr. Croghan. See "Executive
Compensation--Report of the Organizational Planning and Stock Option Committees
on Executive Compensation."
During 1997, the Corporation's Board of Directors held twelve meetings. No
incumbent director attended fewer than 75% of the aggregate of the total number
of meetings of the Corporation's Board of Directors and the total number of
meetings held by all committees of such board on which the director served.
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EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain summary information concerning the
compensation paid by the Corporation and its subsidiaries for services rendered
during each of the fiscal years ended December 31, 1995, 1996 and 1997 to the
Corporation's chief executive officer and to each of the four other most highly
compensated executive officers of the Corporation determined as of December 31,
1997 (the "named executive officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES
ANNUAL COMPENSATION(B) UNDERLYING ALL OTHER
----------------------- OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(A) #(C) ($)(D)
- --------------------------- ---- --------- ----------- ------------ ------------
Joseph C. Scully......................... 1997 $410,436 $209,011 1,500 $166,139
Chairman of the Board, 1996 394,644 300,558 56,250 149,660
Chief Executive Officer and Director 1995 372,036 298,758 75,000 144,019
Patrick J. Agnew......................... 1997 291,216 205,434 1,500 105,189
President, Chief 1996 280,008 297,054 56,250 94,055
Operating Officer and Director 1995 263,713 295,516 75,000 90,680
Robert N. Parke.......................... 1997 158,676 89,657 1,500 3,592
Senior Vice President, Finance 1996 152,580 126,789 18,750 2,897
and Chief Financial Officer 1995 146,700 123,865 37,500 2,765
Thomas J. Rinella........................ 1997 167,220 84,039 1,500 3,616
Senior Vice President, 1996 160,788 120,461 18,750 2,897
Community Lending 1995 154,595 119,677 37,500 2,765
Donald G. Ross........................... 1997 156,480 81,110 1,500 3,545
Senior Vice President, 1996 150,456 116,325 18,750 2,897
Retail Banking 1995 144,661 115,557 37,500 2,765
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(a) Includes incentive compensation paid in July of 1995, 1996 and 1997 to the
Bank's officers based on a percentage of earnings, as well as annual holiday
bonuses (3% of base compensation) paid in December of each year. Incentive
compensation, if any, is paid in July of each year based upon the
Corporation's earnings during the preceding twelve month period, and is
included in the table based on the amount earned with respect to each year
presented. The amount of incentive compensation earned by the named
executive officers for the last six months of 1997 is not yet calculable.
(b) Certain executive officers of St. Paul Federal receive indirect compensation
in the form of personal benefits; including insurance premiums, death
benefits, personal tax, financial and estate planning services, club
memberships, the use of automobiles and various benefits (including medical
and retirement plans) generally available to employees of the Corporation.
The amount of such indirect compensation in 1997 did not exceed, with
respect to any named executive officer, the lesser of $50,000 or 10% of the
total amount of annual salary and bonus paid to such officer.
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(c) Represents stock options granted on June 26, 1995, June 20, 1996 and June
19, 1997, under the Corporation's Stock Option Plan and 1995 Incentive Plan
to purchase the stated number of shares of the Corporation's Common Stock at
exercise prices of $12.00, $12.27 and $21.83 per share, respectively. The
number of shares subject to stock options and the per share exercise prices
have been adjusted to reflect the Corporation's five-for-four stock split on
January 14, 1997 and three-for-two stock split on July 14, 1997. Although
the Corporation's Stock Option Plan and 1995 Incentive Plan permit the grant
of stock appreciation rights ("SARs"), no grants of SARs have been made.
(d) Consists of contributions to the Corporation's Employee Stock Ownership Plan
(the "ESOP") with respect to Mr. Parke, Mr. Rinella and Mr. Ross. With
respect to Messrs. Scully and Agnew, data consists of ESOP contributions and
deferred compensation. For 1997, ESOP contributions for Messrs. Scully and
Agnew were $3,616 each, and deferred compensation was $162,523 and $101,573,
respectively, earned under their respective employment agreements.
STOCK OPTION GRANTS
The following table sets forth certain information concerning the grant of
stock options under the Corporation's 1995 Incentive Plan during the fiscal year
ended December 31, 1997 to each of the named executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED(#)(A)(B) IN FISCAL YEAR ($/SHARE)(B) DATE ($)(C)
---- ---------------- -------------- ------------ ---------- -------------
Joseph C. Scully................ 1,500 0.25% $21.83 7/19/07 $13,410
Patrick J. Agnew................ 1,500 0.25% 21.83 7/19/07 13,410
Robert N. Parke................. 1,500 0.25% 21.83 7/19/07 13,410
Thomas J. Rinella............... 1,500 0.25% 21.83 7/19/07 13,410
Donald G. Ross.................. 1,500 0.25% 21.83 7/19/07 13,410
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(a) All options were granted with an exercise price equal to the fair market
value of the Corporation's Common Stock on the date of grant. Options
granted during 1997 are exercisable in respect of 50% of the number of
shares on the first anniversary of the date of grant and are exercisable in
respect of an additional 25% on each of the second and third anniversaries
of the grant. The options also become exercisable upon any merger or
consolidation in which the Corporation is not the surviving entity.
(b) Number of options granted and exercise price per share have been adjusted to
reflect the Corporation's three-for-two stock split on July 14, 1997.
(c) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an employee may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised. There is no assurance that the value realized
by an employee will be at or near the value estimated by the Black-Scholes
model. The estimated values under that model are based on assumptions as to
variables such as the expected term of the option (seven years), the
risk-free interest rate for the expected term of the option (based upon the
rate available on the date of grant on a seven-year zero-coupon U.S.
Treasury Note of 6.40%), stock price volatility (based on the Corporation's
month-end stock price history over the seven-year period prior to the date
of grant), and expected future dividend yield (based upon the dividend yield
at date of grant). No adjustments were made for non-transferability and risk
of forfeiture.
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STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information, with respect to the
named executive officers, concerning the exercise of options during the fiscal
year ended December 31, 1997 and the value of unexercised options held as of
December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS AT OPTIONS/SARS AT FISCAL
ON VALUE FISCAL YEAR-END(#)(A) YEAR-END ($)(B)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#)(A) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ---------- ----------- ------------- ----------- -------------
Joseph C. Scully.......... 295,313 $3,697,491 285,939 1,500 $3,574,005 $6,625
Patrick J. Agnew.......... 37,500 472,916 398,439 1,500 5,927,122 6,625
Robert N. Parke........... -0- -0- 104,063 1,500 1,312,650 6,625
Thomas J. Rinella......... 37,500 501,477 104,063 1,500 1,312,650 6,625
Donald G. Ross............ 14,063 176,177 104,063 1,500 1,312,650 6,625
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(a) Adjusted for the Corporation's five-for-four stock split on January 14, 1997
and three-for-two stock split on July 14, 1997.
(b) Market value of underlying securities at year-end, minus the exercise price.
REPORT OF THE ORGANIZATIONAL PLANNING AND STOCK OPTION COMMITTEES ON EXECUTIVE
COMPENSATION
Overview and Philosophy
The Organizational Planning Committee (the "Planning Committee") of the
Corporation's Board of Directors is composed of two outside directors, Dr.
Fredian and Mr. Viera. The Stock Option Committee (together with the Planning
Committee herein referred to as the "Committee") of the Corporation's Board of
Directors is composed of three outside directors, Dr. Fredian, Mr. Croghan and
Mr. Viera.
The Planning Committee is responsible for developing and making
recommendations to the Board with respect to the Corporation's executive
compensation policies. In addition, the Planning Committee determines annually
the compensation that is paid to the Chief Executive Officer and the other
executive officers of the Corporation, subject to Board approval. The Stock
Option Committee selects, subject to Board approval, the eligible persons to
whom options will be granted based on each individual's performance and
responsibilities. The Stock Option Committee prescribes the terms and provisions
(which need not be identical) of each option granted under the Corporation's
1995 Incentive Plan and the Employee Incentive Plan.
The Committee has access to outside compensation consultants and
independent national, regional and industry compensation survey information.
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The objectives of the Corporation's executive compensation program are to:
- Directly tie individual executive pay to corporate performance;
- Support the achievements of the long- and short-term strategic goals and
performance objectives of the Corporation;
- Provide a competitive compensation program that will attract and retain
talented and qualified executives while rewarding individual achievement
and contribution; and
- Align the executives' interests with corporate success by making a
substantial portion of compensation subject to profitability.
The Corporation's executive compensation program provides an overall level
of compensation opportunity that is competitive within the thrift and banking
industry. The Committee will use its discretion to set executive compensation
where, in its judgment, external, internal or individual circumstances warrant
it.
The 1993 Tax Act
The Omnibus Budget Reconciliation Act of 1993 added a provision to the
Internal Revenue Code of 1986, as amended (the "Code"), which generally limits
to $1.0 million the Corporation's allowable deduction for federal income tax
purposes of certain compensation paid to executive officers, except for certain
"performance-based" compensation and certain compensation related to employee
benefit plans.
The Committee has considered the implications of this law and has concluded
that, since the cash compensation paid to the Corporation's executive officers
is significantly below the $1.0 million limitation, no general policy with
respect to this matter is necessary at this time. The Corporation, however,
could be impacted by this law to the extent that option exercises by executive
officers cause an individual's compensation in a particular year to exceed $1.0
million. Accordingly, the Committee has attempted to conform the terms of the
1995 Incentive Plan in order that compensation attributable to awards thereunder
will not be subject to the deduction limitation.
Executive Officer Compensation Program
The Corporation's executive officer compensation program consists of base
salary, annual cash incentive compensation, long-term incentive compensation in
the form of stock options, deferred compensation, personal benefits such as
insurance premiums, tax services, club memberships, financial and estate
planning and the use of automobiles, and various benefits including medical and
retirement plans generally available to employees of the Corporation. The
executive officer compensation program is reviewed, with the assistance of an
independent compensation consultant, relative to other well-managed large thrift
institutions, regional thrifts and local bank competitors (the "Compensation
Peer Group"). The Compensation Peer Group (which consists of 29 large national
thrifts, 11 regional and local thrifts and five local banks) is used to compare
the Corporation's compensation packages to that of other companies that compete
with the Bank for executives. The Committee believes that this peer group, which
differs from the published NASDAQ indices utilized in the Comparative
Performance Graph set forth below, is appropriate for executive compensation
purposes.
Base Salary. Executive officer base salaries are set relative to market
data and surveys of the Compensation Peer Group. Base salaries are reviewed
position by position and are generally set at levels lower than the market due
to the large emphasis on incentive compensation determined by annual corporate
and individual performance. Overall base salaries for the named executive
officers average 24% below the
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combined base salaries of the Compensation Peer Group. In determining base
salaries, the Committee also takes into consideration individual experience and
contributions, as well as level of responsibility.
Annual Incentive Compensation. The officer incentive compensation program
is the Corporation's annual incentive program for corporate officers. The
purpose of the incentive compensation program is to provide a direct link
between executive officer compensation and corporate earnings. The Planning
Committee believes that compensation tied to corporate performance strengthens
management's incentive to increase the Corporation's profitability. Accordingly,
annual incentive compensation is a significant component of the executive
officers' total cash compensation. For the named executive officers, the portion
of compensation attributable to the incentive program in 1997 ranged from 47% to
67% of total compensation.
Incentive compensation for all corporate officers has generally averaged 5%
of the Corporation's pre-tax earnings for the preceding twelve-month period,
with adjustments made for certain non-recurring items. Aggregate incentive
compensation of $3,516,410 was paid on July 1, 1997, and was distributed to
officers based on individual performance and position within the Corporation.
For the period from July 1, 1996 to June 30, 1997, the Corporation's
pre-tax earnings increased by 22.7%, or $13.3 million, over the same fiscal
period in 1996. Bonus payments made in July 1997 to all officers of the
Corporation were approximately 20% higher than the prior year. The Planning
Committee believes that the annual incentive program provides an excellent link
between the level of the Corporation's earnings and the incentives paid to
executive officers.
Individual incentive bonus awards to the executive officers are determined,
at the discretion of the Planning Committee, based on individual performance and
achievement. The annual incentive bonus, when combined with base salary,
resulted in average compensation payments during 1997 to the named executive
officers at 12% below the average of the Compensation Peer Group. The Planning
Committee believes that the level of compensation paid to the named executive
officers during 1997 was appropriate based upon the Corporation's financial
performance and the significant portion of compensation tied to corporate
performance.
Stock Options. The Board of Directors of the Corporation believes that
stock options are important to increase the incentive and to attract and
encourage the continued employment and service of executive officers and other
key officers and employees by facilitating their purchase of a stock interest in
the Corporation. The Stock Option Committee believes that the grant of stock
options aligns management with the interests of the Corporation's shareholders,
while creating another form of performance-based compensation.
The Corporation's 1995 Incentive Plan authorizes the Stock Option Committee
to administer the plan and make recommendations to award stock options to key
officers, directors and employees. Stock options are granted at the discretion
of the Stock Option Committee, with grants generally made based on individual
contributions and upon promotion. Stock options are granted at an option price
equal to the fair market value of the Corporation's Common Stock on the date of
grant, have ten year terms and have exercise restrictions based on length of
service. The amount of stock option grants increases according to salary and
position within the Corporation. See "Proposed Amendment to 1995 Incentive
Plan".
In fiscal 1997, the named executive officers received stock option grants
for an aggregate of 7,500 shares of Common Stock, at an exercise price of $21.83
per share. These grants represent approximately 1.26% of all stock options
granted in fiscal 1997.
Deferred Compensation Plan. A deferred compensation plan is provided to
Messrs. Scully and Agnew as part of their long-term incentive compensation
program. This plan, as specified in their employment
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agreements, requires that a specified sum be credited annually to their account.
In fiscal 1997, the amounts credited (without earnings) for Messrs. Scully and
Agnew were $162,523 and $101,573, respectively, representing 20% of Mr. Scully's
and 15% of Mr. Agnew's annual compensation.
Benefits. The Corporation provides medical, life insurance and retirement
benefits to the executive officers that are generally available on the same
terms to other employees of the Corporation. Certain executive officers receive
indirect compensation in the form of personal benefits; including insurance
premiums, death benefits, personal tax services, financial planning, club
memberships and the use of automobiles. As to each executive officer, the amount
of these perquisites, as determined in accordance with the rules of the SEC
relating to executive compensation, did not exceed the lesser of either $50,000
or 10% of the total amount of salary and bonus for fiscal 1997.
Chief Executive Officer Compensation
At the beginning of fiscal 1997, Mr. Scully's base salary was $402,384.
During the year, Mr. Scully received a base salary increase of $16,095,
representing an increase of 4% effective July 1, 1997. His base salary at the
end of the fiscal year was $418,479. Mr. Scully's base salary is reviewed
annually by the Committee. The Committee consults with an independent
compensation consultant who conducts a customized survey of the Compensation
Peer Group. The survey data is used to develop trend line analysis which shows
the relationship between CEO total compensation and return on assets, as well as
CEO total compensation and institution asset size. As discussed above, the
Corporation's base salaries are set at the low end of the market data range,
allowing for an effective incentive compensation program. For 1997, Mr. Scully's
base salary was 28% below the peer group.
Mr. Scully received a bonus in fiscal 1997 of $344,200 for the period from
July 1, 1996 through June 30, 1997. The bonus was the result of corporate
performance for the above period and was paid from a pool which has generally
averaged 5% of the Corporation's pre-tax earnings for such period, with
adjustments made for certain non-recurring items.
The Corporation's incentive program is designed to reward officers
according to annual earnings. Mr. Scully's 1997 incentive bonus payment was 20%
higher than the 1996 incentive bonus payment. The Committee believes that Mr.
Scully's leadership and management abilities have allowed the Corporation to
successfully compete within a challenging business environment, while achieving
financial results generally equivalent to the Compensation Peer Group. Mr.
Scully's total cash compensation paid in 1997 was 32% below the average of the
Compensation Peer Group.
The stock options for 1,500 shares granted to Mr. Scully in fiscal 1997
brought his cumulative option grants to 779,627 since the Corporation's
formation in 1987.
Submitted by the Members of the
Organizational Planning Committee
and the Stock Option Committee
Alan J. Fredian, Chairman
John C. Croghan
John J. Viera
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COMPARATIVE PERFORMANCE GRAPH
The following graph sets forth comparative information regarding the
Corporation's cumulative shareholder return on its Common Stock over the last
five fiscal years. The shareholder return is measured by dividing total
dividends (assuming dividend reinvestment) plus share price change for a period
by the share price at the beginning of the measurement period. The Corporation's
cumulative shareholder return, based on an investment of $100 at the beginning
of the five-year period beginning January 1, 1993, is compared to the cumulative
total return of the NASDAQ Stock Market Index and the NASDAQ Bank Stock Index.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
MEASUREMENT PERIOD ST. PAUL NASDAQ
(FISCAL YEAR COVERED) BANCORP BANK NASDAQ
12/31/92 100 100 100
12/31/93 124.17 114.04 114.79
12/31/94 117.62 113.63 112.21
12/31/95 173.64 169.22 158.68
12/31/96 203.60 223.41 195.19
12/31/97 347.26 377.44 239.63
12/31/98
Employment Agreements. The Corporation and the Bank have entered into
employment agreements with Joseph C. Scully, Chairman of the Board and Chief
Executive Officer, and Patrick J. Agnew, President and Chief Operating Officer.
The salaries for Messrs. Scully and Agnew for the twelve-month period
ending June 30, 1998 are $418,479 and $296,924, respectively. Each officer
receives annual salary increases as determined by the Bank's Board of Directors.
Both Mr. Scully and Mr. Agnew are entitled to participate in any discretionary
bonuses and retirement or other benefit plans applicable to the Corporation's or
the Bank's executive officers. The employment agreements for Messrs. Scully and
Agnew, as amended, are each for terms of three years, with each expiring on
December 19, 2000. The Corporation and the Bank may, upon the majority
affirmative vote
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of each of their respective Boards, by written notice to the officer, renew the
employment agreements for one additional year on each anniversary date,
commencing with the December 19, 1998 anniversary date, unless the officer gives
contrary written notice to the other parties prior to such anniversary date. The
employment agreements provide that the terms thereof are automatically
terminated upon the officer attaining the age of 65.
The employment of Messrs. Scully and Agnew may be terminated by the Boards
of Directors of the Corporation and the Bank at any time; provided, however,
that if the termination is not for cause, as defined in the agreements, each is
entitled: (a) to receive a lump sum payment in an amount equal to his
then-current compensation (including any bonuses paid during the then-current
fiscal year and deferred compensation credited for the preceding year)
calculated for a period equal to the remaining term of the agreement (provided
that the aggregate amount of such payment shall not exceed three times the
officer's then-current compensation) and (b) subject to certain limitations, to
continue to participate in retirement and other benefit plans for the remaining
term of the agreement, to be funded by an irrevocable trust established by the
Corporation and the Bank. Such lump sum payments for termination without cause
would be $2,812,572 and $2,254,311 for Messrs. Scully and Agnew, respectively,
based upon current salary and deferred compensation plus the most recent
incentive compensation paid to such officers, assuming a remaining term of three
years. However, if the termination of employment is in connection with a "change
in control," the lump sum severance payment would instead be calculated in
accordance with the provisions described below.
If any such officer terminates his employment without the consent of both
Boards, then the agreements restrict the terminating officer for one year or the
remaining term of the agreement plus six months, whichever is less, from being
employed by a competing bank, savings bank, savings and loan association or
mortgage banking company, or a holding company affiliate of any of the
foregoing, having an office in Illinois within 50 miles of the Bank's home
office, out of which the terminating officer would be primarily based.
If, during the term of the employment agreements, there is a "change in
control" of the Corporation or of the Bank, and the employment of Messrs. Scully
or Agnew is terminated, voluntarily or involuntarily, within two years
thereafter (except by reason of normal retirement, disability, death or for
cause), each will be entitled to receive, as liquidated damages for services
previously rendered, a lump sum cash payment. Such payment will be in the amount
of one year's then-current compensation, including deferred compensation and any
bonuses paid during the past twelve months, if employment is voluntarily
terminated without "good reason," defined in the agreements as, among other
things, a material reduction in the officer's salary or deferred compensation, a
material reduction in the officer's bonus below a certain amount, the officer's
relocation of more than 50 miles or a material reduction in his position,
authority, duties or responsibilities. If the officer's employment is terminated
by him voluntarily with good reason or involuntarily by the Corporation or the
Bank, such payment will be equal to the sum of (X) the amount of the officer's
then-current compensation which, but for such termination, would be payable for
the remaining term of the agreement, plus (Y) one year's then-current
compensation; provided that the aggregate amount of such payment shall not
exceed three times the officer's then-current compensation. Based upon current
salary and deferred compensation plus the most recent incentive compensation
paid to such officers, such payments would be $937,524 and $751,437 for Messrs.
Scully and Agnew, respectively, if employment were terminated as described in
the second sentence of this paragraph, and, $2,812,572 and $2,254,311,
respectively, if employment were terminated as described in the third sentence
of this paragraph. This payment will be in lieu of the lump sum amount payable
for termination without cause. The agreements also permit Messrs. Scully and
Agnew to receive a lump sum amount equal to, but in lieu of, the above payment
if they elect to terminate their employment agreements while continuing to work
for the Corporation and the Bank following a change
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in control. In addition, such officers would be entitled, subject to certain
limitations, to continue to participate in retirement and other benefit plans to
be funded by an irrevocable trust created by the Corporation and the Bank. The
employment agreements provide that the officers shall not have the right to
receive any payment or benefits under the agreement to the extent that such
payment or benefit would cause any payment to be considered a "parachute
payment" under Section 280G of the Code.
A "change in control" of the Corporation will be deemed to have occurred if
(i) any person becomes the beneficial owner of 25% or more of the Corporation's
voting shares; (ii) any person receives certain regulatory approvals to acquire
control of the Corporation; (iii) any person enters into a binding agreement to
acquire (by means of stock purchase, tender offer or merger) beneficial
ownership of 25% or more of the Corporation's voting shares, provided that a
change in control would not be deemed to occur unless the Board of Directors
makes a determination that such action constitutes a change in control, and
further provided that a change in control shall no longer be deemed to have
occurred upon any termination of such an agreement; (iv) any person becomes the
beneficial owner of 10% to 25% of the Corporation's voting shares, provided that
the Office of Thrift Supervision (the "OTS") has made a determination that such
ownership constitutes a change in control of the Corporation; (v) any person
(other than persons named as proxies solicited on behalf of the Corporation)
holds irrevocable proxies for 25% or more of the Corporation's voting shares,
provided that the Board of Directors has made a determination that such action
constitutes a change in control; (vi) as the result of any tender offer,
business combination or contested proxy solicitation, the persons who were
directors prior to such transaction cease to constitute at least two-thirds of
the Board of Directors of the Corporation; (vii) the Corporation enters into an
agreement with respect to any merger other than (a) a merger which would result
in the voting shares of the Corporation outstanding immediately prior thereto
continuing to represent more than 80% of the combined voting power of the voting
shares outstanding immediately after such merger or (b) a merger effected to
implement a recapitalization of the Corporation; or (viii) the Corporation
enters into an agreement with respect to any merger with any other person having
total consolidated assets in an amount that is at least 60% of the Corporation's
total consolidated assets; provided that a change in control will not be deemed
to have occurred under clauses (vii) or (viii) if the Board of Directors of the
Corporation has made a determination that such action will not constitute a
change in control. The Board of Directors may de-trigger any transaction or
event (pursuant to which any person became the beneficial owner of up to 50% of
the Corporation's voting shares) which terminates or ceases to exist. A "change
in control" of the Bank will be deemed to have taken place if the Corporation's
beneficial ownership of the total number of outstanding voting shares of the
Bank is reduced to less than 50%.
The employment agreements with Messrs. Scully and Agnew each provide for
deferred compensation. In general, the employment agreements require St. Paul
Federal to credit a specified sum annually as deferred compensation for each of
these officers. The accrued payments will be paid to a named beneficiary if the
officer dies prior to retirement. In case of involuntary termination before the
end of the term of the agreement, the officer will receive the entire accrued
amount in annual payments over a period of ten years or a lesser period at the
option of the Bank. If the officer voluntarily terminates his employment, 75% of
the accrued amount will be payable to the officer in five annual payments. If
the officer remains in the employment of St. Paul Federal until he retires due
to age, early retirement or disability and refrains from engaging in any
competitive business, as described above, the accrued payments will be paid to
the officer in ten annual installments or a lesser period at the option of the
Bank. Each officer may elect, one year prior to the officer's retirement, to
extend the period within which he or his beneficiaries will receive distribution
of the accrued payments to a period not in excess of 15 years, except that at
the option of the Bank it may be paid over a lesser period. Also, at the option
of the Bank distribution of the accrued payments may begin at age 70 and such
payments may be made over a 15-year period. The employment agreements permit
Messrs. Scully and
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Agnew to direct that deferred compensation contributions be invested in
government securities, the Common Stock of the Corporation or such other types
of investments as directed by the officer.
Severance Agreements. The Corporation and the Bank have entered into
severance agreements with the Senior Vice Presidents and First Vice Presidents
of the Corporation and the Bank, including Robert N. Parke, Thomas J. Rinella
and Donald G. Ross, Senior Vice Presidents of the Corporation and the Bank.
Under these agreements, each officer is entitled to receive a severance payment
in the event his employment with the Corporation and the Bank is terminated,
voluntarily or involuntarily (except by reason of normal retirement, disability,
death or for cause), within two years of a change in control of the Corporation
or of the Bank.
The severance agreements provide that each officer will receive one year's
then-current compensation, including any bonuses paid and any deferred
compensation credited to his account during the past twelve months, if he
voluntarily terminates his employment without "good reason" (defined in the
agreements to include, among other things, a reduction in the officer's salary,
a reduction in the officer's bonus below a certain amount, the officer's
relocation of more than 50 miles, or a material reduction in the position,
authority, duties or responsibilities which existed prior to the change in
control). In the event the employment of any such officer is terminated by him
voluntarily with good reason or involuntarily by the Corporation or the Bank, he
will receive three times his average annual compensation for the five-year
period before termination. Based upon current salaries and the most recent
incentive compensation payments received, the aggregate amount of such payments
under the severance agreements would be $315,104, $313,793 and $297,966 for
Messrs. Parke, Rinella and Ross, respectively, if employment were terminated as
described in the first sentence of this paragraph, and would be $828,455,
$836,816 and $778,198 for Messrs. Parke, Rinella and Ross, respectively, if
employment were terminated as described in the second sentence hereof. In
addition, such employees will be entitled, subject to certain limitations, to
continue to participate in retirement and other benefit plans to be funded by an
irrevocable trust created by the Corporation and the Bank. The severance
agreements provide that the officers shall not have the right to receive any
payment or benefits under the agreement to the extent that such payment or
benefit would cause any payment to be considered a "parachute payment" under
Section 280G of the Code.
The severance agreements are each for terms of three years, with each
expiring on December 20, 2000. The Corporation and the Bank may, upon the
majority affirmative vote of each of their respective Boards, by written notice
to the officer, renew the severance agreements for one additional year on each
anniversary date, commencing with the December 20, 1998 anniversary date, unless
the officer gives contrary written notice to the other parties prior to such
anniversary date.
Pension Plans. The Bank maintains a qualified noncontributory pension plan
administered by trustees appointed by the Board of Directors of the Bank for its
employees and the employees of its subsidiaries. All of the current trustees are
members of the Bank's Board of Directors. The plan covers those employees who
have reached the age of 21 and who have completed at least 1,000 hours of
employment in a 12-month period. Contributions are determined in accordance with
actuarial principles, subject to the approval of the Board of Directors. Accrued
benefits of eligible employees become vested after five years of service.
The Bank has established an excess benefit plan entitled the "St. Paul
Federal Supplemental Retirement Plan and Excess Benefit Plan" (the "Plan"). The
purpose of the Plan is to provide employees who are participants in the pension
plan with benefits which are not currently available because such benefits would
be in excess of the limitations on contributions and benefits imposed by the
Code. The Plan is also intended to provide a targeted level of retirement income
to eligible participants.
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20
The Bank has established and maintains a grantor "rabbi" trust for the
purpose of accumulating funds with which to meet the Bank's future obligations
under the Plan. Although the trust is irrevocable and contributed assets can
only be used to pay benefits (with certain exceptions), the benefits under the
Plan remain obligations of the Bank. The Bank has purchased company-owned life
insurance policies for its benefit on the lives of certain participants in the
Plan, estimated to be sufficient to recover, over time, the cost of benefits
provided under the Plan, plus the cost of insurance. The program results in
little or no cost to the Bank over time.
The following table shows estimated aggregate annual pension benefits at
age 65 payable to employees under the pension plan and the supplemental benefit
plan in the form of a single life annuity for various levels of compensation and
years of credited service, without any limitations on benefits imposed by the
Code:
PENSION PLAN TABLE
YEARS OF SERVICE
--------------------------------------------------------
COMPENSATION(A) 15 20 25 30 35
--------------- -------- -------- -------- -------- --------
$150,000........................ $ 45,052 $ 60,070 $ 75,087 $ 90,104 $105,122
200,000........................ 84,000 112,000 140,000 140,000 141,872
250,000........................ 105,000 140,000 175,000 175,000 178,622
300,000........................ 126,000 168,000 210,000 210,000 215,372
350,000........................ 147,000 196,000 245,000 245,000 252,122
400,000........................ 168,000 224,000 280,000 280,000 288,872
450,000........................ 189,000 252,000 315,000 315,000 325,622
500,000........................ 210,000 280,000 350,000 350,000 362,372
550,000........................ 231,000 308,000 385,000 385,000 399,122
600,000........................ 252,000 336,000 420,000 420,000 435,872
650,000........................ 273,000 364,000 455,000 455,000 472,622
700,000........................ 294,000 392,000 490,000 490,000 509,372
750,000........................ 315,000 420,000 525,000 525,000 546,122
800,000........................ 336,000 448,000 560,000 560,000 582,872
850,000........................ 357,000 476,000 595,000 595,000 619,622
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(a) Compensation is assumed to be the average of the final 60 months of
compensation, which includes base salary plus incentive compensation (as set
forth under "Annual Compensation" in the Summary Compensation Table with
respect to the named executive officers), multiplied by 12. Benefits shown
reflect the Social Security offset allowance as defined in the pension plan.
The amount of any lump sum payment under the plans is calculated based upon
an actuarial determination of the present value, as of the date of retirement,
of the annual pension benefits.
Messrs. Scully, Agnew, Parke, Rinella and Ross had 34, 18, 20, 29 and 25
years of credited service, respectively, under the plans as of December 31,
1997.
Death Benefit Plan. The Board of Directors has adopted a death benefit plan
which will provide benefits to the beneficiaries of eligible executives,
including the named executive officers, who die prior to termination of
employment and before retirement. Generally, the plan provides for five years of
payments to the
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beneficiary in an amount equal to 100% of the executive's annual base salary for
the first year and 50% of executive's annual base salary in each of the
following four years.
Certain Transactions. Certain directors and executive officers of the
Corporation and the Bank, as well as certain members of their families and
certain business entities with which they or their families are affiliated, are
borrowers from the Bank. All such loans, including bridge loans, were made in
the ordinary course of business, did not involve more than the normal risk of
collection or present other unfavorable features, and were made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the same time for comparable transactions with unaffiliated persons. All loans
to directors and executive officers must be approved by the Board of Directors.
The Bank leases a warehouse facility from a limited partnership in which
Mr. Paul C. Gearen, a director of the Corporation, owns a general partner
interest. The lease, which commenced in April 1983, expires on August 31, 1998
and provides for a monthly rental payment of $7,166.67.
PROPOSED AMENDMENT TO 1995 INCENTIVE PLAN
(PROPOSAL 2)
INTRODUCTION
The St. Paul Bancorp, Inc. 1995 Incentive Plan (the "1995 Plan") was
established by the Board of Directors of the Corporation in 1995, and was
approved by the shareholders of the Corporation at the Corporation's annual
meeting on May 3, 1995. The purposes of the 1995 Plan are (i) to align the
interests of the Corporation's shareholders with those of the Corporation's
directors, officers and key employees by providing such recipients with a
proprietary interest in the Corporation's growth and success and (ii) to advance
the interests of the Corporation by attracting and retaining well-qualified
officers, other key employees and directors who are not officers or other
salaried employees of the Corporation ("Non-Employee Directors").
Under the 1995 Plan, 1,687,500 shares of Common Stock are currently
reserved for issuance.
Under the 1995 Plan, the Corporation may grant non-qualified stock options,
"incentive stock options" within the meaning of Section 422 of the Code, stock
appreciation rights ("SARs"), limited stock appreciation rights ("LSARs"),
restricted stock, performance shares and performance units (collectively,
"shares and rights"). To date, the Corporation has granted non-qualified options
with respect to 1,391,863 shares of Common Stock under the 1995 Plan.
In May 1997, the Board of Directors of the Corporation adopted the St. Paul
Bancorp, Inc. Employee Incentive Plan (the "Employee Plan"), which provides for
the award of shares and rights to all full-time and part-time employees of the
Corporation. Under the Employee Plan, 412,500 shares of Common Stock are
reserved for the award of the same types of shares and rights as may be granted
under the 1995 Plan (except incentive stock options). To date, the Corporation
has granted non-qualified options under the Employee Plan relating to 395,700
shares of Common Stock to all employees with at least two years of service
(approximately 1,400 people). The Employee Plan is not intended for the awarding
of Benefits to the senior officers of the Corporation.
The Board of Directors of the Corporation has now adopted, subject to
shareholder approval, an amendment to the 1995 Plan to increase by 1,500,000,
from 1,687,500 to 3,187,500 the number of shares of
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Common Stock reserved for issuance thereunder. Except as amended, the provisions
of the 1995 Plan will remain unchanged. The principal provisions of the 1995
Plan are summarized below.
Assuming the presence of a quorum, the affirmative vote of holders of a
majority of the shares present and eligible vote, in person or by proxy, at the
Annual Meeting is required to approve the amendment to the 1995 Plan. Unless
otherwise indicated, properly executed proxies will be voted in favor of
Proposal 2 to amend the Corporation's 1995 Plan. The Board of Directors
recommends a vote FOR approval of the amendment to the 1995 Plan.
REASONS FOR AMENDMENT
The Board of Directors of the Corporation believes that stock options and
the other benefits available under the 1995 Plan are important to increase the
incentive and to attract and encourage the continued employment and service of
directors, officers and other key employees by facilitating their purchase of an
equity interest in the Corporation. As of March 17, 1998, only 295,637 shares of
Common Stock remain available for future grants under the 1995 Plan. Approval of
the proposed amendment will increase by 1,500,000, to 3,187,500, the number of
shares of Common Stock reserved under the 1995 Plan, including 1,795,637 shares
reserved for future awards.
The Board of Directors has concluded that it is advisable that the
Corporation and its shareholders continue to have the incentive of stock options
and other benefits available as a means of attracting and retaining directors,
officers and key employees. As the Corporation progresses, officers and key
employees are continually being retained or moving into positions where, in the
judgment of the Board, an initial or increased option will be a valuable
incentive and will serve to the ultimate benefit of the shareholders.
DESCRIPTION OF THE 1995 PLAN
Administration. The 1995 Plan is administered by the Board of Directors,
which may appoint a Stock Option Committee of the Board of Directors (the
"Committee") to administer the 1995 Plan. The Board has appointed the Board's
Existing Stock Option Committee as the Committee with authority to act on behalf
of the Board of Directors with respect to the granting of awards and the
administration of the 1995 Plan.
Subject to the express provisions of the 1995 Plan, and except for options
granted to Non-Employee Directors, the Committee has the authority to select
eligible officers and other key employees who will receive awards and to
determine the terms and conditions of each award.
Available Shares. Under the 1995 Plan, 1,687,500 shares of Common Stock are
reserved for awards to officers, other key employees and Non-Employee Directors,
with 295,637 shares available for future issuance. The limitations are subject
to adjustment in the event of a stock split, stock dividend, recapitalization,
reorganization, merger or other similar event or change in capitalization. In
general, shares covered by an option, SAR, restricted stock award, performance
share or performance unit that expires or terminates unexercised or is canceled
or forfeited would again be available for awards under the 1995 Plan. The
maximum number of shares of Common Stock with respect to which awards may be
granted during any calendar year to any individual is 168,750.
Change in Control. In the event of a "change in control" of the Corporation
or the Bank, all outstanding options, SARs, and LSARs will become exercisable in
full, and all other awards will vest. See "Executive Compensation--Employment
Agreements" for the definition of a "change in control".
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Non-Qualified Stock Options, Stock Appreciation Rights and Limited Stock
Appreciation Rights. The period for the exercise of a non-qualified stock option
or SAR and the option exercise price and base price of an SAR are determined at
the time of grant. The option exercise price of a non-qualified stock option
cannot be less than the fair market value of the Common Stock on the date of
grant of such option. The 1995 Plan contemplates that options and SARs granted
to employees will become exercisable in installments of 50% after one year and
12.5% in each of the next four years, except as provided in the related option
agreement. The 1995 Plan also contemplates that, except as otherwise provided,
options and SARs will become fully exercisable upon the date on which the
optionee completes five years of employment with the Corporation or the Bank.
LSARs become exercisable only upon the occurrence of a change in control of
the Corporation or the Bank. LSARs may be granted under the 1995 Plan with
respect to options or SARs granted or previously granted under the 1995 Plan.
Each LSAR will be identified with a share of Common Stock subject to an option
or a SAR and the number of LSARs granted to a grantee shall equal the sum of the
number of shares of Common Stock subject to the option or the number of SARs
with which such LSARs are identified.
In the event of termination of employment by reason of normal retirement
(or prior thereto with the consent of the Committee), each non-qualified stock
option will not terminate until the expiration of such award in accordance with
the terms of the 1995 Plan, and each SAR and LSAR may be exercised for a period
of three months (or such longer period as may be determined by the Committee)
after the date of such termination of service or employment, unless earlier
terminated. In the event of termination of employment by reason of death or
permanent and total disability (which, for purposes of the 1995 Plan, is total
disability within the meaning of Section 22(e)(3) of the Code), each
non-qualified stock option may be exercised by the recipient or his or her
executor or administrator at any time prior to the expiration of such award in
accordance with the terms of the 1995 Plan, and each SAR and LSAR may be
exercised within one year (or such longer period as may be determined by the
Committee) after the date of the holder's death or termination of employment
(and prior to the termination of the award), but only to the extent such award
was exercisable immediately prior to the recipient's death or termination. In
the event of termination of employment for any other reason, each non-qualified
stock option will terminate three months after the date of such termination of
employment, and each SAR and LSAR will terminate on the date of termination of
employment (although the Committee may extend such period for up to three
months), unless earlier terminated.
Incentive Stock Options. No incentive stock option will be exercisable more
than ten years after its date of grant. If the recipient of the incentive stock
option owns greater than ten percent of the voting power of all shares of
capital stock of the Corporation (a "ten percent holder"), the option must be
exercised within five years after its date of grant. The option exercise price
of an incentive stock option will not be less than the fair market value of the
Common Stock on the date of grant of such option, unless the recipient of the
incentive stock option is a ten percent holder, in which case the option
exercise price will be the price required by the Code, currently 110% of fair
market value.
In the event of a termination of employment by reason of death, the
executor or administrator of the recipient's estate may exercise any incentive
stock option at any time within one year (or such longer period as may be
determined by the Committee) of such recipient's death to the extent such option
was exercisable immediately prior to the recipient's death. In the event of
termination of employment by reason of permanent and total disability, the
recipient may exercise an incentive stock option for a period of one year (or,
although such option may no longer qualify as an incentive stock option, such
longer period as may be determined by the Committee) after such termination to
the extent such award was exercisable on the date of such
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termination. In the event of a termination of employment for any other reason,
incentive stock options will be exercisable to the extent exercisable on the
date of termination for a period of three months (or, although such options may
no longer qualify as incentive stock options, such longer period as may be
determined by the Committee) after such termination, but in no event after the
expiration of the incentive stock option. If the holder of an incentive stock
option dies during the one-year period following termination of employment by
reason of permanent and total disability, or during the three-month period
following termination of employment for any other reason, each incentive stock
option will be exercisable to the extent such option was exercisable on the date
of the holder's death and may thereafter be exercised for a period of one year
(or such longer period as may be determined by the Committee), but in no event
after the expiration of such incentive stock option.
Non-Employee Director Options. Under the 1995 Plan, each Non-Employee
Director of the Corporation is automatically granted, on the date of each annual
meeting of shareholders, a non-qualified option to purchase 2,250 shares of
Common Stock at an option exercise price per share equal to the fair market
value of a share of Common Stock on the date of grant. In addition, an option to
purchase 14,063 shares of Common Stock, at an option exercise price per share
equal to the fair market value of a share of Common Stock on the date of grant,
will be granted to each new Non-Employee Director upon his or her initial
election to the Committee. Such options will be fully exercisable on the date
one year after the date of grant and will expire ten years after the date of
grant, provided that no Common Stock acquired upon the exercise of said options
shall be sold or transferred by the person exercising such option during the
six-month period following the date of grant of such option. The maximum number
of options that may be granted to Non-Employee Directors as a group shall not
exceed 30% of the shares covered by the 1995 Plan (as increased by the proposed
amendment).
Restricted Stock Awards. The 1995 Plan provides for the grant of stock
awards which are subject to a restriction period ("restricted stock") and to the
satisfaction of specified performance measures for the applicable restriction
period. Prior to the grant, the Committee will determine the restrictions
applicable to such shares. Shares of restricted stock are non-transferable until
they have become nonforfeitable. An award of shares of restricted stock, or
portion thereof, is subject to forfeiture if the holder does not remain
continuously in the employment of the Corporation during the restriction period
or to the extent the performance measures are not attained during the
restriction period; provided, however, that termination of employment by reason
of normal retirement (or prior thereto with the consent of the Committee), total
disability or death, will result in the restricted stock becoming fully vested.
In the event of termination of employment for any other reason, the portion of a
restricted stock award which is then subject to a restriction period will be
forfeited and canceled by the Corporation. Unless otherwise determined by the
Committee, the holder of a restricted stock award will have rights as a
stockholder of the Corporation, including the right to vote and to receive
dividends with respect to the shares of restricted stock.
Performance Share Awards. The 1995 Plan also provides for the grant of
performance shares. Each performance share is a right, contingent upon the
attainment of specified performance measures within a specified performance
period, to receive one share of Common Stock, which may be restricted stock, or
the fair market value of such performance share in cash. Prior to the settlement
of a performance share award in shares of Common Stock, the Committee may
determine to afford the holder of such award rights as a stockholder of the
Corporation with respect to the shares of Common Stock subject to the award.
Performance shares will be non-transferable. An award of performance shares, or
portion thereof, is subject to forfeiture to the extent the specified
performance measures are not attained during the applicable performance period;
provided, however, that termination of employment by reason of normal retirement
(or prior thereto with the
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consent of the Committee), total disability or death, will result in the
performance share award becoming fully vested. In the event of termination of
employment for any other reason, the portion of a performance share award which
is then subject to a performance period will be forfeited and canceled by the
Corporation.
Performance Unit Awards. Performance units may be granted under the 1995
Plan to provide a benefit if specified performance measures determined by the
Committee are achieved during a performance cycle. A performance cycle may
consist of a period of not less than one year nor more than three years. As soon
as practicable after each applicable performance cycle, the Committee shall
determine the number of performance units which have been earned and shall pay
each participant the value of such units in cash or, at the discretion of the
Committee, wholly or partly in shares of Common Stock. The value of the amount
payable to the participant equals a percentage (which may exceed 100%) of the
value of one share of Common Stock multiplied by the number of performance units
earned. The Committee may, in its discretion, permit deferment of the payment
provided that the election to defer is made prior to the applicable performance
cycle.
Prior to the grant of a performance unit, the Committee will determine the
performance measures, the length of the performance cycle and the value of a
performance unit. Performance unit awards will be non-transferable. An award of
performance units, or portion thereof, is subject to forfeiture to the extent
that specified performance measures are not attained during the applicable
performance cycle. In the event of a termination of employment by reason of
normal retirement (or prior thereto with the consent of the Committee), total
disability or death or under circumstances determined by the Committee to be for
the Corporation's convenience, the holder will receive the same percentage of
the performance unit award which is earned by other participants for such
performance cycle. In the event of termination of employment for any other
reason before the end of a performance cycle, the performance award will be
forfeited and cancelled by the Corporation.
Performance Measures. Under the 1995 Plan, the vesting or payment of
restricted stock awards, performance share awards and performance unit awards
will be subject to the satisfaction of certain performance measures. The
performance measures applicable to a particular award will be determined by the
Committee at the time of grant of such award. At present, no such awards are
outstanding and, accordingly, no performance measures have been designated by
the Committee. Such performance measures may be one or more of the following: a
level specified by the Committee for (a) return on assets, (b) return on equity,
(c) growth in net earnings, and (d) growth in earnings per share. Pursuant to
the 1995 Plan, the maximum number of shares with respect to which awards may be
granted during any calendar year to any individual is 168,750.
Section 162(m) of the Code. In general, Code Section 162(m) limits to $1
million the amount that a publicly held corporation is allowed to deduct each
year for compensation paid to each of its chief executive officer and four other
most highly compensated executive officers. The deduction limitation does not
apply to "qualified performance-based compensation" as defined in Code Section
162(m) and the Treasury Regulations under that section. Whether compensation
under the 1995 Plan will be "qualified performance-based compensation" for such
purposes depends upon a number of factors, including disclosure to and approval
by shareholders of the Corporation of the material terms of the performance
goals (and any material changes in such goals) under which the compensation is
to be paid. The Code and Regulations also prescribe certain procedural
requirements that must be met in order to satisfy the "qualified
performance-based compensation" definition, including that such compensation be
paid solely on account of the attainment of one or more preestablished,
objective performance goals established by a committee comprised of two or more
"outside" directors (as defined in Code Section 162(m) and the Regulations) and
that such committee must certify the
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attainment of the relevant performance goals before any compensation will be
paid. Special rules apply to compensation paid under stock options and stock
appreciation rights having an exercise price not less than the fair market value
of the stock covered by such options or rights at the date of grant, provided
that the plan under which such options or rights are granted contains a
limitation on the maximum number of options or rights that may be granted to any
employee during a specified period of time. The Corporation expects that
shareholder approval of the amendment of the 1995 Plan will permit compensation
payable with respect to options, SARs and LSARs granted under the 1995 Plan to
continue to constitute "qualified performance-based compensation" for purposes
of the $1 million deduction limitation. Although the Corporation has also
structured the 1995 Plan, as amended, such that compensation payable with
respect to other awards under the 1995 Plan will satisfy the applicable
requirements with respect to "qualified performance-based compensation," awards
may be made that do not satisfy such requirements and there can be no assurance
that awards under the 1995 Plan intended to satisfy such requirements will in
fact be "qualified performance-based compensation" for purposes of Code Section
162(m). Accordingly, the Corporation may be limited in the deductions it may
take with respect to certain awards under the 1995 Plan.
Federal Income Tax Consequences. The following discussion of the federal
income tax consequences of the 1995 Plan is only a summary of the general rules
applicable to the grant and settlement of awards under the 1995 Plan and does
not purport to give specific details on every aspect and does not cover, among
other things, state and local tax treatment. The information is based on present
law and regulations, which are subject to being changed prospectively or
retroactively.
A participant receiving a non-qualified stock option under the 1995 Plan,
including options granted to Non-Employee Directors, does not recognize taxable
income upon the grant of the option, but will recognize taxable compensation at
the time of exercise in the amount of the difference between the exercise price
and the fair market value on the date of exercise of the shares acquired
pursuant to the exercise of the option. At that time, the Corporation will be
entitled to a deduction as compensation expense in an amount equal to the amount
taxable to the participant as income.
A participant receiving an incentive stock option will not recognize
taxable income upon the grant or exercise of the option, but will recognize
income or loss upon disposition of the shares acquired pursuant to the exercise
of the option, which may be ordinary income or capital gain (or loss), depending
on the length of time the shares have been held. The Corporation will not be
entitled to any deduction with respect to the grant or exercise of a
participant's incentive stock option. However, if the participant disposes of
the shares acquired pursuant to the exercise of the option before the later of
two years from the date of grant and one year from the date of exercise, the
Corporation will, except as limited by Section 162(m) of the Code, be entitled
to a deduction as compensation expense in an amount taxable to the participant
as ordinary income and not capital gain. Such ordinary income is the amount by
which the lesser of the fair market value of the shares on the date of exercise
or on the date of disposition exceeds the exercise price of the option.
A participant who is granted SARs or LSARs will not recognize any taxable
income upon the grant of the SARs or LSARs. Upon exercise, the participant
recognizes taxable compensation in an amount equal to the fair market value of
any shares delivered and the amount of cash paid by the Corporation. This amount
is deductible by the Corporation as compensation expense.
A participant receiving restricted stock will not recognize taxable income
at the time of the grant, and the Corporation will not be entitled to a tax
deduction at such time, unless the participant makes an election to be taxed at
the time restricted stock is granted. If such election is not made, the
participant will recognize taxable income at the time the restrictions lapse or
the stock becomes vested, in an amount equal to the excess of the
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fair market value of the shares at such time over the amount, if any, paid for
such shares. The amount of ordinary income recognized by a participant by making
the above-described election or upon the lapse of the restrictions or upon
vesting is deductible by the Corporation as compensation expense, except to the
extent the deduction limits of Section 162(m) of the Code apply.
A participant receiving performance shares and performance units will not
recognize taxable income upon the grant of such shares or units, as the case may
be, and the Corporation will not be entitled to a tax deduction at such time.
Upon the settlement of performance shares or performance units, the participant
will recognize ordinary income in an amount equal to the fair market value of
any shares delivered and any cash paid by the Corporation. This amount is
deductible by the Corporation as compensation expense, except to the extent the
deduction limits of Section 162(m) of the Code apply.
In the event of a change in control, the acceleration of the vesting or
payment of any awards under the 1995 Plan may result in the receipt by the
participant of "parachute payments" under Section 280G of the Code. As such, the
participant may be subject to an excise tax, in addition to ordinary income tax,
and the Corporation may not be entitled to a deduction with respect to such
amounts.
Accounting Consequences. Under current generally accepted accounting
principles, the value of stock options granted under the 1995 Plan are
non-compensatory and is not charged against the Corporation's earnings for
financial accounting purposes. Increases in the market value of stock following
the date of grant of SARs are currently treated as a compensation expense for
financial accounting purposes. LSARs, however, may be granted without incurring
an accounting charge until the occurrence of the event which "triggers"
exercisability of the LSAR. The Corporation would recognize compensation expense
attributable to awards of restricted stock, which expense would reflect the
aggregate market value of the shares of restricted stock on the award date,
accrued over the period during which the shares vest. With respect to
performance share and performance unit awards, a compensation expense is
recognized as measured by the market price of the related shares.
Grants to Non-Employee Directors. The following table sets forth the number
of shares of Common Stock underlying options which, under the terms of the 1995
Incentive Plan, are granted automatically to Non-Employee Directors on the date
of each annual meeting of shareholders, including the 1998 Annual Meeting.
STOCK
NAME OPTIONS
---- -------
William A. Anderson......................................... 2,250
John W. Croghan............................................. 2,250
Alan J. Fredian............................................. 2,250
Paul C. Gearen.............................................. 2,250
Kenneth J. James............................................ 2,250
Jean C. Murray, O.P......................................... 2,250
John J. Viera............................................... 2,250
All Non-Employee Directors as a Group (7 persons)........... 15,750(1)
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(1) The option exercise price per share would be the closing sale price of the
Corporation's Common Stock on The Nasdaq Stock Market's National Market
("NASDAQ National Market") on the date of grant. For example, on March 17,
1998, the closing sale price of Common Stock on the NASDAQ National Market
was $26.375 per share. Each option would be fully exercisable one year after
the date of grant and would expire ten years after the date of grant.
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The Corporation's option committee has not determined how any additional
benefits will be awarded among the Corporation's executive officers, other
officers or key employees if the proposed amendment to the 1995 Plan is approved
by shareholders. See "Executive Compensation--Option/SAR Grants in Last Fiscal
Year" for certain information as to option grants to the named executive
officers during 1997 and "Executive Compensation--Aggregated Option/SAR
Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values" for
information as to how outstanding options were allocated among such individuals
as of December 31, 1997.
The Board of Directors may terminate or suspend the 1995 Plan at any time.
Unless previously terminated, the 1995 Plan will terminate automatically on May
3, 2005, the tenth anniversary of the effective date of the plan.
The Board of Directors of the Corporation recommends that the shareholders
vote FOR the proposed amendment to the 1995 Plan.
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STOCK OWNED BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth information as of March 17, 1998 with
respect to the shares of the Corporation's Common Stock beneficially owned by
each director of the Corporation, each of the named executive officers and by
all directors and executive officers of the Corporation as a group. Such
individuals and certain of the Corporation's employee benefit plans beneficially
own a total of 5,341,093 shares of the Corporation's Common Stock, or 14.97% of
the Common Stock outstanding, including shares subject to options that will
become exercisable within 60 days.
AMOUNT AND PERCENT OF
NATURE OF COMMON
BENEFICIAL STOCK
NAME AND POSITION WITH THE CORPORATION OWNERSHIP(A) OUTSTANDING
- -------------------------------------- ------------ -----------
Joseph C. Scully
Chairman of the Board, Chief Executive Officer and
Director.................................................. 616,155(b) 1.8%
Patrick J. Agnew
President, Chief Operating Officer and Director........... 603,550(b) 1.7%
William A. Anderson
Director.................................................. 19,332 *
John W. Croghan
Director.................................................. 119,251 *
Alan J. Fredian
Director.................................................. 38,607(b)(c) *
Paul C. Gearen
Director.................................................. 71,757 *
Kenneth J. James
Director.................................................. 129,683 *
Jean C. Murray, O.P.
Director.................................................. 20,813(b)(c) *
John J. Viera
Director.................................................. 35,122 *
Robert N. Parke
Senior Vice President..................................... 192,386 *
Thomas J. Rinella
Senior Vice President..................................... 193,458 *
Donald G. Ross
Senior Vice President..................................... 198,195 *
All directors and executive officers as a group (15
persons).................................................. 2,620,243(b)(c) 7.3%
- ---------------
* Less than 1%
(a) In accordance with Rule 13d-3 under the 1934 Act, a person is deemed to be
the beneficial owner, for purposes of this table, of any shares of Common
Stock if he has or shares voting power or investment power with respect to
such security, or has the right to acquire beneficial ownership at any time
within 60 days from March 17, 1998. As used herein, "voting power" is the
power to vote or direct the voting of shares and "investment power" is the
power to dispose or direct the disposition of shares. The table includes
shares owned by spouses or other immediate family members or that are held
in trust, as to which the persons named in the table possess shared voting
and/or investment power as follows:
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Mr. Scully, 30,871 shares; Mr. Agnew, 72,141 shares; Dr. Fredian, 25,054
shares; Mr. James, 122,873 shares; Mr. Viera, 14,422 shares; Mr. Parke,
76,790 shares; Mr. Rinella, 14,245 shares; Mr. Ross, 26,155 shares; and all
directors and executive officers as a group, 386,265 shares. The table
includes 13,597 shares and 45,233 shares as of March 17, 1998 held for the
benefit of Mr. Scully and Mr. Agnew, respectively, under the St. Paul
Federal Bank For Savings Deferred Compensation Trust. All other shares
included in the table are held by persons who have sole voting and
investment power over such shares. The table includes 1,377,068 shares of
Common Stock subject to outstanding options which are exercisable within 60
days from March 17, 1998. The table also includes 398,880 shares as of March
17, 1998 allocated to executive officers' accounts under the Bank's ESOP and
401(k) Profit Sharing Plan.
(b) Does not include 334,158 shares as of March 17, 1998 with respect to which
the St. Paul Federal Bank For Savings Employees Pension Plan has sole voting
and dispositive power. Also does not include 364,963 unallocated shares with
respect to which the ESOP has shared voting and dispositive power. Dr.
Fredian, Dr. Murray and Messrs. Scully and Agnew are the trustees of the
Employees Pension Plan and the ESOP.
(c) Except as allotted to Messrs. Scully and Agnew as indicated above, does not
include 74,544 shares as of March 17, 1998 with respect to which the St.
Paul Federal Bank For Savings Deferred Compensation Trust has shared voting
and dispositive power. Dr. Fredian and Dr. Murray are the trustees of the
Deferred Compensation Trust.
As of March 17, 1998, no persons are known by the Corporation to have filed
a beneficial ownership report with the SEC with regard to 5% or more of the
Corporation's outstanding Common Stock.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the 1934 Act requires the Corporation's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Corporation's equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Corporation. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the
Corporation with copies of all Section 16(a) forms they file.
To the Corporation's knowledge, based solely upon review of the copies of
such reports furnished to the Corporation and written representations that no
other reports were required, all Section 16(a) filing requirements applicable to
its officers, directors and greater than ten-percent beneficial owners were
complied with.
INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP to
continue as independent auditors for the Corporation for the year ending
December 31, 1998. Ernst & Young LLP was appointed as the independent auditors
of St. Paul Federal in 1981 and has performed audits for the Bank for the years
since then. Ernst & Young LLP has also served as the independent auditors of the
Corporation since its organization as the holding company of St. Paul Federal.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting. They will be given an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.
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DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
TO BE PRESENTED AT 1999 ANNUAL MEETING OF SHAREHOLDERS
Any proposal intended to be presented by any shareholder for action at the
1999 annual meeting of shareholders of the Corporation must be received by the
Secretary of the Corporation at 6700 West North Avenue, Chicago, Illinois 60707
not later than November 27, 1998 in order for the proposal to be considered for
inclusion in the proxy statement and proxy relating to the 1999 annual meeting.
In addition, the Corporation's Bylaws require that notice of shareholder
proposals and nominations for director be delivered to, or mailed to and
received at, the principal executive offices of the Corporation not less than 30
days nor more than 90 days prior to the date of an annual meeting, unless notice
or public disclosure of the date of the meeting occurs less than 45 days prior
to the date of such meeting, in which event, shareholders may deliver such
notice not later than the 15th day following the day on which notice of the date
of the meeting was mailed or public disclosure thereof was made. Nothing in this
paragraph shall be deemed to require the Corporation to include in its proxy
statement and proxy relating to the 1999 annual meeting any shareholder proposal
which does not meet all of the requirements for inclusion established by the SEC
in effect at the time such proposal is received.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors of the
Corporation does not know of any other matters to be presented for action by the
shareholders at the Annual Meeting. If, however, any other matters not now known
are properly brought before the meeting, the persons named in the accompanying
proxy will vote such proxy in accordance with the determination of a majority of
the Board of Directors.
By Order of the Board of Directors
JOSEPH C. SCULLY
Joseph C. Scully
Chairman of the Board and
Chief Executive
Officer
Chicago, Illinois
March 27, 1998
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TABLE OF CONTENTS
ITEM PAGE
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Solicitation, Voting and Revocability of
Proxies................................ 1
Election of Directors.................... 2
Executive Compensation................... 8
Proposed Amendment to 1995 Incentive
Plan................................... 19
Stock Owned by Management and Principal
Shareholders........................... 27
Independent Auditors..................... 28
Deadline for Submission of Shareholder
Proposals to be Presented at 1999
Annual Meeting of Shareholders......... 29
Other Matters............................ 29
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ST. PAUL BANCORP LOGO
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PROXY STATEMENT
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MARCH 27, 1998
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33
[LOGO] ST. PAUL BANCORP INC.
The officers and directors of St. Paul Bancorp, Inc.
cordially invite you to attend
the Annual Meeting of Shareholders
Wednesday, May 6, 1998 at 10:00 a.m.
Drury Lane Oakbrook
100 Drury Lane, Oakbrook Terrace, Illinois
Joseph C. Scully
Chairman and Chief Executive Officer
PLEASE BRING THIS CARD TO THE MEETING AS YOUR ADMISSION TICKET.
Directions to Drury Lane Oakbrook on reverse.
DETACH HERE
REVOCABLE PROXY ST. PAUL BANCORP, INC. REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of St. Paul Bancorp, Inc. (the "Corporation")
hereby appoints Joseph C. Scully and John J. Viera, or either of them, with
full power of substitution in each, as proxies to cast all votes which the
undersigned shareholder is entitled to cast at the annual meeting of
shareholders to be held at 10:00 a.m. on May 6, 1998, at the Drury Lane
Oakbrook, 100 Drury Lane, Oakbrook Terrace, Illinois 60181, and at any
adjournments thereof, upon the following matters. The undersigned shareholder
hereby revokes any proxy or proxies heretofore given.
THIS PROXY WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED SHAREHOLDER.
UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF THE NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2 TO AMEND THE
CORPORATION'S 1995 INCENTIVE PLAN AND IN ACCORDANCE WITH THE DETERMINATION OF
A MAJORITY OF THE BOARD OF DIRECTORS AS TO OTHER MATTERS. THE UNDERSIGNED
SHAREHOLDER MAY REVOKE THIS PROXY AT ANY TIME BEFORE IT IS VOTED BY DELIVERING
TO THE SECRETARY OF THE CORPORATION EITHER A WRITTEN REVOCATION OF THE PROXY OR
A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY APPEARING AT THE ANNUAL
MEETING AND VOTING IN PERSON. THE UNDERSIGNED SHAREHOLDER HEREBY ACKNOWLEDGES
RECEIPT OF THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT.
(CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE) SEE REVERSE SIDE
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DIRECTIONS TO DRURY LANE OAKBROOK
When approaching Drury Lane Oakbrook:
From the North or South on Route 83 (Kingery), exit at Roosevelt Road (38)
East and follow GREEN sign to DRURY LANE.
From the East or West on Roosevelt Road, exit Route 83 (Kingery) South to
Roosevelt Road (38) East and follow GREEN sign to DRURY LANE.
From Downtown Chicago and the Loop, take Eisenhower Expressway (I-290) West
to Roosevelt Road (38) West. Proceed to 83 (Kingery) South, exit 83 South
at Roosevelt Road (38) East and follow GREEN sign to DRURY LANE.
From the West on I-88, exit at Midwest Road, proceed north to Butterfield
Road (56), turn right onto Butterfield Road, exit Roosevelt Road (38) East
to DRURY LANE.
From I-294 (Tri-State), take I-88 West to Aurora, exit at Cermak Road (22nd
Street), make no turns and proceed north on Spring Road 3/4 of a mile to
DRURY LANE.
DRURY LANE OAKBROOK, 100 DRURY LANE, OAKBROOK TERRACE, ILLINOIS
Located next door to the 31-Story Oakbrook Terrace Tower
DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL CARDS
IN THE ACCOMPANYING ENVELOPE.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2
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1. Election of each of four directors for a three-year term.
NOMINEES: PATRICK J. AGNEW, WILLIAM A. ANDERSON, ALAN J. FREDIAN AND JEAN
C. MURRAY, O.P.
FOR WITHHELD MARK HERE
IF YOU PLAN [ ]
[ ] [ ] TO ATTEND
THE MEETING
For, except vote withheld from the following nominee(s):
MARK HERE
[ ] FOR ADDRESS [ ]
------------------------------ CHANGE AND
NOTE BELOW
2. To amend the Corporation's 1995 Incentive Plan to increase by 1,500,000
the number of shares of Common Stock reserved for issuance thereunder.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING, OR ANY ADJOURNMENTS THEREOF, IN ACCORDANCE WITH
THE DETERMINATION OF A MAJORITY OF THE CORPORATION'S BOARD OF DIRECTORS.
PLEASE DATE AND SIGN EXACTLY AS NAME APPEARS HEREIN. EACH EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN, ATTORNEY-IN-FACT AND OTHER FIDUCIARY SHOULD
SIGN AND INDICATE HIS OR HER FULL TITLE. WHEN STOCK HAS BEEN ISSUED IN THE
NAME OF TWO OR MORE PERSONS, ALL SHOULD SIGN.
SIGNATURE: DATE: SIGNATURE: DATE:
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