<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 8, 1998
REGISTRATION NO. 333-
REGISTRATION NO. 333-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C>
METROPOLITAN FINANCIAL CORP. METROPOLITAN CAPITAL TRUST I
(Exact name of Registrant as specified in its charter) (Exact name of Registrant as specified in its trust agreement)
OHIO DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
34-1109469 APPLIED FOR
(I.R.S. Employer (I.R.S. Employer
Identification Number) Identification Number)
</TABLE>
6120
(Primary Standard Industrial
Classification Code Number)
6001 LANDERHAVEN DRIVE
MAYFIELD HEIGHTS, OHIO 44124
(440) 646-1111
(Address, including zip code, and telephone number, including area code,
of Registrants' principal executive offices)
DAVID G. LODGE
PRESIDENT, ASSISTANT SECRETARY AND ASSISTANT TREASURER
METROPOLITAN FINANCIAL CORP.
6001 LANDERHAVEN DRIVE
MAYFIELD HEIGHTS, OHIO 44124
(440) 646-1111
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------------------
Copies to:
MALVIN E. BANK, ESQ. JOSEPH G. PASSAIC, JR., ESQ.
PAUL N. HARRIS, ESQ. MARY M. SJOQUIST, ESQ.
THOMPSON HINE & FLORY LLP PATTON BOGGS, LLP
3900 KEY CENTER 2550 M STREET, N.W.
127 PUBLIC SQUARE WASHINGTON, D.C. 20037
CLEVELAND, OHIO 44114-1216 (202) 457-6000
(216) 566-5500 (202) 457-6315 (FACSIMILE)
(216) 566-5800 (Facsimile)
-------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
-------------------------------
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
<PAGE> 2
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to
Rule 434, check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT (1) PRICE (1) REGISTRATION FEE
(2) (3)
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<S> <C> <C> <C> <C>
% Trust Preferred Securities of
Metropolitan Capital Trust I $28,750,000 100% $28,750,000 $8,481.25
- ---------------------------------------------------------------------------------------------------------------------------------
% Junior Subordinated
Deferrable Interest Debentures of
Metropolitan Financial Corp. (2) $28,750,000 100% $28,750,000 N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Metropolitan Financial Corp.
Guarantee With Respect to the
Trust Preferred Securities (3) N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Total $28,750,000 (4) 100% $28,750,000 (4) $8,481.25
===================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the Registration Fee.
(2) No separate consideration will be received for the Junior Subordinated
Deferrable Interest Debentures of Metropolitan Financial Corp. (the
"Junior Subordinated Debentures") distributed upon any liquidation of
Metropolitan Capital Trust I.
(3) No separate consideration will be received for the Metropolitan
Financial Corp. Guarantee.
(4) Such amount represents the liquidation amount of the Metropolitan
Capital Trust I Trust Preferred Securities and the principal amount of
Junior Subordinated Debentures that may be distributed to holders of
such Trust Preferred Securities upon any liquidation of Metropolitan
Capital Trust I.
-------------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
===============================================================================
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 8, 1998
PROSPECTUS
$25,000,000
METROPOLITAN CAPITAL TRUST I
[METROPOLITAN % CUMULATIVE TRUST PREFERRED SECURITIES
LOGO]
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
2,500,000 PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
METROPOLITAN FINANCIAL CORP.
The % Cumulative Trust Preferred Securities (the "Preferred
Securities") offered hereby represent beneficial interests in Metropolitan
Capital Trust I, a statutory business trust created under the laws of the State
of Delaware (the "Trust Issuer"). Metropolitan Financial Corp., an Ohio
corporation ("Metropolitan" or the "Corporation"), will be the owner of all of
the beneficial interests represented by common securities of the Trust Issuer
(the "Common Securities" and, collectively with the Preferred Securities, the
"Trust Securities"). Wilmington Trust Company is the Property Trustee of the
Trust Issuer. The Trust Issuer exists for the sole purpose of issuing the Trust
Securities and investing the proceeds from the sale thereof in % Junior
Subordinated Deferrable Interest Debentures (the "Junior Subordinated
Debentures") to be issued by the Corporation. The Junior Subordinated Debentures
will mature on June 30, 2028 (the "Stated Maturity"). The Preferred Securities
will have a preference over the Common Securities under certain circumstances
with respect to cash distributions and amounts payable on liquidation,
redemption or otherwise. See "Description of the Preferred Securities --
Subordination of the Common Securities."
Application has been made to list the Preferred Securities on the Nasdaq
Stock Market's National Market under the symbol "METFCP." See "Risk Factors --
Absence of Prior Public Market for the Preferred Securities; Trading Price and
Tax Considerations."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE FUND OF
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================
<TABLE>
<S> <C> <C> <C>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC COMMISSION(1) ISSUER(2)(3)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security.................................. $10.00 (2) $10.00
- -----------------------------------------------------------------------------------------------------------------------
Total(4)................................................ $25,000,000 (2) $25,000,000
=======================================================================================================================
</TABLE>
(1) The Trust Issuer and Metropolitan have agreed to indemnify the underwriter,
Ryan, Beck & Co. (the "Underwriter") against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debentures of
Metropolitan, Metropolitan has agreed to pay the Underwriter, as
compensation for its arranging the investment of such proceeds in the Junior
Subordinated Debentures, $ per Preferred Security, or $ in the
aggregate ($ in the aggregate if the over-allotment option is
exercised in full). See "Underwriting."
(3) Before deducting expenses payable by Metropolitan, estimated to be
approximately $280,000.
(4) The Trust Issuer and Metropolitan have granted the Underwriter a 30-day
option to purchase up to 375,000 additional Preferred Securities on the same
terms and conditions set forth above solely to cover over-allotments, if
any. If this option is exercised in full, the total Price to Public and
Proceeds to Issuer will be $28,750,000. See "Underwriting."
The Preferred Securities are offered by the Underwriter subject to receipt
and acceptance by it, prior sale and the Underwriter's right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the Preferred Securities will be made in
book-entry form through the book-entry facilities of The Depository Trust
Company on or about , 1998 against payment therefor in immediately
available funds.
[RYAN, BECK LOGO]
The date of this Prospectus is , 1998
<PAGE> 4
(continued from the previous page)
The Preferred Securities will be represented by one or more global
securities registered in the name of a nominee of The Depository Trust Company,
as depository ("DTC"). Beneficial interests in the global securities will be
shown on, and transfer thereof will be effected only through, records maintained
by DTC and its participants. Except as described under "Description of Preferred
Securities," Preferred Securities in definitive form will not be issued and
owners of beneficial interests in the global securities will not be considered
holders of the Preferred Securities. Settlement for the Preferred Securities
will be made in immediately available funds. The Preferred Securities will trade
in DTC's Same-Day Funds Settlement System, and secondary market trading activity
for the Preferred Securities will therefore settle in immediately available
funds.
Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash distributions accumulating from the date of
original issuance and payable quarterly in arrears on June 30, September 30,
December 31 and March 31 of each year, commencing June 30, 1998, at the annual
rate of % of the Liquidation Amount of $10 per Preferred Security
("Distributions"). Subject to certain exceptions, Metropolitan has the right to
defer payment of interest on the Junior Subordinated Debentures at any time or
from time to time for a period not exceeding 20 consecutive quarters with
respect to each deferral period (each, an "Extension Period"), provided that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all interest then accrued and unpaid (together with interest
thereon at the rate of %, compounded quarterly, to the extent permitted by
applicable law), Metropolitan may elect to begin a new Extension Period subject
to the requirements set forth herein. If interest payments on the Junior
Subordinated Debentures are so deferred, Distributions on the Preferred
Securities will also be deferred, and Metropolitan will not be permitted,
subject to certain exceptions described herein, to declare or pay any cash
distributions with respect to the capital stock of Metropolitan or debt
securities of Metropolitan that rank pari passu with or junior to the Junior
Subordinated Debentures. See "Description of the Junior Subordinated
Debentures--Restrictions on Certain Payments."
During an Extension Period, interest on the Junior Subordinated
Debentures would continue to accrue (and the amount of Distributions to which
holders of the Preferred Securities are entitled would accumulate) at the rate
of % per annum, compounded quarterly, and holders of the Preferred Securities
would be required to include interest income in their gross income for United
States federal income tax purposes in advance of receipt of the cash
distributions with respect to such deferred interest payments. Metropolitan
believes that the mere existence of its right to defer interest payments should
not cause the Preferred Securities to be issued with original issue discount for
federal income tax purposes. However, it is possible that the Internal Revenue
Service could take the position that the likelihood of deferral was not a remote
contingency within the meaning of applicable Treasury Regulations. See
"Description of the Junior Subordinated Debentures--Right to Defer Interest
Payment Obligation" and "Certain Federal Income Tax Consequences-Interest Income
and Original Issue Discount."
Metropolitan and the Trust Issuer believe that, taken together, the
obligations of Metropolitan under the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures, the Indenture and the Expense Agreement (each as
defined herein), constitute, in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of all of the Trust Issuer's
obligations under the Preferred Securities. See "Relationship Among the
Preferred Securities, the Junior Subordinated Debentures, the Expense Agreement
and the Guarantee--Full and Unconditional Guarantee." The Guarantee of
Metropolitan (the "Guarantee") guarantees the payment of Distributions and
payments on liquidation or redemption of the Preferred Securities, but only in
each case to the extent of funds held by the Trust Issuer, as described herein.
See "Description of the Guarantee." If Metropolitan does not make interest
payments on the Junior Subordinated Debentures held by the Trust Issuer, the
Trust Issuer will have insufficient funds to pay Distributions on the Preferred
Securities. The Guarantee does not cover payment of Distributions when the Trust
Issuer does not have sufficient funds to pay such Distributions. In such event,
a holder of the Preferred Securities may institute a legal proceeding directly
against Metropolitan to enforce payment of amounts equal to such Distributions
to such holder. See "Description of the Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of the Preferred
Securities."
The Preferred Securities are subject to mandatory redemption, in whole
or in part, upon repayment of the Junior Subordinated Debentures at their Stated
Maturity or their earlier redemption. Subject to regulatory approval, if then
required under applicable capital guidelines or regulatory policies, and to
restrictions contained in the indenture (the "1995 Notes Indenture") for the
Corporation's 9.625% subordinated notes maturing January 1, 2005 (the "1995
Notes"), the Junior Subordinated Debentures are redeemable prior to their Stated
Maturity at the option of the Corporation (i) on or after , 2003, in whole
at any time or in part from time to time, or (ii) at any time, in whole (but not
in part), within ninety days following the occurrence and continuation of a Tax
Event, an Investment Company Event or a Capital Treatment Event (each as defined
herein) at a redemption price (the "Redemption Price") equal to the accrued
<PAGE> 5
and unpaid interest on the Junior Subordinated Debentures so redeemed to the
date fixed for redemption plus 100% of the principal amount thereof. See
"Description of the Junior Subordinated Debentures--Redemption or Exchange" and
"Description of the 1995 Notes."
The obligations of Metropolitan under the Guarantee and the Junior
Subordinated Debentures will be unsecured and are junior in right of payment to
all indebtedness not specifically subordinated to the Junior Subordinated
Debentures (the "Senior Indebtedness"). At December 31, 1997, Metropolitan had
$20.4 million in outstanding Senior Indebtedness. There are no limits pursuant
to the terms of the Trust Securities or the Junior Subordinated Debentures on
the amount of Senior Indebtedness or indebtedness ranking pari passu with the
Junior Subordinated Debentures which Metropolitan may issue. Metropolitan may
from time to time incur Senior Indebtedness and indebtedness ranking pari passu
with the Junior Subordinated Debentures. The obligations of Metropolitan under
the Guarantee and the Junior Subordinated Debentures are also junior to the
liabilities of the Bank and other subsidiaries of Metropolitan. See "Description
of the Junior Subordinated Debentures--Subordination."
Metropolitan will have the right at any time to dissolve the Trust
Issuer and, after satisfaction of creditors of the Trust Issuer, if any, as
provided by applicable law, cause the Junior Subordinated Debentures to be
distributed to the holders of the Preferred Securities and the Common Securities
in exchange therefor upon liquidation of the Trust Issuer. The ability of
Metropolitan to do so may be subject to Metropolitan's prior receipt of
regulatory approval. In the event of the dissolution of the Trust Issuer, after
satisfaction of liabilities to creditors of the Trust Issuer as provided by
applicable law, the holders of the Preferred Securities will be entitled to
receive a Liquidation Amount of $10 per Preferred Security plus accumulated and
unpaid Distributions thereon to the date of payment, which may be in the form of
a distribution of a Like Amount of the Junior Subordinated Debentures, subject
to certain exceptions. See "Description of the Preferred Securities--Liquidation
of the Trust Issuer and Distribution of the Junior Subordinated Debentures to
Holders" and "--Liquidation Distribution upon Dissolution."
- ------------------------------------------------------------------------------
Metropolitan will provide to the holders of the Preferred Securities
annual reports containing financial statements audited by Metropolitan's
independent auditors. Metropolitan will also furnish annual reports on Form 10-K
free of charge to holders of the Preferred Securities who so request in writing
addressed to the Secretary of Metropolitan.
- -------------------------------------------------------------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
PREFERRED SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING
TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. ANY OF THE
FOREGOING TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT
NOTICE. FOR A DESCRIPTION OF THESE ACTIVITIES, See "UNDERWRITING."
ii
<PAGE> 6
[Map indicating Metropolitan
Savings Bank's branch offices and
loan production office.]
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements and notes thereto appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus assumes that the Underwriter's over-allotment option will not be
exercised.
METROPOLITAN FINANCIAL CORP.
Metropolitan Financial Corp. ("Metropolitan" or the "Corporation") is
the holding company for Metropolitan Savings Bank of Cleveland (the "Bank"), an
Ohio chartered stock savings association headquartered in Mayfield Heights,
Ohio. Metropolitan had total assets of $925.0 million at December 31, 1997. The
Bank operates 15 full service retail offices serving primarily the eastern
suburbs of Cleveland, Ohio and is the fifth largest savings association
headquartered in Ohio. The Bank's deposits are insured up to applicable limits
by the Federal Deposit Insurance Corporation ("FDIC").
In recent years, Metropolitan has pursued a strategy of maximizing
long term profitability by pursuing balance sheet growth designed to enhance the
franchise value of the Bank, its primary operating subsidiary. Metropolitan
seeks to maintain strong growth through (i) increasing total interest-earning
assets by continuing to focus on multifamily, commercial real estate and
residential loan origination while maintaining a high level of asset quality and
"adequately capitalized" status pursuant to FDIC guidelines, (ii) growing time
and core deposits at a rate that is consistent with the overall level of growth
of interest-earning assets, (iii) increasing non-interest income as a non-credit
based source of income that requires a lower commitment of capital than credit
based products, and (iv) increasing the capital of the Bank through retained
earnings.
As a result of this strategy, Metropolitan's assets have increased
from $300.5 million at December 31, 1992 to $925.0 million at December 31, 1997.
Net income for the Corporation has increased from $3.1 million for the year
ended December 31, 1992 to $5.8 million for the year ended December 31, 1997.
Metropolitan is primarily engaged in originating and purchasing
multifamily and commercial real estate loans in Ohio, Southeastern Michigan,
Central and Northern New Jersey, Northern Kentucky, Western Pennsylvania and
California, and residential real estate loans in Northeastern Ohio. Metropolitan
has expanded its multifamily and commercial real estate lending beyond its
primary lending markets into other areas of the United States in order to
benefit from management's expertise in multifamily and commercial lending.
Management believes that a certain degree of geographic diversity serves to
enhance Metropolitan's asset quality.
At December 31, 1997, Metropolitan's loan portfolio totaled $707.9
million, of which $194.5 million, or 25.4%, was in multifamily loans. Management
intends to continue to focus on originating and purchasing variable rate
multifamily, as well as commercial real estate and residential mortgages in its
primary lending markets. Management believes that multifamily loans offer
attractive risk-adjusted yields and favorable asset/liability management
characteristics. Metropolitan believes that, despite growing competition for
multifamily real estate loans from other lenders, it will continue to benefit
from management's experience and relationships with various sources of
multifamily lending developed over the years.
At December 31, 1997, commercial real estate loans comprised 21.8% of
Metropolitan's total loan portfolio. Over the past three years, this portion of
Metropolitan's portfolio has increased mainly through purchases. A majority of
these loans were part of larger packages of loans that included multifamily
residential loans and exhibited the yield and term characteristics sought by
Metropolitan and met the underwriting criteria established by Metropolitan.
Metropolitan plans to continue to add commercial real estate loans to its
portfolio through these types of purchases and to a lesser extent, through
origination. Due to regulatory limitations, Metropolitan expects that although
the level of commercial real estate loans in its portfolio will continue to
increase, the percentage of its loan portfolio consisting of commercial real
estate loans will remain stable.
Metropolitan originates one- to four-family residential loans in its
primary market of Northeastern Ohio. Metropolitan originates fixed rate
residential loans primarily for sale in the secondary market and originates
adjustable rate residential loans to hold in its portfolio. At December 31,
1997, 19.2% of Metropolitan's total loan portfolio was made up of residential
real estate loans secured by one- to four-family residences. When Metropolitan
sells its fixed rate real estate loans into the secondary market, it retains the
servicing rights on the loans, thereby increasing the amount of non-interest
income to the Corporation.
1
<PAGE> 8
In addition to retaining servicing rights on the residential loans
that it sells, Metropolitan increases its loan servicing portfolio through
purchases of servicing rights. At December 31, 1997, Metropolitan's overall
servicing portfolio was $1.6 billion. Of such amount, $1.2 billion represented
loans serviced for others. Loan servicing income, net, which was $1.3 million in
the 12 months ended December 31, 1997, represents a significant source of fee
income to Metropolitan. Management believes that the market value of the
servicing portfolio exceeds the amount reflected on the balance sheet.
Maintaining a high level of asset quality is one of management's top
priorities. Net charge-offs have averaged 0.06% for the five years ended
December 31, 1997, and net charge-offs were $893,000 in the 12 months ended
December 31, 1997. At December 31, 1997, nonperforming loans represented 0.44%
of total loans and nonperforming assets represented 0.56% of total assets.
Metropolitan plans to fund its asset growth primarily through growth
in time and core deposits. Deposits have grown at a compounded annual rate of
22.3% from December 31, 1992 to December 31, 1997, while assets have grown at
the rate of 25.2%. As deposit growth has lagged behind asset growth, Federal
Home Loan Bank ("FHLB") advances and reverse repurchase agreements have been
used by the Bank to fund asset growth. Metropolitan targets growing communities
with demographic and market characteristics which can support new retail sales
office locations and plans to open two de novo offices per year. In addition to
providing a source of core deposit funding, these retail sales offices will
enable the Corporation to continue to increase residential, consumer and
business lending in its primary Ohio markets.
In recent years, Metropolitan has put in place several initiatives
designed to make the Bank a full service bank. Metropolitan has created a trust
department, which manages investment assets for individuals and institutional
clients. In addition, the Bank has expanded its business lending and consumer
loan departments and personnel, including a credit card program. These
initiatives have been undertaken despite the short-term detrimental impact on
earnings as Metropolitan believes that such additional products and services
will enhance its competitive position and profitability in future years.
Although these activities constitute a relatively small part of Metropolitan's
business strategy at the present time, management expects these lines of
business to continue to grow and to become a more significant part of the
business of the Bank in the future.
The Corporation was incorporated in Ohio in 1972. Its corporate
headquarters is located at 6001 Landerhaven Drive, Mayfield Heights, Ohio 44124
and its telephone number is (440) 646-1111.
METROPOLITAN CAPITAL TRUST I
Metropolitan Capital Trust I (the "Trust Issuer") is a statutory
business trust created under Delaware law pursuant to (i) the Trust Agreement
executed by the Corporation, as depositor, Wilmington Trust Company, as Property
Trustee, and the Administrative Trustees named therein, and (ii) the filing of a
certificate of trust with the Delaware Secretary of State on April 7, 1998. The
trust agreement will be amended and restated in its entirety (as so amended, the
"Trust Agreement"). All of the beneficial interests represented by common
securities of the Trust Issuer (the "Common Securities") will be owned by the
Corporation. The Corporation will acquire Common Securities in an aggregate
Liquidation Amount equal to 4% of the total capital of the Trust Issuer. The
Trust Issuer exists for the exclusive purposes of (i) issuing and selling the
Common Securities and the % Cumulative Trust Preferred Securities (the
"Preferred Securities", and collectively with the Common Securities, the "Trust
Securities"), (ii) using the proceeds from the sale of the Trust Securities to
acquire % Junior Subordinated Deferrable Interest Debentures (the "Junior
Subordinated Debentures") issued by the Corporation, and (iii) engaging in only
those other activities necessary, advisable or incidental thereto (such as
registering the transfer of the Trust Securities). Accordingly, the Junior
Subordinated Debentures will be the sole assets of the Trust Issuer, and
payments under the Junior Subordinated Debentures will be the sole revenue of
the Trust Issuer. The principal executive office of the Trust Issuer is 6001
Landerhaven Drive, Mayfield Heights, Ohio 44124 and its telephone number is
(440) 646-1111.
2
<PAGE> 9
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
THE TRUST ISSUER......................................... Metropolitan Capital Trust I, a Delaware statutory business trust.
The sole assets of the Trust Issuer will be the Junior Subordinated
Debentures.
SECURITIES OFFERED....................................... 2,500,000 shares of % Cumulative Trust Preferred Securities,
evidencing undivided preferred beneficial interests in the assets of
the Trust Issuer, which will consist only of the Junior Subordinated
Debentures.
OFFERING PRICE........................................... $10 per Preferred Security (Liquidation Amount $10).
DISTRIBUTIONS............................................ Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash distributions at an annual rate of %
of the Liquidation Amount of $10 per Preferred Security,
accumulating from the date of original issuance and payable
quarterly in arrears on June 30, September 30, December 31 and
March 31 of each year, commencing on June 30, 1998
("Distributions"). The distribution rate and the distribution and
other payment dates for the Preferred Securities will correspond to
the interest rate and interest and other payment dates on the Junior
Subordinated Debentures. See "Description of the Preferred
Securities."
JUNIOR SUBORDINATED DEBENTURES........................... The Trust Issuer will invest the proceeds from the issuance of the
Trust Securities in an equivalent amount of the Junior Subordinated
Debentures. The Junior Subordinated Debentures will mature on
June 30, 2028. The Junior Subordinated Debentures will rank
subordinate and junior in right of payment to all indebtedness of
Metropolitan not specifically subordinated to the Junior
Subordinated Debentures (the "Senior Indebtedness"). At
December 31, 1997, Metropolitan had $20.4 million in outstanding
Senior Indebtedness. There is no limitation on the amount of Senior
Indebtedness which Metropolitan may issue. Metropolitan may
from time to time incur indebtedness constituting Senior
Indebtedness. In addition, because Metropolitan is a holding
company, Metropolitan's obligations under the Junior Subordinated
Debentures will effectively be subordinated to all existing and future
liabilities and obligations of its subsidiaries, including the Bank.
See "Risk Factors--Subordination of the Guarantee and the Junior
Subordinated Debentures," "Risk Factors--Source of Payments to
Holders of Preferred Securities" and "Description of the Junior
Subordinated Debentures--Subordination."
GUARANTEE................................................ Payments of Distributions out of funds held by the Trust Issuer, and
payments on liquidation of the Trust Issuer or the redemption of the
Preferred Securities, are guaranteed by Metropolitan to the extent
the Trust Issuer has funds available therefor (the "Guarantee").
Metropolitan and the Trust Issuer believe that, taken together, the
obligations of Metropolitan under the Guarantee, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and
the Expense Agreement (each as defined herein), constitute, in the
aggregate, a full, irrevocable and unconditional guarantee, on a
subordinated basis, of all of the Trust Issuer's obligations under the
Preferred Securities. See "Description of the Guarantee" and
"Relationship Among the Preferred Securities, the Junior
Subordinated Debentures, the Expense Agreement and the
Guarantee." The obligations of Metropolitan under the Guarantee
</TABLE>
3
<PAGE> 10
<TABLE>
<S> <C>
are subordinate and junior in right of payment to all Senior
Indebtedness of Metropolitan. See "Risk Factors--Subordination of
the Guarantee and the Junior Subordinated Debentures" and
"Description of the Guarantee."
RIGHT TO DEFER INTEREST PAYMENTS......................... So long as no event of default under the Indenture has occurred and
is continuing, Metropolitan has the right under the Indenture at any
time during the term of the Junior Subordinated Debentures to defer
the payment of interest at any time or from time to time for a period
not exceeding 20 consecutive quarters with respect to each deferral
period (each, an "Extension Period"), provided that no Extension
Period may extend beyond the Stated Maturity (as defined herein)
of the Junior Subordinated Debentures. At the end of such
Extension Period, Metropolitan must pay all interest then accrued
and unpaid (together with interest thereon at the annual rate of %,
compounded quarterly, to the extent permitted by applicable law).
During an Extension Period, interest will continue to accrue and
holders of the Junior Subordinated Debentures (and holders of the
Preferred Securities) will be required to accrue interest income for
United States federal income tax purposes in advance of receipt of
payment of such deferred interest. See "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount").
During any such Extension Period, Metropolitan may not (i) declare
or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of
Metropolitan's capital stock (other than (a) the reclassification of
any class of Metropolitan's capital stock into another class of
capital stock, (b) dividends or distributions payable in common
shares of Metropolitan, (c) any declaration of a dividend in
connection with the implementation of a shareholders' rights plan,
or the issuance of shares under any such plan in the future or the
redemption or repurchase of any such rights pursuant thereto, (d)
payments under the Guarantee, and (e) purchases of common shares
related to the issuance of common shares or rights under any of
Metropolitan's benefit plans for its directors, officers or
employees), (ii) make any payment of principal, interest or premium,
if any, on, or repay, repurchase or redeem, any debt securities of
Metropolitan that rank pari passu with or junior in right of payment
to the Junior Subordinated Debentures, or (iii) make any guarantee
payments with respect to any guarantee by Metropolitan of the debt
securities of any subsidiary of Metropolitan if such guarantee ranks
pari passu with or junior in right of payment to the Junior
Subordinated Debentures other than payments pursuant to the
Guarantee. Additionally, during any such Extension Period, the
Corporation shall not redeem, purchase or acquire less than all the
outstanding Junior Subordinated Debentures or any of the Preferred
Securities. Prior to the termination of any such Extension Period,
Metropolitan may further defer the payment of interest on the Junior
Subordinated Debentures, provided that no Extension Period may
exceed 20 consecutive quarters or extend beyond the Stated Maturity
of the Junior Subordinated Debentures. There is no limitation on the
number of times that Metropolitan may elect to begin an Extension
Period. See "Description of the Junior Subordinated Debentures-Right
to Defer Interest Payment Obligation" and "Certain Federal Income
Tax Consequences--Interest Income and Original Issue Discount."
</TABLE>
4
<PAGE> 11
<TABLE>
<S> <C>
Metropolitan has no current intention of exercising its right to
defer payments of interest by extending the interest payment period
on the Junior Subordinated Debentures. However, should Metropolitan
elect to exercise such right in the future, the market price of the
Preferred Securities is likely to be adversely affected. As a result
of the existence of Metropolitan's right to defer interest payments,
the market price of the Preferred Securities may be more volatile
than the market prices of other similar securities that do not
provide for such optional deferrals.
REDEMPTION............................................... Subject to regulatory approval, if then required under applicable
capital guidelines or regulatory policies, and to restrictions
contained in the indenture (the "1995 Notes Indenture") for the
Corporation's 9.625% subordinated notes maturing January 1, 2005
(the "1995 Notes"), the Junior Subordinated Debentures are subject
to redemption prior to their Stated Maturity at the option of
Metropolitan (i) on or after , 2003, in whole at any time or in part
from time to time, or (ii) at any time, in whole (but not in part),
within 90 days following the occurrence and continuation of a Tax
Event, an Investment Company Event or a Capital Treatment Event
(each as defined herein) in each case at a redemption price equal to
100% of the principal amount of the Junior Subordinated Debentures
so redeemed, together with any accrued and unpaid interest to the
date fixed for redemption.
If the Junior Subordinated Debentures are redeemed prior to their
Stated Maturity, the Trust Issuer must apply the proceeds of such
redemption to redeem a Like Amount (as defined herein) of the
Preferred Securities and the Common Securities. The Preferred
Securities will be redeemed upon repayment of the Junior
Subordinated Debentures at their Stated Maturity. See "Description
of the Preferred Securities--Redemption" and "Description of the
1995 Notes."
DISTRIBUTION OF THE JUNIOR
SUBORDINATED DEBENTURES UPON
LIQUIDATION OF THE TRUST ISSUER........................ Metropolitan will have the right at any time to dissolve the Trust
Issuer and, after satisfaction of creditors of the Trust Issuer, if any,
as provided by applicable law, cause the Junior Subordinated
Debentures to be distributed to the holders of the Preferred
Securities and the Common Securities in exchange therefor upon
liquidation of the Trust Issuer. The ability of Metropolitan to do so
may be subject to Metropolitan's prior receipt of regulatory
approval. See "Description of the Preferred Securities--Liquidation
Distribution upon Dissolution."
In the event of the dissolution of the Trust Issuer, after
satisfaction of the claims of creditors of the Trust Issuer, if any,
as provided by applicable law, the holders of the Preferred
Securities will be entitled to receive a Liquidation Amount of $10
per Preferred Security plus accumulated and unpaid Distributions
thereon to the date of payment, which may be in the form of a
distribution of a Like Amount of the Junior Subordinated Debentures,
subject to certain exceptions as described herein. See "Description
of the Preferred Securities--Liquidation of the Trust Issuer and
Distribution of the Junior Subordinated Debentures to Holders."
</TABLE>
5
<PAGE> 12
<TABLE>
<S> <C>
VOTING RIGHTS............................................ Except in limited circumstances, the holders of the Preferred
Securities will have no voting rights. See "Description of the
Preferred Securities--Voting Rights; Amendment of Trust
Agreement."
USE OF PROCEEDS.......................................... All of the proceeds from the sale of the Preferred Securities will be
used by the Trust Issuer to purchase Junior Subordinated
Debentures. Metropolitan intends that the net proceeds from the
sale of such Junior Subordinated Debentures will be used for
general corporate purposes, including, but not limited to, repayment
of the $4.9 million in principal amount currently outstanding with
respect to the Corporation's 1993 subordinated notes, which bear
interest at the rate of 10% per annum and mature on December 31,
2001 (the "1993 Notes"), acquisitions by either the Corporation or
the Bank (although there presently exist no agreements or
understandings with respect to any such acquisition), capital
contributions to the Bank to support growth and for working capital,
and the possible repurchase of Metropolitan's common shares,
subject to acceptable market conditions.
RISK FACTORS............................................. An investment in the Preferred Securities involves substantial risks
that should be considered by prospective purchasers. In addition,
because holders of the Preferred Securities may receive Junior
Subordinated Debentures on termination of the Trust Issuer, and
because payments on the Junior Subordinated Debentures are the
sole source of funds for Distributions on and redemptions of the
Preferred Securities, prospective purchasers of the Preferred
Securities are also making an investment decision with regard to the
Junior Subordinated Debentures and should carefully review all of
the information regarding the Junior Subordinated Debentures
contained herein. See "Risk Factors" and "Description of the Junior
Subordinated Debentures."
NASDAQ NATIONAL MARKET SYMBOL............................ Application has been made to list the Preferred Securities on The
Nasdaq Stock Market's National Market under the symbol
"METFCP."
ERISA CONSIDERATIONS..................................... For a discussion of certain restrictions on purchases, see "ERISA
Considerations."
</TABLE>
6
<PAGE> 13
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth certain summary consolidated financial
and other data of the Corporation at or for the dates indicated. This
information does not purport to be complete and should be read in conjunction
with, and is qualified in its entirety by, the more detailed information,
including the Consolidated Financial Statements and notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, included elsewhere herein.
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets....................................... $924,985 $769,076 $590,095 $479,384 $372,390
Loans receivable, net.............................. 693,655 637,493 478,345 424,944 284,288
Loans held for sale................................ 14,230 8,973 1,504 84 10,391
Mortgage-backed securities......................... 143,167 56,672 39,156 16,785 13,412
Securities......................................... 6,446 13,173 22,806 7,641 10,168
Intangible assets.................................. 2,987 3,239 3,188 3,409 3,631
Loan servicing rights.............................. 9,224 8,051 9,130 4,825 2,295
Deposits .......................................... 737,782 622,105 503,742 436,198 332,549
Borrowings......................................... 135,870 101,874 46,874 15,504 15,745
Shareholders' equity............................... 36,661 30,244 25,466 20,280 17,750
SELECTED OPERATIONS DATA:
Total interest income.............................. $ 69,346 $ 54,452 $ 43,435 $ 31,639 $ 24,448
Total interest expense............................. 41,703 33,116 26,816 15,992 11,215
------- ------- ------- ------- -------
Net interest income....................... 27,643 21,336 16,619 15,647 13,233
Provision for loan losses.......................... 2,340 1,636 959 766 740
-------- -------- --------- --------- ---------
Net interest income after provision
for loan losses......................... 25,303 19,700 15,660 14,881 12,493
Loan servicing income, net......................... 1,293 1,204 1,068 642 601
Net gain on sale of loans and securities........... 580 336 833 86 1,712
Other noninterest income........................... 2,268 2,233 2,323 873 1,067
Noninterest expense(1)............................. (20,149) (20,839) (14,187) (11,058) (8,274)
------- ------- ------- ------- ------
Income before income taxes and
cumulative effect of change in
accounting method....................... 9,295 2,634 5,697 5,424 7,599
Income tax expense................................. (3,492) (1,095) (2,155) (1,987) (2,829)
Cumulative effect on prior years of change
in accounting method............................. (300)
------- ------- ------- ------- ------
Net Income......................................... $ 5,803 $ 1,539 $ 3,542 $ 3,437 $ 4,470
======== ======== ======== ======== ========
</TABLE>
7
<PAGE> 14
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:(1)(2)
Basic and diluted net income per share.......... $0.82 $0.24 $0.57 $0.55 $0.72
Book value per share............................ 5.20 4.29 4.08 3.25 2.84
Tangible book value per share................... 4.76 3.84 3.52 2.63 2.16
PERFORMANCE RATIOS:(1)
Return on average assets........................ 0.69% 0.23% 0.65% 0.82% 1.34%
Return on average equity........................ 17.58 5.75 16.19 17.83 29.30
Interest rate spread............................ 3.20 3.07 2.98 3.71 4.05
Net interest margin(3).......................... 3.48 3.34 3.24 3.94 4.26
Average interest-earning assets to average
interest-bearing liabilities ................ 105.30 105.39 105.13 105.53 105.62
Noninterest expense to average assets........... 2.40 3.08 2.61 2.64 2.49
Efficiency ratio(4)............................. 62.75 82.57 68.28 62.95 49.42
ASSET QUALITY RATIOS:(5)
Nonperforming loans to total loans.............. 0.44% 0.80% 0.68% 0.55% 1.08%
Nonperforming assets to total assets............ 0.56 0.70 0.60 0.51 1.08
Allowance for losses on loans to total loans.... 0.79 0.64 0.57 0.45 0.43
Net charge-offs to average loans................ 0.13 0.04 0.02 0.03 0.09
CAPITAL RATIOS:
Shareholders' equity to total assets............ 3.96% 3.93% 4.32% 4.23% 4.77%
Average shareholders' equity to average assets.. 3.94 3.96 4.02 4.60 4.58
Tier 1 capital to total assets(6)............... 5.47 5.58 5.77 5.34 5.81
Tier 1 capital to risk-weighted assets(6)....... 7.75 7.87 8.20 7.60 8.33
OTHER DATA:
Loans serviced for others (000's)............... $1,190,185 $1,102,514 $1,182,216 $739,425 $504,677
Number of full service offices.................. 15 14 13 11 9
Number of loan production offices............... 4 5 5 4 1
<FN>
- -------------------------
(1) Noninterest expense for 1996 includes a $2.9 million pre-tax or $1.9
million net of tax one-time assessment to recapitalize the Savings
Association Insurance Fund ("SAIF"). All per share data and performance
ratios include the effect of this assessment.
(2) Per share data has been calculated to reflect the 3,125,635-for-1
stock split which occurred in October 1996 and 2-for-1 stock split which
occurred in December 1997.
(3) Represents the ratio of net interest income to average interest-earning
assets.
(4) Equals noninterest expense less amortization of intangible assets
divided by net interest income plus noninterest income (excluding gains
or losses on securities transactions).
(5) Ratios are calculated on end of period balances except net charge-offs to
average loans.
(6) Ratios are for Metropolitan Savings Bank of
Cleveland only.
</TABLE>
8
<PAGE> 15
RISK FACTORS
An investment in the Preferred Securities involves a high degree of
risk. Prospective investors should carefully consider, together with the other
information contained in this Prospectus, the following factors in evaluating
the Corporation, its business and the Trust Issuer before purchasing the
Preferred Securities offered hereby. Prospective investors should note, in
particular, that this Prospectus contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), that involve substantial risks and uncertainties.
When used in this Prospectus, the terms "anticipates," "plans," "expects,"
believes," and similar expressions as they relate to the Corporation or its
management are intended to identify such forward-looking statements. The
Corporation's actual results, performance or achievements may materially differ
from those expressed or implied in the forward-looking statements. Risks and
uncertainties that could cause or contribute to such material differences
include, but are not limited to, general economic conditions, interest rate
environment, competitive conditions in the financial services industry, changes
in law, governmental policies and regulations, and rapidly changing technology
affecting financial services. The considerations listed below represent certain
important factors the Corporation believes could cause such results to differ.
These considerations are not intended to represent a complete list of the
general or specific risks that may affect the Corporation and the Trust Issuer.
It should be recognized that other risks, including those described above, may
be significant, presently or in the future, and the risks set forth below may
affect the Corporation and the Trust Issuer to a greater extent than indicated.
RISK FACTORS RELATING TO THE CORPORATION
ASSET GROWTH STRATEGY
The Corporation's primary strategy is to maximize long-term
profitability by pursuing balance sheet growth designed to enhance the franchise
value of the Bank. In accordance with this growth strategy, the Corporation's
objective has been to maintain "adequately capitalized" status (as opposed to
"well capitalized" status) under Federal regulatory guidelines. In the event
that the Corporation's operating performance would be adversely affected by
losses on loans or other circumstances, the Bank's capital status could be
reclassified as "undercapitalized". An institution classified as
"undercapitalized" is subject to "prompt corrective action" by its primary
regulator and may be required to comply with certain mandatory or discretionary
supervisory actions. Prompt corrective action includes increased restriction on
dividends and other capital distributions by the Bank to its holding company and
can require the adoption of a written capital restoration plan which must be
submitted to and approved by regulators. Institutions like the Bank which
operate with capital at or close to the required levels may be more likely to be
reclassified to the next lower capital category. See "Regulation and
Supervision--The Bank--Prompt Corrective Action and --Restrictions on Dividends
and Other Capital Distributions."
LEVERAGE; CAPITAL DISTRIBUTION REGULATIONS
As a result of the Corporation's asset growth strategy and its use of
debt to help fund its growth, the Corporation is highly leveraged and its debt
service requirements are substantial. As of December 31, 1997, the Corporation
had indebtedness of $20.4 million and shareholders' equity of $36.7 million.
Virtually all of the proceeds from the Corporation's debt is invested in the
common shares of the Bank accordingly, shareholder's equity of the Bank of $54.2
million is greater than the Corporation's Shareholders' equity of $36.7 million.
The ability of the Corporation to satisfy its obligations is dependent upon
the Bank's ability to generate profits and pay dividends to the Corporation as
well as the Corporation's ability to renew or refinance borrowings or to raise
additional equity capital. Each of these alternatives is dependent upon
financial, business, regulatory and other general factors affecting the
Corporation. There can be no assurance that any such alternatives would be
accomplished on satisfactory terms. See "Capitalization."
The capital distribution regulations of the Office of Thrift
Supervision ("OTS") limit the Bank's ability to pay dividends to the Corporation
based on the Bank's capital level and supervisory condition. Under the
regulations, a savings institution that meets the OTS capital requirements is
generally permitted to make capital distributions during a year up to the
greater of (i) 100% of its net income during that year, plus the amount that
would reduce by one-half its "surplus capital ratio" at the beginning of the
calendar year (the excess capital over its capital requirements), or (ii) 75% of
its net income over the most recent four-quarter period. In addition, an insured
depository institution is prohibited from declaring any dividend, making any
other capital distribution, or paying a management fee to its holding company
if, following the distribution or payment, the institution would be classified
as "undercapitalized" or lower. See "Regulation and Supervision--The
Bank--Prompt Corrective Action." As a practical matter, dividends can not be
paid which would cause the Bank's capital to fall below the regulatory minimums.
As of December 31, 1997, the Bank met the OTS capital requirements and under the
above regulations, the Bank had approximately $2.5 million available for the
payment of dividends in the aggregate to the Corporation. There can be no
assurance that the Bank will continue
9
<PAGE> 16
to meet its capital requirements or that its net income and surplus capital in
the future will be sufficient to permit the payment of dividends by the Bank to
the Corporation. In the event that the capital of the Bank falls below its
capital requirements or the OTS notifies the Bank that it is in need of more
than normal supervision, the ability of the Bank to pay dividends could be
further restricted. See "Regulation and Supervision--The Bank--Restrictions on
Dividends and Other Capital Distributions" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources--Capital."
COMPOSITION OF LOAN PORTFOLIO
At December 31, 1997, approximately 83.5% of Metropolitan's loans were
secured by real estate. Metropolitan's ability to conduct its mortgage lending
business and the value of Metropolitan's real estate collateral could therefore
be adversely affected by adverse changes in the real estate markets in which
Metropolitan conducts its business. At December 31, 1997, approximately 60.0% of
the principal amount of Metropolitan's real estate loans was secured by
properties located in Ohio. A decline in real estate values in Ohio would
increase the risk that losses would be incurred should borrowers default on
their loans.
At December 31, 1997, approximately 25.4% of the principal amount of
Metropolitan's loans was secured by multifamily properties. Multifamily
properties include residential apartment buildings of five or more units.
Metropolitan focuses on this segment of the market more than many other
financial institutions, and it believes that this emphasis gives Metropolitan
certain competitive advantages. Loans secured by multifamily properties,
however, are generally higher in principal amount and are considered to entail a
higher level of risk of loss than loans secured by oneto four-family residences.
Potential significant sources of losses are the possibilities that the cash
flows from the properties securing the loans may become inadequate to service
the loan payments and the value of the collateral may be insufficient to repay
the loan. See "Business--Lending Activities--Multifamily Residential Lending."
At December 31, 1997, approximately 21.8% of the principal amount of
Metropolitan's loans was secured by commercial real estate. Commercial real
estate loans generally present a higher level of risk than loans secured by
oneto four-family residences due to the concentration of principal in a limited
number of loans and borrowers, the effects of general economic conditions on
commercial properties and the increased difficulty of evaluating and monitoring
these types of loans. In addition, the repayment of loans secured by commercial
real estate is typically dependent upon the successful operation of the related
business activities. See "Business--Lending Activities--Commercial Real Estate
Lending."
ALLOWANCE FOR LOSSES ON LOANS
The Corporation's allowance for losses on loans is maintained at a
level considered adequate by management to cover losses that are currently
anticipated based on past loss experience, general economic conditions,
information about specific borrower situations, including their financial
position and collateral values, and other factors and estimates which are
subject to change over time. The amount of future losses is susceptible to
changes in economic, operating and other conditions, including changes in
interest rates, that may be beyond the Corporation's control, and such losses
may exceed the Corporation's current allowance for losses on loans. At December
31, 1997, the Corporation had total non-performing loans of $3.1 million. At the
same date, the Corporation's allowance for losses on loans was $5.6 million, or
0.79% of total loans and 178.60% of total non-performing loans. There can be no
assurance however, that such allowance will be adequate to cover actual losses.
See "Business--Loan Delinquencies and Non-Performing Assets" and "--Allocation
of Allowance for Losses on Loans."
EXPOSURE TO CHANGES IN INTEREST RATES
The consolidated net income of the Corporation depends to a substantial
extent on its net interest income, which reflects the difference between the
interest income the Corporation receives from loans, securities and other
interest-earning assets, and the interest expense it pays to obtain deposits and
other liabilities. During periods of rising interest rates, the Corporation's
net interest income could be adversely affected, because at the present time the
Bank has more short-term interest rate sensitive liabilities than short-term
interest rate sensitive assets. These rates are highly sensitive to many factors
including competition, general economic conditions and the policies of various
governmental and regulatory authorities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Quantitative and
Qualitative Disclosures about Market Risk."
10
<PAGE> 17
GOVERNMENT REGULATION
As a savings and loan holding company, the Corporation is subject to
regulation, examination and supervision by the OTS. The Bank is subject to
regulation and examination by the OTS, the FDIC and by agencies of the State of
Ohio. Applicable laws and regulations relate to such matters as capital
standards, mergers, establishment of branch offices, subsidiary investments and
activities and general investment authority.
As a savings and loan association, deposits with the Bank are insured
by the SAIF, which is administered by the FDIC. Deposits with state commercial
banks and national banks are insured by the Bank Insurance Fund ("BIF").
Currently, the Deposit Insurance Funds Act of 1996 (the "Funds Act") the merger
of the BIF and SAIF into a single insurance fund no later than January 1, 1999
if there are no savings associations at that date. In connection with the merger
of the funds, it is possible that SAIF-insured institutions could be forced to
convert their charters into state bank charters or national bank charters. If
such a proposal became law, the Corporation would become a bank holding company
and be subject to regulation by the Federal Reserve Board, which imposes capital
requirements on bank holding companies. The Corporation is not currently subject
to capital requirements. See "Regulation and Supervision-The Bank--Insurance of
Accounts and Regulation by the FDIC."
YEAR 2000
The year 2000 issue refers to computer programs being written using two
digits rather than four to define an applicable year. Any of a company's
hardware, date-driven automated equipment or computer programs that have a
two-digit field to define the year may recognize a date using "00" as the year
1900 rather than the year 2000. This faulty recognition could result in a system
failure, disruption of operations, or inaccurate information or calculations.
Similar to other companies, Metropolitan faces the challenge of ensuring that
all computer-related functions will work properly in the year 2000 and beyond.
As a result, Metropolitan has addressed this issue by forming a task force to
plan for and implement any changes necessary to ensure year 2000 compliance. The
task force has identified four major areas where it will concentrate its
efforts: (i) the service bureau that services the majority of Metropolitan's
customer accounts; (ii) the various software vendors whose software is used by
Metropolitan; (iii) critical vendors Metropolitan uses that are dependent upon
data processing; and (iv) major loan customers to ensure that their revenues
will continue uninterrupted. A time line has been established and the task force
and its subcommittees will progress through assessment planning, implementation
and testing during 1998. Metropolitan believes the plans currently in place will
be adequate to provide quality service to customers without interruption. In
management's opinion, any related incremental costs will not have a material
impact on the financial condition, operations, or cash flows of the Corporation.
COMPETITION
The Corporation faces strong competition, both in originating real
estate and other loans and attracting deposits. Competition in originating loans
comes primarily from other savings institutions, commercial banks, mortgage
companies, conduit lenders, credit unions, finance companies and insurance
companies. Competition in deposits comes primarily from other savings
institutions, commercial banks, credit unions, mutual funds and brokerage
companies. Some of the Bank's competitors have higher lending limits and
substantially greater financial resources than the Bank.
See "Business--Competition".
CONTROL BY ROBERT M. KAYE
The Corporation is majority-owned by Mr. Robert M. Kaye of Rumson, New
Jersey, who controls 77.5% of the Corporation's common shares. Mr. Kaye is also
Chairman of the Corporation and Chairman of the Bank. Mr. Kaye, as majority
shareholder and Chairman of the Corporation, has the ability to elect or remove
all of the directors of the Corporation and has ultimate control of the
Corporation and the Bank.
11
<PAGE> 18
RISK FACTORS RELATING TO THE OFFERING
SUBORDINATION OF THE GUARANTEE AND THE JUNIOR SUBORDINATED DEBENTURES
The obligations of Metropolitan under the Guarantee issued by
Metropolitan for the benefit of the holders of the Preferred Securities and
under the Junior Subordinated Debentures issued to the Trust Issuer will be
unsecured and will rank subordinate and junior in right of payment to all Senior
Indebtedness of Metropolitan. At December 31, 1997, Metropolitan had $20.4
million in outstanding Senior Indebtedness. There is no limitation on the amount
of Senior Indebtedness, or Subordinated Debt (as defined herein) which is pari
passu with the Junior Subordinated Debentures, which Metropolitan may issue.
Because Metropolitan is a holding company, the right of Metropolitan to
participate in any distribution of assets of any subsidiary, including the Bank,
upon such subsidiary's liquidation or reorganization or otherwise (and thus the
ability of holders of the Preferred Securities to benefit indirectly from such
distribution), is subject to the prior claims of creditors of that subsidiary
(including depositors in the Bank), except to the extent that Metropolitan may
itself be recognized as a creditor of that subsidiary. If Metropolitan is a
creditor of a subsidiary, the claims of Metropolitan would be subject to any
prior security interest in the assets of the subsidiary and any indebtedness of
the subsidiary senior to that of Metropolitan. Accordingly, the Junior
Subordinated Debentures and the Guarantee will be effectively subordinated to
all existing and future liabilities of Metropolitan's subsidiaries, including
the Bank. At December 31, 1997, the Bank had liabilities of $867.8 million
(including $738.1 million in deposits). Only the capital stock of Metropolitan
is currently junior in right of payment to the Junior Subordinated Debentures to
be issued to the Trust Issuer. Holders of the Junior Subordinated Debentures
will be able to look only to the assets of Metropolitan for payments on the
Junior Subordinated Debentures. None of the Indenture, the Guarantee, the
Expense Agreement or the Trust Agreement places any limitation on the amount of
secured or unsecured debt, including Senior Indebtedness, that may be incurred
by Metropolitan. Metropolitan may from time to time incur indebtedness
constituting Senior Indebtedness. See "Description of the Guarantee--Status of
the Guarantee", "Description of the Junior Subordinated
Debentures--Subordination" and "Description of the 1995 Notes."
SOURCE OF PAYMENTS TO HOLDERS OF PREFERRED SECURITIES
As a savings and loan holding company, Metropolitan conducts its
operations principally through its subsidiaries and, therefore, its principal
source of cash, other than its investing and financing activities, is the
receipt of dividends from the Bank. Since Metropolitan is without significant
assets other than the capital stock of the Bank, the ability of Metropolitan to
pay interest on the principal of the Junior Subordinated Debentures to the Trust
Issuer (and consequently, the Trust Issuer's ability to pay Distributions on the
Preferred Securities and Metropolitan's ability to perform its obligations under
the Guarantee) will be dependent on the ability of the Bank to pay dividends to
Metropolitan in amounts sufficient to service Metropolitan's obligations.
Metropolitan may become obligated to make other payments with respect to
securities issued by Metropolitan in the future which are pari passu or have a
preference over the Junior Subordinated Debentures issued to the Trust Issuer
with respect to the payment of principal, interest or dividends. There is no
restriction on the ability of Metropolitan to issue, or limitations on the
amount of securities which Metropolitan may issue, which are pari passu or have
a preference over the Junior Subordinated Debentures issued to the Trust Issuer,
nor is there any restriction on the ability of the Bank to issue additional
capital stock or incur additional indebtedness.
See "Risk Factors--Risk Factors Relating To The Corporation--Leverage;
Capital Distribution Regulations" and Regulation and Supervision."
RIGHT TO DEFER INTEREST PAYMENT OBLIGATION; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
So long as no event of default under the Indenture has occurred and is
continuing, Metropolitan has the right under the Indenture to defer the payment
of interest on the Junior Subordinated Debentures, at any time or from time to
time, for a period not exceeding 20 consecutive quarters with respect to each
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. As a consequence of any such
deferral, quarterly Distributions on the Preferred Securities by the Trust
Issuer would also be deferred (and the amount of Distributions to which holders
of the Preferred Securities are entitled would accumulate additional
Distributions thereon at the rate of % per annum, compounded quarterly from the
relevant payment date for such Distributions) during any such Extension Period.
During any such Extension Period, Metropolitan may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of Metropolitan's capital stock (other
than (a) the reclassification of any class of Metropolitan's capital stock into
another class of capital stock, (b) dividends or distributions payable in common
shares of Metropolitan, (c) any declaration of a dividend in connection with the
implementation of a shareholders' rights plan, or the issuance of stock under
any such plan in the future or the redemption or repurchase of any such rights
pursuant thereto, (d) payments
12
<PAGE> 19
under the Guarantee, and (e) purchases of common shares related to the issuance
of common shares or rights under any of Metropolitan's benefit plans for its
directors, officers or employees), (ii) make any payment of principal, interest
or premium, if any, on or repay, repurchase or redeem any debt securities of
Metropolitan that rank pari passu with or junior in right of payment to the
Junior Subordinated Debentures, or (iii) make any guarantee payments with
respect to any guarantee by Metropolitan of the debt securities of any
subsidiary of Metropolitan if such guarantee ranks pari passu with or junior in
right of payment to the Junior Subordinated Debentures other than payments
pursuant to the Guarantee. Additionally, during any such Extension Period,
Metropolitan shall not redeem, purchase or acquire less than all the outstanding
Junior Subordinated Debentures or any of the Preferred Securities. Prior to the
termination of any such Extension Period, Metropolitan may further defer the
payment of interest, provided that no Extension Period may exceed 20 consecutive
quarters or extend beyond the Stated Maturity of the Junior Subordinated
Debentures. Upon the termination of any Extension Period and the payment of all
interest then accrued and unpaid on the Junior Subordinated Debentures (together
with interest thereon at the annual rate of %, compounded quarterly from the
relevant payment date for such interest, to the extent permitted by applicable
law), Metropolitan may elect to begin a new Extension Period subject to the
above requirements. There is no limitation on the number of times that
Metropolitan may elect to begin an Extension Period so long as no event of
default under the Indenture has occurred and is continuing. See "Description of
the Preferred Securities--Distributions" and "Description of the Junior
Subordinated Debentures--Right to Defer Interest Payment Obligation."
If an Extension Period were to occur, a holder of the Preferred
Securities would continue to accrue income (in the form of original issue
discount) for United States federal income tax purposes in respect of its pro
rata share of the interest accruing on the Junior Subordinated Debentures held
by the Trust Issuer. As a result, a holder of the Preferred Securities would be
required to include such income in gross income for United States federal income
tax purposes in advance of the receipt of cash and would not receive the cash
related to such income from the Trust Issuer if the holder disposed of the
Preferred Securities prior to the record date for the payment of Distributions.
See "Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount" and "--Sales or Redemption of the Preferred Securities."
Metropolitan has no current intention of exercising its right to defer
payments of interest on the Junior Subordinated Debentures. However, should
Metropolitan elect to exercise such right in the future, the market price of the
Preferred Securities would likely be adversely affected. A holder that disposed
of its Preferred Securities during an Extension Period, therefore, might not
receive the same return on its investment as a holder that continued to hold its
Preferred Securities. In addition, as a result of the existence of
Metropolitan's right to defer interest payments, the market price of the
Preferred Securities may be more volatile than the market prices of other
similar securities that are not subject to such deferrals.
OPTIONAL REDEMPTION AFTER 2003
Metropolitan has the right to redeem the Junior Subordinated Debentures
prior to their stated Maturity on or after , 2003 in whole at one time or in
part from time to time. The exercise of such right may be subject to
Metropolitan having received prior regulatory approval, if then required under
applicable capital guidelines or regulatory policies, and to restrictions set
forth in the 1995 Notes Indenture. See "Description of the Junior Subordinated
Debentures--General" and "Description of the 1995 Notes."
REDEMPTION DUE TO TAX EVENT, INVESTMENT COMPANY EVENT OR CAPITAL TREATMENT EVENT
Metropolitan has the right, but not the obligation, to redeem the
Junior Subordinated Debentures in whole (but not in part) within 90 days
following the occurrence of a Tax Event, an Investment Company Event or a
Capital Treatment Event, as those terms are defined below (whether occurring
before or after , 2003), and, therefore, cause a mandatory redemption of the
Preferred Securities. The exercise of such right may be subject to Metropolitan
having received prior regulatory approval, if then required under applicable
capital guidelines or regulatory policies, and to restrictions set forth in the
in the 1995 Notes Indenture. See "Description of the Junior Subordinated
Debentures-General" and "Description of the 1995 Notes."
A "Tax Event" means the receipt by the Trust Issuer of an Opinion of
Counsel (as defined below) to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or such
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) the Trust Issuer is, or will be within 90 days of
the date of such opinion, subject to United States federal income tax with
respect
13
<PAGE> 20
to income received or accrued on the Junior Subordinated Debentures, (ii)
interest payable by Metropolitan on the Junior Subordinated Debentures is not,
or within 90 days of the date of such opinion will not be, deductible by
Metropolitan, in whole or in part, for United States federal income tax
purposes, or (iii) the Trust Issuer is, or will be within 90 days of the date of
such opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges. The Trust Issuer or Metropolitan must request and
receive an opinion with regard to such matters within a reasonable period of
time after either becomes aware of the possible occurrence of any of the events
described in clauses (i) through (iii) above.
"Investment Company Event" means the receipt by the Trust Issuer of an
Opinion of Counsel to the effect that, as a result of the occurrence of a change
in law or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, the Trust Issuer is or will be considered an "investment company"
that is required to be registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), which change occurs or becomes effective
on or after the date of original issuance of the Preferred Securities.
"Capital Treatment Event" means the receipt by the Trust Issuer of an
Opinion of Counsel to the effect that as a result of any amendment to, or change
(including any proposed change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such proposed change, pronouncement, action or decision
is announced on or after the date of original issuance of the Preferred
Securities, there is more than an insubstantial risk that the Preferred
Securities would not constitute Tier 1 Capital (or the then equivalent thereof)
applied as if Metropolitan (or its successor) were a bank holding company for
purposes of applicable capital adequacy guidelines of the Federal Reserve (or
any successor regulatory authority with jurisdiction over bank holding
companies), or any capital adequacy guidelines as then in effect and applicable
to Metropolitan.
"Opinion of Counsel" means an opinion in writing of independent legal
counsel experienced in such matters as are being opined upon.
EXCHANGE OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES; REDEMPTION
AND TAX CONSEQUENCES
Metropolitan has the right at any time to dissolve the Trust Issuer
and, after the satisfaction of liabilities to creditors of the Trust Issuer as
required by applicable law, cause the Junior Subordinated Debentures to be
distributed to the holders of the Preferred Securities in exchange therefor in
liquidation of the Trust Issuer. The exercise of such right may be subject to
Metropolitan having received prior regulatory approval. Metropolitan will have
the right, in certain circumstances, to redeem the Junior Subordinated
Debentures in whole or in part, in lieu of a distribution of the Junior
Subordinated Debentures by the Trust Issuer, in which event the Trust Issuer
will redeem the Preferred Securities on a pro rata basis to the same extent as
the Junior Subordinated Debentures are redeemed by Metropolitan. Any such
distribution or redemption prior to the Stated Maturity will be subject to prior
regulatory approval if then required under applicable capital guidelines or
regulatory policies, and to restrictions set forth in the 1995 Notes Indenture.
See "Description of the Preferred Securities--Liquidation of the Trust Issuer
and Distribution of the Junior Subordinated Debentures to Holders", "Description
of the Junior Subordinated Debentures--Redemption or Exchange" and "Description
of the 1995 Notes."
Under current United States federal income tax law, a distribution of
Junior Subordinated Debentures upon the dissolution of the Trust Issuer would
not be a taxable event to holders of the Preferred Securities. If, however, the
Trust Issuer were characterized as an association taxable as a corporation at
the time of the dissolution of the Trust Issuer, the distribution of the Junior
Subordinated Debentures would constitute a taxable event to holders of Preferred
Securities. Moreover, any redemption of the Preferred Securities for cash would
be a taxable event to such holders. See "Certain Federal Income Tax
Consequences--Distribution of the Junior Subordinated Debentures to Holders of
the Preferred Securities" and "--Sales or Redemption of the Preferred
Securities."
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities upon a dissolution or liquidation of the Trust
Issuer. The Preferred Securities or the Junior Subordinated Debentures may trade
at a discount to the price that the investor paid to purchase the Preferred
Securities offered hereby. Because holders of Preferred Securities may receive
Junior Subordinated Debentures as a result of the liquidation of the Trust, and
because payments on the Junior Subordinated Debentures are the sole source of
funds for Distributions and redemptions of the Preferred Securities, prospective
purchasers of Preferred Securities are also making an investment decision with
regard to the Junior
14
<PAGE> 21
Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein.
If the Junior Subordinated Debentures are distributed to the holders of
Preferred Securities upon the liquidation of the Trust Issuer, Metropolitan will
use its best efforts to list the Junior Subordinated Debentures on the Nasdaq
Stock Market's National Market or SmallCap Market or such stock exchanges, if
any, on which the Preferred Securities are then listed.
INVESTMENT NOT INSURED
The Junior Subordinated Debentures do not constitute a deposit with a
depository institution; therefore, the Junior Subordinated Debentures are not
insured by the FDIC or any other governmental entity.
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities the
following payments, to the extent not paid by the Trust Issuer: (i) any
accumulated and unpaid Distributions required to be paid on the Preferred
Securities, to the extent that the Trust Issuer has funds on hand available
therefor at such time, (ii) the redemption price with respect to any Preferred
Securities called for redemption, to the extent that the Trust Issuer has funds
on hand available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding-up or liquidation of the Trust Issuer (unless
the Junior Subordinated Debentures are distributed to holders of the Preferred
Securities in exchange therefor), the lesser of (a) the aggregate of the
Liquidation Amount and all accumulated and unpaid Distributions to the date of
payment, to the extent that the Trust Issuer has funds on hand available
therefor at such time, and (b) the amount of assets of the Trust Issuer
remaining available for distribution to holders of the Preferred Securities
after payment of creditors of the Trust Issuer as required by applicable law.
If Metropolitan were to default on its obligation to pay amounts
payable under the Junior Subordinated Debentures, the Trust Issuer would lack
funds for the payment of Distributions or amounts payable on redemption of the
Preferred Securities or otherwise, and, in such event, holders of the Preferred
Securities would not be able to rely upon the Guarantee for payment of such
amounts. The holders of not less than a majority in aggregate Liquidation Amount
of the Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
(as defined below) in respect of the Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Guarantee. Any holder
of the Preferred Securities may institute a legal proceeding directly against
Metropolitan to enforce its rights under the Guarantee without first instituting
a legal proceeding against the Trust Issuer, the Guarantee Trustee or any other
person or entity. If an event of default under the Indenture shall have occurred
and be continuing and such event is attributable to the failure of Metropolitan
to pay interest on or principal of the Junior Subordinated Debentures on the
applicable payment date, a holder of the Preferred Securities may institute a
legal proceeding directly against Metropolitan for enforcement of payment to
such holder of the principal of or interest on such Junior Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Preferred Securities of such holder (a "Direct Action"). The exercise by
Metropolitan of its right, as described herein, to defer the payment of interest
on the Junior Subordinated Debentures does not constitute an event of default
under the Indenture. In connection with any Direct Action, Metropolitan will
have a right of set-off under the Indenture to the extent of any payment made by
Metropolitan to such holder of the Preferred Securities in the Direct Action.
Except as described herein, holders of the Preferred Securities will not be able
to exercise directly any other remedy available to the holders of the Junior
Subordinated Debentures or assert directly any other rights in respect of the
Junior Subordinated Debentures. Wilmington Trust Company will act as the
guarantee trustee under the Guarantee (the "Guarantee Trustee") and will hold
the Guarantee for the benefit of the holders of the Preferred Securities.
Wilmington Trust Company will also act as Debenture Trustee for the Junior
Subordinated Debentures, and as Property Trustee under the Trust Agreement. The
Trust Agreement provides that each holder of the Preferred Securities by
acceptance thereof agrees to the provisions of the Guarantee and the Indenture.
See "Description of the Junior Subordinated Debentures--Enforcement of Certain
Rights by Holders of the Preferred Securities," "Description of the Junior
Subordinated Debentures--Debenture Events of Default" and "Description of the
Guarantee."
LIMITED COVENANTS
The covenants in the Indenture and the Trust Agreement are limited. As
a result, neither the Indenture nor the Trust Agreement protects holders of
Junior Subordinated Debentures or Preferred Securities, respectively, in the
event of a material adverse change in Metropolitan's financial condition or
results of operations or limits the ability of Metropolitan or any subsidiary to
incur or assume additional indebtedness or other obligations. Additionally,
neither the Indenture nor the Trust Agreement contains any financial ratios or
specified levels of liquidity to which Metropolitan
15
<PAGE> 22
must adhere. Therefore, the provisions of these governing instruments should not
be considered a significant factor in evaluating whether Metropolitan will be
able to or will comply with its obligations under the Junior Subordinated
Debentures or the Guarantee.
LIMITED VOTING RIGHTS
Holders of the Preferred Securities will generally have limited voting
rights relating only to the modification of the Preferred Securities and the
exercise of the Trust Issuer's rights as holder of the Junior Subordinated
Debentures and the Guarantee. Holders of the Preferred Securities will not be
entitled to vote to appoint, remove or replace the Property Trustee or the
Administrative Trustees, as such voting rights are vested exclusively in
Metropolitan, as the holder of the Common Securities (except, with respect to
the Property Trustee, upon the occurrence of certain events described herein).
The Property Trustee, the Administrative Trustees and Metropolitan may amend the
Trust Agreement without the consent of holders of the Preferred Securities to
ensure that the Trust Issuer will be classified for United States federal income
tax purposes as a grantor trust even if such action adversely affects the
interests of such holders. See "Description of the Preferred Securities--Voting
Rights; Amendment of the Trust Agreement" and "--Removal of the Trust Issuer
Trustees."
ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES; TRADING PRICE AND
TAX CONSIDERATIONS
There is no current public market for the Preferred Securities.
Application has been made to list the Preferred Securities on the Nasdaq Stock
Market's National Market. However, three market makers for the Preferred
Securities are required for original listing, and two are required for continued
listing thereafter. Metropolitan has been advised that the Underwriter intends
to make a market in the Preferred Securities. However, the Underwriter is not
obligated to do so and such market making may be discontinued at any time.
Therefore, there is no assurance that an active trading market will develop for
the Preferred Securities or, if such market develops, that it will be maintained
or that the market price will equal or exceed the public offering price set
forth on the cover page of this Prospectus. Accordingly, holders of Preferred
Securities may experience difficulty reselling them or may be unable to sell
them at all. The public offering price for the Preferred Securities has been
determined through negotiations between Metropolitan and the Underwriter. Prices
for the Preferred Securities will be determined in the marketplace and may be
influenced by many factors, including prevailing interest rates, the liquidity
of the market for the Preferred Securities, investor perceptions of Metropolitan
and general industry and economic conditions.
Further, should Metropolitan exercise its option to defer any payment
of interest on the Junior Subordinated Debentures, the Preferred Securities
would be likely to trade at prices that do not fully reflect the value of
accrued but unpaid interest with respect to the underlying Junior Subordinated
Debentures. In the event of such a deferral, a holder of Preferred Securities
that disposed of its Preferred Securities between record dates for payments of
Distributions (and consequently did not receive a Distribution from the Trust
Issuer for the period prior to such disposition) would nevertheless be required
to include accrued but unpaid interest on the Junior Subordinated Debentures
through the date of disposition in income as ordinary income and to add such
amount to the adjusted tax basis of the Preferred Securities disposed of. Upon
disposition of the Preferred Securities, such holder would recognize a capital
loss to the extent the selling price (which might not fully reflect the value of
accrued but unpaid interest) was less than its adjusted tax basis (which would
include all accrued but unpaid interest). Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes. See "Certain Federal Income Tax Consequences--Sales
or Redemption of the Preferred Securities."
USE OF PROCEEDS
All of the proceeds from the sale of the Preferred Securities will be
invested by the Trust Issuer in Junior Subordinated Debentures. The net proceeds
to the Corporation from the sale of the Junior Subordinated Debentures are
estimated to be approximately $ million ($ million if the
Underwriter's over-allotment option is exercised in full) after deduction of the
underwriting discount and estimated expenses. The Corporation intends to use the
net proceeds from the sale of the Junior Subordinated Debentures for general
corporate purposes, including, but not limited to, repayment of the $4.9 million
in principal amount currently outstanding with respect to the 1993 Notes,
acquisitions by either the Corporation or the Bank (although there presently
exist no agreements or understandings with respect to any such acquisition);
capital contributions to the Bank to support growth and for working capital; and
possible repurchase of the Corporation's common shares, subject to regulatory
requirements and acceptable market conditions.
16
<PAGE> 23
MARKET FOR THE PREFERRED SECURITIES
Application has been made to list the Preferred Securities on the
Nasdaq Stock Market's National Market under the symbol "METFCP." Although the
Underwriter has informed the Corporation that it presently intends to make a
market in the Preferred Securities, the Underwriter is not obligated to do so
and any such market making may be discontinued at any time. Accordingly, there
is no assurance that an active and liquid trading market will develop or, if
developed, that such a market will be sustained. The offering price and
distribution rate have been determined by negotiations among representatives of
the Corporation and the Underwriter, and the offering price of the Preferred
Securities may not be indicative of the market price following the offering. See
"Underwriting."
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust Issuer will be treated as a
subsidiary of the Corporation and, accordingly, the Trust Issuer's financial
statements will be included in the consolidated financial statements of the
Corporation. The Preferred Securities will be presented as a separate line item
in the consolidated statements of financial condition of the Corporation under
the caption "Guaranteed Preferred Beneficial Interests in the Corporation's
Junior Subordinated Debentures" and appropriate disclosures about the Preferred
Securities will be included in the notes to the consolidated financial
statements. For financial reporting purposes, the Corporation will record
distributions payable on the Preferred Securities as an interest expense in the
consolidated statements of operations.
In its future financial reports, the Corporation will: (i) present the
Preferred Securities in the Corporation's consolidated statements of financial
condition as a separate line item entitled "Guaranteed Preferred Beneficial
Interests in the Corporation's Junior Subordinated Debentures"; (ii) include in
a footnote to the consolidated financial statements disclosure that the sole
assets of the Trust Issuer are the Junior Subordinated Debentures specifying the
principal amount, interest rate and maturity date of Junior Subordinated
Debentures held, and payments thereon; and (iii) if Staff Accounting Bulletin
No. 53 treatment is sought, include, in an audited footnote to the consolidated
financial statements, disclosure that (a) the Trust Issuer is wholly owned, (b)
the sole assets of the Trust Issuer are its Junior Subordinated Debentures, and
(c) the obligations of the Corporation under the Guarantee, the Trust Agreement,
the Junior Subordinated Debentures, the Indenture and the Expense Agreement,
constitute, in the aggregate, a full, irrevocable and unconditional guarantee,
on a subordinated basis, by the Corporation of all of the Trust Issuer's
obligations under the Preferred Securities.
17
<PAGE> 24
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Corporation's consolidated ratios of
earnings to fixed charges for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Earnings to Fixed Charges(1):
Including interest on deposits 1.22x 1.08x 1.21x 1.34x 1.67x
Excluding interest on deposits 2.18x 1.50x 2.59x 5.32x 14.70x
<FN>
- -------------------------
(1) For purposes of computing the ratios of earnings to fixed charges,
earnings represent income from continuing operations before income
taxes, extraordinary items and cumulative effect of a change in
accounting principle plus fixed charges. Fixed charges represent total
interest expense, including and excluding interest on deposits, as
applicable, as well as the interest component of rental expense.
</TABLE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation as of December 31, 1997, as adjusted to give effect to the
consummation of the offering of the Preferred Securities. The following data
should be read in conjunction with the Consolidated Financial Statements and
notes thereto of the Corporation included elsewhere in this document.
<TABLE>
<CAPTION>
As
Actual Adjusted
------------ -----------
(In thousands)
<S> <C> <C>
Deposits............................................................... $737,782 $737,782
Borrowings:
FHLB advances.......................................................... 41,000 41,000
1993 Subordinated Notes................................................ 4,874 0
1995 Subordinated Notes................................................ 14,000 14,000
Other borrowings...................................................... 75,996 75,996
-------- --------
Total borrowings.................................................... 135,870 130,996
------- -------
Total deposits and borrowings....................................... 873,652 868,778
------- -------
Guaranteed Preferred Beneficial Interests in the Corporation's
Junior Subordinated Debentures(1)...................................... 0 25,000
------------ --------
Shareholders' equity:
Common shares, no par value, 20,000,000 shares authorized, 7,051,270 shares
issued and outstanding.................................................
Additional paid-in capital............................................. 11,101 11,101
Retained earnings...................................................... 24,270 24,270
Unrealized gain on securities available for sale....................... 1,290 1,290
-------- --------
Total shareholders' equity......................................... 36,661 36,661
------- -------
<FN>
- -------------------------
(1) Preferred Securities of the Trust Issuer representing beneficial
interests in $25.0 million aggregate principal amount of the Junior
Subordinated Debentures issued by the Corporation to the Trust Issuer.
The Junior Subordinated Debentures will bear interest at the annual
rate of % of the principal amount thereof, payable quarterly and will
mature on June 30, 2028. The Corporation owns all of the Common
Securities of the Trust Issuer.
</TABLE>
18
<PAGE> 25
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth certain selected consolidated financial
and other data of the Corporation at or for the dates indicated. This
information does not purport to be complete and should be read in conjunction
with, and is qualified in its entirety by, the more detailed information,
including the Consolidated Financial Statements and notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, included elsewhere herein.
<TABLE>
<CAPTION>
As of or for the Year Ended December 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Selected Financial Condition Data:
Total assets........................................... $924,985 $769,076 $590,095 $479,384 $372,390
Loans receivable, net.................................. 693,655 637,493 478,345 424,944 284,288
Loans held for sale.................................... 14,230 8,973 1,504 84 10,391
Mortgage-backed securities............................. 143,167 56,672 39,156 16,785 13,412
Securities............................................. 6,446 13,173 22,806 7,641 10,168
Intangible assets...................................... 2,987 3,239 3,188 3,409 3,631
Loan servicing rights.................................. 9,224 8,051 9,130 4,825 2,295
Deposits .............................................. 737,782 622,105 503,742 436,198 332,549
Borrowings............................................. 135,870 101,874 46,874 15,504 15,745
Shareholders' equity................................... 36,661 30,244 25,466 20,280 17,750
Selected Operations Data:
Total interest income.................................. $ 69,346 $ 54,452 $ 43,435 $ 31,639 $ 24,448
Total interest expense................................. 41,703 33,116 26,816 15,992 11,215
-------- -------- -------- -------- --------
Net interest income........................... 27,643 21,336 16,619 15,647 13,233
Provision for loan losses.............................. 2,340 1,636 959 766 740
--------- --------- ---------- ---------- ----------
Net interest income after provision
for loan losses............................. 25,303 19,700 15,660 14,881 12,493
Loan servicing income, net............................. 1,293 1,204 1,068 642 601
Net gain on sale of loans and securities............... 580 336 833 86 1,712
Other noninterest income............................... 2,268 2,233 2,323 873 1,067
Noninterest expense(1)................................. (20,149) (20,839) (14,187) (11,058) (8,274)
-------- -------- -------- -------- --------
Income before income taxes and
cumulative effect of change in
accounting method........................... 9,295 2,634 5,697 5,424 7,599
Income tax expense..................................... (3,492) (1,095) (2,155) (1,987) (2,829)
Cumulative effect on prior years of change
in accounting method................................. (300)
-------------------------------------------------------------
Net Income............................................. $ 5,803 $ 1,539 $ 3,542 $ 3,437 $ 4,470
======== ======== ======== ======== =========
</TABLE>
19
<PAGE> 26
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:(1)(2)
Basic and diluted net income per share................. $0.82 $0.24 $0.57 $0.55 $0.72
Book value per share................................... 5.20 4.29 4.08 3.25 2.84
Tangible book value per share.......................... 4.76 3.84 3.52 2.63 2.16
PERFORMANCE RATIOS:(1)
Return on average assets............................... 0.69% 0.23% 0.65% 0.82% 1.34%
Return on average equity............................... 17.58 5.75 16.19 17.83 29.30
Interest rate spread................................... 3.20 3.07 2.98 3.71 4.05
Net interest margin(3)................................. 3.48 3.34 3.24 3.94 4.26
Average interest-earning assets to average
interest-bearing liabilities ....................... 105.30% 105.39% 105.13% 105.53% 105.62%
Noninterest expense to average assets.................. 2.40 3.08 2.61 2.64 2.49
Efficiency ratio(4).................................... 62.75 82.57 68.28 62.95 49.42
ASSET QUALITY RATIOS:(5)
Nonperforming loans to total loans..................... 0.44% 0.80% 0.68% 0.55% 1.08%
Nonperforming assets to total assets................... 0.56 0.70 0.60 0.51 1.08
Allowance for losses on loans to total loans........... 0.79 0.64 0.57 0.45 0.43
Net charge-offs to average loans....................... 0.13 0.04 0.02 0.03 0.09
CAPITAL RATIOS:
Shareholders' equity to total assets................... 3.96% 3.93% 4.32% 4.23% 4.77%
Average shareholders' equity to average assets......... 3.94 3.96 4.02 4.60 4.58
Tier 1 capital to total assets(6)...................... 5.47 5.58 5.77 5.34 5.81
Tier 1 capital to risk-weighted assets(6).............. 7.75 7.87 8.20 7.60 8.33
OTHER DATA:
Loans serviced for others (000's)..................... $1,190,185 $1,102,514 $1,182,216 $739,425 $504,677
Number of full service offices......................... 15 14 13 11 9
Number of loan production offices...................... 4 5 5 4 1
<FN>
- -------------------------
(1) Net interest expense for 1996 includes a $2.9 million pre-tax or $1.9
million net of tax one-time assessment to recapitalize the SAIF. All per
share data and performance ratios include the effect of this assessment.
(2) Per share data has been calculated to reflect the 3,125,635-for-1 stock
split which occurred in October 1996 and 2-for-1 stock split which
occurred in December 1997.
(3) Represents the ratio of net interest income to average interest-earning
assets.
(4) Equals noninterest expense less amortization of intangible assets
divided by net interest income plus noninterest income (excluding gains
or losses on securities transactions).
(5) Ratios are calculated on end of period balances except net charge-offs
to average loans.
(6) Ratios are for Metropolitan Savings Bank of
Cleveland only.
</TABLE>
20
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Corporation's financial
condition and results of operations should be read in conjunction with the
Consolidated Financial Statements and related notes included elsewhere in this
Prospectus.
OVERVIEW
The reported results of Metropolitan primarily reflect the operations
of the Bank. Metropolitan's results of operations are dependent on a variety of
factors, including the general interest rate environment, competitive conditions
in the industry, governmental policies and regulations and conditions in the
markets for financial assets. Like most financial institutions, the primary
contributor to Metropolitan's income is net interest income, the difference
between the interest Metropolitan earns on interest-earning assets, such as
loans and securities, and the interest Metropolitan pays on interest-bearing
liabilities, such as deposits and borrowings. Metropolitan's operations are also
affected by noninterest income, such as loan servicing fees, service charges on
deposit accounts, gains or losses from sales of loans and securities and loan
option income. Metropolitan's principal operating expenses, aside from interest
expense, consist of compensation and employee benefits, occupancy costs, and
other general and administrative expenses.
Average Balances and Yields. The following table presents, for the
periods indicated, the total dollar amount of interest income from average
interest-earning assets and the resultant yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollars and
rates, and the net interest margin. Net interest margin refers to net interest
income divided by total interest-earning assets and is influenced by the level
and relative mix of interest-earning assets and interest-bearing liabilities.
All average balances are daily average balances. Nonaccruing loans are
considered in average loan balances. The average balance of mortgage-backed
securities and securities are presented at historical cost.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- -------------------------- -----------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ---- ------- -------- ---- ------- -------- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable $673,809 $ 61,230 9.09% $574,502 $ 50,268 8.75% $458,423 $ 39,963 8.72%
Mortgage-backed securities
available for sale 101,160 6,947 6.87 43,734 2,890 6.61 39,342 2,493 6.34
Other 18,923 1,169 6.18 20,417 1,294 6.34 14,610 979 6.70
---------- ---------- -------------------- --------------------
Total interest-earning
assets 793,892 69,346 8.73 638,653 54,452 8.53 512,375 43,435 8.48
--------- --------- --------
Nonearning assets 44,727 37,021 31,881
---------- ---------- ----------
Total assets $838,619 $675,674 $544,256
======== ======== ========
INTEREST-BEARING
LIABILITIES:
Deposits $636,777 34,120 5.36 $532,100 28,132 5.29 $439,286 23,522 5.35
Borrowings 117,150 7,583 6.47 73,899 4,984 6.74 48,066 3,294 6.85
--------- ---------- -------------------- ---------- ---------
Total interest-bearing
liabilities 753,927 41,703 5.53 605,999 33,116 5.46 487,352 26,816 5.50
--------- ------ --------- ------ -------- ------
Noninterest-bearing
liabilities 51,674 42,924 35,032
Shareholders' equity 33,018 26,751 21,872
---------- ---------- ----------
Total liabilities and
shareholders' equity $838,619 $675,674 $544,256
======== ======== ========
Net interest income and
interest rate spread $ 27,643 3.20% $ 21,336 3.07% $ 16,619 2.98%
======== ====== ======== ====== ======== ======
Net interest margin 3.48% 3.34% 3.24%
Average interest-earning
assets to average
interest-bearing
liabilities 105.30% 105.39% 105.13%
</TABLE>
21
<PAGE> 28
Rate and Volume Variances. Net interest income is affected by changes
in the level of interest-earning assets and interest-bearing liabilities and
changes in yields earned on assets and rates paid on liabilities. The following
table sets forth, for the periods indicated, a summary of the changes in
interest earned and interest paid resulting from changes in average asset and
liability balances and changes in average rates. Changes attributable to the
combined impact of volume and rate have been allocated proportionately to change
due to volume and change due to rate.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
1997 VS. 1996 1996 VS. 1995
INCREASE (DECREASE) INCREASE (DECREASE)
-------------------------------- -------------------------------
TOTAL CHANGE DUE CHANGE DUE TOTAL CHANGE DUE CHANGE DUE
CHANGE TO VOLUME TO RATE CHANGE TO VOLUME TO RATE
-------- ---------- ---------- --------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest Income on:
Loans receivable $10,962 $ 8,962 $2,000 $10,305 $10,157 $ 148
Mortgage-backed securities 4,057 3,940 117 397 287 110
Other (125) (93) (32) 315 365 (50)
------- ------- ------ ------- ------- -----
Total interest income 14,894 $12,809 $2,085 11,017 $10,809 $ 208
------- ======= ====== ------- ======= =====
Interest Expense on:
Deposits 5,988 $ 5,603 $ 385 4,610 $ 4,903 $(293)
Borrowings 2,599 2,792 (193) 1,690 1,741 (51)
-------- ------- ------ ------- ------- -----
Total interest expense 8,587 $ 8,395 $ 192 6,300 $ 6,644 $(344)
-------- ======= ====== ------- ======= =====
Increase in net interest income $ 6,307 $ 4,717
======== =======
</TABLE>
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Net Income. Net income for 1997 was $5.8 million, or $0.82 per common
share, an increase of $4.3 million from 1996. Net income for 1996 was $1.5
million, or $0.24 per common share. The increase was primarily a result of the
increase in net interest income and the $1.9 million after tax SAIF assessment
in 1996 which was not repeated in 1997. Excluding the one-time SAIF assessment,
net income for 1996 was $3.5 million, or $0.54 per common share.
Interest Income. Total interest income increased 27.4% to $69.3 million
for 1997 as compared to $54.5 million for 1996. The increase was due to a 24.3%
increase in average interest-earning assets between the years and a 187.2%
increase in prepayment penalties to $1.1 million in 1997 from $0.4 million in
1996. Average earning assets increased as a result of Metropolitan's strategy of
increasing assets as long as assets with acceptable portfolio characteristics
are available. Prepayment penalties on multifamily and commercial real estate
loans increased when payoffs increased in response to declining interest rates
during the second half of 1997. The weighted average yield on interest-earning
assets increased to 8.73% during 1997 as compared to 8.53% during 1996. The
increase in prepayment penalties accounted for 9 basis points of the 20 basis
point increase. The remainder was primarily due to the increase in the weighted
average rate on loans receivable which went up due to increases in consumer and
business loans relative to real estate loans.
Interest Expense. Total interest expense increased 25.9% to $41.7
million for 1997 as compared to $33.1 million for 1996. Interest expense
increased primarily because the average balance of interest-bearing liabilities
increased 24.4%. The average balance of interest-bearing liabilities grew at
this rate in order to fund the growth of interest-earning assets discussed
above. Metropolitan's cost of funds increased to 5.53% in 1997 as compared to
5.46% in 1996 because the rates on new borrowings and new deposits were higher
than the weighted average rate of interest-bearing liabilities for 1996.
Net Interest Margin. Metropolitan's net interest margin rose 14 basis
points to 3.48% for 1997 compared to 3.34% for 1996. While overall interest
rates on loans and deposits declined during 1997, Metropolitan experienced
increases in yields on interest-earning assets due to prepayment penalties and
changes in asset mix and experienced increased liability costs due to an effort
to lengthen liability maturities to reduce the risk of declining net interest
income from rising rates. The increased yields in 1997 more than offset the
increased cost of liabilities.
Provision for Loan Losses. The provision for loan losses increased
43.1% to $2.3 million in 1997 as compared to $1.6 million in 1996. The increase
was related to the increase in total loans and management's estimate of the
adequacy of the allowance for losses on loans. Total loans (including loans held
for sale) increased 9.5% to $707.9 million at December 31, 1997 from $646.5
million at the same date a year earlier. The allowance for losses on loans at
December 31, 1997 was $5.6 million, or 0.79% of total loans, as compared to $4.2
million, or 0.64% of total loans, at the same date in 1996. Management's
estimate of the adequacy of the allowance for losses on loans is based upon an
analysis of factors such as historical loan loss experience, the status of
impaired loans, economic conditions affecting real estate markets, and
regulatory considerations.
22
<PAGE> 29
Noninterest Income. Total noninterest income increased 9.8% to $4.1
million in 1997 as compared to $3.8 million in 1996. Net loan servicing income
increased 7.4% to $1.3 million in 1997 as compared to $1.2 million in 1996. The
increase in net loan servicing fees was a result of Metropolitan's strategy of
increasing non-credit based fee income. The portfolio of loans serviced for
others increased to $1.2 billion at December 31, 1997 compared to $1.1 billion
at the same date a year earlier as a result of securitization of $93.0 million
of multifamily loans with the Federal National Mortgage Association ("FNMA")
during the third quarter of 1997. Purchases of loan servicing rights and
origination of loan servicing on one- to four-family mortgages during 1997
approximately offset payoffs and amortization of existing loans serviced.
Metropolitan remains committed to this line of business and will only acquire
the rights to service portfolios where the loan characteristics and pricing are
consistent with management's long-term profitability objectives.
Service charges on deposit accounts increased 26.7% to $716,000 in 1997
as compared to $565,000 in 1996. The primary reason for the increase was the
overall growth in deposit accounts and greater fee income derived from various
accounts due to increased business levels.
Gain on sale of loans was $488,000 in 1997 as compared to $203,000 in
1996. This income was dependent upon the amount of loans sold, secondary market
pricing, and the value allocated to mortgage servicing rights, and these
variables were in turn directly affected by prevailing interest rates. As such,
the primary reason for the increase in these gains was the sale of residential
fixed rate loans into a favorable market during the year. The proceeds of loans
sold were $65.5 million during 1997 as compared to $55.5 million in 1996.
Gain on sale of securities was $92,000 in 1997 as compared to $134,000
in 1996. During 1997, Metropolitan sold securities with a principal balance
outstanding of $16.6 million including FNMA preferred stock, a FNMA note, and
U.S. Treasury Notes. In 1996, $3.6 million of mortgage-backed securities were
sold at a gain of $134,000. Metropolitan does not actively purchase
mortgage-backed securities for resale; however, the existing portfolio of
mortgage-backed securities is monitored for opportunities to improve the yield,
manage interest rate risk, and increase profits, and as a result, certain
mortgage-backed securities have been sold.
Loan option income was $320,000 in 1997 as compared to $696,000 in
1996. This income was dependent upon the amount of loans for which options were
written and the price negotiated, both of which are affected by market
conditions. During 1997, Metropolitan purchased $10.6 million of loans and sold
nonrefundable options to purchase those same loans at a specified price within a
specified time period, as compared to $16.7 million of loans purchased for
options in 1996.
Other income increased 26.7% to $1.2 million in 1997 as compared to
$1.0 million in 1996. This increase was primarily due to increased fee income
earned on investment services, rental income at retail sales office locations,
and fee income from credit cards.
Noninterest Expense. Total noninterest expense decreased 3.3% to $20.1
million in 1997 as compared to $20.8 million in 1996. Noninterest expense in
1996 included a $2.9 million one-time assessment to recapitalize the SAIF.
Increases in other expense categories in 1997 as compared to 1996 related
primarily to growth in assets, the increase in retail sales offices and
personnel.
Personnel related expenses increased $2.0 million in 1997, or 23.1%,
from 1996. The increase was the result of increased staffing due to the growth
of the Bank, the payment of incentives for loan and deposit production, the
addition to staff for loan production, and the effects of merit increases. To
the extent that the number of retail sales offices continues to grow and loan
production increases, management anticipates increases in personnel costs will
continue in the near future.
Occupancy and equipment expense increased 23.5% to $3.0 million in 1997
as compared to $2.5 million in 1996. These increases were generally the result
of additional full service retail offices, remodeling of certain other retail
sales offices, and expanded space at the corporate headquarters. At the present
time, two new retail sales offices are planned for 1998 and additional sites are
under consideration for 1999.
Federal deposit insurance expense decreased $3.6 million to $0.6
million for 1997 as compared to $4.2 million for 1996 primarily as a result of
the one-time assessment to recapitalize the SAIF in 1996. The one-time SAIF
assessment was $2.9 million and represented 65.7 basis points of deposits held
as of March 31, 1995. The remaining decrease was attributable to a decline in
insurance premiums paid made possible by the previously mentioned SAIF
recapitalization.
Data processing expense decreased 26.3% to $441,000 in 1997 from
$599,000 in 1996. The primary reason for the decrease was a discount on
processing fees from the Bank's primary data services provider in mid-1997. This
discount on fees will extend until mid-1998 when fees will be returned to their
normal range prior to the discount.
Other operating expenses increased $0.4 million to $3.9 million for
1997 as compared to $3.5 million for 1996. The increase was primarily due to
increased credit card servicing costs as a result of the increased size of the
credit card portfolio, increased depreciation on newly acquired computer
technology, and increased legal fees related to delinquent loans.
23
<PAGE> 30
Provision for Income Taxes. The provision for income taxes increased to
$3.5 million in 1997 as compared to $1.1 million in 1996 due to the increase in
income before taxes. The effective tax rate was 37.6% for 1997 and 41.6% for
1996. The effective tax rate in 1997 was significantly lower because expenses
which are not deductible for tax purposes, such as amortization of intangibles,
were less significant in relationship to pre-tax income compared to 1996 as a
result of the unfavorable effect the one-time assessment to recapitalize the
SAIF had on pre-tax income in 1996. This more than offset the fact that
Metropolitan incurred significant state income tax and was subject to a higher
federal tax rate in 1997.
As a result of legislation enacted during 1996, savings associations
like the Bank will no longer be able to calculate their deduction for bad debts
using the percentage of taxable income method. Instead, savings associations
will generally be required to compute their deduction based on specific
charge-offs during the taxable year. While this change, effective for the tax
year 1996, will affect the timing of payments, it will not affect the
comparability of results among years.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
Net Income. Net income for 1996 was $3.5 million, or $0.54 per common
share, excluding the one-time assessment mandated by legislation to recapitalize
the SAIF. Net income including the SAIF assessment was $1.5 million, or $0.24
per common share as compared to $3.5 million, or $0.57 per common share for
1995. The decrease was primarily a result of the $1.9 million after tax, or
$0.30 per common share, SAIF assessment.
Interest Income. Total interest income increased 25.4% to $54.5 million
for 1996 as compared to $43.4 million for 1995. This increase primarily resulted
from a 24.6% increase in average interest-earning assets between the years. The
average balance of loans increased $116.1 million, which was a result of
Metropolitan's strategy of increasing assets when quality loans with acceptable
portfolio characteristics are available. Metropolitan originated $263.4 million
and purchased $126.9 million in loans in 1996, as compared to $161.9 million and
$103.7 million, respectively, for 1995. The weighted average yield on
interest-earning assets increased to 8.53% during 1996 as compared to 8.48%
during 1995.
Net Interest Margin. Metropolitan's net interest margin rose 10 basis
points to 3.34% for 1996 as compared to 3.24% for 1995, as a result of a modest
decline in interest rates paid for funds and an increase in the yield earned on
assets. Rates paid on deposits and other borrowings decreased in response to
lower market interest rates. The rate earned on interest-earning assets
increased slightly due to the change in mix of interest-earning assets.
Interest Expense. Total interest expense increased 23.5% to $33.1
million for 1996 as compared to $26.8 million for 1995. Interest expense
increased due to a higher average balance of interest-bearing liabilities
outstanding which was only partially offset by a lower cost of funds during
1996. The average balance of interest-bearing liabilities increased $118.6
million in 1996 compared to 1995 in order to fund the growth of interest-earning
assets discussed above.
Metropolitan's cost of funds decreased to 5.46% in 1996 as compared to
5.50% in 1995 generally due to the lower overall level of interest rates.
Metropolitan's increased use of wholesale borrowings, whose cost was lower than
the incremental cost of time deposits, permitted the overall cost of deposits to
decline despite the significant growth experienced during 1996.
Provision for Loan Losses. The provision for loan losses increased
70.5% to $1.6 million in 1996 as compared to $959,000 in 1995. The increase was
related to the increase in total loans and management's estimate of the adequacy
of the allowance for losses on loans. Total loans (including loans held for
sale) increased 34.0% to $650.9 million at December 31, 1996 from $482.6 million
at the same date a year earlier. The allowance for losses on loans at December
31, 1996 was $4.2 million, or 0.64% of total loans, as compared to $2.8 million,
or 0.57% of total loans, at the same date in 1995, while net charge-offs were
only $225,000, or 0.04% of average loans during 1996. Management's estimate of
the adequacy of the allowance for losses on loans is based upon an analysis of
factors such as historical loan loss experience, the status of impaired loans,
economic conditions affecting real estate markets, and regulatory
considerations.
Noninterest Income. Total non-interest income decreased 10.7% to $3.8
million in 1996 as compared to $4.2 million in 1995. Net loan servicing income
increased 12.7% to $1.2 million in 1996 as compared to $1.1 million in 1995. The
increase in net loan servicing fees was a result of Metropolitan's strategy of
increasing non-credit based fee income. Although the portfolio of loans serviced
for others declined due to normal runoff to $1.1 billion at December 31, 1996
compared to $1.2 billion at the same date a year earlier, the average balance of
loans serviced during the year was actually higher in 1996 as opposed to 1995.
Metropolitan remains committed to this business and continues to evaluate new
acquisitions. Metropolitan will only acquire the rights to service portfolios
where the loan characteristics and pricing are consistent with management's
long-term profitability objectives.
Gain on sale of loans was $203,000 in 1996 as compared to $444,000 in
1995. This income was dependent upon the amount of loans sold, secondary market
pricing, and the value allocated to mortgage servicing rights and these
variables were in turn directly affected by prevailing interest rates. The
proceeds of loans sold were $55.5 million during 1996 as compared to $59.8
million in 1995. The volume
24
<PAGE> 31
of loans sold was greater in 1995 compared to 1996 due to a greater market
demand for fixed rate loans in 1995. These loans were sold in the secondary
market in order to manage interest rate risk.
Gain on sale of securities was $134,000 in 1996 as compared to $389,000
in 1995. During 1996, Metropolitan sold mortgage-backed securities available for
sale with a principal balance outstanding of $3.6 million at a gain of $133,000.
In 1995, $29.1 million of mortgage-backed securities were sold at a gain of
$389,000. The decline in net gains was a result of the reduced volume of sales
which was consistent with availability. Metropolitan does not actively purchase
mortgage-backed securities for resale; however, the existing portfolio of
mortgage-backed securities is monitored for opportunities to improve the yield,
manage interest rate risk and increase profits, and as a result certain
mortgage-backed securities have been sold.
Loan option income was $696,000 in 1996 as compared to $559,000 in
1995. This income was dependent upon the amount of loans for which options were
written and the price negotiated, both of which were affected by market
conditions. During 1996, Metropolitan purchased $16.7 million of loans and sold
nonrefundable options to purchase those same loans at a specified price within a
specified time period, as compared to $16.2 million of loans purchased for
options in 1995.
Loan credit discount income decreased to $0 in 1996 from $640,000 in
1995. Since 1993, Metropolitan has purchased multifamily and commercial real
estate loans, often at a discount due to Metropolitan's assessment of credit
risk and the value of the underlying collateral. These collateral discounts are
not recognized in income over the life of the loan. When the loans paid off,
Metropolitan received the full contractual principal due, and any discount
related to management's initial estimate of deficiency in collateral values was
recognized as noninterest income. Metropolitan had no loan credit discount
income in 1996 and does not expect this source of noninterest income to be
recurring.
Other income increased 41.6% to $1.0 million in 1996 as compared to
$0.7 million in 1995. This increase was primarily due to an increase in
automated teller machine ("ATM") fees due to increases in transactions fees and
the number of ATM transactions, an increase in credit fees due to the increase
in the credit card portfolio and increased credit card transactions, and an
increase in miscellaneous fee income due to the increased size and number of
retail sales offices.
Noninterest Expense. Total non-interest expense increased 46.9% to
$20.8 million in 1996 as compared to $14.2 million in 1995. Personnel related
expenses increased $1.9 million, or 27.1% in 1996 as compared to 1995. The
increase was attributable to two additional full service retail sales offices
open in the 1996 period, the payment of incentives for loan and deposit
production, the addition to staff of several loan production officers, the full
effect of additions to staff in various departments late in 1995 and the effects
of merit increases.
Federal deposit insurance expense increased $3.1 million to $4.2
million for 1996 as compared to $1.1 million for 1995 primarily as a result of
the one-time assessment to recapitalize the SAIF. The SAIF assessment was $2.9
million and represented 65.7 basis points of deposits held as of March 31, 1995.
The remaining increase was attributable to an increase in insurance premiums
paid and was a result of increased deposit levels.
Other operating expenses increased $1.0 million to $3.5 million for
1996 as compared to $2.5 million for 1995, which represented a 42.4% increase in
1996 as compared to 1995. The increase was primarily due to increased credit
card servicing costs as a result of the increased size of the credit card
portfolio, increased business development expenses incurred to generate loan and
deposit growth, an employee benefits consulting project aimed at making
Metropolitan's salary and benefit structure competitive with that of its peers,
and increases in other general and administrative expenses as a result of the
increased number of full service retail offices.
Provision for Income Taxes. The provision for income taxes decreased
49.2% to $1.1 million in 1996 as compared to $2.2 million in 1995 due to the
decline in income before taxes. The effective tax rate was 41.6% for 1996 and
37.8% for 1995. The effective tax rate in 1996 was higher because expenses which
are not deductible for tax purposes, such as amortization of intangibles, have
increased in relationship to pre-tax income as a result of the unfavorable
effect the one-time assessment to recapitalize the SAIF had on pre-tax income.
ASSET QUALITY
Nonperforming Assets. Metropolitan's goal is to maintain the above
average asset quality of its loan portfolio through conservative lending
policies and prudent underwriting. Detailed reviews of the loan portfolio are
undertaken regularly to identify potential problem loans or trends early and to
provide for adequate estimates of potential losses. In performing these reviews,
Metropolitan's management considers, among other things, current economic
conditions, portfolio characteristics, delinquency trends, and historical loss
experiences. Metropolitan normally considers loans to be nonperforming when
payments are 90 days or more past due or when the loan review analysis indicates
that repossession of the collateral may be necessary to satisfy the loan. In
addition, Metropolitan considers loans to be impaired when, in management's
opinion, it is probable that the borrower will be unable to meet the contractual
terms of the loan. When loans are classified as nonperforming, an assessment is
made as to the collectibility of the unpaid interest. Interest determined to be
uncollectible is reversed from interest income and future interest income is
recorded only if the loan principal and interest due is considered collectible
and is less than the estimated fair value of the underlying collateral.
25
<PAGE> 32
The table below sets forth the amounts and categories of Metropolitan's
nonperforming assets as of the dates indicated. At December 31, 1997, all loans
classified by management as impaired were also classified as nonperforming.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1997 1996 1995
-------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Nonaccrual loans $2,763 $4,923 $3,103
Loans past due greater than 90 days,
still accruing 384 271 204
-------- -------- --------
Total nonperforming loans 3,147 5,194 3,307
Real estate owned 2,037 177 258
------- -------- --------
Total nonperforming assets $5,184 $5,371 $3,565
====== ====== ======
Nonperforming loans to total loans 0.44% 0.80% 0.69%
Nonperforming assets to total assets 0.56% 0.70% 0.60%
</TABLE>
Real estate owned increased $1.9 million to $2.0 million at December
31, 1997 from a year earlier while total nonperforming assets declined $0.2
million over the same period. This reflects the progression of nonperforming
loans at December 31, 1996 to real estate owned during 1997. Two properties
accounted for the majority of this increase, a strip shopping center in the
Philadelphia, Pennsylvania area valued at $1.0 million and a commercial
condominium warehouse near Chicago, Illinois valued at $0.5 million.
Metropolitan is actively marketing both properties through local real estate
agents and no losses are expected.
In addition to the nonperforming assets included in the table above,
Metropolitan identifies potential problem loans which are still performing but
have a weakness which causes Metropolitan to classify those loans as substandard
for regulatory purposes. There was $4.9 million of loans in this category at
December 31, 1997. The largest loan in that category was a $4.0 million
participation in a $9.0 million loan secured by a water park in Southern
California. The loan was 30 days past due at December 31, 1997 and the borrower
is in the process of refinancing the loan and obtaining more working capital. If
the borrower does not refinance this property with another lender, then the
borrower's ability to repay the loan will be contingent on the operating success
of the park during 1998, its first full year of operation.
Allowance for Losses on Loans. The provision for loan losses and
allowance for losses on loans is based on an analysis of individual loans, prior
loss experience, growth in the loan portfolio, changes in the mix of the loan
portfolio and other factors including current economic conditions. See Note 1 of
Notes to Consolidated Financial Statements. The following table sets forth an
analysis of Metropolitan's allowance for losses on loans at the dates indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
-------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD $4,175 $2,765 $1,911
Charge-offs:
One- to four-family 32 22 23
Multifamily 494 119 --
Commercial real estate -- -- 27
Construction and land -- -- --
Consumer 363 95 56
Business 10 -- --
----- ----- ------
Total charge-offs 899 236 106
----- ----- ------
Recoveries:
One- to four-family -- -- 1
Multifamily -- -- --
Commercial real estate -- -- --
Construction and land -- -- --
Consumer 6 11 --
Business -- -- --
----- ----- ------
Total recoveries 6 11 1
----- ----- ------
Net charge-offs 893 225 105
Provision for loan losses 2,340 1,635 959
----- ----- ------
BALANCE AT END OF PERIOD $5,622 $4,175 $2,765
====== ====== ======
Net charge-offs to average loans 0.13% 0.04% 0.02%
Provision for loan losses to average loans 0.35% 0.28% 0.21%
Allowance for losses on loans to total
non-performing loans at end of period 178.60% 77.73% 83.61%
Allowance for losses on loans to total loans
at end of period 0.79% 0.64% 0.57%
</TABLE>
26
<PAGE> 33
The allowance for losses on loans as a percentage of total loans was
0.79% at December 31, 1997 as compared to 0.64% at December 31, 1996 and 0.57%
at December 31, 1995. In each period, the provision for loan losses and
allowance for losses on loans were based on an analysis of individual loans,
prior and current loss experience, overall growth in the portfolio and current
economic conditions. Charge-offs increased during 1997 to $0.9 million compared
to $0.2 million in 1996 and $0.1 million in 1995. This increase was the result
of overall growth in the loan portfolio, an expansion of consumer loan activity
into higher risk loans and the fact that multifamily loans carry larger average
balances than single-family loans so that a small number of multifamily loans
charged off can result in a significant write-off in dollars. Based on this
activity, Metropolitan increased the provision for losses on loans which
resulted in an increase in the allowance for losses on loans of $1.4 million in
both 1997 and 1996.
COMPARISON OF DECEMBER 31, 1997 AND DECEMBER 31, 1996 FINANCIAL CONDITION
Total assets amounted to $925.0 million at December 31, 1997, as
compared to $769.1 million at December 31, 1996, an increase of $155.9 million,
or 20.3%. The increase in assets was funded primarily with deposit growth of
$115.7 million, an increase in FHLB of Cincinnati advances and other borrowings
of $34.0 million, and an increase in shareholders' equity of $6.4 million.
Securities decreased by $6.8 million, or 51.1%, to $6.4 million.
Securities available for sale are maintained by Metropolitan to meet the
liquidity maintenance requirement of the 1995 Notes and as a way to enhance
earnings by improving the return on idle cash, or taking advantage of changes in
the level of interest rates to generate gains or maintain profitable yields. See
"Liquidity and Capital Resources." During 1997, the Bank sold U.S. Treasury
notes, FNMA preferred stock, and a FNMA note. Some of these proceeds were
reinvested in mortgage-backed securities at a higher yield.
Mortgage-backed securities increased $86.5 million to $143.2 million at
December 31, 1997. The increase was primarily due to the securitization of $93.0
million of multifamily loans with FNMA in the third quarter, the purchase of
$10.4 million of Federal Home Loan Mortgage Corporation ("FHLMC") securities,
and the securitization of $5.4 million of originated one- to four-family
mortgage loans, also with FHLMC.
Loans held for sale increased $5.3 million to $14.2 million at December
31, 1997, primarily as a result of the increased balance of commercial real
estate loans for which Metropolitan had pending sales. From time to time,
Metropolitan sells multifamily or commercial real estate loans in order to
reduce interest rate risk, maintain an appropriate balance of the different
types of loans in the loan portfolio or to free up capital for other types of
growth. When sales are planned, the loans involved are reclassified to held for
sale. These pending sales were completed in January, 1998 for a gain.
Loans receivable increased $56.2 million, or 8.8% to $693.7 million.
This increase was consistent with Metropolitan's overall strategy of increasing
assets while adhering to prudent underwriting standards and preserving its
adequately capitalized status. The following increases by loan category were
experienced: one- to four-family loans--$31.9 million; commercial real estate
loans-- $30.9 million; consumer loans--$14.4 million; construction and land
loans (net of loans in process)--$29.6 million; and business loans-- $34.0
million. Multifamily loans decreased $82.1 million as a result of the
multifamily loan securitization of $93.0 million discussed above.
Premises and equipment increased $2.6 million, or 22.9%, to $13.9
million. This increase was primarily the result of a retail sales office opening
in 1997 and the purchase of computer hardware and software used in the retail
sales office network.
Deposits totaled $737.8 million at December 31, 1997, an increase of
$115.7 million, or 18.6%, over the balance at December 31, 1996. The increase
resulted from management's marketing efforts, growth at new retail sales office,
and paying competitive rates to increase certificate of deposit balances.
Borrowings increased $34.0 million to $135.9 million at December 31,
1997, as compared to $101.9 million at December 31, 1996. Based on the lower
cost of wholesale funds as compared to comparable maturity retail deposits and
the increased availability of collateral after the multifamily loan
securitization, management chose to fund a portion of the loan growth discussed
above with wholesale funds. Reverse repurchase agreements were the predominant
source of the increased borrowings.
Shareholders' equity increased $6.4 million, or 21.2%, to $36.7
million, due largely to the retention of net income.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The term "liquidity" refers to Metropolitan's ability to
generate adequate amounts of cash to meet its needs, for funding loan
originations, loan purchases, deposit withdrawals, maturities of borrowings and
operating expenses. Metropolitan's primary sources of internally generated funds
are principal repayments and payoffs of loans, cash flows from operations and
proceeds from sales of assets. External sources of funds include increases in
deposits, borrowings and the public sale or private placement of debt or equity
issues by the Corporation.
27
<PAGE> 34
In addition to debt or equity issues, the Corporation's primary source
of funds is dividends from the Bank, which are subject to restrictions imposed
by federal bank regulatory agencies. At December 31, 1997 the Corporation had
liquid assets of $2.1 million and had $2.5 million available to borrow on a line
of credit of $4.0 million with the Huntington National Bank (the "Huntington
Loan Agreement"). Funds could also be used to fund additional capital
contributions to the Bank, other operating expenses, purchase investment
securities or the acquisition of other assets. Currently the Corporation's
primary use of funds is for interest payments on its existing debt. The
covenants associated with the 1995 Subordinated Notes require the Corporation to
maintain liquid assets sufficient to pay six months interest, or approximately
$675,000.
Sources of funds for the Bank such as loan repayments and deposits
flows are greatly influenced by prevailing interest rates, economic conditions
and competition. Other sources of funds such as borrowings and maturities of
securities are more reliable or predictable. The Bank currently has a $50
million Cash Management Line of Credit with the FHLB which is available to meet
liquidity needs. There was no outstanding balance on that line as of December
31, 1997. Metropolitan regularly reviews cash flow needed to fund its operations
and believes that the aforementioned resources are adequate for its foreseeable
requirements.
At December 31, 1997, $86.9 million, or 18.2%, of Metropolitan's
certificates of deposits were in the form of accounts of $100,000 and over. If a
large number of these certificates of deposits matured at approximately the same
time and were not renewed, there could be an adverse effect on Metropolitan's
liquidity. Metropolitan monitors maturities to attempt to minimize any potential
adverse effect on liquidity.
When evaluating sources of funds, Metropolitan considers the cost of
various alternatives such as local retail deposits, FHLB advances and other
wholesale borrowings. One option considered and utilized in the past has been
the acceptance of out-of-state time deposits from individuals and entities,
predominantly credit unions. These deposits typically have balances of $90,000
to $100,000 and have a term of one year or more. They are not accepted through
brokers. At December 31, 1997, approximately $57.7 million of certificates of
deposits, or 12.1% of Metropolitan's accounts, were held by these individuals
and entities. If Metropolitan were unable to replace these deposits upon
maturity, there could be an adverse effect on Metropolitan's liquidity.
Metropolitan monitors maturities to attempt to minimize any potential adverse
effect on liquidity.
Historically, the Bank has been subject to a regulatory liquidity
requirement. In November 1997 liquidity regulations were significantly changed.
These new regulations require that the Bank maintain liquid assets equal to at
least 4% of the liquidity base on a monthly basis. Liquid assets generally
include all unpledged cash in banks, investment securities maturing within five
years and securities issued by the Government National Mortgage Association
("GNMA"), FNMA, or FHLMC regardless of maturity. The liquidity base includes
amounts due banks and deposits and borrowings maturing in less than one year.
The Bank's liquidity ratio for December 1997 was 14.6%. This ratio is
substantially above the minimum because the new regulations are less restrictive
than the old regulations and because Metropolitan added significantly to its
portfolio of mortgage-backed securities with the $93.0 million multifamily loan
securitization during the third quarter of 1997.
Capital. Total shareholders' equity of the Corporation at December 31,
1997 was $36.7 million, an increase of $6.4 million or 21.2% from equity of
$30.2 million at December 31, 1996. The increase was due to net income of $5.8
million and an increase in unrealized gains on securities available for sale,
net of tax, of $0.6 million. No dividends were paid in 1997, 1996 or 1995. Terms
of the 1993 Notes prohibit the payment of dividends until those notes are paid
off. The terms of the 1995 Subordinated Notes prohibit the payment of dividends
unless total equity divided by total assets is greater than 7%. The Corporation
raised $3.3 million in additional capital in 1996 through an initial public
offering of common shares. Sources of future capital for the Corporation could
include, but would not be limited to, earnings of the Corporation or additional
offerings of equity securities.
The OTS imposes capital requirements on savings associations. Savings
associations are required to meet three minimum capital standards: (i) a
leverage requirement, (ii) a tangible capital requirement, and (iii) a
risk-based capital requirement. Such standards must be no less stringent than
those applicable to national banks. In addition, the OTS is authorized to impose
capital requirements in excess of these standards on individual associations on
a case-by-case basis.
The OTS leverage requirement expressly requires that core capital be
maintained in an amount not less than 3% of adjusted total assets. The OTS has
taken the position, however, that the Prompt Corrective Action regulatory scheme
has effectively raised the leverage ratio requirement for all but the most
highly rated savings associations to 4%. Core capital is defined to include
shareholders' equity less intangibles other than qualifying supervisory goodwill
and certain qualifying intangibles, less investments in subsidiaries engaged in
activities not permissible for national banks.
Under the tangible capital requirement, tangible capital (defined as
core capital less all intangible assets, except a limited amount of qualifying
purchased mortgage servicing rights ("PMSR") must be maintained in an amount
equal to at least 1.5% of adjusted total assets. Adjusted total assets, for the
purpose of the tangible capital ratio, include total assets less all intangible
assets except qualifying PMSRs.
28
<PAGE> 35
The risk-based capital requirement is calculated based on the risk
weight assigned to on-balance sheet assets and off-balance sheet commitments,
which ranges from 0% to 100% of the book value of the asset and is based upon
the risk inherent in the asset. The risk weights assigned by the OTS for
principal categories of assets are (i) 0% for cash and securities issued by the
U.S. Government or unconditionally backed by the full faith and credit of the
U.S. Government; (ii) 20% for securities (other than equity securities) issued
by U.S. Government sponsored agencies and mortgage-backed securities issued by,
or fully guaranteed as to principal and interest by, FNMA or FHLMC except for
those classes with residual characteristics or stripped mortgage-related
securities; (iii) 50% for prudently underwritten permanent one- to four-family
first lien mortgage loans not more than 90 days delinquent and having a loan to
value ratio of not more that 80% at origination unless insured to such ratio by
an insurer approved by FNMA or FHLMC, certain qualifying multifamily first lien
mortgage loans and residential construction loans; and (iv) 100% for all other
loans and investments, including consumer loans, commercial loans, repossessed
assets and loans more than 90 days delinquent. The risk-based requirement
mandates total capital of 8.0% of risk-weighted assets. Total capital consists
of core capital, as defined above, and supplementary capital. Supplementary
capital consists of certain permanent and maturing capital instruments that do
not qualify as core capital and general valuation loan and lease loss allowances
up to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be
used to satisfy the risk-based requirement only to the extent of core capital.
The Bank's regulatory capital ratios at December 31, 1997 were in
excess of the capital requirements specified by OTS regulations as shown by the
following table:
<TABLE>
<CAPTION>
TANGIBLE CAPITAL CORE CAPITAL RISK-BASED CAPITAL
---------------------- ---------------------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Capital amount:
Actual $49,901 5.43% $50,215 5.47% $54,343 8.39%
Required 13,777 1.50 36,738 4.00 51,836 8.00
------- ------- -------- ------- ------- -------
Excess $36,124 3.93% $13,477 1.47% $ 2,507 0.39%
======= ======= ======= ======= ======= =======
</TABLE>
The Bank's primary sources of capital are the earnings of the Bank and
additional capital investments from the Corporation. The Corporation follows the
strategy of contributing additional capital to the Bank as growth occurs to
maintain risk based capital at "well capitalized" or "adequately capitalized"
levels as defined by OTS regulations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Metropolitan, like other financial institutions, is subject to direct
and indirect market risk. Direct market risk exists from changes in interest
rates. To the extent that interest-bearing assets and interest-bearing
liabilities mature at different intervals, changes in market interest rates can
result in increases or decreases in net interest income. This is also known as
interest rate risk. Indirect market risk exists to the extent that Metropolitan
has a concentration of loans secured by similar assets and the market for those
assets deteriorates. Metropolitan manages that risk of decline in the value of a
class of collateral by maintaining diversity by type of collateral, geographic
area, industry for corporate borrowers, and by size of loan. In addition,
Metropolitan always gives consideration to the credit worthiness of the borrower
in addition to depending on the value of the collateral when underwriting loans.
Direct exposure to interest rate risk is more significant than indirect market
risk and Metropolitan has created a system for monitoring this risk which
includes periodic quantitative analysis.
The Bank's Asset and Liability Committee, which includes
representatives of senior management, monitors the level and relative mix of its
interest-earning assets and interest-bearing liabilities. The Bank, like many
financial institutions, currently has exposure to declines in net interest
income from rising interest rates. The steps being taken by the Bank to reduce
interest rate risk from rising interest rates include: (i) focusing on
originating and purchasing adjustable rate assets for portfolio; (ii) the sale
of fixed rate one- to four-family loans with servicing retained; (iii) focusing
on shortening the term of fixed rate lending by increasing the percent of the
fixed rate loan portfolio represented by consumer loans; (iv) increasing
business lending which will generally result in loans with adjustable rates and
shorter terms; (v) increasing the loan servicing portfolio; (vi) emphasizing
transaction account deposit products which are less susceptible to repricing in
a rising interest rate environment; (vii) maintaining competitive pricing on
longer term certificates of deposit; and (viii) utilizing term advances and
other borrowings rather than short-term funds.
As part of its effort to monitor and manage interest rate risk, the
Bank uses the Net Portfolio Value ("NPV") methodology adopted by the OTS as part
of OTS capital regulations. Generally, NPV is the discounted present value of
the difference between incoming cash flows on interest-earning and other assets
and outgoing cash flows on interest-bearing and other liabilities. The
application of the methodology attempts to quantify interest rate risk as the
change in NPV which would result from theoretical instantaneous and sustained
parallel shifts of 100 basis points in market interest rates.
29
<PAGE> 36
Presented below, as of December 31, 1997 and 1996, is an analysis of
the Bank's interest rate risk measured by the NPV methodology. The table also
contains the policy limits set by the Board of Directors of the Bank established
with consideration of the dollar impact of various rate changes and the Bank's
capital position.
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
CHANGES IN BOARD LIMIT PERCENTAGE PERCENTAGE
INTEREST RATE PERCENTAGE CHANGE CHANGE CHANGE CHANGE
(BASIS POINTS) CHANGE IN NPV IN NPV IN NPV IN NPV
-------------- ------------- ----------------------- -------------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
+400 (65)% $(27,474) (36)% $(26,596) (44)%
+300 (45) (20,131) (27) (19,790) (33)
+200 (25) (12,743) (17) (12,853) (21)
+100 (15) (5,829) (8) (6,302) (10)
-100 (15) 5,631 7 6,294 10
-200 (25) 13,381 18 14,644 24
-300 (45) 25,415 33 26,402 44
-400 (65) 40,157 53 40,742 68
</TABLE>
As illustrated in the table, Metropolitan's NPV is unfavorably affected
in the rising rate scenarios. This occurs principally because the interest paid
on deposits would increase more rapidly than rates earned on assets because
deposits generally have shorter periods to maturity. In addition, the fixed rate
assets in the loan portfolio will only reprice as the loans are repaid and new
loans at market rates are made. Furthermore, even for the adjustable rate
assets, repricing may lag behind the rate change due to contractual time frames.
At December 31, 1997 and 1996, the Bank was within the Board-established limits
for various changes in interest rates, and the Bank's sensitivity to rising
interest rates has decreased from 1996 to 1997. The modest improvement in
interest rate sensitivity, from 1996 to 1997, was a result of: (i) slightly
lower overall interest rates; (ii) a shortening of the average term of fixed
rate assets; and (iii) a lengthening of the average term of time deposits and
borrowings.
The principal strategy used by Metropolitan to mitigate the risk of
decline in net interest income from increases in interest rates has been to
build a portfolio of adjustable rate interest-earning assets. At December 31,
1997, 63.4% of the total loan portfolio had adjustable rates. In order to remain
competitive in the mortgage loan market and meet customer needs, Metropolitan
also offers a variety of fixed rate products. Metropolitan has managed its
investment in fixed rate loans in several ways in order to minimize interest
rate risk. It has long been Metropolitan's policy to sell the majority of its
fixed rate one- to four-family loan production in the secondary market. At
December 31, 1997, Metropolitan had only 7.7% of its total loans comprised of
fixed rate residential one- to four-family loans. Within the remaining fixed
rate portfolio, Metropolitan has focused on short-term loan types. Fixed rate
multifamily and commercial real estate loans comprised 14.7% of total loans at
December 31, 1997, and had a weighted average contractual term to maturity of
approximately five years. Fixed rate consumer loans, with a weighted average
contractual term of maturity of approximately eight years, comprised 8.0% of
total loans at December 31, 1997. Consumers often, for various reasons, repay
loans before their contractual maturity, thereby shortening the effective term
to maturity.
As with any method of measuring interest rate risk, certain
shortcomings are inherent in the NPV approach. For example, although certain
assets and liabilities may have similar maturities or periods of repricing, they
may react in different degrees to changes in market interest rates. Also, as a
result of competition, the interest rates on certain assets and liabilities may
fluctuate in advance of changes in market interest rates, while interest rates
on other types of assets and liabilities may lag behind changes in market rates.
Further, in the event of a change in interest rates, expected rates of repayment
on assets and early withdrawal levels from certificates of deposit would likely
deviate from those scheduled. Finally, the NPV approach is a measure of how long
term value changes with changes in interest rates and assumes no responses by
management to changes in rates. Changes in interest rates may affect near-term
net interest income to a greater or lesser extent than those changes affect NPV.
Despite its limitations, management considers NPV the best method for monitoring
interest rate risk since core repricing and maturity relationships are very
clearly seen. The clarity of the risk relations is enhanced by the simplicity of
the rate changes and the fact that all rates, short-term and long-term, change
by the same degree.
YEAR 2000
The year 2000 issue refers to computer programs being written using two
digits rather than four to define an applicable year. Any of a company's
hardware, date-driven automated equipment or computer programs that have a
two-digit field to define the year may recognize a date using "00" as the year
1900 rather than the year 2000. This faulty recognition could result in a system
failure, disruption of operations, or inaccurate information or calculations.
Similar to other companies, Metropolitan faces the challenge of ensuring that
all computer-related functions will work properly in the year 2000 and beyond.
As a result, Metropolitan has addressed this issue by forming a task force to
plan for and implement any changes necessary to ensure year 2000 compliance. The
task force has identified four major areas where it will concentrate its
efforts: (i) the service bureau that services the majority of Metropolitan's
customer accounts; (ii) the various software vendors whose software is used by
Metropolitan; (iii) critical vendors Metropolitan uses that are dependent upon
data
30
<PAGE> 37
processing; and (iv) major loan customers to ensure that their revenues will
continue uninterrupted. A time line has been established and the task force and
its subcommittees will progress through assessment planning, implementation and
testing during 1998. Metropolitan believes the plans currently in place will be
adequate to provide quality service to customers without interruption. In
management's opinion, any related incremental costs will not have a material
impact on the financial condition, operations, or cash flows of the Corporation.
RECENT ACCOUNTING DEVELOPMENTS
In December 1996, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 127, Deferral of
the Effective Date of Certain Provisions of SFAS No. 125. This statement defers
provisions of SFAS No. 125 related repurchase agreements, securities lending and
other similar transactions for one year. Metropolitan adopted these provisions
prospectively as of January 1, 1998. The adoption of this statement will not
have a material impact on the financial position or results of operations of the
Bank or the Corporation.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. This statement establishes standards for reporting certain changes in
equity that are not included in net income but are a component of comprehensive
income. The change in unrealized gains or losses on securities available for
sale is an example of a component of comprehensive income that would be relevant
to Metropolitan. This statement will be effective for Metropolitan beginning
with interim financial statements in 1998. This statement will result in
additional disclosures but will have no impact on the financial position or
results of operations of the Corporation.
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments
of an Enterprise and Related Information. This statement requires disclosure of
financial and descriptive information about operating segments of a business in
annual and interim financial reports to shareholders. This statement will be
effective for the 1998 annual report but will not be required or included in
1998 interim financial reports. This statement may require additional
disclosures but will not have any impact on the financial position or results of
operations of the Bank or the Corporation.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and notes included herein have
been prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the changes in relative purchasing power
of money over time due to inflation. The impact of inflation is reflected in the
increased cost of Metropolitan's operations.
In management's opinion, changes in interest rates affect the financial
condition of a financial institution to a far greater degree than changes in the
inflation rate. While interest rates are influenced by changes in the inflation
rate, they do not change at the same rate or in the same magnitude as the
inflation rate. Rather, interest rate volatility is based on changes in the
expected rate of inflation, as well as changes in monetary and fiscal policies.
Metropolitan's ability to match the interest rate sensitivity of its financial
assets to the interest sensitivity of its financial liabilities in its
asset/liability management may tend to minimize the effect of changes in
interest rates on its financial performance.
FORWARD LOOKING STATEMENTS
Certain statements contained in this report that are not historical
facts are forward looking statements that are subject to certain risks and
uncertainties. When used herein, the terms "anticipates," "plans," "expects,"
"believes," and similar expressions as they relate to Metropolitan or its
management are intended to identify such forward looking statements.
Metropolitan's actual results, performance or achievements may materially differ
from those expressed or implied in the forward looking statements. Risks and
uncertainties that could cause or contribute to such material differences
include, but are not limited to, general economic conditions, interest rate
environment, competitive conditions in the financial services industry, changes
in law, governmental policies and regulations, and rapidly changing technology
affecting financial services.
BUSINESS
GENERAL
Metropolitan is a savings and loan holding company incorporated in 1972
that is engaged in the principal business of originating and purchasing mortgage
and other loans through its wholly-owned subsidiary, the Bank. Funds for lending
and other investment activities are obtained primarily from savings deposits,
wholesale borrowings, principal repayments on loans and the sale of loans. The
activities of the Corporation are limited and impact the results of operations
primarily through interest expense on a consolidated basis. Unless
31
<PAGE> 38
otherwise noted, all of the activities discussed below are of the Bank.
Metropolitan's corporate headquarters is located at 6001 Landerhaven Drive,
Mayfield Heights, Ohio 44124.
The Corporation's current majority shareholder is Robert M. Kaye of
Rumson, New Jersey. Mr. Kaye acquired the Corporation in 1987 and remained sole
shareholder until the IPO of the Corporation's common shares in October, 1996.
As a result of the IPO, Mr. Kaye currently owns 77.5% of the Corporation's
outstanding common shares and has the ability to control the outcome of various
matters submitted to the shareholders for approval, the ability to elect or
remove all the directors of the Corporation and has ultimate control of the
Corporation and the Bank. In addition, Mr. Kaye is Chairman of the Board and
Chief Executive Officer of the Corporation and the Bank.
The Bank is a state chartered stock savings association established in
1958. At December 31, 1997, the Bank operated fifteen full service retail
offices throughout Eastern Cuyahoga, Summit, Lake and Geauga Counties. As of
December 31, 1997, the Bank also maintained four residential and
multifamily/commercial real estate loan production offices. In addition to its
principal business of originating and purchasing mortgage and other loans, the
Bank services a significant portfolio of mortgage loans for various investors.
At December 31, 1997, Metropolitan had total assets of $925.0 million,
total deposits of $737.8 million and shareholders' equity of $36.7 million. The
deposits of the Bank are insured by the FDIC up to applicable limits.
In addition to the Bank, Metropolitan has four other subsidiaries, each
of which are either directly or indirectly wholly-owned by Metropolitan:
MetroCapital Corporation; Kimberly Construction Company, Incorporated ("Kimberly
Construction"); Metropolitan Savings Service Corporation; and Metropolitan
Securities Corporation. Each of these subsidiaries, with the exception of
Kimberly Construction, is inactive. Currently, Kimberly Construction's sole
business function is to serve as a principal party to various construction
contracts entered into in connection with the construction of Bank premises.
LENDING ACTIVITIES
General. Metropolitan primarily originates and purchases mortgage loans
secured by multifamily residential and commercial real estate. Metropolitan also
originates one- to four-family residential and construction loans, and to a
lesser extent, consumer and business loans. In order to minimize interest rate
risk, the majority of the residential real estate loans retained by Metropolitan
in its portfolio are adjustable rate mortgages ("ARMs").
32
<PAGE> 39
Loan Portfolio Composition. The following information presents the
composition of Metropolitan's loan portfolio, including loans held for sale, in
dollar amounts and in percentages (before deductions for loans in process,
deferred fees and discounts and allowance for losses on loans) as of the dates
indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
----- ----- ----- ----- ----
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REAL ESTATE LOANS:
One- to four-family $146,685 19.2% $114,758 16.8% $ 76,259 15.0% $112,840 25.2% $ 39,510 12.7%
Multifamily 194,450 25.4 276,544 40.3 231,459 45.8 187,928 41.9 166,221 53.2
Commercial 166,593 21.8 135,635 19.8 109,403 21.5 83,354 18.6 54,819 17.5
Construction and land 116,829 15.3 71,697 10.5 48,210 9.5 38,270 8.5 30,894 9.9
Held for sale 14,230 1.8 8,973 1.3 1,504 0.2 84 0.0 10,391 3.3
--------- ------- ---------- ------- --------- ------ ----------- ------ -------- ------
Total real estate
loans 638,787 83.5 607,607 88.7 466,835 92.0 422,476 94.2 301,835 96.6
CONSUMER LOANS 68,590 9.0 54,180 7.9 32,214 6.3 25,946 5.8 10,687 3.4
BUSINESS AND OTHER
LOANS 57,496 7.5 23,508 3.4 8,703 1.7 171 0.0 50 0.0
--------- ------- --------- ------- --------- ------ ---------- ------ ------- ------
Total loans 764,873 100.0% 685,295 100.0% 507,752 100.0% 448,593 100.0% 312,572 100.0%
===== ===== ===== ===== =====
LESS:
Loans in process 46,833 31,758 23,373 19,338 14,656
Deferred fees,
premiums and
discounts, net 4,533 2,896 1,764 2,317 1,998
Allowance for losses
on loans 5,622 4,175 2,765 1,911 1,239
--------- --------- --------- --------- ---------
TOTAL LOANS
RECEIVABLE, NET $707,885 $646,466 $479,850 $425,027 $294,679
======= ======= ========= ========= =========
</TABLE>
Metropolitan had commitments to originate or purchase fixed and
variable rate loans of $22.3 million and $49.4 million, respectively, at
December 31, 1997. In addition, Metropolitan had firm commitments to sell fixed
rate loans of $2.2 million at December 31, 1997.
33
<PAGE> 40
The following table shows the composition of Metropolitan's loan
portfolio, including loans held for sale, in dollar amounts and in percentages
(before deductions for loans in process, deferred fees and discounts and
allowance for losses on loans) by fixed and adjustable rates as of the dates
indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------------
1997 1996 1995
------ ------ ------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
FIXED RATE LOANS:
Real estate:
One- to four-family $ 59,058 7.7% $ 41,436 6.1% $ 35,042 6.9%
Multifamily 60,136 7.9 88,529 12.9 71,909 14.2
Commercial 52,390 6.9 34,726 5.1 17,615 3.5
Construction and land 20,854 2.7 392 0.0 39 0.0
Held for sale 6,294 0.8 2,531 0.4 1,504 0.3
--------- --- --------- ---- --------- -----
Total fixed rate real estate
loans 198,732 26.0 167,614 24.5 126,109 24.9
Consumer 61,307 8.0 46,725 6.8 32,214 6.3
Business and other 19,575 2.6 5,650 0.8 2,744 0.5
-------- ---- --------- ----- --------- ----
Total fixed rate loans 279,614 36.6% 219,989 32.1% 161,067 31.7%
------- ==== --------- ===== ------- ====
ADJUSTABLE RATE LOANS:
Real estate:
One- to four-family 87,627 11.5% 73,322 10.7% 41,217 8.1%
Multifamily 134,314 17.6 188,015 27.5 159,550 31.4
Commercial 114,203 14.9 100,909 14.7 91,788 18.1
Construction and land 95,975 12.5 71,305 10.4 48,171 9.5
Held for sale 7,936 1.0 6,442 0.9
--------- ---- --------- ---- ------- -----
Total adjustable rate real
estate loans 440,055 57.5 439,993 64.2 340,726 67.1
Consumer 7,283 0.9 7,455 1.1
Business and other 37,921 5.0 17,858 2.6 5,959 1.2
-------- ----- ------- ----- ------- -----
Total adjustable rate loans 485,259 63.4% 465,306 67.9% 346,685 68.3%
------- ==== -------- ==== ------- ====
LESS:
Loans in process 46,833 31,758 23,373
Deferred fees, premiums
and discounts, net 4,533 2,896 1,764
Allowance for losses
on loans 5,622 4,175 2,765
--------- --------- ---------
TOTAL LOANS
RECEIVABLE, NET $707,885 $646,466 $479,850
======= ======= =======
<CAPTION>
DECEMBER 31,
------------------------------------------------
1994 1993
------ -----
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C>
FIXED RATE LOANS:
Real estate:
One- to four-family $ 46,418 10.4% $ 20,448 6.5%
Multifamily 19,852 4.4 5,281 1.7
Commercial 7,948 1.8 8,325 2.7
Construction and land
Held for sale 84 0.0 10,391 3.3
-------- ---- -------- ----
Total fixed rate real estate
loans 74,302 16.6 44,445 14.2
Consumer 25,946 5.8 10,687 3.4
Business and other 20 0.0
-------- ----- -------- -----
Total fixed rate loans 100,268 22.4% 55,132 17.6%
-------- ===== -------- =====
ADJUSTABLE RATE LOANS:
Real estate:
One- to four-family 66,422 14.8% 19,062 6.1%
Multifamily 168,076 37.5 160,940 51.5
Commercial 75,406 16.8 46,494 14.9
Construction and land 38,270 8.5 30,894 9.9
Held for sale
Total adjustable rate real
estate loans 348,174 77.6 257,390 82.4
Consumer
Business and other 151 0.0 50 0.0
Total adjustable rate loans 348,325 77.6% 257,440 82.4%
------- ==== ------- =====
LESS:
Loans in process 19,338 14,656
Deferred fees, premiums
and discounts, net 2,317 1,998
Allowance for losses
on loans 1,911 1,239
--------- ---------
TOTAL LOANS RECEIVABLE,
RECEIVABLE, NET $425,027 $294,679
======= =======
</TABLE>
34
<PAGE> 41
The following table illustrates the contractual maturity of
Metropolitan's loan portfolio, including loans held for sale at December 31,
1997. Loans which have adjustable or renegotiable interest rates are shown as
maturing in the period during which the contract is due. The schedule does not
reflect the effects of possible prepayments, enforcement of due-on-sale clauses,
or the effect of the amortization of premium, discounts, or deferred loan fees.
<TABLE>
<CAPTION>
AFTER ONE YEAR
DUE IN OVER YEAR OR LESS DUE THROUGH FIVE YEARS DUE AFTER FIVE YEARS TOTAL
---------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
------ ------ ------ ------ ------ ------ ------ -----
REAL ESTATE: (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One- to Four-family $ 248 7.94% $ 3,658 8.13% $147,332 7.41% $151,238 7.43%
Multifamily 23,410 8.97 49,291 8.85 121,749 8.36 194,450 8.56
Commercial 20,277 9.14 78,125 9.27 77,868 8.92 176,270 9.10
Construction and land 84,002 9.60 24,861 9.56 7,966 9.47 116,829 9.58
CONSUMER 8,560 13.76 20,568 9.77 39,462 11.09 68,590 11.03
BUSINESS 20,822 9.39 14,839 9.30 21,835 8.62 57,496 9.08
-------- -------- -------- --------
Total $157,319 9.64% $191,342 9.23% $416,212 8.42% $764,873 8.88%
======= ======= ======= =======
- -------------------------
(1) Includes demand loans, loans having no stated maturity and overdraft
loans of $0.6 million.
</TABLE>
The total amount of loans due after December 31, 1998 which have
predetermined interest rates is $228.1 million, while the total amount of loans
due after such date which have floating or adjustable rates is $379.5 million.
35
<PAGE> 42
LOAN ORIGINATIONS AND PURCHASES
Metropolitan's strategy in recent years has been to increase
interest-earning assets, primarily by increasing the total loan portfolio, as
long as quality assets with the necessary portfolio characteristics were
available. This was accomplished by increasing origination capacity and
emphasizing purchases. The following table sets forth loan origination,
purchase, sale and repayment activities of Metropolitan for the periods
indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1996 1995
----- ----------- --------
<S> <C> <C> <C>
ORIGINATIONS BY TYPE:
ADJUSTABLE RATE:
Real Estate:
One- to Four-Family $ 28,017 $ 56,519 $ 22,503
Multifamily 12,600 20,669 24,542
Commercial 29,304 14,667 5,919
Construction and Land 77,062 60,566 41,559
Consumer 12,719 10,062
Business 27,058 18,536 6,814
-------- ------- -------
Total Adjustable Rate 186,760 181,019 101,337
------- ------- -------
FIXED RATE:
Real Estate:
one- to Four-Family 53,712 44,795 24,230
Multifamily 9,490 15,759 13,957
Commercial 1,300 4,400
Construction and Land 25,333 328 37
Consumer 17,598 17,242 15,048
Business 15,003 4,249 2,915
-------- --------- ---------
Total Fixed Rate 22,436 82,373 60,587
-------- -------- --------
Total Loans Originated 309,196 263,392 161,924
------- ------- -------
PURCHASES BY TYPE:
ADJUSTABLE RATE:
Real Estate:
One- to Four-Family 90 1,835
Multifamily 19,433 45,184 3,694
Commercial 22,541 16,905 13,939
Construction and Land 347
Consumer 5,432
Business
-------- -------- --------
Total Adjustable Rate 42,411 69,356 17,633
------ ------ -------
FIXED RATE:
Real Estate:
One- to Four-Family 1,125 19,381
Multifamily 23,195 22,971 50,420
Commercial 46,729 21,296 15,879
Construction and Land 1,975
Consumer 16,900 12,224 387
-------- -------- --------
Business
Total Fixed Rate 88,799 57,616 86,067
-------- -------- --------
Total Loans Purchased 131,210 126,972 103,700
------- ------- -------
SALES:
Real Estate:
One- to Four-Family (34,887) (36,392) (35,770)
Multifamily (9,678) (11,539) (27,094)
Commercial (20,782) (7,808) (1,835)
Construction and land (600)
-------- -------- --------
Total loan sales (65,947) (55,739) (64,699)
--------- --------- ---------
Loans Securitized (98,325) (14,458) (53,795)
Principal Repayments (196,556) (142,624) (87,972)
-------- -------- ---------
Total reductions (360,828) (212,821) (206,466)
-------- -------- --------
Increase (decrease) in other items, net (18,159) (10,927) (4,336)
--------- --------- ----------
NET INCREASE $ 61,419 $166,616 $ 54,822
=========== ========= ===========
</TABLE>
36
<PAGE> 43
Multifamily Residential Lending. Metropolitan places a major portfolio
lending effort on multifamily residential real estate loans. Multifamily loans
are originated by Metropolitan from referrals by present customers of the Bank
and mortgage and real estate brokers. Through its existing referral network and
advertising efforts, Metropolitan has become known for multifamily lending in
its primary multifamily lending markets of Ohio, Kentucky, Michigan,
Pennsylvania, and New Jersey. Although Metropolitan operates full service retail
sales offices solely in Northeast Ohio, it has loan origination offices in
Southern Ohio, Western Pennsylvania, and Southeastern Michigan.
At December 31, 1997, Metropolitan's multifamily loans totaled $194.5
million, with an average loan size of approximately $543,000. Of this amount,
$89.7 million or 46.1% were originated by Metropolitan. Currently, Metropolitan
emphasizes the origination of ARMs with principal amounts of $2.0 to $6.0
million and balloon maturities of 10 years. The loans are adjustable on a one-,
threeor five-year schedule with amortization periods of 25 or 30 years. Rate
adjustments are based on the appropriate term U.S. Treasury securities plus a
margin. The loans are subject to a maximum individual aggregate interest rate
adjustment as well as a maximum aggregate adjustment over the life of the loan
(generally 6%). Due to increasing demand for fixed rate loans, Metropolitan has
allocated some funds for fixed rate programs, typically those with 7 to 10-year
maturities. The maximum loan to value ratio of Metropolitan's multifamily
residential loans is 75%.
Metropolitan recognizes that multifamily residential property loans
generally involve a higher degree of risk than the financing of one- to
four-family residential real estate because they typically involve larger loan
balances to single borrowers or groups of related borrowers. The payment
experience on these loans is typically dependent upon the successful operation
of the related real estate project and is subject to certain risks including
excessive vacancy rates or inadequate rental income levels. In order to manage
and reduce these risks, Metropolitan uses strict underwriting standards in its
multifamily residential lending process.
The loans originated in this area are typically secured by apartments
with generally under 75 residential units. The underwriting process includes a
site evaluation which considers such factors as location, access by roadways,
condition of the apartments and amenities. In addition, a Metropolitan employee
visits each location before a loan approval is made. The underwriting process
also involves an evaluation of the borrower, whether the borrower is an
individual or a group of individuals acting as a separate entity. The financial
statements of each of the individual borrowers are reviewed and personal
guarantees in an amount equal to the original principal amount of the loan are
generally obtained. The financial statements of individual guarantors are
reviewed by staff independent of the lending department. Another important
aspect of Metropolitan's underwriting of its multifamily residential loans is
the debt service coverage test of the property. Debt service coverage
requirements are determined based upon the individual characteristics of each
loan, and typically range from a ratio of 1.15:1 to 1.30:1. In order to factor
in the adjustable rate of the multifamily loans, the debt service coverage is
calculated based on the maximum interest rate of the loan.
At December 31, 1997, $104.8 million or 53.9% of Metropolitan's
multifamily residential loan portfolio was purchased. Prior to purchasing these
loans, Metropolitan utilizes a similar underwriting process with substantially
the same standards as for its originated loans. In some cases, when Metropolitan
considers the purchase of a portfolio with a considerable number of moderate
balance loans, an independent contract inspector may be utilized for property
inspections. Real estate located in Ohio secures 52.8% of Metropolitan's
multifamily residential loan portfolio. Underlying real estate for the remaining
loans is primarily located in California, Michigan, Pennsylvania and New Jersey.
Commercial Real Estate Lending. Although Metropolitan has always held
an investment in loans secured by commercial real estate, this portion of the
portfolio has increased, mainly through purchases, in the last three years. At
December 31, 1997, Metropolitan's loans secured by commercial real estate
totaled $166.6 million or 21.8% of Metropolitan's total portfolio, with an
average loan size of $677,000. Of this amount, $51.6 million or 31.0% was
originated by Metropolitan and $115.0 million or 69.0% represented loans
purchased from a variety of sources, predominantly other financial institutions.
The $115.0 million of purchased commercial real estate loans were acquired by
Metropolitan since 1992.
Loans secured by commercial real estate are purchased by Metropolitan
generally when they are in the primary lending markets being targeted by
Metropolitan, are generally secured by retail strip shopping centers or office
buildings, and meet Metropolitan's yield and term requirements. In 1997,
Metropolitan began to introduce more geographic diversity into the portfolio
based on its desire to acquire seasoned loans. Management believes a certain
amount of geographic diversity is important to maintaining good asset quality.
Metropolitan recognizes that commercial real estate loans generally
involve a higher degree of risk than the financing of oneto four-family
residential real estate because these loans typically involve larger loan
balances to single borrowers or groups of related borrowers. The payment
experience on these loans is typically dependent upon the successful operation
of the related real estate project and is subject to certain risks including
excessive vacancy brought on by tenant turnover and inadequate rental income
levels. In addition, the profitability of the business operating in the property
may affect the borrower's ability to make timely payments. In order to manage
and reduce these risks, Metropolitan focuses its lending on existing properties
with a record of satisfactory performance and targets retail strip centers and
office buildings with multiple tenants.
Metropolitan originates commercial real estate loans secured by strip
shopping centers and small office buildings to a much lesser extent than it
purchases commercial real estate loans. Through customer referrals and real
estate brokers, Metropolitan lends on commercial real estate in Ohio,
Pennsylvania, Northern Kentucky, and Southeastern Michigan. These loans are ten
year balloon loans
37
<PAGE> 44
adjustable on a one-, three- or five-year schedule with amortization of 25 years
at a margin over the appropriate term U.S. Treasury securities. The maximum loan
to value ratio is 75%.
The following table presents information as to the locations and types
of properties securing Metropolitan's multifamily and commercial real estate
portfolio as of December 31, 1997:
<TABLE>
<CAPTION>
Number
of Loans Percent Principal Percent
-------- ------- --------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Ohio:
Apartments 157 26.0% $102,668 28.4%
Office buildings 43 7.1 20,042 5.6
Retail centers 24 4.0 18,950 5.2
Other 32 5.3 9,994 2.8
--- ---- ------- ----
Total 256 42.4 151,654 42.0
--- ---- ------- ----
California:
Apartments 76 12.6 41,616 11.6
Office buildings 9 1.5 6,635 1.8
Retail centers 17 2.8 11,141 3.1
Other 10 1.6 5,874 1.6
--- ---- ------- ----
Total 112 18.5 65,266 18.1
--- ---- ------- ----
Pennsylvania:
Apartments 32 5.3 4,683 1.3
Office buildings 1 0.2 82
Retail centers 5 0.8 10,531 2.9
Other 5 0.8 1,540 0.4
--- ---- ------- ----
Total 43 7.1 16,836 4.6
--- ---- ------- ----
Michigan:
Apartments 3 0.5 6,227 1.7
Office buildings 6 1.0 6,844 1.9
Retail centers 7 1.2 9,291 2.6
Other 2 0.3 6,913 1.9
--- ---- ------- ----
Total 18 3.0 29,275 8.1
--- ---- ------- ----
Other states(1):
Apartments 90 14.9 39,256 10.9
Office buildings 25 4.1 22,988 6.4
Retail centers 23 3.8 20,292 5.6
Other 37 6.2 15,476 4.3
--- ---- ------- ----
Total 175 29.0 98,012 27.2
--- ---- ------- ----
604 100.0% $361,043 100.0%
=== ===== ======== =====
<FN>
- -------------------------
(1)Properties securing loans in other states are located in 26 other
states, none of which exceed 5.0% of the outstanding principal balance
of the total multifamily and commercial real estate portfolio.
</TABLE>
The following table presents aggregate information as to the type of
security as of December 31, 1997:
<TABLE>
<CAPTION>
AVERAGE
NUMBER BALANCE
OF LOANS PER LOAN PRINCIPAL PERCENT
-------- -------- --------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Apartments 358 $543 $194,450 53.9%
Office buildings 84 674 56,591 15.7
Retail centers 76 924 70,205 19.4
Other 86 463 39,797 11.0
---- -------- -------
Total 604 $598 $361,043 100.0%
==== ======== =====
</TABLE>
38
<PAGE> 45
One- to Four-family Residential Lending. In 1997, approximately 41.6%
of Metropolitan's one- to four-family residential loans were originated through
its full service retail sales offices. The remainder were originated by
commissioned loan officers. Metropolitan has focused its one- to four-family
residential lending efforts primarily on the origination of loans secured by
first mortgages on owner-occupied residences. As of December 31, 1997,
Metropolitan's one- to four-family residential mortgages totaled $146.7 million
or 19.2% of Metropolitan's loan portfolio.
Metropolitan emphasizes the origination of conventional ARM loans for
retention in Metropolitan's portfolio and fixed rate loans suitable for sale in
the secondary market. In addition, Metropolitan offers fixed rate end loan
financing to borrowers building homes with Metropolitan's approved construction
loan builders. Metropolitan retains only a limited dollar amount of this fixed
rate end loan financing in its portfolio. The amount being originated and
subsequently retained is monitored very closely. Substantially all of
Metropolitan's one- to four-family residential mortgage loans originated for
retention in Metropolitan's portfolio are secured by property located in its
Northeast Ohio market area. At December 31, 1997, Metropolitan's fixed rate
residential mortgage loan portfolio totaled $59.1 million, or 7.7% of
Metropolitan's total loan portfolio.
Metropolitan is presently originating three types of ARM products for
retention in its portfolio. The first product is a one-year adjustable ARM, the
interest rate being subject to change annually. The adjustments are based upon
the weekly average yield on U.S. Treasury securities adjusted to a constant
maturity of one year, and are generally limited to a 2% maximum annual interest
rate adjustment, as well as a maximum lifetime adjustment of 6%. The second
product, known as a five/one ARM, has the same index and caps as the one year
ARM; the five/one ARM, however, retains its initial interest rate for the first
five years of the loan and then begins to adjust annually in the sixth year. The
third product, the three-year ARM, allows for interest rate adjustments every
three years. The adjustments are based upon the weekly average yield on U.S.
Treasury securities adjusted to a constant maturity of three years, and are
generally limited to a 2% maximum interest rate adjustment per change, as well
as a maximum lifetime adjustment of 6%.
Metropolitan's originated ARMs do not permit negative amortization of
principal and most of them are convertible into fixed rate mortgages. If
converted, they are typically sold in the secondary market. ARMs are originated
with terms to maturity of up to 30 years, and borrowers are qualified based upon
secondary market requirements.
At December 31, 1997, $19.5 million, or 13.3% of Metropolitan's one- to
four-family residential loan portfolio was purchased. Prior to purchasing these
loans, Metropolitan utilizes an underwriting process with substantially the same
standards as for its originated loans.
Construction Lending and Land Development. Metropolitan originates
construction loans on single family homes to local builders in Metropolitan's
primary lending market and to individual borrowers on owner-occupied properties.
Metropolitan also makes loans to builders for the purchase of fully-improved
single family lots and to developers for the purpose of developing land into
single family lots. Metropolitan's market area for construction lending is in
Northeastern Ohio, primarily in the counties of Cuyahoga, Lake, Geauga, Summit,
Medina, Portage, and Lorain. Metropolitan has one commissioned construction loan
originator in the high volume Columbus, Ohio construction market to originate
single family construction loans and improved lot loans.
The following table presents the number, amount, and type of properties
securing Metropolitan's construction and land development loans at December 31,
1997:
<TABLE>
<CAPTION>
NUMBER OF LOANS PRINCIPAL BALANCE
--------------- -----------------
(Dollars in thousands)
<S> <C> <C>
RESIDENTIAL CONSTRUCTION LOANS:
Owner-occupied 33 $ 12,003
Builder presold 43 6,502
Builder spec/model 128 25,736
Allocated construction loans 28 24,579
Lot loans 46 5,284
Development loans 23 16,168
--- --------
Total residential construction loans 301 90,272
NONRESIDENTIAL CONSTRUCTION LOANS:
Multifamily 1 5,000
Commercial 2 10,200
--- --------
Total nonresidential construction loans 3 15,200
LAND LOANS 14 11,357
--- --------
Total 318 $116,829
=== ========
</TABLE>
Metropolitan's risk of loss on a construction loan is largely dependent
upon the accuracy of the initial estimate of the property's value upon
completion of the project and the estimated cost of the project. The application
process includes a submission of the cost, specifications and plans.
Metropolitan also reviews the borrower's financial position and requires a
personal guarantee on all builder loans. All loans are based upon the appraised
value of the underlying collateral, as completed. Appraisals are completed by
qualified independent fee appraisers who have been approved by Metropolitan's
Board of Directors.
Each type of loan has a maximum loan to value ratio which is
established by the contract price, cost estimate or appraised value, whichever
is less. The maximum loan to value ratio for each type of construction loan is
as follows: owner-occupied homes - 80%; builder presold homes - 80%; builder
models or speculative homes - 75%; lot loans - 75%; development loans - 70%
(development of single-family home lots for resale to builders) and 75%
(development of land for cluster or condominium projects which will be part of
an allocated construction loan).
All of Metropolitan's construction loans that are made to builders are
made for relatively short terms (6 to 24 months) and are made with an adjustable
rate of interest. Owner-occupied loans are generally fixed rate. These loans
increase the yield on, and the proportion of interest rate sensitive loans in,
Metropolitan's portfolio.
Allocated construction loans or lines of credit are used to build
single family homes only and cannot be used for any other purpose. All lines of
credit are secured by the homes that are built with the draws under such credit
agreements. Most of the homes built with the line of credit funds are presold
homes, and the number of spec and model homes allowed to be built is limited by
the financial strength of the builder. Lines of credit can only be utilized
where a builder owns a specific number of lots in a development. Draws are based
upon the percentage of completion, and at all times, funds remain to complete
the home. Disbursements are only made after receipt of a property inspection and
a mechanic's lien update from the title company.
39
<PAGE> 46
Metropolitan also originates construction loans on multifamily and
commercial real estate projects where Metropolitan intends to provide the
financing once construction is complete. These loans are underwritten in a
manner similar to originated and purchased multifamily residential and
commercial real estate loans described above. The two commercial real estate
construction loans are rehabilitation projects with existing tenants ensuring
satisfactory cash flow.
Consumer Lending. The underwriting standards employed by Metropolitan
for consumer loans include a determination of the applicant's payment history on
other debts and an assessment of the applicant's ability to meet existing
obligations and payments on the proposed loan. Although creditworthiness of the
applicant is a primary consideration, the underwriting process also includes a
comparison of the value of the security, if any, in relation to the proposed
loan amount.
Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured or are secured by
rapidly depreciable assets, such as automobiles. At December 31, 1997, $58.2
million or 84.9% of Metropolitan's $68.6 million consumer loan portfolio was
secured. However, even in the case of secured loans, repossessed collateral for
a defaulted consumer loan may not provide an adequate source of repayment of the
outstanding loan balance due to the higher likelihood of damage, loss or
depreciation. In addition, consumer loan collections are dependent upon the
borrower's continuing financial stability, and thus are more likely to be
affected by adverse personal circumstances. Furthermore, the application of
various federal and state laws, including bankruptcy and insolvency laws, may
limit the amount which can be recovered on such loans in the event of default.
In order to supplement the growth in the consumer loan portfolio,
Metropolitan has been purchasing loans through correspondent lenders and bulk
portfolios offered for sale. At December 31, 1997, $22.8 million, or 33.3% of
the outstanding balance of consumer loans was purchased. These loans are
generally secured by second mortgages on one- to four-family homes, automobiles,
or manufactured housing. In 1997, Metropolitan acquired two packages of subprime
loans totaling $6.3 million (loans where the borrower's credit rating is below
an A grade). These loans require more intensive collection techniques; however,
the yield is significantly higher to cover these incremental costs.
At December 31, 1997, Metropolitan's credit card portfolio had an
outstanding balance of $7.3 million with $22.7 million in unused credit lines.
Of the outstanding balance, $2.6 million related to cards originated by
Metropolitan and $4.7 million related to credit card relationships purchased by
Metropolitan.
Business Lending. Metropolitan began offering business loans in 1994.
At December 31, 1997, Metropolitan had $57.5 million of business loans
outstanding, or 7.5% of Metropolitan's total loan portfolio, against available
lines on existing business loans totaling $73.0 million. Metropolitan's business
lending activities encompass loans with a variety of purposes and security,
including loans to finance accounts receivable, inventory and equipment.
Generally, Metropolitan's business lending has been limited to borrowers
headquartered, or doing business in, Metropolitan's retail market area. These
loans are generally adjustable interest rates at some margin over the prime
interest rate and some may be guaranteed by the Small Business Administration.
40
<PAGE> 47
The following table sets forth information regarding the number and
amount of Metropolitan's business loans as of December 31, 1997:
<TABLE>
<CAPTION>
NUMBER TOTAL LOAN OUTSTANDING
OF LOANS COMMITMENT PRINCIPAL BALANCE
-------- ---------- -----------------
(Dollars in thousands)
<S> <C> <C> <C>
LOANS SECURED BY:
Accounts receivable, inventory and equipment 194 $39,025 $28,705
Second lien on real estate 36 6,977 5,805
First lien on real estate 35 23,064 19,915
Specific equipment and machinery 25 1,843 1,843
Titled vehicles 31 705 705
Stocks and bonds 5 227 77
Certificates of deposit 3 196 110
UNSECURED LOANS 18 1,011 336
--- ------- -------
Total 347 $73,048 $57,496
=== ======= =======
</TABLE>
Unlike residential mortgage loans, which generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income, and which are secured by real property whose value tends to be
more easily ascertainable, business loans are of higher risk and typically are
made on the basis of the borrower's ability to make repayment from the cash flow
of the borrower's business. As a result, the availability of funds for the
repayment of business loans may be substantially dependent upon the success of
the business itself. Furthermore, the collateral securing the loans may
depreciate over time, may be difficult to appraise and may fluctuate in value
based on the success of the business.
SECONDARY MARKET ACTIVITIES
In addition to originating loans for its own portfolio, Metropolitan
participates in secondary mortgage market activities by selling whole loans, as
well as creating mortgage-backed securities, with the FNMA and the FHLMC.
Secondary market sales allow Metropolitan to make loans during periods when
deposit flows decline, or are not otherwise available, and at times when
customers prefer loans with long-term fixed interest rates which Metropolitan
does not choose to originate for its own portfolio. Metropolitan's primary focus
in its mortgage banking operations is on the sale of fixed rate one- to
four-family residential mortgage loans.
The secondary market for mortgage loans is comprised of institutional
investors who purchase loans meeting certain underwriting specifications with
respect to loan-to-value ratios, maturities and yields. Subject to market
conditions, Metropolitan tailors certain real estate loan programs to meet the
specifications of FHLMC and FNMA, two of the largest institutional investors.
Metropolitan may retain a portion of the loan origination fee paid by the
borrower and receive annual servicing fees as compensation for retaining
responsibility for and performing the servicing of all loans sold to
institutional investors. See "--Loan Servicing Activities." The sale of
substantially all loans to FHLMC and FNMA is nonrecourse to Metropolitan.
The terms and conditions under which such sales are made depend upon,
among other things, the specific requirements of each institutional investor,
the type of loan, the interest rate environment and Metropolitan's relationship
with the institutional investor. In the case of one- to four-family residential
loans, Metropolitan periodically obtains formal commitments primarily with FHLMC
and FNMA. Pursuant to these commitments, FHLMC or FNMA is obligated to purchase
a specific dollar amount of whole loans over a specified period of time. The
terms of the commitments range from ten to sixty days. The pricing will vary,
depending upon the length of each commitment. Loans are classified as held for
sale while Metropolitan is negotiating the sale of specific loans which meet
selected criteria to a specific investor.
During the third quarter of 1997, Metropolitan completed the
securitization of $93.0 million of multifamily loans with FNMA under a newly
developed program which uses insurance to provide the credit enhancement
necessary to achieve a AAA rating. The loans are serviced as mortgage-backed
securities for FNMA. Up to this point, Metropolitan has retained ownership of
the securities in that portfolio. In addition to resulting in a decrease in
loans receivable and a related increase in mortgage-backed securities, the
securitization has had several other benefits to Metropolitan, including the
following: i) improvement in the credit risk profile of the Bank's balance sheet
by converting whole loans into mortgage-backed securities guaranteed by FNMA;
ii) reduction of the required level of risk-based capital; and iii) addition of
high quality collateral which can be pledged for borrowings in the secondary
market to fund future loan growth.
Metropolitan also sells whole loans or participations in multifamily
and commercial real estate loans to private investors and retains the right to
service the loans. The majority of Metropolitan's sales of multifamily and
commercial real estate loans are made pursuant to individually negotiated whole
loan or participation sales agreements for individual loans or for a package of
such loans. During 1997, Metropolitan sold $9.9 million of multifamily and
commercial real estate participations. The Bank may seek out a participant when
a loan would otherwise exceed the loan-to-one borrower limit. Other loans have
been sold to manage geographic concentration or interest rate risk. In addition,
Metropolitan sells multifamily and commercial real estate loans that were
purchased under a loan option program.
See "--Loan Option Income."
41
<PAGE> 48
Loan Servicing Activities
At December 31, 1997, Metropolitan's overall servicing portfolio was
$1.6 billion. Of that amount, loans serviced for others totaled $1.2 billion.
The following table summarizes the portfolio by investor and source:
<TABLE>
<CAPTION>
Originated Purchased Portfolio
Servicing Servicing Servicing Total
--------- --------- --------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
One- to Four-family:
Metropolitan portfolio $138,099 $ 138,099
FHLMC $178,751 $469,465 648,216
FNMA 55,974 321,013 376,987
Private investors 10,050 10,050
-------- -------- -------- ----------
Total One- to Four-family 234,725 800,528 138,099 1,173,352
-------- -------- -------- ----------
Multifamily and Commercial:
Metropolitan portfolio 303,961 303,961
FHLMC 4,925 3,676 8,601
FNMA 107,057 23,340 130,397
Private investors 13,339 2,705 16,044
-------- -------- -------- ----------
Total Multifamily and Commercial 125,321 29,721 303,961 459,003
-------- -------- -------- ----------
Total $360,046 $830,249 $442,060 $1,632,355
======== ======== ======== ==========
</TABLE>
Metropolitan generally services the loans that it originates. When
Metropolitan sells loans to an investor, such as FHLMC or FNMA, it generally
retains the servicing rights for the loans. Servicing fee income is generated
from the loans sold to investors. In order to further increase Metropolitan's
servicing fee income, the Bank has aggressively pursued purchases of servicing
portfolios from other originating institutions. These purchased servicing
portfolios are primarily FHLMC and FNMA single family loans that are
geographically located within the eastern half of the nation. At December 31,
1997, Metropolitan's purchased servicing portfolio was $830.2 million and the
related balance of purchased mortgage servicing rights was $7.7 million.
Approximately 72.9% of the overall servicing portfolio (by dollar
volume) is comprised of loans sold to investors, primarily FHLMC and FNMA.
Metropolitan receives fee income for servicing these sold loans at various
percentages based upon unpaid principal balances of the loans serviced.
Servicing fees are collected and retained by Metropolitan out of monthly
mortgage payments.
Loan servicing functions include collecting and remitting loan
payments, accounting for principal and interest, holding escrow (impound) funds
for payment of taxes and insurance, making rate and payment changes to
contractually adjustable loans, managing loans in payment default, processing
foreclosure and other litigation activities to recover mortgage debts,
conducting property inspections and risk assessment for investment loans and
general administration of loans for the investors to whom they are sold, and for
Metropolitan as mortgagee.
LOAN OPTION INCOME
During 1995, Metropolitan developed a program to purchase loans and
sell loan options in order to take advantage of its underwriting capabilities,
increase net interest income and increase non-interest income. In these
transactions, Metropolitan purchases loans and sells nonrefundable options to a
third party to purchase these same loans at a specified price within a specified
time period. The Bank, prior to purchasing the loans that will be subject to the
options, utilizes an underwriting process with substantially the same standards
as in its origination process. In the event the option is not exercised,
Metropolitan would sell the underlying loans or transfer them to the Bank's
portfolio at its fair value at the date of the transfer. A nonrefundable option
fee is negotiated based on a percentage of the principal amount of the loans
involved. The third party acquiring the option is a loan broker who markets the
loans to potential buyers who may be willing to pay a higher price for the
loans. To date, Metropolitan has entered into these option transactions with one
loan broker. At December 31, 1997, there were no loans held for sale in
connection with outstanding options and $320,000 has been recognized in income
in connection with these loan options during the year then ended.
BRIDGE LOAN ACTIVITY
During 1997, Metropolitan developed a program to underwrite and fund
bridge loans to take advantage of its underwriting capabilities and increase net
interest income. For these loans, Metropolitan assesses debt service capacity
and underlying collateral value as it would for multifamily or other commercial
real estate loans. Bridge loans have a shorter term to maturity (generally 6 to
24 months) than the typical ten year portfolio loans. Metropolitan collects a
fee at origination which is deferred and recognized in interest income over the
term of the loan. As a result of the comparatively short term to maturity of
these loans, the borrowers must refinance the underlying properties sooner than
is the case with longer term, permanent loans, which adds a potential element of
risk. In all cases, these loans are adequately secured by real property. During
1997, Metropolitan originated seven of these loans totalling $15.9 million and
recognized origination fees of $515,000 in net interest income.
42
<PAGE> 49
LOAN DELINQUENCIES AND NONPERFORMING ASSETS
When a borrower fails to make a required payment on a loan,
Metropolitan attempts to cause the delinquency to be cured by contacting the
borrower. In the case of real estate loans, a late notice is sent 15 days after
the due date. If the delinquency is not cured by the 30th day, contact with the
borrower is made by phone. Additional written and verbal contacts are made with
the borrower between 30 and 90 days after the due date. If the delinquency
continues for a period of 90 days, Metropolitan usually institutes appropriate
action to foreclose on the property. If foreclosed, the property is sold at
public auction and may be purchased by Metropolitan. Delinquent consumer loans
are handled in a generally similar manner, except that initial contacts are made
when the payment is 10 days past due and appropriate action may be taken to
collect any loan payment that is delinquent for more than 30 days.
Metropolitan's procedures for collection efforts, repossession and sale of
consumer collateral are subject to various requirements under state and federal
consumer protection laws.
The following table sets forth information concerning delinquent loans
at December 31, 1997, in dollar amounts and as a percentage of each category of
Metropolitan's loan portfolio. The amounts presented represent the total
remaining principal balances of the related loans, rather than the actual
payment amounts which are overdue.
<TABLE>
<CAPTION>
Loans Delinquent For:
60-89 Days 90 Days and Over
---------------------------------- --------------------------------------
Percent of Loan Percent of Loan
Number Amount Category Number Amount Category
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Real Estate
One-to Four-Family 6 $ 460 0.31% 5 $ 792 0.53%
Multifamily - - - - - -
Commercial - - - 3 198 0.11
Construction and Land - - - - - -
Consumer 83 821 1.20 324 1,946 2.84
Business 1 239 0.42 6 211 0.37
-- ------ ---- ---- ------ ----
Total 90 $1,520 0.20% $338 $3,147 0.41%
== ====== ==== ==== ====== ====
<CAPTION>
Total Delinquent Loans
-------------------------------------
Percent of Loan
Number Amount Category
------ ------ --------
<S> <C> <C> <C>
Real Estate
One-to Four-Family 11 $ 1,252 0.84%
Multifamily - - -
Commercial 3 198 0.11
Construction and Land - - -
Consumer 407 2,767 4.04
Business 7 450 0.79
--- ------ ----
Total 428 $4,667 0.61%
=== ====== ====
</TABLE>
Nonperforming assets include all nonaccrual loans, loans past due
greater than 90 days still accruing and real estate owned. Interest is not
accrued on loans contractually past due 90 days or more as to interest or
principal payments and as to which payment of principal and interest in full is
not expected unless in the judgment of management the loan is well secured, and
no loss in principal or interest is expected.
When a loan reaches nonaccrual status, interest accruals are
discontinued and prior accruals are reversed. The classification of a loan on
nonaccrual status does not necessarily indicate that the principal is
uncollectible in whole or in part. A determination as to collectibility is made
by the management of Metropolitan on a case-by-case basis. Metropolitan
considers both the adequacy of the collateral and the other resources of the
borrower in determining the steps to be taken to collect nonaccrual loans. The
final determination as to these steps is made on a case-by-case basis.
Alternatives that are considered are commencing foreclosure, collecting on
guarantees, restructuring the loan or instituting collection lawsuits.
43
<PAGE> 50
The following table summarizes non-performing assets by category as of
the dates indicated.
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in thousands)
Nonaccruing loans
<S> <C> <C> <C> <C> <C>
One- to four-family $ 792 $ 950 $ 293 $ 337 $ 475
Multifamily 871 2,138 1,585 549
Commercial real estate 198 2,032 391 150 691
Construction and land development 15 15 1,051
Consumer 1,562 802 266 153 53
Business 211 268
------ ------ ------- ------- ------
Total nonaccruing loans 2,763 4,923 3,103 2,240 2,819
Loans past due greater than 90
days still accruing 384 271 204 128 277
------ ------ ------- ------- ------
Total nonperforming loans 3,147 5,194 3,307 2,368 3,096
Real estate owned 2,037 177 258 53 941
------ ------ ------- ------- ------
Total nonperforming assets $5,184 $5,371 $ 3,565 $ 2,421 $4,037
====== ====== ======= ======= ======
Nonperforming loans to total loans 0.44% 0.80% 0.69% 0.55% 1.08%
Nonperforming assets to total
assets 0.56% 0.70% 0.60% 0.51% 1.08%
</TABLE>
For the years ended December 31, 1997 and 1996, gross interest income
which would have been recorded had the nonaccruing loans been current in
accordance with their original terms amounted to $151,000 and $439,000,
respectively. The amounts that were included in interest income on such loans
were $132,000 and $85,000 for the years ended 1997 and 1996, respectively.
Nonperforming assets were $5.2 million at December 31, 1997, a
decrease of $0.2 million from $5.4 million at December 31, 1996. During the same
period, total net loans receivable increased $61.4 million to $707.9 million at
December 31, 1997. Also during 1997, nonaccrual loans decreased $2.2 million to
$2.8 million, while at the same time, real estate owned increased $1.9 million
to $2.0 million. This reflects the progression of nonperforming loans at
December 31, 1996 to real estate owned during 1997. Two properties accounted for
the majority of this increase, a strip shopping center in the Philadelphia,
Pennsylvania area valued at $1.0 million and a commercial condominium warehouse
near Chicago, Illinois valued at $0.5 million. Metropolitan is actively
marketing both properties through local real estate agents and no losses are
expected. At December 31, 1997, all loans classified by management as impaired
were included in nonperforming loans.
Nonperforming consumer loans increased to $1.6 million in 1997 due in
part to the acquisition of subprime consumer loans. These loans are secured by
manufactured housing or are unsecured. The yield on this portfolio is
substantially higher to compensate for the increased costs of collection and the
cost to carry nonperforming loans. Management expects a higher level of
nonperforming consumer loans to continue due to this portfolio.
At December 31, 1997, Metropolitan had potential problem loans
totaling $4.9 million which were classified by management as substandard and
were not included in the table above. Although these loans were current or not
seriously delinquent, there is some unfavorable development involving each loan
which, if not corrected, could result in the loan changing to nonaccrual status
and/or a loss being incurred. Metropolitan is in contact with these borrowers
and monitors their status closely. The largest loan in that category was a $4.0
million participation in a $9.0 million loan secured by a water park in Southern
California. The loan was 30 days past due at December 31, 1997 and the borrower
is in the process of refinancing the loan and obtaining additional working
capital. If the borrower does not refinance this property with another lender,
then the borrower's ability to repay the loan will be contingent on the
operating success of the park during 1998, its first full year of operation.
ALLOCATION OF ALLOWANCE FOR LOSSES ON LOANS
Because some loans may not be repaid in full, an allowance for losses
on loans is maintained. The allowance is maintained by management at a level
considered adequate to cover possible losses that are currently anticipated
based on past loss experience, general economic conditions, information about
specific borrower situations, including their financial position and collateral
values, and other factors and estimates which are subject to change over time.
While management may periodically allocate portions of the allowance for
specific problem loans, the whole allowance is available for any loan
charge-offs that occur. A loan is charged off against the allowance by
management as a loss when deemed uncollectible, although collection efforts
continue and future recoveries may occur.
The following table sets forth an allocation of the allowance for
losses on loans among categories as of the dates indicated based on Management's
estimate of possible losses that are currently anticipated based largely on past
loss experience. Since the factors influencing such estimates are subject to
change over time, management believes that any allocation of the allowance for
losses on loans into specific categories lends an appearance of precision which
does not exist. In practice, the allowance is utilized as a single unallocated
44
<PAGE> 51
allowance available for all loans. The allowance can also be reallocated among
different loan categories if actual losses differ from expected losses and based
upon changes in management's expectation of future losses. The following
allocation table should not be interpreted as an indication of the actual
amounts or the relative proportion of future charges to the allowance.
<TABLE>
<CAPTION>
1997 1996 1995 1994
------------------------ ----------------------- --------------------- ----------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN LOANS IN
EACH EACH EACH EACH
CATEGORY TO CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
------ ----------- ------ ----------- ------ ----------- ------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family $ 237 19.8% $ 228 17.1% $ 172 15.2% $ 189 25.2%
Multifamily 482 25.4 1,020 40.8 887 45.8 733 41.9
Commercial real estate 1,400 23.0 937 20.3 676 21.5 358 18.6
Construction and land 353 15.3 193 10.5 167 9.5 99 8.5
Consumer 2,132 9.0 1,182 7.9 512 6.3 340 5.8
Business 456 7.5 197 3.4 74 1.7 1
Unallocated 562 418 277 191
------ ----- ------ ----- ------ ----- ------ -----
Total $5,622 100.0% $4,175 100.0% $2,765 100.0% $1,911 100.0%
====== ===== ====== ===== ====== ===== ====== =====
<CAPTION>
1993
---------------------
PERCENT OF
LOANS IN
EACH
CATEGORY TO
AMOUNT TOTAL LOANS
------ -----------
<S> <C> <C>
One- to four-family $ 93 16.0%
Multifamily 494 53.2
Commercial real estate 314 17.5
Construction and land 90 9.9
Consumer 124 3.4
Business
Unallocated 124
------ -----
Total $1,239 100.0%
====== =====
</TABLE>
With the uncertainties that could adversely impact the overall quality of
Metropolitan's loan portfolio, management of Metropolitan considers an adequate
allowance for losses on loans essential. The unallocated allowance is considered
adequate to cover losses from the existing loans that have not demonstrated
problems such as late payments, financial difficulty of the borrower or
deterioration of collateral values. The risks associated with off-balance sheet
commitments are insignificant in the opinion of management of Metropolitan and
therefore, no allowance for such commitments is provided.
45
<PAGE> 52
The following table provides an analysis of Metropolitan's allowance for
losses on loans for the periods indicated. In each period, the provision for
loan losses was based on an analysis of individual credits, prior and current
loss experience, overall growth in the portfolio and current economic
conditions.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD $4,175 $2,765 $1,911 $1,239 $ 725
Charge-offs:
One- to four-family 32 22 23 23 50
Multifamily 494 119 64 100
Commercial real estate 27 74
Construction and land
Consumer 363 95 56 14 5
Business 10
------ ------ ------ ------ ------
Total charge-offs 899 236 106 101 229
------ ------ ------ ------ ------
Recoveries:
One- to four-family 1 1 3
Multifamily 6
Commercial real estate
Construction and land
Consumer 6 11
Business
------ ------ ------ ------ ------
Total recoveries 6 11 1 7 3
------ ------ ------ ------ ------
Net charge-offs 893 225 105 94 226
Provision for loan losses 2,340 1,635 959 766 740
------ ------ ------ ------ ------
BALANCE AT END OF PERIOD $5,622 $4,175 $2,765 $1,911 $1,239
====== ====== ====== ====== ======
Net charge-offs to average
loans 0.13% 0.04% 0.02% 0.03% 0.09%
Provision for loan losses to
average loans 0.35% 0.28% 0.21% 0.21% 0.29%
Allowance for losses on loans
to total non-performing loans
at end of period 178.60% 77.73% 83.61% 80.70% 40.02%
Allowance for losses on loans
to total loans at end of period 0.79% 0.64% 0.57% 0.45% 0.43%
</TABLE>
46
<PAGE> 53
Investment Portfolio
Metropolitan maintains its investment portfolio in accordance with
policies adopted by the Board of Directors that consider the regulatory
requirements and restrictions which dictate the type of securities that can be
held. As a member of the FHLB System, the Bank is required to hold a minimum
amount of FHLB stock based upon asset size and mix. As the Bank grows,
management anticipates this investment will increase.
The following table summarizes the amounts and the distribution of
Metropolitan's securities held as of the dates indicated:
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
Securities:
<S> <C> <C> <C>
Mutual funds $ 1,706 $ 2,009 $10,364
Tax-exempt bond 4,740
U.S. Treasury securities 6,065 12,442
FNMA preferred stock 5,100
FHLB stock 5,350 3,989 3,569
-------- -------- --------
Total $11,796 $17,163 $26,375
======== ======== ========
Other interest-earning assets:
Interest-bearing deposits with banks $1,961 $2,745 $4,788
Term repurchase agreements 6,397 6,000
-------- -------- --------
Total $ 8,358 $ 8,745 $ 4,788
======== ======== ========
</TABLE>
The following table sets forth the contractual maturities and
approximate weighted average yields of Metropolitan's securities at December 31,
1997.
<TABLE>
<CAPTION>
Due in
---------------------------------------------
One year or less More than ten years Total
---------------- -------------------- ------
(Dollars in thousands)
<S> <C> <C>
Mutual Funds $1,706 $1,706
Tax-exempt bond $4,740 4,740
FHLB stock 5,350 5,350
------ ------ -------
Total $7,056 $4,740 $11,796
====== ====== =======
Weighted average yield 6.86% 7.75% 7.22%
</TABLE>
MORTGAGE-BACKED SECURITIES PORTFOLIO
The following table sets forth Metropolitan's mortgage-backed
securities portfolio at the dates indicated. All mortgage-backed securities are
classified as available for sale.
<TABLE>
<CAPTION>
At December 31,
---------------------------------------------------
1997 1996 1995
(Dollars in thousands)
<S> <C> <C> <C>
FNMA pass-through certificates $97,146 $19,775 $22,549
GNMA pass-through certificates 8,037 9,700 11,348
FHLMC participation certificates 37,714 26,713 4,715
-------- ------- -------
Other 270 484 544
======== ======= =======
</TABLE>
47
<PAGE> 54
The following table sets forth the contractual maturities and
approximate weighted average yields of Metropolitan's mortgage-backed securities
at December 31, 1997.
<TABLE>
<CAPTION>
DUE IN
-------------------------------------------------------
ONE YEAR TO
FIVE YEARS FIVE TO TEN YEARS OVER TEN YEARS TOTAL
------------ -------------------- --------------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
FNMA pass-through certificates $ 9,880 $78,420 $ 8,846 $ 97,146
GNMA pass-through certificates 108 7 7,922 8,037
FHLMC participation certificates 19,274 18,440 37,714
Other 270 270
------- ------- ------- --------
Total available for sale $29,262 $78,427 $35,478 $143,167
======= ======= ======= ========
Weighted average yield 7.00% 7.30% 7.09% 7.18%
</TABLE>
SOURCES OF FUNDS
The Bank's primary sources of funds are deposits, amortization and
repayment of loan principal, borrowings, sales of mortgage loans, sales or
maturities of mortgage-backed securities, securities, and short-term
investments. Deposits are the principal source of Metropolitan's funds for
lending and investment purposes. The following paragraphs provide a brief
description of the types of accounts offered by Metropolitan:
Passbook and Statement Savings Accounts. Savings may be invested in and
withdrawn from regular passbook, tiered passbook and statement savings accounts
without restriction. Interest on tiered passbook accounts is compounded monthly
and credited monthly. Interest on regular passbook and statement savings
accounts is compounded quarterly and credited quarterly.
Checking Accounts. Metropolitan offers two interest-bearing checking
and one noninterest-bearing checking account for consumers. The noninterest
checking requires no minimum balance and has no monthly service fees. The rate
paid on the interest checking account is dependent upon the balance in the
account. Monthly service charges can be waived on personal interest-bearing
checking accounts by maintaining either a $1,000 minimum balance or greater than
$5,000 minimum balance in another deposit account or establishing a direct
deposit relationship. All accounts have no minimum maturity or penalty for early
withdrawal and no restrictions on the size and frequency of the withdrawals or
additional deposits. Metropolitan regularly reviews the interest rate paid on
the interest-bearing checking accounts and adjusts the rate based on cash flow
projections and market interest rates.
In connection with loan servicing activities, Metropolitan maintains
custodial checking accounts for principal and interest payments collected for
investors monthly and for tax and insurance escrow balances. This remains a
recurring but relatively short-term source of funds for the Bank given the level
of loans serviced for others.
Metropolitan offers a commercial checking account that is noninterest
bearing and is assessed monthly service charges based upon transaction activity
levels.
Certificates of Deposit. Metropolitan offers fixed rate, fixed term
certificates of deposit. Terms are from seven days to five years, and there are
no regulatory rate ceilings. Certificates of deposit require a penalty for
withdrawal prior to maturity dates. These accounts generally bear the highest
interest rates of any deposit product offered by Metropolitan. Interest rates
offered on certificates of deposit are regularly reviewed and adjusted based on
cash flow projections and market interest rates.
Metropolitan has from time to time accepted certificates of deposit from
out-of-state individuals and entities, predominantly credit unions. These
deposits typically have balances of $90,000 to $100,000 and have a term of one
year or more. They are not accepted through brokers. At December 31, 1997,
approximately $57.7 million of certificates of deposits, or 12.1% of
Metropolitan's certificate of deposit accounts, were held by these individuals
and entities.
Individual Retirement Accounts ("IRA"). Metropolitan offers IRAs.
Funds may be invested in a passbook account or any certificate of deposit
offered by Metropolitan.
48
<PAGE> 55
The following table sets forth information regarding trends in
Metropolitan's average deposits for the periods indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------------------------------------------
1997 1996 1995
----------------------------------------------------------------------------------------------------
(Dollars in thousands)
Average Percent of Rate Average Percent of Rate Average Percent of Rate
Amount Total Paid Amount Total Paid Amount Total Paid
------ ----- ---- ------ ----- ---- ------ ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand
deposits(1) $ 38,837 5.8% $ 31,248 5.5% $ 24,636 5.3%
Interest bearing deposits:
Demand deposits 39,965 5.9 2.66% 36,273 6.4 2.64% 37,695 8.1 2.57%
Savings deposits 170,362 25.2 4.56% 169,866 30.2 4.79% 118,475 25.5 4.76%
Time deposits 426,450 63.1 5.93% 325,960 57.9 5.83% 283,186 61.1 5.98%
-------- ------ ----- ------- ----- ----- -------- ----- -----
Total interest-bearing
deposits 636,777 94.2 5.36% 532,099 94.5 4.97% 439,356 94.7 5.07%
-------- ------ ------- ----- -------- -----
Total average deposits $675,614 100.0% $563,347 100.0% $463,992 100.0%
======== ====== ======== ===== ======== =====
</TABLE>
- -------------------------
(1) Includes principal and interest custodial accounts and taxes and insurance
custodial accounts for loans serviced for FHLMC, FNMA and private investors.
Deposits increased 18.6% to $737.8 million at December 31, 1997 consistent with
the overall growth of the Bank. The growth was primarily in time deposits which
increased 27.3% to $478.0 million. During the same period, the Bank experienced
overall growth in other types of savings accounts.
The following table shows rate and maturity information for Metropolitan's
certificates of deposit as of December 31, 1997.
<TABLE>
<CAPTION>
2.00-4.99% 5.00-6.99% 7.00-8.99% TOTAL PERCENT OF TOTAL
---------- ---------- ---------- ----- ----------------
(Dollars in thousands)
CERTIFICATE ACCOUNTS MATURING IN QUARTER ENDING:
<S> <C> <C> <C> <C> <C>
March 31, 1998 $ 4,910 $105,548 $ 1,650 $112,108 23.5%
June 30, 1998 138 100,797 335 101,270 21.2
September 30, 1998 11 52,568 52,579 11.0
December 31, 1998 17 49,763 50 49,830 10.4
March 31, 1999 54 65,906 478 66,438 13.9
June 30, 1999 21 35,829 71 35,921 7.5
September 30, 1999 4,679 4,679 1.0
December 31, 1999 23,678 1,552 25,230 5.3
March 31, 2000 1,999 4,996 6,995 1.5
June 30, 2000 4,512 27 4,539 0.9
September 30, 2000 803 7,916 8,719 1.8
December 31, 2000 2,312 1,121 3,433 0.7
Thereafter 5,402 882 6,284 1.3
-------- -------- -------- -------- -----
Total $ 5,151 $453,796 $ 19,078 $478,025 100.0%
======== ======== ======== ======== =====
Percent of total 1.1% 94.9% 4.0% 100.0%
</TABLE>
The following table sets forth the remaining maturity for time
deposits of $100,000 or more at the date indicated.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------
(Dollars in thousands)
<S> <C>
Three months or less $18,142
Over three through six months 16,197
Over six through twelve months 18,210
Over twelve months 34,335
-------
Total $86,884
=======
</TABLE>
In addition to deposits, Metropolitan relies on borrowed funds. The
following describes Metropolitan's current borrowings:
Note Offerings. In 1993 and early 1994, Metropolitan issued the 1993
Notes. The interest rate on the 1993 Notes is 10%, which is paid quarterly and
principal will be repaid when the 1993 Notes mature on December 31, 2001.
Metropolitan may redeem the 1993 Notes, in whole or in part, at any time by
paying the outstanding principal amount plus accrued interest and a prepayment
premium. The prepayment premium was 10% of the principal amount prepaid if such
prepayment was made during the first year following the issuance
49
<PAGE> 56
of the 1993 Notes and the prepayment premium reduces 1% for each year the 1993
subordinated notes are outstanding. If the 1993 Notes are prepaid more than
seven years after issuance, the prepayment premium is 3%. The 1993 Notes may
also be repurchased in privately negotiated transactions. The 1993 Notes are
unsecured.
In December 1995, Metropolitan issued the 1995 Notes. The interest
rate on the notes is 9.625%, which is paid monthly and principal will be repaid
when the notes mature on January 1, 2005. The 1995 Notes are not redeemable, in
whole or in part, by Metropolitan prior to December 1, 1998. After December 1,
1998, the 1995 Notes may be redeemed by Metropolitan at a declining premium
which begins at 3% of the prepaid principal amount. After December 1, 2000, the
1995 Notes may be prepaid at par plus accrued interest. The 1995 Notes may also
be repurchased in privately negotiated or open market transactions. The 1995
Notes are also unsecured.
Line of Credit. In October 1996, the Corporation amended the
Huntington Loan Agreement. The Huntington Loan Agreement is a revolving line of
credit for the first 24 month period and then it converts to a 36 month term
note. The maximum permitted borrowing amount is $4.0 million. The terms of the
Huntington Loan Agreement require interest only payments for 24 months, then
quarterly principal payments based on a 60-month amortization with a balloon
payment due in May 2001. The interest rate during the first 24 months is tied to
LIBOR or Huntington National Bank prime at Metropolitan's option. After
conversion to a term loan in May 1998, the interest rate is prime. As collateral
for the Huntington Loan Agreement, Mr. Kaye, Chairman and Chief Executive
Officer of Metropolitan, has agreed to pledge a portion of his shares of Common
Stock of Metropolitan with a market value at least equal in value to 200% of any
outstanding balance. At December 31, 1997, the outstanding balance under the
Huntington Loan Agreement was $1.5 million.
FHLB Advances. The FHLB makes funds available for housing finance to
eligible financial institutions like Metropolitan. The FHLB generally limits
advances to 25% of assets with a total borrowing limit of 40% of assets from all
borrowing sources. Advances are collateralized by any combination of the
following assets and collateralization rates: one- to four-family first mortgage
loans, not past due greater than 90 days, pledged on a blanket basis at 150% of
the advance amount, specifically identified mortgage loans at 125% of the
advance amount and various types of investment and mortgage-backed securities at
rates ranging from 101-110% of the advance amount. FHLB stock owned by the Bank
is pledged as additional collateral but is not available as primary collateral.
The aggregate balance of assets pledged as collateral for FHLB advances at
December 31, 1997 was $147.0 million.
Reverse Repurchase Agreements. From time to time the Bank borrows
funds by using its investment or mortgage-backed securities to issue reverse
repurchase agreements. This type of borrowing provides an alternative source of
funds to FHLB borrowings and at times, more favorable rates. The aggregate
balance of mortgage-backed securities pledged as collateral for reverse
repurchase agreements at December 31, 1997 was $77.8 million.
The following table sets forth the maximum month-end balance of
borrowings during the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1997 1996 1995
----------------- -------------- ---------------
(DOLLARS IN THOUSANDS)
MAXIMUM MONTH-END BALANCE:
<S> <C> <C> <C>
FHLB advances $73,700 $75,150 $51,000
Term Loan 3,240
Qualifying Subordinated Debt 1,200
1993 subordinated notes 4,874 4,874 4,874
1995 subordinated notes 14,000 14,000 14,000
Line of credit 4,000 5,000
Reverse repurchase agreements 74,496 23,500 9,000
</TABLE>
50
<PAGE> 57
The following table sets forth the average balance during the periods
indicated, end of period balances at the date indicated, and interest rates
during the period then ended.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1997 1996 1995
----------------- -------------- ---------------
(DOLLARS IN THOUSANDS)
AVERAGE BALANCE:
<S> <C> <C> <C>
FHLB advances $59,325 $50,546 $28,467
Term Loan 485
Qualifying Subordinated Debt 923
1993 subordinated notes 4,874 4,874 4,874
1995 subordinated notes 14,000 14,000 690
Line of credit 114 3,834
Reverse repurchase agreements 38,843 4,480 7,591
ENDING BALANCE:
FHLB advances $41,000 $59,500 $28,000
Term loan
Qualifying subordinated debt
1993 subordinated notes 4,874 4,874 4,874
1995 subordinated notes 14,000 14,000 14,000
Line of credit 1,500
Reverse repurchase agreements 74,496 23,500
WEIGHTED AVERAGE INTEREST RATE:
FHLB advances 5.65% 5.43% 6.18%
Term Loan 8.79
Qualifying Subordinated Debt 11.78
1993 subordinated notes 10.47 10.47 10.47
1995 subordinated notes 10.48 10.48 10.48
Line of credit 8.98 8.67
Reverse repurchase agreements 5.73 5.61 6.10
</TABLE>
COMPETITION
Metropolitan faces strong competition, both in originating real estate
and other loans and in attracting deposits. Competition in originating real
estate loans comes primarily from other savings institutions, commercial banks,
mortgage companies, credit unions, finance companies and insurance companies.
The Bank competes for loans principally on the basis of the interest rates and
loan fees it charges, the type of loans it originates and the quality of
services it provides to borrowers. Some of the Bank's competitors, however, have
higher lending limits and substantially greater financial resources than the
Bank.
The Bank attracts its deposits through its retail sales offices,
primarily from the communities in which those retail sales offices are located;
therefore, competition for those deposits is principally from other savings
institutions, commercial banks, credit unions, mutual funds and brokerage
companies located in the same communities. The Bank competes for these deposits
by offering a variety of deposit accounts at competitive rates, convenient
business hours, and convenient branch locations.
EMPLOYEES
At December 31, 1997, Metropolitan had a total of 281 employees,
including part-time employees. The Corporation's employees are not represented
by any collective bargaining group. Management considers its employee relations
to be excellent.
REGULATION AND SUPERVISION
INTRODUCTION
Metropolitan is registered as a savings and loan holding company within
the meaning of the Home Owners' Loan Act (the "HOLA"). As a savings and loan
holding company, Metropolitan is subject to the regulations, examination,
supervision, and reporting requirements of the OTS. The Bank, an Ohio-chartered
savings and loan association, is a member of the FHLB System, and its deposits
are insured by the FDIC through the SAIF. The Bank is subject to examination and
regulation by the OTS, the FDIC and the Ohio
51
<PAGE> 58
Superintendent of Savings and Loan Associations and to regulations regarding
such matters as capital standards, mergers, establishment of branch offices,
subsidiary investments and activities, and general investment authority. Such
examination and regulation is intended primarily for the protection of
depositors.
The descriptions of the statutes and regulation which are applicable to
Metropolitan and the Bank and the effects thereof which are set forth below and
elsewhere in this document do not purport to be a complete description of such
statutes and regulations and their effects on Metropolitan or the Bank or to
identify every statute and regulation that may apply to Metropolitan or the
Bank.
METROPOLITAN
As a savings and loan holding company, Metropolitan is subject to
certain restrictions with respect to its activities and investments. Among other
things, Metropolitan is generally prohibited, either directly or indirectly,
from acquiring control of any other savings association or savings and loan
holding company, without prior approval of the OTS, and from acquiring more than
5% of the voting stock of any savings association or savings and loan holding
company which is not a subsidiary of Metropolitan.
Similarly, OTS approval must be obtained prior to any person's
acquiring control of the Bank or Metropolitan. Control is conclusively presumed
to exist if, among other things, a person acquires more than 25% of any class of
voting stock of the institution or holding company or controls in any manner the
election of a majority of the directors of the institution or the holding
company. Control is rebuttably presumed to exist if, among other things, a
person acquires more than 10% of any class of voting stock (or 25% of any class
of stock) and is subject to any certain specified "control factors."
THE BANK
General. The OTS also has enforcement authority over all savings
associations. This enforcement authority includes the ability to impose
penalties for and to seek correction of violations of laws and regulations and
unsafe or unsound practices by assessing civil money penalties, issuing cease
and desist or removal and prohibition orders against an institution, its
directors, officers or employees and other persons, or initiating injunctive
actions.
As a lender and a financial institution, the Bank is subject to various
regulations promulgated by the Federal Reserve Board including, without
limitation, Regulation B (Equal Credit Opportunity), Regulation D (Reserves),
Regulation E (Electronic Fund Transfers), Regulation F (Interbank Liabilities),
Regulation Z (Truth in Lending), Regulation CC (Availability of Funds), and
Regulation DD (Truth in Savings). As lenders of loans secured by real property,
and as owners of real property, financial institutions, including the Bank, are
subject to compliance with various statutes and regulations applicable to
property owners generally, including statutes and regulations relating to the
environmental condition of the property.
Insurance of Accounts and Regulation by the FDIC. The Bank is a member
of the SAIF, which is administered by the FDIC. Deposits are insured up to
applicable limits by the FDIC and such insurance is backed by the full faith and
credit of the United States Government. As insurer, the FDIC imposes deposit
insurance premiums and is authorized to conduct examinations of and to require
reporting by FDIC-insured institutions. It also may prohibit any FDIC-insured
institution from engaging in any activity the FDIC determines by regulation or
order to pose a serious risk to the FDIC. The FDIC also has the authority to
initiate enforcement actions against savings associations, after giving the OTS
an opportunity to take such action, and may terminate the deposit insurance if
it determines that the institution has engaged or is engaging in unsafe or
unsound practices, or is in an unsafe or unsound condition.
Under the FDIC risk-based deposit insurance assessment system, all
insured depository institutions are placed into one of nine categories and
assessed insurance premiums based upon their level of capital and supervisory
evaluation. Under the system, institutions classified as well-capitalized and
requiring little supervision would pay the lowest premium while institutions
that are classified as undercapitalized and considered of substantial
supervisory concern would pay the highest premium. Risk classification of all
insured institutions is made by the FDIC for each semi-annual assessment period.
With respect to the SAIF, the FDIC is authorized to increase assessment
rates, on a semi-annual basis, if it determines that the reserve ratio of the
SAIF will be less than the designated reserve ratio of 1.25% of SAIF-insured
deposits. In setting these increased assessments, the FDIC must seek to restore
the reserve ratio to that designated reserve level, or such higher reserve ratio
as established by the FDIC. In addition, the FDIC may impose special assessments
on SAIF members to repay amounts borrowed from the United States Treasury or for
any other reason deemed necessary by the FDIC.
Similarly, with respect to deposits which are insured by the BIF, the
FDIC is authorized to adjust the insurance premium rates in order to maintain
the reserve ratio of the BIF at 1.25% of BIF-insured deposits. In setting the
BIF assessment rates, the FDIC must maintain the reserve ratio at that
designated reserve level, or such higher reserve ratio as established by the
FDIC. BIF and SAIF assessment rates, however, have not remained comparable.
During fiscal 1996, BIF members generally paid lower premiums than SAIF
52
<PAGE> 59
insured institutions, placing SAIF-insured institutions whose deposits are
exclusively or primarily SAIF-insured at a competitive disadvantage.
As a result of this disparity in insurance premium rates, on September
30, 1996 the President signed into law the Omnibus Bill which included
provisions designed to recapitalize the SAIF and to mitigate the BIF/SAIF
premium disparity. The Omnibus Bill required the FDIC to impose a special
assessment on SAIF-insured deposits held by institutions as of March 31, 1995 in
order that the SAIF achieve the designated reserve ratio. Accordingly, the FDIC
assessed and the Bank paid a $2.9 million special assessment from working
capital of the Bank.
Now that the SAIF has reached it required reserve ratio following the
one-time assessment, the FDIC has reduced the annual assessment rates for
SAIF-insured institutions. Effective January 1, 1997, the SAIF assessment rates
are identical to those for BIF-insured institutions.
The Omnibus Bill also requires the repayment of Financing Corporation
("FICO") bonds to be shared by both SAIF- and BIF-insured institutions. Prior to
the enactment of this legislation, only a portion of the SAIF assessment was
used to repay the $780 million in annual FICO interest payments. However, as of
January 1, 1997, BIF institutions are required to pay a portion of the FICO
interest payments, as well. For the first three years, the BIF assessment rates
for FICO payments are 20% of those for SAIF institutions. Thus, SAIF
institutions, such as the Bank, will continue to be subject to a greater burden
than BIF institutions. The rates established by the FDIC to implement this
requirement for all FDIC-insured institutions are 6.44 basis points on SAIF
deposits and 1.29 basis points on BIF deposits. However, after January 1, 2000,
assessments on BIF-insured institutions will be made on the same basis as
SAIF-insured institutions. It is estimated that the payments of such assessments
will be 2.43 basis points on deposits. It is important to note that these
assessments are only for FICO interest payments and that further premiums could
be assessed in order to maintain the BIF and SAIF funds at the required 1.25%
reserve ratio.
In addition, the Omnibus Bill requires the merger of the BIF and SAIF
into a single insurance fund no later than January 1, 1999 if there are no
savings associations at that date. In connection with the merger of the BIF and
the SAIF, SAIF-insured institutions could be forced to convert to state bank
charters or national bank charters. If such a proposal became law, the
Corporation would become a bank holding company and be subject to regulation by
the Federal Reserve Board, which imposes capital requirements on bank holding
companies. The Corporation is not currently subject to capital requirements.
Regulatory Capital Requirements. The capital regulations of the OTS
issued thereunder (the "Capital Regulations") establish a "leverage limit," a
"tangible capital requirement" and a "risk-based capital requirement." In
addition, the OTS may establish, on a case by case basis, individual minimum
capital requirements for a savings association which vary from the requirements
that would otherwise apply under the Capital Regulations. The OTS has not
established such individual minimum capital requirements for the Bank.
A savings association which fails to meet one or more of the applicable
capital requirements is subject to various regulatory limitations and sanctions,
including a prohibition on growth and the issuance of a capital directive by the
OTS requiring the following: an increase in capital; reduction of rates paid on
savings accounts; cessation of or limitations on deposit-taking and lending;
limitations on operational expenditures; an increase in liquidity; and such
other actions deemed necessary or appropriate by the OTS. In addition, a
conservator or receiver may be appointed under certain circumstances.
The leverage limit currently requires a savings association to maintain
"core capital" of not less than 3% of adjusted total assets. The OTS has taken
the position, however, that the prompt corrective action regulatory scheme
(See"-Prompt Corrective Action") has effectively raised the leverage ratio
requirement for all but the most highly-rated institutions to 4% since an
institution is "undercapitalized" for such purpose if, among other things, its
leverage ratio is less than 4% (3% for MACRO 1 rated institutions).
The tangible capital requirement requires a savings association to
maintain "tangible capital" in an amount not less than 1.5% of adjusted total
assets.
The risk-based capital requirement generally provides that a savings
association must maintain total capital in an amount at least equal to 8.0% of
its risk-weighted assets. The risk-based capital regulations are similar to
those applicable to national banks. The regulations assign each asset and
certain off-balance sheet assets held by a savings association to one of four
risk-weighting categories, based upon the degree of credit risk associated with
the particular type of asset.
Savings associations are required to incorporate interest rate risk in
their capital calculations for determining compliance with capital requirements.
Interest rate risk is measured by the decline in "net portfolio value" that
would result from a hypothetical 200 basis point increase or decrease in market
interest rates, whichever is lower, divided by the estimated economic value of
assets. An institution whose measured interest rate exposure exceeds 2% must
deduct an amount equal to one-half of the difference between its measured
interest
53
<PAGE> 60
rate risk and 2%, multiplied by the estimated economic value of its total
assets, from total capital in determining whether it meets its riskbased capital
requirement.
Banking regulators continue to indicate their desire to raise capital
requirements applicable to financial institutions beyond their current levels.
No prediction can be made as to whether and when higher capital requirements
would be imposed and, if so, to what levels and on what schedule.
Each bank regulatory agency and the OTS review each of their capital
standards every two years to determine whether those standards require
sufficient capital to facilitate prompt corrective action to prevent or minimize
loss to the deposit insurance funds. Each bank regulatory agency and the OTS
revise each of their risk-based capital standards to ensure that those standards
take adequate account of interest rate risk, concentration of credit risk and
the risk of non-traditional activities.
At December 31, 1997, the Bank complied with each of the tangible
capital, the core capital and the risk-based capital requirements. The following
table presents the Bank's regulatory capital position at December 31, 1997.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT REGULATORY ASSETS(1)
------ --------------------
(Dollars in thousands)
<S> <C> <C>
Tangible capital $49,901 5.43%
Tangible capital requirement 13,777 1.50
------- ----
Excess $36,124 3.93%
======= ====
Core capital $50,215 5.47%
Core capital requirement(2) 36,738 4.00
------- ----
Excess $13,477 1.47%
======= ====
Risk-based capital $54,343 8.39%
Risk-based capital requirement 51,836 8.00
------- ----
Excess $ 2,507 0.39%
======= ====
<FN>
- -------------------------
(1) Represents the percentage of adjusted total assets for tangible and core
capital purposes and the percentage of risk-weighted assets for
risk-based capital purposes.
(2) The "prompt corrective action" regulatory scheme (See "-Prompt
Corrective Action") has effectively raised the leverage requirement to
4% for all but the most highly-rated institutions since an institution
is considered "undercapitalized" for such purposes if, among other
things, it has a leverage ratio of under 4% (3% for MACRO 1 rated
institutions).
</TABLE>
Prompt Corrective Action. Banks and savings associations are
classified into one of five categories based upon capital adequacy, ranging from
"well-capitalized" to "critically undercapitalized" and require (subject to
certain exceptions) the appropriate federal banking agency to take prompt
corrective action with respect to an institution which becomes
"undercapitalized" and to take additional actions if the institution becomes
"significantly undercapitalized" or "critically undercapitalized."
The federal banking agencies have issued a joint rule for this purpose
under which, in general, an institution is: "well capitalized" if it has total
risk-based capital of 10% or greater, Tier 1 risk-based capital of 6% or
greater, leverage ratio of 5% or greater, and is not subject to an order or
other supervisory directive to meet and maintain a specific capital level for
any capital measure; "adequately capitalized" if it has total risk-based capital
of 8% or greater, Tier 1 risk-based capital of 4% or greater, and leverage ratio
of 4% or greater (3% or greater if rated Composite 1 under the MACRO rating
system); "undercapitalized" if it has total risk-based capital of less than 8%,
Tier 1 risk-based capital of less than 4%, or a leverage ratio of less than 4%
(3% if rated Composite 1 under the MACRO rating system); "significantly
undercapitalized" if it has total risk-based capital of less than 6%, Tier 1
risk-based capital of less than 3%, or a leverage ratio of less than 3%; and
"critically undercapitalized" if it has a ratio of tangible equity to total
assets equal to or less than 2%. Based on these requirements, the Bank is an
"adequately capitalized" institution.
The appropriate federal banking agency has the authority to
reclassify, a well-capitalized institution as adequately capitalized, and to
treat an adequately capitalized or undercapitalized institution as if it were in
the next lower capital category, if it is determined, after notice and an
opportunity for a hearing, to be in an unsafe or unsound condition or to have
received and not corrected a less-thansatisfactory rating for any of the
categories of asset quality, management, earnings or liquidity in its most
recent examination. As a result of such reclassification or determination, the
appropriate federal banking agency may require an adequately capitalized or
under-capitalized institution to comply with certain mandatory and discretionary
supervisory actions. A significantly undercapitalized savings association may
not be reclassified, however, as critically undercapitalized.
54
<PAGE> 61
Restrictions on Dividends and Other Capital Distributions. Savings
association subsidiaries of holding companies generally are required to provide
their OTS Regional Director not less than thirty days' advance notice of any
proposed declaration of a dividend on the association's stock. Any dividend
declared within the notice period, or without giving the prescribed notice, is
invalid.
OTS regulations impose limitations upon certain "capital
distributions" by savings associations, including cash dividends, payments to
repurchase or otherwise acquire an association's shares, payments to
shareholders of another institution in a cash-out merger and other distributions
charged against capital. The regulation establishes a three-tiered system of
regulation, with the greatest flexibility being afforded to well-capitalized
associations. The OTS retains discretion to treat a Tier 1 Institution as a Tier
2 or Tier 3 Institution if the OTS determines that the institution is in need of
more than normal supervision and has provided the institution with notice to
that effect.
A Tier 1 Institution may, after prior notice but without the approval
of the OTS, make capital distributions during a calendar year up to the higher
of: (i) 100% of its net income to date during the calendar year plus the amount
that would reduce the association's "surplus capital ratio" (the excess over its
fully phased-in capital requirement) to one-half of its surplus capital ratio at
the beginning of the calendar year or (ii) 75% of its net income over the most
recent four-quarter period. Any additional capital distributions would require
prior regulatory non-objection. A Tier 2 Institution may, after prior notice but
without the approval of the OTS, make capital distributions in accordance with
the following schedule: if the association's capital satisfies the risk-based
capital standard applicable to the association as of January 1, 1993, the
association may make distributions up to 75% of its net income over the most
recent four-quarter period, and, if the association's capital satisfies the
risk-based capital standard applicable as of January 1, 1991, it may make
distributions up to 50% of its net income over the most recent four-quarter
period. A Tier 3 Institution is not authorized under the regulation to make any
capital distributions unless it receives prior written approval from the OTS or
in accordance with the express terms of an approved capital plan.
The OTS retains the authority to prohibit any capital distribution
otherwise authorized under the regulation if the OTS determines that the capital
distribution would constitute an unsafe or unsound practice. The regulation also
states that the capital distribution limitations apply to direct and indirect
distributions to affiliates, including those occurring in connection with
corporate reorganizations.
Under the "prompt corrective action" provisions ( See "--Prompt
Corrective Action"), an FDIC-insured institution may not make a "capital
distribution" (which includes, among other things, cash dividends and stock
purchases) if, after making the distribution, the institution would be
"undercapitalized" for such purposes.
The OTS has proposed regulations that would revise the current capital
distribution restrictions. The proposal eliminates the current tiered structure
and the safe-harbor percentage limitations. In their current form, the proposed
regulations would not apply to the Bank as it is owned by a holding company.
Under the proposal, a savings association may make a capital distribution
without notice to the OTS provided that it has a MACRO 1 or 2 rating, is not in
troubled condition, and would remain adequately capitalized (as defined in the
OTS prompt corrective action regulations) following the proposed distribution.
Savings associations that would remain adequately capitalized following the
proposed distribution but do not meet the other noted requirements must notify
the OTS 30 days prior to declaring a capital distribution. The OTS stated it
will generally regard as permissible that amount of capital distributions that
do not exceed 50% of the institution's excess regulatory capital plus net income
to date during the calendar year. A savings association may not make a capital
distribution without prior approval of the OTS and the FDIC if it is
undercapitalized before, or as a result of, such a distribution. A savings
association will be considered in troubled condition if it has a MACRO rating of
4 or 5, is subject to an enforcement action relating to its safety and soundness
or financial viability, or has been informed in writing by the OTS that it is in
troubled condition. As under the current rule, the OTS may object to a capital
distribution if it would constitute an unsafe or unsound practice. No assurance
may be given as to whether or in what form the regulations may be adopted.
Liquidity. Federal regulations currently require savings associations
to maintain, for each calendar month, an average daily balance of liquid assets
(including cash, certain time deposits, bankers' acceptances, and specified
United States Government, state or federal agency obligations) equal to at least
4% of the ending or average daily balance of deposit accounts with maturities
less than a year plus short-term borrowings during the preceding calendar month.
This liquidity requirement may be changed from time to time by the OTS to an
amount within a range of 4% to 10% of such accounts and borrowings depending
upon economic conditions and the deposit flows of savings associations. Monetary
penalties may be imposed for failure to meet liquidity ratio requirements. At
December 31, 1997, the liquidity ratio of the Bank was 14.6%, which exceeded the
applicable requirement.
Qualified Thrift Lender Test. Pursuant to the Qualified Thrift Lender
("QTL") test, a savings institution must invest at least 65% of its portfolio
assets in "qualified thrift investments" on a monthly average basis on a rolling
12-month "look-back" basis. Portfolio assets are an institution's total assets
less goodwill and other intangible assets, the institution's business property,
and a limited amount of the institution's liquid assets.
A savings association's failure to remain a QTL may result in: (i)
limitations on new investments and activities; (ii) imposition of branching
restrictions; (iii) loss of FHLB borrowing privileges; and (iv) limitations on
the payment of dividends. If a savings institution that is a subsidiary of a
savings and loan holding company fails to regain QTL status within one year of
its loss of such status, the holding
55
<PAGE> 62
company must register as and will be deemed to be a bank holding company subject
to, among other things, the business activity restrictions and capital
regulations of the Bank Holding Company Act.
The Bank's qualified thrift investments were in excess of 69.2% of its
portfolio assets as of December 31, 1997.
Ohio Regulation. As a savings and loan association organized under the
laws of the State of Ohio, the Bank is subject to regulation by the Ohio
Division of Financial Institutions (the "Division"). Regulation by the Division
affects the Bank's internal organization as well as its savings, mortgage
lending, and other investment activities. Periodic examinations by the Division
are usually conducted on a joint basis with the OTS. Ohio law requires that the
Bank maintain federal deposit insurance as a condition of doing business.
Under Ohio law and regulations, an Ohio association may invest in
loans and interests in loans, secured or unsecured, of any type or amount for
any purpose, subject to certain requirements including but not limited to: loans
secured by liens on income-producing real estate may not exceed 20% of an
association's assets; all loans for educational purposes may not exceed 5% of an
association's assets; consumer loans, commercial paper and corporate debt
securities may not exceed 20% of an association's assets; and loans for
commercial, corporate, business or agricultural purposes may not exceed 10% of
an association's assets (subject to certain exceptions). In addition, no
association may make loans for the acquisition and development of undeveloped or
partially developed land for primarily residential use to one borrower in excess
of 2% of assets of the association. The total investment in commercial paper or
corporate debt of any issuer cannot exceed 1% of an association's assets, with
certain exceptions.
Ohio law authorizes Ohio-chartered associations to, among other
things: (i) invest up to 15% of assets in the capital stock, obligations and
other securities of service corporations organized under the laws of Ohio, and
an additional 20% of net worth may be invested in loans to majority owned
service corporations; (ii) invest up to 10% of assets in corporate equity
securities, bonds, debentures, notes, or other evidence of indebtedness; (iii)
exceed limits otherwise applicable to certain types of investments (other than
investments in service corporations) by between 3% and 10% of assets, depending
upon the level of the institution's permanent stock, general reserves, surplus
and undivided profits; and (iv) invest up to 15% of assets in any loans or
investments not otherwise specifically authorized or prohibited, subject to
authorization by the institution's board of directors.
An Ohio association may invest in such real property or interests
therein as its board of directors deems necessary or convenient for the conduct
of the business of the association, but the amount so invested may not exceed
the net worth of the association at the time the investment is made.
Additionally, an association may invest an amount equal to 10% of its assets in
any other real estate. This limitation does not apply, however, to real estate
acquired by foreclosure, conveyance in lieu of foreclosure or other legal
proceedings in relation to loan security interests.
Notwithstanding the above powers authorized under Ohio law and
regulation, a state-chartered savings association, such as the Bank, is subject
to certain limitations on its permitted activities and investments under federal
law which may restrict the ability of an Ohio-chartered association to engage in
activities and make investments otherwise authorized under Ohio law.
Ohio has adopted a statutory limitation on the acquisition of control
of an Ohio savings and loan association which requires the written approval of
the Division prior to the acquisition by any person or entity of a controlling
interest in an Ohio association. Control exists, for purposes of Ohio law, when
any person or entity, either directly or indirectly, or acting in concert with
one or more other persons or entities, owns, controls, holds with power to vote,
or holds proxies representing, 15% or more of the voting shares or rights of an
association, or controls in any manner the election or appointment of a majority
of the directors.
Under certain circumstances, interstate mergers and acquisitions
involving associations incorporated under Ohio law are permitted by Ohio law. A
savings and loan association or savings and loan holding company with its
principal place of business in another state may acquire a savings and loan
association or savings and loans holding company incorporated under Ohio law if
laws of such other state permit an Ohio savings and loan association or an Ohio
holding company reciprocal rights.
Ohio law requires prior written approval of the Ohio Superintendent of
a merger of an Ohio association with another savings and loan association or a
holding company affiliate.
Federal and State Taxation
The following discussion of tax matters is intended only as a summary
and does not purport to be a comprehensive description of the tax rules
applicable to the Corporation or the Bank.
Savings associations such as the Bank are generally taxed in the same
manner as other corporations. For taxable years beginning prior to January 1,
1996, savings associations such as the Bank which met certain definitional tests
primarily relating to their assets and
56
<PAGE> 63
the nature of their supervision and business operations ("qualifying thrifts")
were permitted to establish a reserve for bad debts and to make annual additions
thereto, which additions may, within specified formula limits, have been
deducted in arriving at their taxable income. The Bank's deduction with respect
to "qualifying real property loans," which are generally loans secured by
certain interests in real property, may have been computed using an amount based
on the Bank's actual loss experience, or a percentage equal to 8% of the Bank's
taxable income, computed with certain modifications and reduced by the amount of
any permitted additions to the reserve for nonqualifying loans (the "percentage
of taxable income method"). The Bank's deduction with respect to nonqualifying
loans was computed under the experience method, which essentially allows a
deduction based on the Bank's actual loss experience over a period of several
years. Each year the Bank selected the most favorable way to calculate the
deduction attributable to an addition to the tax bad debt reserve.
Legislation enacted during 1996 repealed the existing reserve method
of accounting for bad debt reserves for tax years beginning after December 31,
1995. As a result, savings associations will no longer be able to calculate
their deduction for bad debts using the percentage of taxable income method.
Instead, savings associations will be required to compute their deduction based
on specific charge offs during the taxable year or, if the savings association
or its control group had assets of not more than $500 million, based on actual
loss experience over a period of years. This legislation also requires a savings
association (or its controlled group) with assets of more than $500 million to
recapture into income over a six-year period their post-1987 additions to their
bad debt tax reserves for qualifying real property loans and nonqualifying
loans, thereby generating additional tax liability. A savings association (or
its controlled group) with assets of not more than $500 million are required to
recapture their bad debt tax reserve to the extent it exceeds the greater of (i)
the applicable bad debt tax reserve as of the close of the last taxable year
beginning before January 1, 1988, or (ii) what the savings association's
applicable bad debt tax reserve would have been at the close of its last taxable
year beginning before January 1, 1996 under the experience method. The recapture
may be suspended for up to two years if, during those years, the savings
association satisfies a residential loan requirement.
Under prior law, if the Bank failed to satisfy the qualifying thrift
definitional tests in any taxable year, it would be unable to make additions to
its bad debt reserve. Instead, the Bank would be required to deduct bad debts as
they occur and would additionally be required to recapture its bad debt reserve
deductions ratable over a multi-year period. Among other things, the qualifying
thrift definitional tests required the Bank to hold at least 60% of its assets
as "qualifying assets." Qualifying assets generally include cash, obligations of
the United States or any agency or instrumentality thereof, certain obligations
of a state or political subdivision thereof, loan secured by interests in
improved residential real property or by savings accounts, student loans and
property used by the Bank in the conduct of its banking business. Under current
law, a savings association will not be required to recapture its pre-1988 bad
debt reserves if it ceases to meet the qualifying thrift definitional tests.
In addition to the regular income tax, corporations, including savings
associations such as the Bank, generally are subject to an alternative minimum
tax. An alternative minimum tax is imposed at a tax rate of 20% on alternative
minimum taxable income ("AMTI"), which is the sum of a corporation's regular
taxable income (with certain adjustments) and tax preference items, less any
available exemption. Adjustments and preferences include depreciation deductions
in excess of those allowable for alternative minimum tax purposes, tax-exempt
interest on most private activity bonds issued after August 7, 1986 (reduced by
any related interest expense disallowed for regular tax purposes), and, for 1990
and succeeding years, 75% of the excess of adjusted current earnings ("ACE")
over AMTI. ACE equals pre-adjustment AMTI (i) increased or decreased by certain
ACE adjustments, which include tax-exempt interest on municipal bonds,
depreciation deductions in excess of those allowable for ACE purposes and, in
certain cases, the dividend received deduction, and (ii) determined without
regard to the ACE adjustment and the alternative tax net operating loss. The
alternative minimum tax is imposed to the extent it exceeds the corporation's
regular income tax, and alternative tax net operating losses can offset no more
than 90% of AMTI. The payment of alternative minimum tax will give rise to a
minimum tax credit which will be available with an indefinite carry forward
period to reduce federal income taxes in future years (but not below the level
of alternative minimum tax arising in each of the carry forward years). For
taxable years beginning after 1986 and before 1996, corporations, including
savings associations such as the Bank, are also subject to an environmental tax
equal to 0.12% of the excess of AMTI for the taxable year (determined without
regard to alternative tax net operating losses and the deduction for the
environmental tax) over $2 million.
Metropolitan, the Bank and other includable subsidiaries file
consolidated federal income tax returns on a December 31 calendar year basis
using the accrual method of accounting. Metropolitan, the Bank and other
includable subsidiaries have been audited by the Internal Revenue Service
through December 31, 1994.
The Bank is subject to the Ohio corporate franchise tax. As a
financial institution, the Bank computes its franchise tax based on its net
worth. Under this method, the Bank will compute its Ohio corporate franchise tax
by multiplying its net worth (as determined under generally accepted accounting
principles) as specifically adjusted pursuant to Ohio law, by the applicable tax
rate, which is currently 1.5% and will drop to 1.4% for 1999 and 1.3% for 2000
and thereafter. As an Ohio-chartered savings and loan association, the Bank also
receives a credit against the franchise tax for a portion of the state
supervisory fees paid by it.
The Corporation is subject to an Ohio corporation franchise tax
payable in an amount equal to the greater of a specified percentage of net
income (currently 5.1% of the first $50,000 and 8.9% of the remainder (8.5% for
1999 and thereafter), with an additional add-on tax not to exceed $5,000) or a
specified percentage of net worth (currently approximately 0.6% (0.4% for 1999
and thereafter with a $150,000 cap), plus an add-on tax not to exceed $5,000).
In calculating net income for this purpose, dividends from wholly-owned
57
<PAGE> 64
subsidiaries, such as the Bank, would be excluded. In addition, in calculating
net worth, the Corporation's investment in the Bank would be excluded for this
purpose. Beginning with the 1999 tax year, the Corporation may be exempt from
the franchise tax as computed on the net worth basis as a qualified holding
company.
MANAGEMENT
The following table sets forth the names of and certain information,
including any positions held with the Bank, with respect to the director
nominees for election at the Corporation's 1998 Annual Meeting and the
directors.
<TABLE>
<CAPTION>
FOR TERM
DIRECTOR TO POSITIONS CURRENTLY HELD WITH
NOMINEES FOR DIRECTOR AGE SINCE EXPIRE METROPOLITAN AND THE BANK
- --------------------- --- -------- -------- --------------------------------
<S> <C> <C> <C> <C>
Ralph D. Ketchum 71 1991 2001 Director of Metropolitan and the
Bank
James A. Karman 60 1992 2001 Director of Metropolitan and the
Bank
Robert R. Broadbent 76 1992 2001 Director of Metropolitan and the
Bank
Marjorie M. Carlson 57 1994 2001 Director of Metropolitan and the
Bank
DIRECTOR TERM POSITIONS CURRENTLY HELD WITH
CONTINUING DIRECTORS AGE SINCE EXPIRING METROPOLITAN AND THE BANK
- --------------------- --- -------- -------- --------------------------------
Robert M. Kaye 61 1987 1999 Chairman of Metropolitan and
Chairman of the Bank
David G. Lodge 58 1991 1999 President, Assistant Secretary,
Assistant Treasurer and Director of
Metropolitan and President and
Director of the Bank
Malvin E. Bank 67 1991 1999 Secretary, Assistant Treasurer and
Director of Metropolitan and
Secretary and Director of the Bank
David P. Miller 65 1992 1999 Treasurer, Assistant Secretary and
Director of Metropolitan and
Director of the Bank
Lois K. Goodman 64 1994 2000 Director of Metropolitan and the
Bank
Marguerite B. Humphrey 56 1994 2000 Director of Metropolitan and the
Bank
Alfonse M. Mattia 56 1996 2000 Director of Metropolitan and the
Bank
</TABLE>
58
<PAGE> 65
During the past five years, the business experience of each of the
director nominees, directors and executive officers has been as follows:
NOMINEES
Mr. Ketchum has served as a Director of Metropolitan and the Bank
since 1991. Since 1987, Mr. Ketchum has been President of RDK Capital Inc., a
general partner in a partnership formed for the purposes of acquiring and
managing companies serving the aircraft industry. Prior thereto, he was a Senior
Vice President and Group Executive for the General Electric Company, Lighting
Group. Mr. Ketchum is also a member of the Board of Directors of Oglebay Norton
Company, Thomas Industries, Pacific Scientific and Lithium Technologies Corp.
Mr. Karman has served as a Director of Metropolitan and the Bank since
1992. Mr. Karman has been affiliated with RPM, Inc. since 1963, and in 1978 he
became President of RPM, Inc., a manufacturer of protective coatings, sealants
and specialty chemicals. Mr. Karman serves as a member of the Board of Directors
of RPM, Inc., McDonald & Company Investments, Inc., A. Schulman, Inc. and Shiloh
Industries, Inc. Mr. Karman also serves as a member of the Board of Trustees of
the Musical Arts Association, the Boys & Girls Club of Cleveland, Hiram College
and Boys Hope, and is a member of the Corporate Council, Cleveland Museum of
Art.
Mr. Broadbent has served as a Director of Metropolitan and the Bank
since 1992. From 1984 to 1989, Mr. Broadbent served as Chairman and Chief
Executive Officer of The Higbee Company, a Cleveland-based clothing and
housewares retailer. Mr. Broadbent served as the Chairman of the Rock and Roll
Hall of Fame Museum, Inc. until May 1994 and is now on the advisory board. Mr.
Broadbent also serves as a Director of PICO Holding, Inc., as well as a Trustee
of the Murphy Foundation.
Ms. Carlson has served as a Director of Metropolitan and the Bank
since 1994. She also is the Director of Development for the Cleveland
Foundation. Ms. Carlson is a member of the Board of Trustees of the College of
Wooster, the Musical Arts Association, the Playhouse Square Foundation, and is a
Director of the National Committee on Planned Giving.
CONTINUING DIRECTORS
Mr. Kaye has served as Chairman and Chief Executive Officer of
Metropolitan and the Bank since 1987. He has also served as President of Planned
Residential Communities, Inc. since 1960. Planned Residential Communities, Inc.
is actively engaged in every aspect of multifamily housing from new construction
and rehabilitation to acquisition and management. Mr. Kaye serves as a member of
the Board of Directors of Community Bank of New Jersey. He has also been a
member of the Corporate Council of the Cleveland Museum of Art since its
inception in 1993 and has been a member of the Board of Trustees of the College
of New Jersey since 1980 and of The Peddie School since 1988.
Mr. Lodge joined Metropolitan in December 1988 as Executive Vice
President. He has served as President of Metropolitan and the Bank since August
1991. Mr. Lodge has also served as Director of Metropolitan and the Bank since
1991 and as Assistant Secretary and Assistant Treasurer of Metropolitan since
1992. Mr. Lodge has served as a Director of University Circle Incorporated and
Vocational Guidance Services since 1994 and became a member of the Board of
Trustees of The Cleveland Playhouse in June 1995.
Mr. Bank has served as a Director and as Secretary of Metropolitan and
the Bank since 1991. Mr. Bank also serves as Assistant Treasurer of
Metropolitan. Mr. Bank is a senior partner with the Cleveland law firm of
Thompson Hine & Flory LLP. Mr. Bank also serves as a Director of Oglebay Norton
Company. Mr. Bank also serves as a Trustee of Case Western Reserve University,
Chagrin River Land Conservancy, Cleveland Center for Research in Child
Development and numerous foundations.
Mr. Miller has served as a Director of Metropolitan and the Bank since
1992. Mr. Miller also serves as Treasurer and Assistant Secretary of
Metropolitan. Since 1986, Mr. Miller has been the Chairman and Chief Executive
Officer of Columbia National Group, Inc., a Cleveland-based scrap and waste
materials wholesaler and steel manufacturer. He is currently commissioner of the
Ohio Lottery.
Ms. Goodman has served as a Director of Metropolitan and the Bank
since 1994. Since 1990, she has been President of the Work & Family Consulting
Group, Inc., a consulting service for employers on managing working families.
Ms. Goodman is also a member of the Board of Trustees for the Cleveland Opera,
the Jewish Community Federation, Starting Point and Eldred Theater.
Ms. Humphrey has served as a Director of Metropolitan and the Bank
since 1994. Ms. Humphrey developed and implemented workshops for trustee
education for the Cultural Arts Trustee Forum at the Cleveland Mandel Center
from 1992 to 1995. She is a trustee for the American Symphony Orchestra League,
the Cleveland Institute of Music, the Musical Arts Association, Rainbow Babies
and Children's Hospital and the Cleveland Zoological Society.
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<PAGE> 66
Mr. Mattia has served as a consultant to the Bank since 1987 and as a
Director of Metropolitan and the Bank since 1996. Mr. Mattia is a CPA and a
founding partner of Amper, Politziner & Mattia, a New Jersey-based accounting
and consulting firm. Mr. Mattia serves on the Assurance Services Executive
Committee of the AICPA and is co-Chairman of the Rutgers University Family
Business Forum.
EXECUTIVE OFFICER WHO IS NOT A DIRECTOR
Patrick W. Bevack, 51, has been Executive Vice President of the Bank
since May 1992. Mr. Bevack became Treasurer and Assistant Secretary of the Bank
in 1993. Prior to joining Metropolitan, Mr. Bevack was Executive Vice President
of TransOhio Savings Bank.
DIRECTOR COMPENSATION
For their services as directors, each member of the Board of Directors
of the Bank who is not an employee of Metropolitan or the Bank receives a
monthly consulting fee of $1,000. The Chairman of the Board of the Bank and all
other members of the Board of the Bank, who are not employees of Metropolitan or
the Bank, receive a $500 attendance fee for each meeting of the Board attended.
Members of the Board of Directors of Metropolitan receive no fees for their
services as such.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Organization Committee of Metropolitan's Board of
Directors consists of Messrs. Ketchum (Chair), Kaye, Bank, and Karman.
Mr. Kaye, the Chairman of the Board, is the sole shareholder of
Planned Residential Communities, Inc. which receives a $96,000 annual fee for
employee benefit related services and multifamily property consulting services
provided to Metropolitan.
The law firm of Thompson Hine & Flory LLP, of which Malvin E. Bank is
a partner, provided legal services to Metropolitan in 1997 and during the
current fiscal year.
Several of the directors and executive officers of Metropolitan
purchased subordinated notes from Metropolitan during the Corporation's private
offering of the 1993 Notes. These purchases were made on the same terms and at
the same prices offered to unaffiliated investors. Mr. Kaye holds $515,000
principal amount of 1993 Notes and Mr. Ketchum holds $200,000 principal amount
of 1993 Notes.
CERTAIN TRANSACTIONS
The accounting firm of Amper, Politziner & Mattia, of which Alfonse M.
Mattia is a partner, provided tax services to Metropolitan in 1997 and during
the current fiscal year.
As noted above, several of the directors and executive officers of
Metropolitan purchased 1993 Notes from Metropolitan during the private offering
of the 1993 Notes. These purchases were made on the same terms and at the same
prices offered to unaffiliated investors. Mr. Miller holds $200,000 principal
amount of 1993 Notes. In addition, the Metropolitan Savings Bank of Cleveland
401(k) Plan and the Planned Residential Communities Management Co. Inc. and
Affiliates 401(k) Plan jointly own $400,000 principal amount of 1993 Notes. The
Amper, Politziner & Mattia Profit Sharing Trust, of which Alfonse M. Mattia is a
trustee, holds $200,000 principal amount of 1993 Notes.
The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of business with Metropolitan's and the
Bank's directors, officers, shareholders and associates on substantially the
same terms, including interest rates and collateral on loans, as those
prevailing at the time for comparable transactions with other persons, and that
do not involve more than the normal risk of collectability or present other
unfavorable terms.
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<PAGE> 67
SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 2, 1998, information
concerning Common Shares beneficially owned by current directors of and nominees
for director of Metropolitan, executive officers included in the Summary
Compensation Table, and all directors, nominees for director and executive
officers of Metropolitan and the Bank as a group. Except as otherwise noted,
each beneficial owner listed has sole investment and voting power with respect
to the Common Shares indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF INDIVIDUAL OR PERSONS IN GROUP BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
---------------------------------------- -------------------------- -----------------------
<S> <C> <C> <C>
Robert M. Kaye 5,467,270 (2) 77.5%
David G. Lodge 22,700 (3) *
Malvin E. Bank 15,000 *
David P. Miller 30,000 *
Ralph D. Ketchum 27,000 (4) *
James A. Karman 5,000 *
Robert R. Broadbent 30,000 (5) *
Marjorie M. Carlson 15,000 *
Lois K. Goodman 15,000 (6) *
Marguerite B. Humphrey 10,000 *
Alfonse M. Mattia 60,000 (7) *
Patrick W. Bevack 8,000 *
All directors and executive officers as a group
(12 persons) 5,704,970 80.9%
<FN>
- -------------------------
(1) The Common Shares indicated reflect the Corporation's completion, on
December 10, 1997, of a two-for-one split in the form of a stock
dividend to shareholders of record as of November 24, 1997.
(2) Total includes 6,000 Common Shares held by Mr. Kaye as trustee.
(3) Total includes 2,100 Common Shares held by Mr. Lodge as custodian for
his children and 1,600 Common Shares held by Mr.
Lodge's spouse, as to which Mr. Lodge disclaims beneficial ownership.
(4) Total includes 7,000 Common Shares held by Mr. Ketchum's spouse, as to
which Mr. Ketchum disclaims beneficial ownership.
(5) Total includes 5,500 Common Shares held by the Broadbent Family
Foundation, of which Mr. Broadbent is Chair.
(6) Total includes 8,000 Common Shares held by Ms. Goodman's spouse, as to
which Ms. Goodman disclaims beneficial ownership.
(7) Total includes 31,400 Common Shares held by Mr. Mattia as trustee, and
1,000 Common Shares held by Mr. Mattia's spouse, as to which Mr. Mattia
disclaims beneficial ownership.
* Represents less than 1% of Metropolitan's outstanding Common Shares.
</TABLE>
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<PAGE> 68
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Except as set forth below, no person is known to Metropolitan at March
2, 1998 to own beneficially within the meaning of the regulations of the
Securities and Exchange Commission, more than 5% of Metropolitan's outstanding
Common Shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
------------------- --------------------------- ----------------
<S> <C> <C>
Robert M. Kaye 5,467,270 77.5%
6001 Landerhaven Drive
Mayfield Heights, Ohio 44124
<FN>
- -------------------------
(1) The Common Shares indicated reflect the Corporation's completion, on
December 10, 1997, of a two-for-one split in the form of a stock
dividend to shareholders of record as of November 24, 1997.
</TABLE>
CHANGE IN CONTROL
As collateral for the Huntington Loan Agreement, Mr. Kaye pledged a
portion of his Common Shares with a fair market value at least equal in value to
200% of any outstanding balance. At March 3, 1998, the outstanding balance under
the Huntington Loan Agreement was $1.5 million.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION TABLE
The following table sets forth certain information with respect to
compensation provided by Metropolitan and its subsidiaries during the years
ended December 31, 1997, 1996 and 1995, to its chief executive officer and
Metropolitan's other executive officers whose annual salary and bonus exceed
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND FISCAL YEAR ENDED ALL OTHER
PRINCIPAL POSITION DECEMBER 31 SALARY BONUS COMPENSATION (1)
------------------ ----------- ------ ----- ----------------
<S> <C> <C> <C> <C>
Robert M. Kaye, 1997 $351,000 $ 75,000(2) $4,750
Chairman of the Board and 1996 295,000 65,000(2) 4,750
Chief Executive Officer 1995 255,000 --- 4,620
David G. Lodge, 1997 242,654 75,000(2) 4,750
President, Assistant Treasurer and 1996 205,000 65,000 4,750
Assistant Secretary 1995 175,000 50,000 4,571
Patrick W. Bevack, 1997 142,942 ---- 4,750
Executive Vice President of the 1996 135,000 7,500 4,750
Bank 1995 125,000 7,000 4,275
<FN>
- -------------------------
(1) Represents the Bank's contribution to the Metropolitan Savings Bank of
Cleveland 401(k) Plan.
(2) Paid January of the following year.
</TABLE>
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<PAGE> 69
OPTION GRANTS
The following table provides information regarding grants of Options
made during the year ended December 31, 1997, to each of the executive officers
named in the Summary Compensation Table. All of the grants were made subject to
shareholder approval of the Metropolitan Financial Corp. 1997 Stock Option Plan.
All share and base price figures reflect the Corporation's completion, on
December 10, 1997, of a two-for-one stock split.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS TEN YEAR OPTION TERM
--------------------------------------------------------------- -----------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE OR
UNDERLYING EMPLOYEES BASE PRICE EXPIRATION
NAME OPTIONS IN FISCAL ($/SHARE) DATE 5% 10%
---- GRANTED (#) YEAR --------- ---- -- ---
----------- ----
<S> <C> <C> <C> <C> <C> <C>
Robert M. Kaye 300,000 (1) 75.0% $10.1250 11/28/2007 $4,947,765 $7,878,510
30,000 (2) 7.5 11.1375 10/28/2007 544,254 866,634
David G. Lodge 20,000 (1) 5.0 10.1250 11/28/2007 329,851 525,234
30,000 (2) 7.5 10.1250 10/28/2007 494,777 787,851
Patrick W. Bevack 2,000 (1) 0.5 10.1250 10/28/2007 32,985 52,523
- -----------------------
<FN>
(1) These options vest 50% on the third anniversary, 25% on the fourth
anniversary and 25% on the fifth anniversary from the date of grant.
(2) These options granted in three groups of 10,000, each vesting 50%, 25%
and 25% beginning on October 28, 2000, October 2001 and October 2002,
respectively.
</TABLE>
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<PAGE> 70
DESCRIPTION OF THE PREFERRED SECURITIES
GENERAL
The following is a summary of certain terms and provisions of the
Preferred Securities. The Trust Indenture Agreement will be qualified under the
Trust Indenture Act. This summary of certain terms and provisions of the
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Trust Agreement and the Trust
Indenture Act. Wherever particular defined terms of the Trust Agreement are
referred to, but not defined herein, such defined terms are incorporated herein
by reference. The form of the Trust Agreement has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. Unless
otherwise expressly stated or the context otherwise requires, all references to
the "Corporation" appearing under this caption "Description of the Preferred
Securities" and under the caption "Description of the Junior Subordinated
Debentures" shall mean Metropolitan Financial Corp. excluding its consolidated
subsidiaries.
DISTRIBUTIONS
The Preferred Securities represent preferred undivided beneficial
interests in the assets of the Trust Issuer. Distributions on such Preferred
Securities will be payable at the annual rate of % of the stated Liquidation
Amount of $10, payable quarterly in arrears on June 30, September 30, December
31 and March 31 of each year, to the holders of the Preferred Securities on the
relevant record dates. The record date will be the 15th day of the preceding
month in which the relevant Distribution payment date occurs. Distributions will
accumulate from the date of the initial issuance of the Preferred Securities and
are cumulative. The first Distribution payment date for the Preferred Securities
will be June 30, 1998. The amount of Distributions payable for any period will
be computed on the basis of a 360-day year of twelve 30-day months. In the
event that any date on which Distributions are payable on the Preferred
Securities is not a Business Day, then payment of the Distributions payable on
such date will be made on the next succeeding day that is a Business Day (and
without any additional Distributions or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment was
originally payable (each date on which Distributions are payable in accordance
with the foregoing, a "Distribution Date"). A "Business Day" shall mean any day
other than a Saturday or a Sunday, or a day on which banking institutions in the
City of New York are authorized or required by law or executive order to remain
closed or a day on which the principal corporate trust office of the Property
Trustee or the Debenture Trustee is closed for business.
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarters with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. As a consequence of any
such deferral of interest, quarterly Distributions on the Preferred Securities
by the Trust Issuer will also be deferred during any such Extension Period.
Distributions to which holders of the Preferred Securities are entitled will
accumulate additional Distributions thereon at the rate per annum of % thereof,
compounded quarterly from the relevant payment date for such Distributions. The
term "Distributions" as used herein, shall include any such additional
Distributions. During any such Extension Period, the Corporation may not (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Corporation's capital
stock (other than (a) the reclassification of any class of the Corporation's
capital stock into another class of capital stock, (b) dividends or
distributions payable in common shares of the Corporation, (c) any declaration
of a dividend in connection with the implementation of a shareholders' rights
plan, or the issuance of shares under any such plan in the future or the
redemption or repurchase of any such rights pursuant thereto, (d) payments under
the Guarantee, and (e) purchases of common shares related to the issuance of
common shares or rights under any of the Corporation's benefit plans for its
directors, officers or employees), (ii) make any payment of principal, interest
or premium, if any, on or repay, repurchase or redeem any debt securities of the
Corporation that rank pari passu with or junior in right of payment to the
Junior Subordinated Debentures or (iii) make any guarantee payments with respect
to any guarantee by the Corporation of the debt securities of any subsidiary of
the Corporation if such guarantee ranks pari passu with or junior in right of
payment to the Junior Subordinated Debentures other than payments pursuant to
the Guarantee. Additionally, during any such Extension Period, the Corporation
shall not redeem, purchase or acquire less than all the outstanding Junior
Subordinated Debentures or any of the Preferred Securities. Prior to the
termination of any such Extension Period, the Corporation may further defer the
payment of interest on the Junior Subordinated Debentures, provided that no
Extension Period may exceed 20 consecutive quarters or extend beyond the Stated
Maturity of the Junior Subordinated Debentures. Upon the termination of any such
Extension Period and the payment of all interest then accrued and unpaid
(together with interest thereon at the rate of %, compounded quarterly, to
the extent permitted by applicable law), the Corporation may elect to begin a
new Extension Period. There is no limitation on the number of times that the
Corporation may elect to begin an Extension Period. See "Description of the
Junior Subordinated Debentures--Right to Defer Interest Payment Obligation" and
"Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount."
The revenue of the Trust Issuer available for distribution to holders
of its Preferred Securities will be limited to payments under the Junior
Subordinated Debentures in which the Trust Issuer will invest the proceeds from
the issuance and sale of its Trust Securities. See "Description of the Junior
Subordinated Debentures." If the Corporation does not make interest payments on
the Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Preferred Securities. The payment of
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Distributions (if and to the extent the Trust Issuer has funds legally available
for the payment of such Distributions and cash sufficient to make such payments)
is guaranteed by the Corporation on a limited basis as set forth herein under
"Description of the Guarantee."
The Corporation has no current intention of exercising its right to
defer payments of interest on the Junior Subordinated Debentures.
SUBORDINATION OF THE COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Preferred
Securities and Common Securities, as applicable, shall be made pro rata based on
the Liquidation Amount of the Preferred Securities and the Common Securities;
provided, however, that if on any Distribution Date or Redemption Date an event
of default under the Indenture shall have occurred and be continuing, no payment
of any Distribution on, or Redemption Price of, any of the Common Securities,
and no other payment on account of the redemption, liquidation or other
acquisition of such Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions on all of the outstanding
Preferred Securities for all Distribution periods terminating on or prior
thereto, or, in the case of payment of the Redemption Price, the full amount of
such Redemption Price on all of the outstanding Preferred Securities then called
for redemption shall have been made or provided for, and all funds available to
the Property Trustee shall first be applied to the payment in full in cash of
all Distributions on, or Redemption Price of, the Preferred Securities then due
and payable.
In the case of any event of default under the Trust Agreement resulting
from an event of default under the Indenture, the Corporation as holder of the
Common Securities will be deemed to have waived any right to act with respect to
any such event of default under the Trust Agreement until the effect of all such
events of default with respect to the Preferred Securities shall have been
cured, waived or otherwise eliminated. Until all such events of default under
the Trust Agreement shall have been so cured, waived or otherwise eliminated,
the Property Trustee shall act solely on behalf of the holders of the Preferred
Securities and not on behalf of the Corporation as holder of the Common
Securities, and only the holders of the Preferred Securities will have the right
to direct the Property Trustee to act on their behalf.
REDEMPTION
The Preferred Securities are subject to mandatory redemption, in whole
or in part, upon repayment of the Junior Subordinated Debentures at their Stated
Maturity or earlier redemption as provided in the Indenture. The proceeds from
such repayment or redemption shall be applied by the Property Trustee to redeem
a Like Amount (as defined below) of the Preferred Securities upon not less than
30 nor more than 60 days' notice prior to the date fixed for repayment or
redemption, at a redemption price equal to the aggregate Liquidation Amount of
such Preferred Securities plus accumulated and unpaid Distributions thereon (the
"Redemption Price") to the date of redemption (the "Redemption Date"). For a
description of the Stated Maturity and redemption provisions of the Junior
Subordinated Debentures, see "Description of the Junior Subordinated
Debentures--General" and "--Redemption or Exchange."
The Corporation has the option to redeem the Junior Subordinated
Debentures prior to maturity on or after , 2003, in whole at any
time or in part from time to time, and thereby cause a mandatory redemption of a
Like Amount of the Preferred Securities. Any time that a Tax Event, an
Investment Company Event or a Capital Treatment Event (each as defined below)
shall occur and be continuing, the Corporation has the right to redeem the
Junior Subordinated Debentures in whole (but not in part) and thereby cause a
mandatory redemption of the Preferred Securities in whole (but not in part). Any
such redemption prior to the Stated Maturity will be subject to prior regulatory
approval, if then required under applicable capital guidelines or regulatory
policies, and to restrictions set forth in the 1995 Notes Indenture. See
"Description of the Junior Subordinated Debentures--Redemption or Exchange" and
"Description of the 1995 Notes."
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed
at the Redemption Price with the applicable proceeds from the contemporaneous
redemption of a Like Amount of the Junior Subordinated Debentures. Redemptions
of the Preferred Securities shall be made and the Redemption Price shall be paid
on each Redemption Date only to the extent that the Trust Issuer has funds on
hand available for the payment of such Redemption Price. See "Description of the
Preferred Securities--Subordination of the Common Securities."
If the Trust Issuer gives a notice of redemption in respect of the
Preferred Securities, then, by 10:00 a.m., New York City time, on the Redemption
Date, to the extent funds are available, the Property Trustee will deposit
irrevocably with DTC funds sufficient to pay the applicable Redemption Price and
will give DTC irrevocable instructions and authority to pay the Redemption Price
to the holders thereof upon surrender of their certificates evidencing such
Preferred Securities. Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date for the Preferred Securities called for redemption
shall be payable to the holders of the Preferred Securities on the relevant
record dates for the related Distribution Dates. If notice of redemption shall
have been given and funds deposited
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as required, then, upon the date of such deposit, all rights of the holders of
such Preferred Securities so called for redemption will cease, except the right
of the holders of such Preferred Securities to receive the Redemption Price, but
without interest on such Redemption Price, and such Preferred Securities will
cease to be outstanding.
In the event that any date fixed for redemption of the Preferred
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of the Preferred Securities called for redemption is
improperly withheld or refused and not paid either by the Trust Issuer or by the
Corporation pursuant to the Guarantee as described under "Description of the
Guarantee," Distributions on such Preferred Securities will continue to accrue
at the then applicable rate, from the Redemption Date originally established by
the Trust Issuer for such Preferred Securities to the date such Redemption Price
is actually paid, in which case the actual payment date will be the date fixed
for redemption for purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by private
agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of the Junior Subordinated Debentures to holders of the Preferred
Securities shall be made to the applicable recordholders thereof as they appear
on the register for the Preferred Securities on the relevant record date, which
date shall be one business day prior to the relevant Redemption Date, however,
in the event the Preferred Securities do not remain in book entry form, the
relevant record date shall be the date at least 15 days prior to the Redemption
Date or liquidation date, as applicable.
If less than all of the Preferred Securities and Common Securities
issued by the Trust Issuer are to be redeemed on a Redemption Date, then the
aggregate Liquidation Amount of the Preferred Securities and Common Securities
to be redeemed shall be allocated pro rata to the Preferred Securities and the
Common Securities based upon the relative Liquidation Amounts of such classes.
The particular Preferred Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Property Trustee from the
outstanding Preferred Securities not previously called for redemption, or, if
the Preferred Securities are then held in the form of a global preferred
security, in accordance with DTC's customary procedures. The Property Trustee
shall promptly notify the trust registrar in writing of the Preferred Securities
selected for redemption and, in the case of any Preferred Securities selected
for partial redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of the Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of the Preferred Securities shall relate,
in the case of the Preferred Securities redeemed or to be redeemed only in part,
to the portion of the aggregate Liquidation Amount of the Preferred Securities
which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 but not more than
60 days before the Redemption Date to each holder of the Preferred Securities to
be redeemed at its registered address. Unless the Corporation defaults in
payment of the Redemption Price on the Junior Subordinated Debentures, on and
after the Redemption Date interest will cease to accrue on the Junior
Subordinated Debentures or portions thereof called for redemption.
LIQUIDATION OF THE TRUST ISSUER AND DISTRIBUTION OF THE JUNIOR SUBORDINATED
DEBENTURES TO HOLDERS
The Corporation has the right at any time to dissolve the Trust Issuer
and, after satisfaction of the liabilities of creditors of the Trust Issuer as
provided by applicable law, cause Junior Subordinated Debentures to be
distributed to the holders of the Preferred Securities and Common Securities in
exchange therefor upon liquidation of the Trust Issuer.
After the liquidation date fixed for any distribution of the Junior
Subordinated Debentures for Preferred Securities (i) such Preferred Securities
will no longer be deemed to be outstanding, and (ii) DTC or its nominee, as the
registered holder of Preferred Securities, will receive a registered global
certificate or certificates representing the Junior Subordinated Debentures to
be delivered upon such distribution with respect to Preferred Securities held by
DTC or its nominee, (iii) any certificates representing the Preferred Securities
not held by DTC or its nominee will be deemed to represent Junior Subordinated
Debentures having a principal amount equal to the stated Liquidation Amount of
such Preferred Securities, and bearing accrued and unpaid interest in an amount
equal to the accumulated and unpaid Distributions on such series of the
Preferred Securities until such certificates are presented to the Administrative
Trustees or their agent for transfer or reissuance.
Under current United States federal income tax law and interpretations,
a distribution of the Junior Subordinated Debentures should not be a taxable
event to holders of the Preferred Securities. Should there be a change in law, a
change in legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Preferred Securities.
See "Certain Federal Income Tax Consequences--Distribution of the Junior
Subordinated Debentures to Holders of the Preferred Securities."
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LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Trust Issuer shall automatically
dissolve upon expiration of its term and shall dissolve on the first to occur of
(i) certain events of bankruptcy, dissolution or liquidation of the Corporation,
subject in certain instances to any such event remaining in effect for a period
of 90 consecutive days; (ii) the distribution of a Like Amount of the Junior
Subordinated Debentures to the holders of its Preferred Securities, if the
Corporation, as depositor, has given written direction to the Property Trustee
to dissolve the Trust Issuer (which direction is optional and wholly within the
discretion of the Corporation, as depositor); (iii) redemption of all of the
Preferred Securities as described under "Description of the Preferred
Securities-Redemption;" and (iv) the entry of an order for the dissolution of
the Trust Issuer by a court of competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii) or (iv)
of the preceding paragraph, the Trust Issuer shall be liquidated by the Trust
Issuer Trustees as expeditiously as the Trust Issuer Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of the
Trust Issuer, if any, as provided by applicable law, to the holders of the
Preferred Securities a Like Amount of the Junior Subordinated Debentures, unless
such distribution is determined by the Property Trustee not to be practical, in
which event such holders will be entitled to receive out of the assets of the
Trust Issuer available for distribution to holders, after satisfaction of
liabilities to creditors of the Trust Issuer, if any, as provided by applicable
law, an amount equal to, in the case of holders of the Preferred Securities, the
aggregate of the Liquidation Amount plus accrued and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust Issuer has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust Issuer on Preferred Securities shall be paid on a pro rata basis. The
Corporation, as the holder of the Common Securities, will be entitled to receive
distributions upon any such liquidation pro rata with the holders of the
Preferred Securities, except that if an event of default under the Indenture has
occurred and is continuing, the Preferred Securities shall have a priority over
the Common Securities with respect to any such distributions.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under
the Trust Agreement (an "Event of Default") with respect to the Trust Securities
issued thereunder (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) the occurrence of an event of default under the Indenture
(see "Description of the Junior Subordinated Debentures--Debenture
Events of Default"); or
(ii) default in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period
of 30 days; or
(iii) default in the payment of any Redemption Price when it
becomes due and payable; or
(iv) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Trust Issuer Trustees in
the Trust Agreement (other than a covenant or warranty a default in the
performance of which or the breach of which is dealt with in clause
(ii) or (iii) above), and continuation of such default or breach for a
period of 60 days after there has been given, by registered or
certified mail, to the defaulting Trust Issuer Trustee or Trustees by
the holders of at least 25% in aggregate Liquidation Amount of the
outstanding Preferred Securities, a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or
insolvency with respect to the Property Trustee and the failure by the
Corporation to appoint a successor Property Trustee within 60 days
thereof.
Within 90 days after the occurrence of any Event of Default actually
known to the Property Trustee, the Property Trustee shall transmit notice of
such Event of Default to the holders of the Preferred Securities, the
Administrative Trustees and the Corporation, as depositor, unless such Event of
Default shall have been cured or waived. The Corporation, as depositor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If an event of default under the Indenture has occurred and is
continuing, the Preferred Securities shall have a preference over the Common
Securities as described above. See "Description of the Preferred
Securities--Subordination of the Common Securities" and "--Liquidation
Distribution Upon Dissolution". The existence of an event of default does not
entitle the holders of the Preferred Securities to accelerate the payment
thereof.
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REMOVAL OF THE TRUST ISSUER TRUSTEES
Unless an event of default under the Indenture shall have occurred and
be continuing, any Trust Issuer Trustee may be removed at any time by the holder
of the Common Securities. If an event of default under the Indenture has
occurred and is continuing, the Property Trustee may be removed at such time by
the holders of a majority in Liquidation Amount of the outstanding Preferred
Securities. In no event will the holders of the Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Corporation as the holder of the
Common Securities. No resignation or removal of any Trust Issuer Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act, if applicable, or of any jurisdiction in which any part of
the Trust Property (as defined in the Trust Agreement) may at the time be
located, the Corporation, as the holder of the Common Securities, shall have
power to appoint one or more persons either to act as a co-trustee, jointly with
the Property Trustee, of all or any part of such Trust Property, or to act as
separate trustee of any such property, in either case with such powers as may be
provided in the instrument of appointment, and to vest in such person or persons
in such capacity any property, title, right or power deemed necessary or
desirable, subject to the provisions of the Trust Agreement. In the event an
event of default under the Indenture has occurred and is continuing, the
Property Trustee alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF THE TRUST ISSUER TRUSTEES
Any entity into which the Property Trustee or any Administrative
Trustee that is not a natural person may be merged or converted or with which it
may be consolidated, or any entity resulting from any merger, conversion or
consolidation to which such Trustee shall be a party or any entity succeeding to
all or substantially all the corporate trust business of such Trustee, shall be
the successor of such Trustee under the Trust Agreement, provided such entity
shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST ISSUER
The Trust Issuer may not merge with or into, consolidate, amalgamate,
be replaced by, convey, transfer or lease its properties and assets
substantially as an entirety to any entity or other Person, except as described
below or as otherwise described in the Trust Agreement. The Trust Issuer may, at
the request of the Corporation, with the consent of the Administrative Trustees
and without the consent of the holders of the Preferred Securities or the
Property Trustee, merge with or into, consolidate, amalgamate, be replaced by,
convey, transfer or lease its properties and assets substantially as an entirety
to, a trust organized as such under the laws of any State: provided, that (i)
such successor entity either (a) expressly assumes all of the obligations of the
Trust Issuer with respect to the Preferred Securities or (b) substitutes for the
Preferred Securities other securities having substantially the same terms as the
Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Preferred Securities in priority with respect to
Distributions and payments upon liquidation, redemption and otherwise, (ii) the
Corporation expressly appoints a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the holder of the Junior
Subordinated Debentures, (iii) the Successor Securities are registered or
listed, or any Successor Securities will be registered or listed upon
notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then registered or listed
(including, if applicable, the Nasdaq Stock Market's National Market), if any,
(iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer
or lease does not cause the Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, (vi) such successor entity has a
purpose substantially identical to that of the Trust Issuer, (vii) prior to such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease,
the Corporation has received an opinion from independent counsel to the Trust
Issuer experienced in such matters to the effect that (a) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any material
respect and (b) following such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither the Trust Issuer nor such successor
entity will be required to register as an investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act") and
(viii) the Corporation or any permitted successor or assignee owns all of the
common securities or its equivalent of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee. Notwithstanding the foregoing, the Trust
Issuer shall not, except with the consent of holders of 100% in Liquidation
Amount of the Preferred Securities, consolidate, amalgamate, merge with or into
or be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Trust Issuer or the successor entity to be classified as other
than a grantor trust for United States federal income tax purposes.
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VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of the
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Trust Agreement, the holders of the Preferred Securities will have no voting
rights.
The Trust Agreement may be amended from time to time by the
Corporation, the Property Trustee and the Administrative Trustees, without the
consent of the holders of the Preferred Securities, (i) with respect to
acceptance of appointment of a successor trustee, (ii) to cure any ambiguity,
correct or supplement any provisions in the Trust Agreement that may be
inconsistent with any other provision or to make any other provisions with
respect to matters or questions arising under the Trust Agreement, which shall
not be inconsistent with the other provisions of the Trust Agreement or (iii) to
modify, eliminate or add to any provisions of the Trust Agreement to such extent
as shall be necessary to ensure that the Trust Issuer will be classified for
United States federal income tax purposes as a grantor trust at all times that
the Preferred Securities are outstanding or to ensure that the Trust Issuer will
not be required to register as an "investment company" under the Investment
Company Act; provided, however, that in the case of clause (ii), such action
shall not adversely affect in any material respect the interests of any holder
of the Preferred Securities, and any such amendments of the Trust Agreement
shall become effective when notice thereof is given to the holders of the
Preferred Securities. The Trust Agreement may be amended by the Trust Issuer
Trustees and the Corporation with (i) the consent of holders representing not
less than a majority (based upon Liquidation Amounts) of the outstanding
Preferred Securities and (ii) receipt by the Trust Issuer Trustees of an opinion
of counsel to the effect that such amendment or the exercise of any power
granted to the Trust Issuer Trustees in accordance with such amendment will not
affect the Trust Issuer's status as a grantor trust for United States federal
income tax purposes or the Trust Issuer's exemption from status as an
"investment company" under the Investment Company Act, provided that without the
consent of each holder of the Preferred Securities, the Trust Agreement may not
be amended to (a) change the amount or timing of any Distribution on the
Preferred Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Preferred Securities as of a
specified date or (b) restrict the right of a holder of the Preferred Securities
to institute suit for the enforcement of any such payment on or after such date.
So long as the Junior Subordinated Debentures are held by the Property
Trustee, the Trust Issuer Trustees shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee or executing any trust or power conferred on the Property Trustee with
respect to the Junior Subordinated Debentures, (ii) waive any past default that
is waivable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Junior Subordinated Debentures shall
be due and payable or (iv) consent to any amendment, modification or termination
of the Indenture or the Junior Subordinated Debentures, where such consent shall
be required, without, in each case, obtaining the prior approval of the holders
of a majority in aggregate Liquidation Amount of all outstanding Preferred
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of the Junior Subordinated Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior consent of each holder of the Preferred Securities. The Trust Issuer
Trustees shall not revoke any action previously authorized or approved by a vote
of the holders of the Preferred Securities except by subsequent vote of the
holders of the Preferred Securities. The Property Trustee shall notify each
holder of the Preferred Securities of any notice of default with respect to the
Junior Subordinated Debentures. In addition to obtaining the foregoing approvals
of the holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Trust Issuer Trustees shall obtain an opinion of counsel
experienced in such matters to the effect that the Trust Issuer will not be
classified as an association taxable as a corporation for United States federal
income tax purposes on account of such action.
Any required approval of holders of the Preferred Securities may be
given at a meeting of holders of the Preferred Securities convened for such
purpose or pursuant to written consent. The Property Trustee will cause a notice
of any meeting at which holders of the Preferred Securities are entitled to
vote, or of any matter upon which action by written consent of such holders is
to be taken, to be given to each holder of record of the Preferred Securities in
the manner set forth in the Trust Agreement.
No vote or consent of the holders of the Preferred Securities will be
required for the Trust Issuer to redeem and cancel the Preferred Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Corporation, the Trust Issuer
Trustees or any affiliate of the Corporation or the Trust Issuer Trustees shall,
for purposes of such vote or consent, be treated as if they were not
outstanding.
LIQUIDATION VALUE
The amount payable on the Preferred Securities in the event of any
liquidation of the Trust Issuer is $10 per Preferred Security plus accumulated
and unpaid Distributions, which may be in the form of a distribution of such
amount in Junior Subordinated Debentures, subject to certain exceptions. See
"Description of the Preferred Securities--Liquidation Distribution Upon
Dissolution."
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EXPENSES AND TAXES
In the Indenture, the Corporation, as borrower, has agreed to pay all
debts and other obligations (other than with respect to the Preferred
Securities) and all costs and expenses of the Trust Issuer (including costs and
expenses relating to the organization of the Trust Issuer, the fees and expenses
of the Trust Issuer Trustee and the costs and expenses relating to the operation
of the Trust Issuer) and to pay any and all taxes and all costs and expenses
with respect thereto (other than United States withholding taxes) to which the
Trust Issuer might become subject. The foregoing obligations of the Corporation
under the Indenture are for the benefit of, and shall be enforceable by, any
person to whom any such debts, obligations, costs, expenses and taxes are owed
(a "Creditor") whether or not such Creditor has received notice thereof. Any
such Creditor may enforce such obligations of the Corporation directly against
the Corporation, and the Corporation has irrevocably waived any right or remedy
to require that any such Creditor take any action against the Trust Issuer or
any other person before proceeding against the Corporation. The Corporation has
also agreed in the Indenture to execute such additional agreements as may be
necessary or desirable to give full effect to the foregoing.
BOOK ENTRY, DELIVERY AND FORM
The Preferred Securities will be issued in the form of one or more
fully registered global securities which will be deposited with, or on behalf
of, DTC and registered in the name of DTC's nominee. Unless and until it is
exchangeable in whole or in part for the Preferred Securities in definitive
form, a global security may not be transferred except as a whole by DTC to a
nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC
or any such nominee to a successor of such depository or a nominee of such
successor.
Ownership of beneficial interests in a global security will be limited
to persons that have accounts with DTC or its nominee ("Participants") or
persons that may hold interests through Participants. The Corporation expects
that, upon the issuance of a global security, DTC will credit, on its book-entry
registration and transfer system, the Participants' accounts with their
respective principal amounts of the Preferred Securities represented by such
global security. Ownership of beneficial interests in such global security will
be shown on, and the transfer of such ownership interests will be effected only
through, records maintained by DTC (with respect to interests of Participants)
and on the records of Participants (with respect to interests of Persons held
through Participants). Beneficial owners will not receive written confirmation
from DTC of their purchase, but are expected to receive written confirmations
from the Participants through which the beneficial owner entered into the
transaction. Transfers of ownership interests will be accomplished by entries on
the books of Participants acting on behalf of the beneficial owners.
So long as DTC, or its nominee, is the registered owner of a global
security, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Preferred Securities represented by such global security
for all purposes under the Indenture. Except as provided below, owners of
beneficial interests in a global security will not be entitled to receive
physical delivery of the Preferred Securities in certificated form and will not
be considered the owners or holders thereof under the Indenture. Accordingly,
each person owning a beneficial interest in such a global security must rely on
the procedures of DTC and, if such person is not a Participant, on the
procedures of the Participant through which such person owns its interest, to
exercise any rights of a holder of Preferred Securities under the Indenture. The
Corporation understands that, under DTC's existing practices, in the event that
the Corporation requests any action of holders, or an owner of a beneficial
interest in such a global security desires to take any action which a holder is
entitled to take under the Indenture, DTC would authorize the Participants
holding the relevant beneficial interests to take such action, and such
Participants would authorize beneficial owners owning through such Participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them. Redemption notices will also be sent to DTC. If less
than all of the Preferred Securities are being redeemed, the Corporation
understands that it is DTC's existing practice to determine by lot the amount of
the interest of each Participant to be redeemed.
Distributions on the Preferred Securities registered in the name of DTC
or its nominee will be made to DTC or its nominee, as the case may be, as the
registered owner of the global security representing such Preferred Securities.
None of the Corporation, the Trust Issuer Trustees, the Administrators, any
Paying Agent (as defined herein) or any other agent of the Corporation or the
Trust Issuer Trustees will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in the global security for such Preferred Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests. Disbursements of Distributions to Participants shall be the
responsibility of DTC. DTC's practice is to credit Participants' accounts on a
payable date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payment on the payable
date. Payments by Participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of DTC, the Corporation,
the Trust Issuer Trustees, the Paying Agent or any other agent of the
Corporation, subject to any statutory or regulatory requirements as may be in
effect from time to time.
DTC may discontinue providing its services as securities depository
with respect to the Preferred Securities at any time by giving reasonable notice
to the Corporation or the Trust Issuer Trustees. If DTC notifies the Corporation
or the Trust Issuer Trustees that it is unwilling to continue as such, or if it
is unable to continue or ceases to be a clearing agency registered under the
Exchange Act and a
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successor depository is not appointed by the Corporation within 90 days after
receiving such notice or becoming aware that DTC is no longer so registered, the
Corporation will issue the Preferred Securities in definitive form upon
registration of transfer of, or in exchange for, such global security. In
addition, the Corporation may, at any time and in its sole discretion, determine
not to have the Preferred Securities represented by one or more global
securities and, in such event, will issue Preferred Securities in definitive
form in exchange for all of the global securities representing such Preferred
Securities.
DTC has advised the Corporation and the Trust Issuer as follows: DTC is
a limited purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its Participants and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book entry changes to accounts of its Participants, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Certain of such Participants (or their
representatives), together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through, or maintain a custodial relationship with, a
Participant, either directly or indirectly.
The information in this section concerning DTC and book-entry systems
has been obtained from sources that the Corporation and the Trust Issuer believe
to be reliable, but neither the Corporation nor the Trust Issuer take
responsibility for the accuracy thereof.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Preferred Securities will be made by the Underwriter
in immediately available funds.
Secondary trading in preferred securities of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the Preferred
Securities will trade in DTC's Same-Day Funds Settlement System, and secondary
market trading activity in the Preferred Securities will therefore be required
by DTC to settle in immediately available funds. No assurance can be given as to
the effect, if any, of settlement in immediately available funds on trading
activity in the Preferred Securities.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities will be made to DTC,
which will credit the relevant accounts at DTC on the applicable Distribution
Dates or, if the Preferred Securities are not held by DTC, such payments will be
made by check mailed to the address of the holder entitled thereto, as such
address appears on the securities register for the Trust Securities. The paying
agent (the "Paying Agent") will initially be the Property Trustee and any
co-paying agent chosen by the Property Trustee and acceptable to the
Administrators. The Paying Agent will be permitted to resign as Paying Agent
upon 30 days' written notice to the Property Trustee and the Administrators. If
the Property Trustee is no longer the Paying Agent, the Property Trustee will
appoint a successor (which must be a bank or trust company reasonably acceptable
to the Administrators) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as the registrar and the transfer agent
for the Preferred Securities. Registration of transfers of Preferred Securities
will be effected without charge by or on behalf of the Trust Issuer, except for
the payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. In the event of any redemption, the
Trust Issuer will not be required to (i) issue, register the transfer of, or
exchange any Preferred Securities during a period beginning at the opening of
business 15 days before the date of mailing of a notice of redemption of any
Preferred Securities called for redemption and ending at the close of business
on the day of such mailing or (ii) register the transfer of or exchange any
Preferred Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any such Preferred Securities being redeemed in part.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of Preferred
Securities are entitled under the Trust Agreement to vote, then the Property
Trustee will take such
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action as it deems advisable and in the best interests of the holders of the
Preferred Securities and will have no liability except for its own negligence or
willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust Issuer in such a way that the Trust Issuer
will not be deemed to be an "investment company" required to be registered under
the Investment Company Act or classified as an association taxable as a
corporation for United States federal income tax purposes and so that the Junior
Subordinated Debentures will be treated as indebtedness of the Corporation for
United States federal income tax purposes. In this connection, the Corporation
and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of the Trust Issuer
or the Trust Agreement, that the Corporation and the Administrative Trustees
determine in their discretion to be necessary or desirable for such purposes.
Holders of the Preferred Securities have no preemptive or similar
rights.
The Trust Agreement and the Preferred Securities will be governed by,
and construed in accordance with, the laws of the State of Delaware.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued under an Indenture
(the "Indenture") between the Corporation and Wilmington Trust Company, as
trustee (the "Debenture Trustee"). The Indenture will be qualified as an
Indenture under the Trust Indenture Act. This summary of certain terms and
provisions of the Junior Subordinated Debentures and the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Indenture, and to the Trust Indenture Act. Wherever particular
defined terms of the Indenture are referred to, but not defined herein, such
defined terms are incorporated herein by reference. The form of the Indenture
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
GENERAL
Concurrently with the issuance of the Preferred Securities, the Trust
Issuer will invest the proceeds thereof, together with the consideration paid by
the Corporation for the Common Securities, in the Junior Subordinated
Debentures. The Junior Subordinated Debentures will bear interest at the annual
rate of %, payable quarterly in arrears on June 30, September 30, December
31 and March 31 of each year (each, an "Interest Payment Date"), commencing June
30, 1998, to the person in whose name each Junior Subordinated Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. It is anticipated that,
until the liquidation, if any, of the Trust Issuer, the Junior Subordinated
Debentures will be held in the name of the Property Trustee in trust for the
benefit of the holders of the Preferred Securities. The amount of interest
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months. In the event that any date on which interest is payable on the
Junior Subordinated Debentures is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment was
originally payable. Accrued interest that is not paid on the applicable Interest
Payment Date will bear additional interest on the amount thereof (to the extent
permitted by applicable law) at the rate per annum of % thereof, compounded
quarterly from the relevant Interest Payment Date. The term "interest" as used
herein shall include quarterly interest payments, interest on quarterly interest
payments not paid on the applicable Interest Payment Date and Additional
Interest (as defined below), as applicable.
The Junior Subordinated Debentures will mature on June 30, 2028 (the
"Stated Maturity").
The Junior Subordinated Debentures will be unsecured and will rank
junior and be subordinate in right of payment to all Senior Indebtedness of the
Corporation. Because the Corporation is a holding company, the right of the
Corporation to participate in any distribution of assets of any subsidiary,
including the Bank, upon such subsidiary's liquidation or reorganization or
otherwise, is subject to the prior claims of creditors of that subsidiary,
except to the extent that the Corporation may itself be recognized as a creditor
of that subsidiary. Accordingly, the Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of the Junior Subordinated Debentures
should look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures. The Indenture does not limit the incurrence or issuance
of other secured or unsecured debt of the Corporation, including Senior
Indebtedness, whether under the Indenture or any existing or other indenture
that the Corporation may enter into in the future or otherwise.
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RIGHT TO DEFER INTEREST PAYMENT OBLIGATION
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture at any time or
from time to time during the term of the Junior Subordinated Debentures to defer
the payment of interest on the Junior Subordinated Debentures for a period not
exceeding 20 consecutive quarters with respect to each Extension Period,
provided that no Extension Period may extend beyond the Stated Maturity of the
Junior Subordinated Debentures. At the end of each Extension Period, the
Corporation must pay all interest then accrued and unpaid on the Junior
Subordinated Debentures (together with interest on such unpaid interest at the
annual rate of %, compounded quarterly from the relevant Interest Payment
Date, to the extent permitted by applicable law, referred to herein as
"Compounded Interest"). During an Extension Period, interest would continue to
accrue and holders of the Junior Subordinated Debentures would be required to
accrue interest income for United States federal income tax purposes. See
"Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount."
During any such Extension Period, the Corporation may not (i) declare
or pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Corporation's capital stock
(other than (a) the reclassification of any class of the Corporation's capital
stock into another class of capital stock, (b) dividends or distributions in
common shares of the Corporation, (c) any declaration of a dividend in
connection with the implementation of a shareholders' rights plan, or the
issuance of shares under any such plan in the future or the redemption or
repurchase of any such rights pursuant thereto, (d) payments under the
Guarantee, and (e) purchases of common shares related to the issuance of common
shares or rights under any of the Corporation's benefit plans for its directors,
officers or employees) or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Corporation that rank pari passu with or junior in right of payment to the
Junior Subordinated Debentures or (iii) make any guarantee payments with respect
to any guarantee by the Corporation of the debt securities of any subsidiary of
the Corporation if such guarantee ranks pari passu with or junior in right of
payment to the Junior Subordinated Debentures other than payments pursuant to
the Guarantee. Additionally, during any such Extension Period, the Corporation
shall not redeem, purchase or acquire less than all the outstanding Junior
Subordinated Debentures or any of the Preferred Securities. Prior to the
termination of any such Extension Period, the Corporation may further defer the
payment of interest on the Junior Subordinated Debentures, provided that no
Extension Period may exceed 20 consecutive quarters or extend beyond the Stated
Maturity of the Junior Subordinated Debentures. Upon the termination of any such
Extension Period and the payment of all interest then accrued and unpaid
(together with interest thereon at the rate of %, compounded quarterly, to
the extent permitted by applicable law), the Corporation may elect to begin a
new Extension Period subject to the above requirements. No interest shall be due
and payable during an Extension Period, except at the end thereof. The
Corporation must give the Property Trustee, the Administrative Trustees and the
Debenture Trustee notice of its election of such Extension Period at least one
Business Day prior to the earlier of (i) the date interest on the Junior
Subordinated Debentures would have been payable except for the election to begin
such Extension Period or (ii) the date the Administrative Trustees are required
to give notice of the record date, or the date such Distributions are payable,
to the Nasdaq Stock Market's National Market or other applicable self-regulatory
organization or to holders of the Preferred Securities as of the record date or
the date such Distributions are payable, but in any event not less than one
Business Day prior to such record date. The Debenture Trustee shall give notice
of the Corporation's election to begin a new Extension Period to the holders of
the Preferred Securities. There is no limitation on the number of times that the
Corporation may elect to begin an Extension Period.
ADDITIONAL INTEREST
If the Trust Issuer or the Property Trustee is required to pay any
additional taxes, duties or other governmental charges as a result of a Tax
Event, the Corporation will pay such additional amounts (the "Additional Sums")
on the Junior Subordinated Debentures as shall be required so that the
Distributions payable by the Trust Issuer shall not be reduced as a result of
any such additional taxes, duties or other governmental charges.
REDEMPTION OR EXCHANGE
The Corporation will have the right to redeem the Junior Subordinated
Debentures prior to maturity (i) on or after , 2003, in whole at any time or in
part from time to time, or (ii) at any time in whole (but not in part), within
90 days following the occurrence and continuation of a Tax Event, an Investment
Company Event or a Capital Treatment Event, in each case at a redemption price
equal to the accrued and unpaid interest on the Junior Subordinated Debentures
so redeemed to the date fixed for redemption, plus 100% of the principal amount
thereof. Any such redemption prior to the Stated Maturity will be subject to
prior regulatory approval, if then required under applicable capital guidelines
or regulatory policies, and to restrictions set forth in the 1995 Notes
Indenture. See "Description of the 1995 Notes."
The Junior Subordinated Debentures will not be subject to any sinking
fund.
Notice of any redemption will be mailed at least 30 but not more than
60 days before the redemption date to each Holder of the Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Corporation
defaults in payment of the redemption
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price, on and after the redemption date interest ceases to accrue on the Junior
Subordinated Debentures or portions thereof called for redemption.
"Investment Company Event" means the receipt by the Trust Issuer of an
Opinion of Counsel to the effect that, as a result of the occurrence of a change
in law or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, the Trust Issuer is or will be considered an "investment company"
that is required to be registered under the Investment Company Act, which change
becomes effective on or after the date of original issuance of the Preferred
Securities.
"Capital Treatment Event" means the receipt by the Trust Issuer of an
Opinion of Counsel to the effect that as a result of any amendment to, or change
(including any proposed change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such proposed change, pronouncement, action or decision
is announced on or after the date of original issuance of the Preferred
Securities, there is more than an insubstantial risk that the Preferred
Securities would not constitute Tier 1 Capital (or the then equivalent thereof)
applied as if the Corporation (or its successor) were a bank holding company for
purposes of the capital adequacy guidelines of the Federal Reserve (or any
successor regulatory authority with jurisdiction over bank holding companies),
or any capital adequacy guidelines as then in effect and applicable to the
Corporation. There are currently no capital adequacy guidelines applicable to
savings and loan holding companies such as the Corporation.
"Tax Event" means the receipt by the Trust Issuer of an Opinion of
Counsel to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which pronouncement or
decision is announced on or after the date of issuance of the Preferred
Securities under the Trust Agreement, there is more than an insubstantial risk
that (i) the Trust Issuer is, or will be within 90 days of the date of such
opinion, subject to United Stated federal income tax with respect to income
received or accrued on the Junior Subordinated Debentures, (ii) interest payable
by the Corporation on the Junior Subordinated Debentures is not, or within 90
days of the date of such opinion will not be, deductible by the Corporation, in
whole or in part, for United States federal income tax purposes or (iii) the
Trust Issuer is, or will be within 90 days of the date of such opinion, subject
to more than a de minimis amount of other taxes, duties or other governmental
charges.
"Opinion of Counsel" means an opinion in writing of independent legal
counsel experienced in such matters as being opined upon, that is delivered to
the Trust Issuer Trustees.
"Additional Interest" means the additional amounts as may be necessary
in order that the amount of Distributions then due and payable by the Trust
Issuer on the outstanding Preferred Securities and Common Securities shall not
be reduced as a result of any additional taxes, duties and other governmental
charges to which the Trust Issuer has become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of the Preferred
Securities, Preferred Securities having a Liquidation Amount equal to that
portion of the principal amount of the Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Preferred Securities pro rata based upon the
relative Liquidation Amounts of such Common Securities and Preferred Securities
and the proceeds of which will be used to pay the Redemption Price of such
Common Securities and Preferred Securities and (ii) with respect to a
distribution of the Junior Subordinated Debentures to holders of the Preferred
Securities in exchange therefor in connection with a dissolution or liquidation
of the Trust Issuer, Junior Subordinated Debentures having a principal amount
equal to the Liquidation Amount of the Preferred Securities of the holder to
whom such Junior Subordinated Debentures would be distributed.
AUTHENTICATION
A Junior Subordinated Debenture shall not be valid until authenticated
manually by an authorized signatory of the Debenture Trustee, or by an
Authenticating Agent. Such signature shall be conclusive evidence that the
Junior Subordinated Debenture so authenticated has been duly authenticated and
delivered under the Indenture and that the holder is entitled to the benefits of
the Indenture. Each Junior Subordinated Indenture shall be dated the date of its
authentication by the Debenture Trustee.
REGISTRATION, DENOMINATION AND TRANSFER
The Junior Subordinated Debentures will initially be registered in the
name of Cede & Co., as nominee of DTC, on behalf of the Trust Issuer. If the
Junior Subordinated Debentures are distributed to holders of Preferred
Securities, it is anticipated that the depository arrangements for the Junior
Subordinated Debentures will be substantially identical to those in effect for
the Preferred Securities. See "Description of Preferred Securities -- Book
Entry, Delivery and Form."
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Although DTC has agreed to the procedures described above, it is under
no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depository and a successor depository is not appointed by
the Corporation within 90 days of receipt of notice from DTC to such effect, the
Corporation will cause the Junior Subordinated Debentures to be issued in
certificated form.
Payments on Junior Subordinated Debentures represented by a global
security will be made to Cede & Co., the nominee for DTC, as the registered
holder of the Junior Subordinated Debentures, as described under "Description of
Preferred Securities -- Book Entry, Delivery and Form." If Junior Subordinated
Debentures are issued in certificated form, principal and interest will be
payable, the transfer of the Junior Subordinated Debentures will be registrable,
and Junior Subordinated Debentures will be exchangeable for Junior Subordinated
Debentures of other authorized denominations of a like aggregate principal
amount, at the corporate trust office of the Debenture Trustee in Wilmington,
Delaware or at the offices of any Paying Agent or transfer agent appointed by
the Corporation, provided that payment of interest may be made at the option of
the Corporation by check mailed to the address of the persons entitled thereto.
However, at the option of the Corporation, a holder of $1 million or more in
aggregate principal amount of Junior Subordinated Debentures may receive
payments of interest (other than interest payable at the Stated Maturity) by
wire transfer of immediately available funds upon written request to the
Debenture Trustee not later than 15 calendar days prior to the date on which the
interest is payable.
Junior Subordinated Debentures will be exchangeable for other Junior
Subordinated Debentures of like tenor, of any authorized denominations and of a
like aggregate principal amount.
Junior Subordinated Debentures may be presented for exchange as
provided above, and may be presented for registration of transfer (with the form
of transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the securities registrar appointed under the
Indenture or at the office of any transfer agent designated by the Corporation
for such purpose without service charge and upon payment of any taxes and other
governmental charges as described in the Indenture. The Corporation will appoint
the Debenture Trustee as securities registrar under the Indenture. The
Corporation may at any time designate additional transfer agents with respect to
the Junior Subordinated Debentures.
In the event of any redemption, neither the Corporation nor the
Debenture Trustee shall be required to (i) issue, register the transfer of or
exchange Junior Subordinated Debentures during a period beginning at the opening
of business 15 days before the day of selection for redemption of the Junior
Subordinated Debentures to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption or (ii) transfer or
exchange any Junior Subordinated Debentures so selected for redemption, except,
in the case of any Junior Subordinated Debentures being redeemed in part, any
portion thereof not to be redeemed.
Any monies deposited with the Debenture Trustee or any paying agent, or
then held by the Corporation in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall, at the request of the Corporation, be repaid
to the Corporation and the holder of such Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to the Corporation for
payment thereof.
RESTRICTIONS ON CERTAIN PAYMENTS
The Corporation will also covenant, as to the Junior Subordinated
Debentures, that, during any Extension Period, it will not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Corporation's capital stock
(other than (a) the reclassification of any class of the Corporation's capital
stock into another class of capital stock, (b) dividends or distributions
payable in common shares of the Corporation, (c) any declaration of a dividend
in connection with the implementation of a shareholders' rights plan, or the
issuance of shares under any such plan in the future or the redemption or
repurchase of any such rights pursuant thereto, (d) payments under the
Guarantee, and (e) purchases of common shares related to the issuance of common
shares or rights under any of the Corporation's benefit plans for its directors,
officers or employees), (ii) make any payment of principal, interest or premium,
if any, on or repay, repurchase or redeem any debt securities of the Corporation
that rank pari passu with or junior in right of payment to the Junior
Subordinated Debentures, or (iii) make any guarantee payments with respect to
any guarantee by the Corporation of the debt securities of any subsidiary of the
Corporation if such guarantee ranks pari passu with or junior in right of
payment to the Junior Subordinated Debentures other than payments pursuant to
the Guarantee. Additionally, the Corporation shall not redeem, purchase or
acquire less than all the outstanding Junior Subordinated Debentures or any of
the Preferred Securities if at such time (a) there shall have occurred an event
of default under the Indenture, (b) the Corporation shall be in default with
respect to its obligations under the Guarantee relating to such Preferred
Securities or (c) the Corporation shall have given notice of its selection of an
Extension Period as provided in the Indenture with respect to the Junior
Subordinated Debentures and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
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MODIFICATION OF INDENTURE
From time to time the Corporation and the Debenture Trustee may,
without the consent of the holders of the Junior Subordinated Debentures, amend,
waive or supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies, provided that any such
action does not materially adversely affect the interest of the holders of the
Junior Subordinated Debentures or the ability to qualify, or maintain the
qualification of, the Indenture under the Trust Indenture Act. The Indenture
contains provisions permitting the Corporation and the Debenture Trustee, with
the consent of the holders of not less than a majority in principal amount of
the Junior Subordinated Debentures affected, to modify the Indenture in a manner
affecting the rights of the holders of the Junior Subordinated Debentures,
provided that no such modification may, without the consent of the holder of
each outstanding Junior Subordinated Debenture so affected, (i) extend the
Stated Maturity of the Junior Subordinated Debentures, reduce the principal
amount thereof or reduce the rate or extend the time of payment of interest
thereon or (ii) reduce the percentage of principal amount of the Junior
Subordinated Debentures, the holders of which are required to consent to any
such modification of the Indenture.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures that has occurred and
is continuing constitutes a "Debenture Event of Default":
(i) failure for 30 days to pay interest (including Additional
Interest or Compounded Interest, if any) on the Junior Subordinated
Debentures when due (subject to the deferral of certain due dates in
the case of an Extension Period); or
(ii) failure to pay any principal on the Junior Subordinated
Debentures when due, whether at maturity, upon declaration of
acceleration of maturity or otherwise; or
(iii) failure to observe or perform certain other covenants
contained in the Indenture for 90 days after written notice to the
Corporation from the Debenture Trustee or the holders of at least 25%
in aggregate outstanding principal amount of the outstanding Junior
Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or
reorganization of the Corporation, subject in certain instances to any
such event remaining in effect for a period of 60 consecutive days.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures may declare
the principal due and payable immediately upon a Debenture Event of Default. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of the Junior Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures affected thereby may, on behalf of the
holders of all the Junior Subordinated Debentures, waive any past default,
except a default in the payment of principal or interest (unless such default
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Debenture Trustee) or a default in respect of a covenant or provision which
under the Indenture cannot be modified or amended without the consent of the
holder of each outstanding Junior Subordinated Debenture. The Corporation is
required to file annually with the Debenture Trustee a certificate as to whether
or not the Corporation is in compliance with all the conditions and covenants
applicable to it under the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Corporation to pay interest or
principal on the Junior Subordinated Debentures on the date such interest or
principal is otherwise payable, a holder of the Preferred Securities may
institute a Direct Action. The Corporation may not amend the Indenture to remove
the foregoing right to bring a Direct Action without the prior written consent
of the holders of all of the Preferred Securities. If the right to bring a
Direct Action is removed, the Trust Issuer may become subject to the reporting
obligations under the Exchange Act. The Corporation shall have the right under
the Indenture to set-off any payment made to such holder of the Preferred
Securities by the Corporation in connection with a Direct Action.
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The holders of the Preferred Securities will not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures. See "Description
of the Preferred Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Corporation shall not consolidate with
or merge into any other entity or convey, transfer or lease its properties and
assets substantially as an entirety to any entity, and no entity shall
consolidate with or merge into the Corporation or convey, transfer or lease its
properties and assets substantially as an entirety to the Corporation, unless:
(i) in the event the Corporation consolidates with or merges into another entity
or conveys or transfers its properties and assets substantially as an entirety
to any entity, the successor entity is organized under the laws of the United
States or any state or the District of Columbia, and such successor entity
expressly assumes the Corporation's obligations on the Junior Subordinated
Debentures issued under the Indenture; (ii) immediately after giving effect
thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, shall have
occurred and be continuing; and (iii) certain other conditions as prescribed by
the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged or
other change in control transaction involving the Corporation that may adversely
affect holders of the Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all of the Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at their Stated Maturity within one year, and the Corporation deposits or causes
to be deposited with the Debenture Trustee funds, in trust, for the purpose and
in an amount in the currency or currencies in which the Junior Subordinated
Debentures are payable sufficient to pay and discharge the entire indebtedness
on the Junior Subordinated Debentures not previously delivered to the Debenture
Trustee for cancellation, for the principal and interest to the date of the
deposit or to the Stated Maturity, as the case may be, then the Indenture will
cease to be of further effect (except as to the Corporation's obligations to pay
all other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the Corporation
will be deemed to have satisfied and discharged the Indenture.
SUBORDINATION
In the Indenture, the Corporation has covenanted and agreed that the
Junior Subordinated Debentures issued thereunder will be subordinate and junior
in right of payment to all Senior Indebtedness to the extent provided in the
Indenture. Upon any payment or distribution of assets to creditors upon the
liquidation, dissolution, winding-up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, the holders of Senior Indebtedness
will first be entitled to receive payment in full of principal of (and premium,
if any) and interest, if any, on such Senior Indebtedness before the holders of
the Junior Subordinated Debentures, or the Property Trustee on behalf of the
holders, will be entitled to receive or retain any payment in respect of the
principal of or interest, if any, on the Junior Subordinated Debentures.
In the event of the acceleration of the maturity of any of the Junior
Subordinated Debentures, the holders of all Senior Indebtedness outstanding at
the time of such acceleration will first be entitled to receive payment in full
of all amounts due thereon (including any amounts due upon acceleration) before
the holders of the Junior Subordinated Debentures will be entitled to receive or
retain any payment in respect of the principal of or interest, if any, on the
Junior Subordinated Debentures.
No payments on account of principal or interest, if any, in respect of
the Junior Subordinated Debentures may be made if there shall have occurred and
be continuing a default in any payment with respect to Senior Indebtedness or an
event of default with respect to any Senior Indebtedness resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
"Debt" means with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent: (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) all
indebtedness of such Person whether incurred on or prior to the date of the
Indenture or thereafter incurred, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps
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and similar arrangements; and (vii) every obligation of the type referred to in
clauses (i) through (vi) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable, directly or indirectly, as obligor or otherwise.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Corporation whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Junior Subordinated Debentures or to other
Debt which is pari passu with, or subordinated to, the Junior Subordinated
Debentures; provided, however, that Senior Debt shall not be deemed to include:
(i) any Debt of the Corporation which when incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Corporation, (ii) any Debt of the
Corporation to any of its subsidiaries, and (iii) any Debt to any employee of
the Corporation.
"Subordinated Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Corporation whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other Debt of the Corporation (other than the Junior Subordinated
Debentures), except that Subordinated Debt shall not include debentures sold by
the Corporation to the Trust.
The Indenture places no limitation on the amount of Senior
Indebtedness, that may be incurred by the Corporation. The Corporation may from
time to time incur indebtedness constituting Senior Indebtedness.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed
by and construed in accordance with the laws of the State of Delaware, without
regard to conflicts of laws principles thereof.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of the Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES
As described under "Description of the Preferred
Securities--Liquidation of the Trust Issuer and Distribution of the Junior
Subordinated Debentures to Holders," under certain circumstances involving the
termination of the Trust Issuer, Junior Subordinated Debentures may be
distributed to the holders of the Preferred Securities in exchange therefor upon
liquidation of the Trust Issuer, after satisfaction of liabilities to creditors
of the Trust Issuer as provided by applicable law. Any such distribution will be
subject to receipt of prior regulatory approval if then required. If the Junior
Subordinated Debentures are distributed to the holders of Preferred Securities
upon the liquidation of the Trust Issuer, the Corporation will use its best
efforts to list the Junior Subordinated Debentures on the Nasdaq Stock Market's
National Market or such stock exchanges, if any, on which the Preferred
Securities are then listed. There can be no assurance as to the market price of
any Junior Subordinated Debentures that may be distributed to the holders of the
Preferred Securities.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Junior Subordinated
Debentures will be made at the offices of the Debenture Trustee in the city of
Wilmington, Delaware or at the offices of such Paying Agent or Paying Agents as
the Corporation may designate from time to time, except that at the option of
the Corporation payment of any interest may be made (i) by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Securities Register or (ii) by transfer to an account maintained by the Person
entitled thereto as specified in the Securities Register, provided that proper
transfer instructions have been received by the Regular Record Date. Payment of
any interest on the Junior Subordinated Debentures will be made to the Person in
whose name the Junior Subordinated Debenture is registered at the close of
business on the Regular Record Date for such interest, except in the case of
Defaulted Interest. The Corporation may at any time designate additional Paying
Agents or rescind the designation of any Paying Agent; however, the Corporation
will at all times be required to maintain a Paying Agent in each Place of
Payment for the Junior Subordinated Debentures.
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Any monies deposited with the Debenture Trustee or any Paying Agent, or
then held by the Corporation in trust, for the payment of the principal of or
interest on the Junior Subordinated Debentures and remaining unclaimed for two
years after such principal or interest has become due and payable shall be
repaid to the Corporation upon written request of the Corporation on May 31 of
each year or (if then held in trust by the Corporation) will be discharged from
such trust and the holders of the Junior Subordinated Debentures shall
thereafter look, as general unsecured creditors, only to the Corporation for
payment thereof.
REGISTRAR AND TRANSFER AGENT
The Debenture Trustee will act as the registrar and the transfer agent
for the Junior Subordinated Debentures. Junior Subordinated Debentures may be
presented for registration of transfer (with the form of transfer endorsed
thereon, or a satisfactory written instrument of transfer, duly executed) at the
office of the registrar. The Corporation may at any time rescind the designation
of any such transfer agent or approve a change in the location through which any
such transfer agent acts; provided that the Corporation maintains a transfer
agent in the place of payment. The Corporation may at any time designate
additional transfer agents with respect to the Junior Subordinated Debentures.
In the event of any redemption, neither the Corporation nor the Debenture
Trustee will be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of selection for redemption of Junior
Subordinated Debentures and ending at the close of business on the day of
mailing of the relevant notice of redemption, or (ii) transfer or exchange any
Junior Subordinated Debentures so selected for redemption, except, in the case
of any Junior Subordinated Debentures being redeemed in part, any portion
thereof not to be redeemed.
DESCRIPTION OF THE GUARANTEE
A Guarantee will be executed and delivered by the Corporation
concurrently with the issuance of the Preferred Securities, and held by the
Guarantee Trustee for the benefit of the holders from time to time of such
Preferred Securities (the "Guarantee"). The Guarantee will be qualified under
the Trust Indenture Act. This summary of certain provisions of the Guarantee
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all of the provisions of the Guarantee and the Trust Indenture
Act. Wherever particular defined terms of the Guarantee are referred to, but not
defined herein, such defined terms are incorporated herein by reference. The
form of the Guarantee has been filed as an exhibit to the Registration Statement
of which this Prospectus forms a part.
GENERAL
The Corporation will irrevocably agree to pay in full, on a
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined below) to the holders of the Preferred Securities, as and when due,
regardless of any defense, right of set-off or counterclaim that the Trust
Issuer may have or assert other than the defense of payment. The following
payments with respect to the Preferred Securities, to the extent not paid by or
on behalf of the Trust Issuer (the "Guarantee Payments"), will be subject to the
Guarantee: (i) any accrued and unpaid Distributions required to be paid on the
Preferred Securities, to the extent that the Trust Issuer has funds on hand
available therefor at such time, (ii) the Redemption Price with respect to any
Preferred Securities called for redemption, to the extent that the Trust Issuer
has funds on hand available therefor at such time, or (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust Issuer (unless
the Junior Subordinated Debentures are distributed to holders of the Preferred
Securities), the lesser of (a) the Liquidation Distribution, to the extent that
the Trust Issuer has funds available therefor at such time, and (b) the amount
of assets of the Trust Issuer remaining available for distribution to holders of
the Preferred Securities after satisfaction of liabilities to creditors of the
Trust Issuer as required by applicable law. The Corporation's obligation to make
a Guarantee Payment may be satisfied by direct payment of the required amounts
by the Corporation to the holders of the Preferred Securities or by causing the
Trust Issuer to pay such amounts to such holders.
The Guarantee will be an irrevocable guarantee, on a subordinated
basis, of the Trust Issuer's obligations under the Preferred Securities, but
will apply only to the extent that the Trust Issuer has funds sufficient to make
such payments, and is not a guarantee of collection.
If the Corporation does not make interest payments on the Junior
Subordinated Debentures held by the Trust Issuer, the Trust Issuer will not be
able to pay Distributions on the Preferred Securities and will not have funds
legally available therefor. The Guarantee will rank subordinate and junior in
right of payment to all Senior Indebtedness of the Corporation. See "Description
of the Guarantee-Status of the Guarantee." Because the Corporation is a holding
company, the right of the Corporation to participate in any distribution of
assets of any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise is subject to the prior claims of creditors of that subsidiary, except
to the extent the Corporation may itself be recognized as a creditor of that
subsidiary. Accordingly, the Corporation's obligations under the Guarantee will
be effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and claimants should look only to the assets of the
Corporation for payments thereunder. The Guarantee does not limit the incurrence
or issuance of other secured or unsecured debt of the Corporation, including
Senior Indebtedness, whether under the Indenture, any other indenture that the
Corporation may enter into in the future, or otherwise. The Corporation may from
time to time to incur indebtedness constituting Senior Indebtedness.
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The Corporation and the Trust Issuer believe that, taken together, the
obligations of the Corporation under the Guarantee, the Trust Agreement, the
Junior Subordinated Debentures, the Indenture and the Expense Agreement,
constitute, in the aggregate, a full, irrevocable and unconditional guarantee,
on a subordinated basis, of all of the Trust Issuer's obligations under the
Preferred Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the Trust
Issuer's obligations under the Preferred Securities. See "Relationship Among the
Preferred Securities, the Junior Subordinated Debentures, the Expense Agreement
and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the
Corporation and will rank subordinate and junior in right of payment to all
Senior Indebtedness of the Corporation in the same manner as the Junior
Subordinated Debentures.
The Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will be held for the benefit of the holders of the Preferred
Securities. The Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the Trust Issuer or upon
distribution to the holders of the Preferred Securities of the Junior
Subordinated Debentures.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely
affect the rights of holders of the Preferred Securities (in which case no vote
will be required), the Guarantee may not be amended without the prior approval
of the holders of not less than a majority of the aggregate Liquidation Amount
of such outstanding Preferred Securities. The manner of obtaining any such
approval will be as set forth under "Description of the Preferred
Securities--Voting Rights; Amendment of the Trust Agreement." All guarantees and
agreements contained in the Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Corporation and shall inure to
the benefit of the holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of
the Corporation to perform any of its payments or other obligations thereunder.
The holders of not less than a majority in aggregate Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
The Corporation, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance
of a default by the Corporation in the performance of the Guarantee, undertakes
to perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of the Preferred Securities unless it is offered
reasonable indemnity by such holder against the costs, expenses and liabilities
that might be incurred thereby. The Guarantee Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Guarantee Trustee reasonably believes repayment
or adequate indemnity is not reasonably assured to it.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
(a) full payment of the Redemption Price of the Preferred Securities, (b) full
payment of the amounts payable upon liquidation of the Trust Issuer, or (c)
distribution of the Junior Subordinated Debentures to the holders of the
Preferred Securities in exchange therefor. The Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the Preferred Securities must restore payment of any sums paid under the
Preferred Securities or the Guarantee.
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GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the
laws of the State of Delaware, without regard to conflicts of laws principles
thereof.
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by the Corporation under
the Trust Agreement (the "Expense Agreement"), the Corporation will irrevocably
and unconditionally guarantee to each person or entity to whom the Trust Issuer
becomes indebted or liable, the full payment of any costs, expenses or
liabilities of the Trust Issuer, other than obligations of the Trust Issuer to
pay to the holders of the Preferred Securities the amounts due such holders
pursuant to the terms of the Preferred Securities. Third party creditors of the
Trust Issuer may proceed directly against the Corporation under the Expense
Agreement, regardless of whether such creditors had notice of the Expense
Agreement.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES,
THE EXPENSE AGREEMENT AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred
Securities (to the extent the Trust Issuer has funds available for the payment
of such Distributions) are irrevocably guaranteed by the Corporation as and to
the extent set forth under "Description of the Guarantee." The Corporation and
the Trust Issuer believe that, taken together, the obligations of the
Corporation under the Guarantee, the Trust Agreement, the Junior Subordinated
Debentures, the Indenture and the Expense Agreement, constitute, in the
aggregate, a full, irrevocable and unconditional guarantee, on a subordinated
basis, of all of the Trust Issuer's obligations under the Preferred Securities.
No single document standing alone or operating in conjunction with fewer than
all of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust Issuer's obligations under
the Preferred Securities. If and to the extent that the Corporation does not
make payments on the Junior Subordinated Debentures, the Trust Issuer will not
pay Distributions or other amounts due on its Preferred Securities. The
Guarantee does not cover payment of Distributions when the Trust Issuer does not
have sufficient funds to pay such Distributions. In such event, the remedy of a
holder of the Preferred Securities is to institute a Direct Action against the
Corporation for enforcement of payment of such Distributions to such holder. The
obligations of the Corporation under the Guarantee are subordinate and junior in
right of payment to all Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on
the Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Preferred Securities, primarily
because: (i) the aggregate principal amount of the Junior Subordinated
Debentures will be equal to the sum of the aggregate stated Liquidation Amount
of the Preferred Securities and Common Securities, (ii) the interest rate and
interest and other payment dates on the Junior Subordinated Debentures will
match the distribution rate and Distribution and other payment dates for the
Preferred Securities, (iii) the Corporation shall pay for all and any costs,
expenses and liabilities of the Trust Issuer except the Trust Issuer's
obligations to holders of its Preferred Securities, and (iv) the Trust Agreement
further provides that the Trust Issuer will not engage in any activity that is
not consistent with the limited purposes of the Trust Issuer.
Notwithstanding anything to the contrary contained in the Indenture,
the Corporation has the right to set-off any payment it is otherwise required to
make thereunder if, and to the extent, the Corporation has theretofore made, or
is concurrently making, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF THE PREFERRED SECURITIES
A holder of a Preferred Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Guarantee Trustee, the
Trust Issuer or any other person or entity.
A default or event of default under any Senior Indebtedness of the
Corporation would not constitute a default or event of default under the
Indenture. However, in the event of payment defaults under, or acceleration of,
Senior Indebtedness of the Corporation, the subordination provisions of the
Indenture provide that no payments may be made in respect of the Junior
Subordinated Debentures until such Senior Indebtedness has been paid in full or
any payment default thereunder has been cured or waived. Failure to make
required payments on the Junior Subordinated Debentures would constitute an
event of default under the Indenture.
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LIMITED PURPOSE OF THE TRUST ISSUER
The Preferred Securities evidence preferred undivided beneficial
interests in the Trust Issuer, and the Trust Issuer exists for the sole purpose
of issuing its Preferred Securities and Common Securities and investing the
proceeds thereof in Junior Subordinated Debentures. A principal difference
between the rights of a holder of a Preferred Security and a holder of a Junior
Subordinated Debenture is that a holder of a Junior Subordinated Debenture is
entitled to receive from the Corporation the principal amount of and interest
accrued on Junior Subordinated Debentures held, while a holder of the Preferred
Securities is entitled to receive Distributions from the Trust Issuer (or from
the Corporation under the Guarantee) if, and to the extent, the Trust Issuer has
funds available for the payment of such Distributions.
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution, winding-up or
liquidation of the Trust Issuer involving the liquidation of the Junior
Subordinated Debentures, after satisfaction of liabilities to creditors of the
Trust Issuer, if any, as provided by applicable law, the holders of the
Preferred Securities will be entitled to receive, out of assets held by the
Trust Issuer, the Liquidation Distribution in cash. See "Description of the
Preferred Securities-Liquidation Distribution Upon Dissolution." Upon any
voluntary or involuntary liquidation or bankruptcy of the Corporation, the
Property Trustee, as holder of the Junior Subordinated Debentures, would be a
subordinated creditor of the Corporation, subordinated in right of payment to
all Senior Indebtedness as set forth in the Indenture, but entitled to receive
payment in full of principal and interest, before any shareholders of the
Corporation receive payments or distributions. Since the Corporation is the
guarantor under the Guarantee and has agreed to pay for all costs, expenses and
liabilities of the Trust Issuer (other than the Trust Issuer's obligations to
the holders of its Preferred Securities), the positions of a holder of such
Preferred Securities and a holder of the Junior Subordinated Debentures relative
to other creditors and to shareholders of the Corporation in the event of
liquidation or bankruptcy of the Corporation are expected to be substantially
the same.
DESCRIPTION OF THE 1995 NOTES
In December 1995, $14.0 million of the 1995 Notes were issued in a
public offering pursuant to the 1995 Notes Indenture. The 1995 Notes will mature
on January 1, 2005. Interest on the 1995 Notes accrues at the rate of 9 5/8% per
annum and is payable monthly. The 1995 Notes are not redeemable, in whole or in
part, by the Corporation prior to December 1, 1998. After December 1, 1998, the
1995 Notes may be redeemed by the Corporation according to the following
schedule:
<TABLE>
<CAPTION>
IF REDEEMED DURING THE REDEMPTION
12 MONTHS BEGINNING PRICE
--------------------- ------
<S> <C>
December 1, 1998...................................... 103%
December 1, 1999...................................... 101 1/2%
December 1, 2000 and thereafter....................... 100%
</TABLE>
The 1995 Notes may also be repurchased in privately negotiated or open
market transactions.
The terms of the 1995 Notes are governed by the 1995 Notes Indenture.
The 1995 Notes Indenture limits the amount of Funded Indebtedness of the
Corporation and all of its subsidiaries to 80% of Consolidated Net Worth.
"Funded Indebtedness" and "Consolidated Net Worth" are defined in the 1995 Notes
Indenture. As of December 31, 1997, the amount of Funded Indebtedness the
Corporation could incur under the 1995 Notes Indenture was $29.3 million. The
1995 Notes Indenture permits the incurrence of junior indebtedness, which is
defined as the principal amount of, and interest on, any Funded Indebtedness
whether now outstanding or hereafter created, incurred, assumed or guaranteed,
provided that in the instrument creating or evidencing such Funded Indebtedness
or pursuant to which such Funded Indebtedness is outstanding it is provided that
(1) such indebtedness is junior in right of payment to the 1995 Notes, (2) no
payments with respect to such indebtedness may be made at any time that an Event
of Default (as defined in the 1995 Notes Indenture) shall have occurred and be
continuing and (3) no payments other than the payment of interest may be made
with respect to such indebtedness at any time the 1995 Notes are Outstanding (as
defined in the 1995 Notes Indenture). In addition, the 1995 Notes Indenture
prohibits the Corporation from paying dividends on its equity securities (except
in the form of those securities) unless the Corporation's ratio of tangible
equity to total assets is in excess of 7.0%. For purposes of the 1995 Notes
Indenture, "tangible equity" is Consolidated Net Worth (as defined in the 1995
Notes Indenture) less goodwill.
The terms of the 1995 Notes Indenture further state that in the event
of a Fundamental Structural Change or a Significant Subsidiary Disposition (both
as defined in the 1995 Notes Indenture), each holder of the 1995 Notes will have
the right to have the Corporation purchase the holder's 1995 Notes at the
outstanding principal amount plus accrued interest. The right of the holders is
not
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exercisable if within 40 days after the occurrence of such event the 1995 Notes
have received a specified rating from a nationally recognized statistical rating
organization. This offering does not constitute a Fundamental Structural Change
for purposes of the 1995 Notes Indenture.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal
income tax consequences of the purchase, ownership and disposition of the
Preferred Securities. This summary addresses only the tax consequences to a
person that acquires Preferred Securities on their original issue at the stated
offering price and does not address the tax consequences to persons that may be
subject to special treatment under United States federal income tax law, such as
banks, insurance companies, thrift institutions, regulated investment companies,
real estate investment trusts, employee benefit plans, tax-exempt organizations,
dealers in securities or currencies, persons that will hold Preferred Securities
as part of a position in a "straddle" or as part of a "hedging", "conversion" or
other integrated investment transaction for federal income tax purposes, persons
whose functional currency is not the United States dollar or persons that do not
hold Preferred Securities as capital assets.
The statements of law or legal conclusions set forth in this summary
constitute the opinion of Thompson Hine & Flory LLP ("Thompson Hine"), special
tax counsel to the Corporation and the Trust Issuer. This summary is based upon
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service rulings and pronouncements and judicial
decisions now in effect, all of which are subject to change at any time. Such
changes may be applied retroactively in a manner that could cause the tax
consequences to vary substantially from the consequences described below,
possibly adversely affecting a beneficial owner of the Preferred Securities. The
authorities on which this summary is based are subject to various
interpretations, and it is therefore possible that the United States federal
income tax treatment of the purchase, ownership and disposition of the Preferred
Securities may differ from the treatment described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX
ADVISORS IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE UNITED STATES
FEDERAL TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX
LAWS.
CLASSIFICATION OF THE TRUST ISSUER AND THE JUNIOR SUBORDINATED DEBENTURES
In the opinion of Thompson Hine, for United States federal income tax
purposes under current law, (i) the Trust Issuer will not be classified as an
association taxable as a corporation, and (ii) the Junior Subordinated
Debentures will be classified as indebtedness. As a result, each beneficial
owner of Preferred Securities (a "Securityholder") will be required to include
in its gross income its pro rata share of the interest (or accrued original
issue discount) in addition to any interest and other income (if any) with
respect to the Junior Subordinated Debentures. See "--Interest Income and
Original Issue Discount." No amount included in income with respect to the
Preferred Securities will be eligible for the dividends-received deduction. This
opinion is based in part upon certain factual assumptions and upon certain
representations made by the Corporation, which representations Thompson Hine has
relied upon and assumed to be true, correct and complete. If such
representations are inaccurate, this opinion could be adversely affected.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations, currently Section 1.1275-2(h)
(the "Regulations"), if the terms and conditions of a debt instrument make the
likelihood that stated interest will not be timely paid a "remote" contingency,
such contingency will be ignored in determining whether the debt instrument is
issued with original issue discount ("OID"). The Corporation believes that the
likelihood of its exercising its option to defer payments of interest on the
Junior Subordinated Debentures is remote, since exercising that option would
prevent it from declaring dividends on any class of its shares. Based on the
foregoing, the Corporation intends to take the position that the Junior
Subordinated Debentures were not issued with OID and, accordingly, a
Securityholder purchasing the Preferred Securities at the stated price should be
required to include in gross income only such Securityholder's pro rata share of
stated interest on the Junior Subordinated Debentures in accordance with such
Securityholder's method of tax accounting.
The Regulations have not yet been addressed in any rulings or other
published interpretations by the Internal Revenue Service (the "IRS"). However,
it is possible the IRS could take the position that the likelihood of deferral
was not a remote contingency within the meaning of the Regulations.
Under the Regulations, if the Corporation were to exercise its option
to defer payments of interest after treating the Junior Subordinated Debentures
as issued without OID, the Junior Subordinated Debentures would be treated as
re-issued with OID at that time, and all stated interest (and de minimis OID, if
any) on the Junior Subordinated Debentures would thereafter be treated as OID as
long as the Junior Subordinated Debentures remained outstanding. In such event,
all of a Securityholder's interest income with respect to the
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<PAGE> 90
Junior Subordinated Debentures would be accounted for as OID on an economic
accrual basis regardless of such Securityholder's method of tax accounting, and
actual distributions of stated interest related thereto would not be includable
in gross income. Consequently, a Securityholder would be required to include OID
in gross income even though the Corporation would not make and the
Securityholder would not receive any actual cash payments during an Extension
Period.
A Securityholder that disposed of Preferred Securities prior to the
record date for the payment of Distributions following an Extension Period would
include OID in gross income but would not receive any cash related thereto from
the Trust Issuer. Any amount of OID included in a Securityholder's gross income
(whether or not during an Extension Period) would increase such Securityholder's
tax basis in its Preferred Securities, and the amount of Distributions not
includable in gross income would reduce such Securityholder's tax basis in its
Preferred Securities.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF THE PREFERRED
SECURITIES
Under current United States federal income tax law and provided that
the Trust Issuer is not treated as an association taxable as a corporation, a
distribution by the Trust Issuer of the Junior Subordinated Debentures as
described under the caption "Description of the Preferred Securities-Liquidation
of the Trust Issuer and Distribution of the Junior Subordinated Debentures to
Holders" will be nontaxable to the Securityholders and will result in a
Securityholder receiving its pro rata share of the Junior Subordinated
Debentures previously held indirectly through the Trust Issuer, with a holding
period and aggregate tax basis equal to the holding period and aggregate tax
basis such Securityholder had in its Preferred Securities before such
distribution. A Securityholder will account for interest in respect of the
Junior Subordinated Debentures received from the Trust Issuer in the manner
described above under "Certain Federal Income Tax Consequences--Interest Income
and Original Issue Discount," including any accrual of OID (if any) attributed
to the Junior Subordinated Debentures upon the distribution.
SALES OR REDEMPTION OF THE PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on the sale of
Preferred Securities (including a redemption for cash or other consideration) in
an amount equal to the difference between the amount realized on the sale (or
redemption) and the Securityholder's adjusted tax basis in the Preferred
Securities sold or so redeemed. Gain or loss recognized by a Securityholder on
Preferred Securities held for more than one year will generally be taxable as
long-term capital gain or loss. Pursuant to the Taxpayer Relief Act of 1997,
Preferred Securities constituting a capital asset which are acquired by an
individual after July 28, 1997, and held for more than 18 months are accorded a
maximum United States federal capital gains tax rate of 20% (or a rate of 10%,
if the individual taxpayer is in the 15% tax bracket). Effective in 2001, the
20% rate drops to 18% (and the 10% rate drops to 8%) for capital assets acquired
after the year 2000 and held more than five years; however, the requirement that
the capital asset be acquired after the year 2000 does not apply to the 8% rate.
Preferred Securities held by an individual for more than one year, but not more
than 18 months, are accorded a United States federal capital gains tax rate of
28%.
If the Corporation were to exercise its option to defer payments of
interest on the Junior Subordinated Debentures, the Preferred Securities might
trade at a price that did not fully reflect the value of accrued but unpaid
interest with respect to the underlying Junior Subordinated Debentures. A
Securityholder that disposed of its Preferred Securities between record dates
for payments of Distributions (and consequently did not receive a Distribution
from the Trust Issuer for the period prior to such disposition) would
nevertheless be required to include in income as ordinary income accrued but
unpaid interest on the Junior Subordinated Debentures through the date of
disposition and to add such amount to its adjusted tax basis in its Preferred
Securities disposed of. Such Securityholder would recognize a capital loss on
the disposition of its Preferred Securities to the extent the selling price
(which might not fully reflect the value of accrued but unpaid interest) was
less than the Securityholder's adjusted tax basis in the Preferred Securities
(which would include accrued but unpaid interest). Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership or a non-resident fiduciary of a foreign estate or trust.
Under current United States federal income tax law: (i) payments by the
Trust Issuer or any of its paying agents to any Securityholder who or which is a
United States Alien Holder will not be subject to United States federal
withholding tax provided that (a) the Securityholder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of shares of the Corporation entitled to vote, (b) the Securityholder is not a
controlled foreign corporation that is related to the Corporation through share
ownership and (c) either (A) the Securityholder certifies to the Trust Issuer or
its agent, under penalties of perjury, that it is not a United States holder and
provides its name and address or (B) a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "Financial Institution") certifies to the
Trust Issuer or its agent,
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<PAGE> 91
under penalties of perjury, that such statement has been received from the
Securityholder by it or by a Financial Institution holding such security for the
Securityholder and furnishes the Trust Issuer or its agent with a copy thereof,
and (ii) a United States Alien Holder of a Preferred Security generally will not
be subject to United States federal withholding tax on any gain realized upon
the sale or other disposition of a Preferred Security.
In October 1997, final Treasury Regulations (the "Withholding Tax
Regulations") were issued that provide alternative methods for satisfying the
certification requirements described in clause (i)(c) above. The Withholding Tax
Regulations also require, in the case of Preferred Securities held by a foreign
partnership, that the certification described in clause (i)(c) above be provided
by the partners rather than by the foreign partnership. A look-through rule
would apply in the case of tiered partnerships. In IRS Notice 98-16, issued
March 27, 1998, the IRS announced that it would extend the effective date of the
Withholding Tax Regulations to payments of interest after December 31, 1999.
Prospective investors are urged to consult their tax advisors with respect to
the effect of the Withholding Tax Regulations. The Trust Issuer will issue a
Form 1042 or 1042-S, where appropriate.
INFORMATION REPORTING TO SECURITYHOLDERS
Generally, income on the Preferred Securities will be reported to
Securityholders on Forms 1099-INT, which will be mailed to Securityholders by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the Securityholder
complies with certain certification requirements. Any withheld amounts will be
allowed as a credit against the Securityholder's United States federal income
tax, provided the required information is provided to the Internal Revenue
Service on a timely basis.
ERISA CONSIDERATIONS
The Corporation and certain affiliates of the Corporation may each be
considered a "party in interest" within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or a "disqualified person"
within the meaning of Section 4975 of the Code with respect to many employee
benefit plans ("Plans") that are subject to ERISA. The purchase of the Preferred
Securities by a Plan that is subject to the fiduciary responsibility provisions
of ERISA or the prohibited transaction provisions of Section 4975(e)(1) of the
Code and with respect to which the Corporation, or any affiliate of the
Corporation, is a service provider (or otherwise is a party in interest or a
disqualified person) may constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, unless the Preferred Securities are acquired
pursuant to and in accordance with an applicable exemption. Any pension or other
employee benefit plan proposing to acquire any Preferred Securities should
consult with its counsel.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement") dated , 1998, among the Corporation, the
Trust Issuer and Ryan, Beck & Co., Inc. (the "Underwriter"), the Trust Issuer
has agreed to sell to the Underwriter, and the Underwriter has agreed to
purchase from the Trust Issuer, $25,000,000 aggregate Liquidation Amount of
Preferred Securities at the public offering price subject to the underwriting
commissions set forth on the cover page of this Prospectus.
The Underwriting Agreement provides that the obligations of the
Underwriter are subject to certain conditions precedent and that the Underwriter
will purchase all of the Preferred Securities offered hereby if any of such
Preferred Securities are purchased.
The Corporation has been advised by the Underwriter that the
Underwriter proposes to offer the Preferred Securities to the public and other
dealers at the public offering price set forth on the cover page of this
Prospectus and will share with certain dealers from its commission a concession
not in excess of $ per Preferred Security. The Underwriter may allow, and such
dealers may reallow, a concession not in excess of $ per Preferred Security to
certain other dealers. After the public offering, the offering price and other
selling terms may be changed by the Underwriter.
The Corporation has granted to the Underwriter an option, exercisable
not later than 30 days after the date of this Prospectus, to purchase up to an
additional $3,750,000 aggregate Liquidation Amount of the Preferred Securities
at the public offering price plus accrued Distributions, if any, from
, 1998. To the extent that the Underwriter exercises such option,
the Corporation will be obligated, pursuant to the option, to sell such
Preferred Securities to the Underwriter. The Underwriter may exercise such
option only to cover over-allotments made in connection with the sale of the
Preferred Securities offered hereby. If purchased, the Underwriter will offer
such additional Preferred Securities on the same terms as those on which the
$25,000,000 aggregate Liquidation Amount of the Preferred Securities are being
offered.
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<PAGE> 92
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures issued by
the Corporation, the Underwriting Agreement provides that the Corporation will
pay as compensation for the Underwriter's arranging the investment therein of
such proceeds an amount of $ per Preferred Security (or $ ($
if the over-allotment option is exercised in full) in the aggregate). The
Corporation has also agreed to reimburse the Underwriter for its reasonable
out-of-pocket expenses, including legal fees (not to exceed $50,000 (excluding
"Blue Sky" work) without the prior written consent of the Corporation) and
expenses relating to the offering of the Preferred Securities.
In connection with the offering of the Preferred Securities, the
Underwriter and any selling group members and their respective affiliates may
engage in transactions effected in accordance with Rule 104 of the Securities
and Exchange Commission's Regulation M that are intended to stabilize, maintain
or otherwise affect the market price of the Preferred Securities. Such
transactions may include over-allotment transactions in which the Underwriter
creates a short position for its own account by selling more Preferred
Securities than it is committed to purchase from the Trust Issuer. In such a
case, to cover all or part of the short position, the Underwriter may exercise
the over-allotment option described above or may purchase Preferred Securities
in the open market following completion of the initial offering of the Preferred
Securities. The Underwriter also may engage in stabilizing transactions in which
it bids for, and purchases, shares of the Preferred Securities at a level above
that which might otherwise prevail in the open market for the purpose of
preventing or retarding a decline in the market price of the Preferred
Securities. The Underwriter also may reclaim any selling concessions allowed to
an Underwriter or dealer if the Underwriter repurchases shares distributed by
the Underwriter or dealer. Any of the foregoing transactions may result in the
maintenance of a price for the Preferred Securities at a level above that which
might otherwise prevail in the open market. Neither the Corporation nor the
Underwriter makes any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Preferred Securities. The Underwriter is not required to engage in
any of the foregoing transactions and, if commenced, such transactions may be
discontinued at any time without notice.
Because the National Association of Securities Dealers, Inc. ("NASD")
is expected to view the Preferred Securities as interests in a direct
participation program, the offering of the Preferred Securities is being made in
compliance with the applicable provisions of Rule 2810 of the NASD's Conduct
Rules.
The Preferred Securities are a new issue of securities with no
established trading market. The Corporation and the Trust Issuer have been
advised by the Underwriter that it intends to make a market in the Preferred
Securities. However, the Underwriter is not obligated to do so and such market
making may be interrupted or discontinued at any time without notice at the sole
discretion of the Underwriter. Application has been made to list the Preferred
Securities on the Nasdaq National Market. However, three market makers for the
Preferred Securities are required for original listing, and two are required for
continued listing thereafter. The presence of a second or a third market maker
cannot be assured. Accordingly, no assurance can be given as to the development
or liquidity of any market for the Preferred Securities.
The Corporation and the Trust Issuer have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the
Preferred Securities, the enforceability of the Trust Agreement and the creation
of the Trust Issuer will be passed upon by Richards, Layton & Finger, special
Delaware counsel to the Corporation and the Trust Issuer. The validity of the
Guarantee and the Junior Subordinated Debentures will be passed upon for the
Corporation by Thompson Hine. Certain legal matters will be passed upon for the
Underwriter by Patton Boggs, LLP. Certain matters relating to the United States
federal income tax considerations will be passed upon for the Corporation by
Thompson Hine.
Malvin E. Bank, a partner of Thompson Hine, is Secretary, Assistant
Treasurer and a Director of the Corporation and a Director of the Bank. Mr. Bank
owns 15,000 of the Corporation's Common Shares. Other partners of Thompson Hine
own a total of 600 of the Corporation's Common Shares.
EXPERTS
The consolidated financial statements of Metropolitan as of December
31, 1997 and 1996, and for each of the three years in the period ended December
31, 1997, included in this Prospectus and Registration Statement have been
included herein and in the Registration Statement in reliance upon the report of
Crowe Chizek and Company LLP, as set forth in its report thereon, appearing
elsewhere herein. The financial statements audited by Crowe Chizek and Company
LLP have been included in reliance upon such report given upon their authority
as an expert in accounting and auditing.
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<PAGE> 93
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Exchange Act, and in accordance therewith, files reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material
may also be accessed electronically by means of the Commission's home page on
the Internet at http://www.sec.gov.
The Corporation and the Trust Issuer have filed with the Commission a
Registration Statement on Form S-1 (together with all amendments thereto, the
"Registration Statement"), of which this Prospectus is a part, under the
Securities Act, with respect to the Preferred Securities, the Junior
Subordinated Debentures and the Guarantee. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Corporation, the Trust
Issuer, the Preferred Securities, the Junior Subordinated Debentures and the
Guarantee, reference is made to the Registration Statement, including the
exhibits thereto. This Prospectus contains a description of the material terms
and features of all material contracts, reports or exhibits to the Registration
Statement required to be disclosed; however, the statements contained in this
Prospectus as to the contents of any contract or other document filed as an
exhibit to the Registration Statement are, of necessity, brief descriptions
thereof and are not necessarily complete, and, in each instance, reference is
made to the copy of such document so filed for a more complete description of
the matter involved. Each such statement is qualified in its entirety by such
reference. The Registration Statement may be inspected without charge at the
principal office of the Commission in Washington, D.C., and copies of all or
part of it may be obtained from the Commission upon payment of the prescribed
fees.
No separate financial statements of the Trust Issuer have been included
herein. The Corporation does not consider that such financial statements would
be material to holders of Preferred Securities because (i) all of the voting
securities of the Trust Issuer will be owned by the Corporation, a reporting
company under the Exchange Act, (ii) the Trust Issuer has no independent
operations but exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of the Trust Issuer and investing
the proceeds thereof in Junior Subordinated Debentures issued by the
Corporation, and (iii) the Corporation and the Trust Issuer believe that, taken
together, the obligations of the Corporation under the Guarantee, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement, constitute, in the aggregate, a full, irrevocable and unconditional
guarantee, on a subordinated basis, of all of the Trust Issuer's obligations
under the Preferred Securities. See "Description of the Junior Subordinated
Debentures" and "Description of the Guarantee."
The Trust Issuer is not currently subject to the information reporting
requirements of the Exchange Act and the Corporation does not expect that the
Trust Issuer will file reports, proxy statements and other information under the
Exchange Act with the Commission.
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METROPOLITAN FINANCIAL CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.................................................................................F-2
Consolidated Financial Statements
Consolidated Statements of Financial Condition
as of December 31, 1997 and 1996......................................................................F-3
Consolidated Statements of Operations for the Years
ended December 31, 1997, 1996 and 1995...............................................................F-4
Consolidated Statements of Shareholders' Equity for the Years
ended December 31, 1997, 1996 and 1995................................................................F-5
Consolidated Statements of Cash Flows for the Years
ended December 31, 1997, 1996 and 1995................................................................F-6
Notes to Consolidated Financial Statements.....................................................................F-8
</TABLE>
F-1
<PAGE> 95
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Metropolitan Financial Corp.
Mayfield Heights, Ohio
We have audited the accompanying consolidated statements of financial
condition of Metropolitan Financial Corp. as of December 31, 1997 and 1996, and
the related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Metropolitan
Financial Corp. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
CROWE, CHIZEK AND COMPANY LLP
Cleveland, Ohio
February 20, 1998
F-2
<PAGE> 96
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks (Note 12) $ 14,152,785 $ 7,777,868
Interest-bearing deposits in other banks 1,961,183 2,744,709
Securities purchased under resale agreements 6,396,720 6,000,000
------------ ------------
Cash and cash equivalents 22,510,688 16,522,577
Securities available for sale (Note 2) 1,705,879 13,173,458
Securities held to maturity (Note 2) 4,740,000
Mortgage-backed securities available for sale (Notes 2 and 8) 143,166,654 56,672,294
Loans held for sale 14,230,130 8,972,946
Loans receivable, net (Notes 3 and 8) 693,654,608 637,492,935
Federal Home Loan Bank stock, at cost (Note 8) 5,349,700 3,988,600
Accrued interest receivable 5,752,161 4,790,661
Premises and equipment, net (Note 4) 13,927,911 11,332,239
Real estate owned, net (Note 5) 2,037,465 177,300
Intangible assets 2,986,539 3,238,839
Loan servicing rights (Note 6) 9,223,974 8,050,837
Prepaid expenses and other assets 5,698,912 4,663,157
------------ ------------
Total assets $924,984,621 $769,075,843
============ ============
LIABILITIES
Noninterest-bearing deposits (Notes 6 and 7) $ 46,234,027 $ 30,850,882
Interest-bearing deposits (Note 7) 691,547,834 591,253,635
Borrowings (Note 8) 135,869,673 101,873,673
Accrued interest payable 3,272,815 4,120,163
Other liabilities 11,399,016 10,733,121
------------ ------------
Total liabilities 888,323,365 738,831,474
------------ ------------
Commitments (Notes 4 and 12)
SHAREHOLDERS' EQUITY (Note 13)
Common stock, no par value, 20,000,000 shares
authorized, 7,051,270 shares issued and
outstanding
Additional paid-in capital 11,101,383 11,101,383
Retained earnings 24,269,873 18,466,986
Unrealized gain on securities available for
sale, net of tax 1,290,000 676,000
------------ ------------
Total shareholders' equity 36,661,256 30,244,369
------------ ------------
Total liabilities and shareholders' equity $924,984,621 $769,075,843
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 97
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $61,230,083 $50,267,618 $39,963,189
Interest on mortgage-backed securities 6,946,824 2,890,437 2,492,744
Interest and dividends on other
investments 1,169,208 1,293,828 979,566
----------- ----------- -----------
Total interest income 69,346,115 54,451,883 43,435,499
----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 34,120,452 28,131,837 23,521,751
Interest on borrowings 7,582,855 4,984,212 3,294,520
----------- ----------- -----------
Total interest expense 41,703,307 33,116,049 26,816,271
----------- ----------- -----------
NET INTEREST INCOME 27,642,808 21,335,834 16,619,228
Provision for loan losses (Note 3) 2,340,000 1,635,541 958,573
----------- ----------- -----------
Net interest income after provision
for loan losses 25,302,808 19,700,293 15,660,655
----------- ----------- -----------
NONINTEREST INCOME
Loan servicing income, net 1,292,719 1,203,779 1,067,767
Service charges on deposit accounts 715,657 564,654 426,175
Net gain on sale of loans 488,104 202,621 444,313
Net gain on sale of securities 92,338 133,706 388,581
Loan option income 320,464 695,798 559,256
Loan credit discount income 640,262
Other operating income 1,231,524 972,057 697,361
----------- ----------- -----------
Total noninterest income 4,140,806 3,772,615 4,223,715
----------- ----------- -----------
NONINTEREST EXPENSE
Salaries and related personnel costs 10,671,192 8,669,705 6,819,383
Occupancy and equipment expense 3,044,220 2,464,926 2,134,862
Federal deposit insurance premiums
(Note 17) 595,268 4,211,869 1,132,125
Marketing expense 685,954 694,898 542,838
State franchise taxes 542,577 461,127 306,518
Data processing expense 441,335 599,150 586,260
Amortization of intangibles 262,659 255,720 220,115
Other operating expenses 3,905,522 3,481,610 2,445,150
----------- ----------- -----------
Total noninterest expense 20,148,727 20,839,005 14,187,251
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 9,294,887 2,633,903 5,697,119
Provision for income taxes (Note 9) 3,492,000 1,095,000 2,154,700
----------- ----------- -----------
NET INCOME $ 5,802,887 $ 1,538,903 $ 3,542,419
=========== =========== ===========
Basic earnings per share (Note 1) $ 0.82 $ 0.24 $ 0.57
=========== =========== ===========
Diluted earnings per share (Note 1) $ 0.82 $ 0.24 $ 0.57
=========== =========== ===========
Weighted average shares for basic
earnings per share 7,051,270 6,384,604 6,251,270
Effect of dilutive stock options 11,726 0 0
----------- ----------- -----------
Weighted average shares for diluted
earnings per share 7,062,996 6,384,604 6,251,270
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 98
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
UNREALIZED
GAIN/(LOSS)
ADDITIONAL ON SECURITIES TOTAL
COMMON PAID-IN RETAINED AVAILABLE SHAREHOLDERS'
STOCK CAPITAL EARNINGS FOR SALE EQUITY
---------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 $ 100 $ 7,801,283 $13,385,664 $ (907,070) $20,279,977
Net income 3,542,419 3,542,419
Change in unrealized gain/(loss) on
securities available for sale,
net of tax 1,644,019 1,644,019
---------- ------------ ----------- ----------- --------------
Balance, December 31, 1995 100 7,801,283 16,928,083 736,949 25,466,415
Net income 1,538,903 1,538,903
Issuance of 400,000 shares of common
stock, net of costs 3,300,000 3,300,000
Change in stated value of common stock (100) 100
Change in unrealized gain/(loss) on
securities available for sale,
net of tax (60,949) (60,949)
---------- ------------ ----------- ----------- --------------
Balance, December 31, 1996 0 11,101,383 18,466,986 676,000 30,244,369
Net income 5,802,887 5,802,887
Change in unrealized gain/(loss) on
securities available for sale,
net of tax 614,000 614,000
---------- ------------ ----------- ----------- --------------
Balance, December 31, 1997 $ 0 $ 11,101,383 $24,269,873 $ 1,290,000 $ 36,661,256
========== ============ =========== =========== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 99
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,802,887 $ 1,538,903 $ 3,542,419
Adjustments to reconcile net income to net cash provided
by operating activities
Net amortization and depreciation 4,533,303 3,022,358 2,036,614
Net gain on sale of securities (92,338) (133,706) (388,581)
Provision for loan and REO losses 2,340,000 1,677,541 973,573
Deferred tax provision (1,131,325) (183,303) (9,326)
Loans originated for sale (36,731,553) (35,235,545) (45,327,774)
Loans purchased for sale (10,654,255) (16,675,331) (16,210,821)
Proceeds from sale of loans 51,402,212 43,410,896 59,830,616
Repayments on loans held for sale 39,180 809,737
Net loss on sale of premises,
equipment and real estate owned 104,608 113,428 3,307
FHLB stock dividend (348,800) (264,100) (216,200)
Changes in other assets (865,930) (2,980,967) (2,618,437)
Changes in other liabilities (561,078) 1,051,576 6,588,239
------------- ------------- -------------
Net cash provided by (used in)
operating activities 13,836,911 (3,848,513) 8,203,629
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Disbursement of loan proceeds (288,659,170) (218,376,200) (117,432,139)
Purchases of:
Loans (103,062,046) (110,565,748) (86,134,911)
Mortgage-backed securities (6,364,379) (13,570,050)
Securities available for sale (5,101,096) (13,336,840) (23,464,948)
Securities held to maturity (4,740,000)
Mortgage loan servicing rights (2,055,908) (732,262) (5,329,415)
FHLB stock (1,012,300) (155,800) (1,041,300)
Premises and equipment (3,713,528) (4,506,250) (4,869,739)
Proceeds from maturities and repayments of:
Loans 208,024,684 140,245,124 96,163,166
Mortgage-backed securities 18,111,121 7,189,624 3,525,478
Securities available for sale 6,051,195 2,000,000
Proceeds from sale of:
Loans 14,088,337 12,106,490
Mortgage-backed securities 3,636,772 29,142,705
Securities available for sale 16,582,643 16,690,055 7,000,000
Premises, equipment and real estate owned 551,043 1,250,813 102,678
Additional investment in real estate owned (88,481)
Premium paid for credit card relationships (10,359) (306,146)
------------- ------------- -------------
Net cash used for investing
activities (157,449,439) (174,379,223) (100,338,425)
------------- ------------- -------------
</TABLE>
(continued)
F-6
<PAGE> 100
(METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposit accounts $ 115,604,639 $ 118,279,840 $ 67,369,745
Proceeds from borrowings 115,219,000 101,500,000 60,000,000
Repayment of borrowings (76,223,000) (53,000,000) (22,480,000)
Net activity on lines of credit (5,000,000) 6,500,000 (6,150,000)
Proceeds from issuance of stock 3,300,000
------------- ------------- -------------
Net cash provided by
financing activities 149,600,639 176,579,840 98,739,745
------------- ------------- -------------
Net change in cash and cash
equivalents 5,988,111 (1,647,896) 6,604,949
Cash and cash equivalents at
beginning of year 16,522,577 18,170,473 11,565,524
------------- ------------- -------------
Cash and cash equivalents at end
of year $ 22,510,688 $ 16,522,577 $ 18,170,473
============= ============= =============
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest $ 42,550,655 $ 33,546,947 $ 23,979,013
Income taxes 4,871,000 1,587,000 2,749,000
Transfer from loans receivable
to other real estate 2,282,807 1,325,948 326,709
Transfer from loans receivable
to loans held for sale 9,678,044
Loans securitized 98,324,696 14,458,129 53,795,086
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 101
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996, and 1995
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Metropolitan Financial Corp. ("Metropolitan" or the "Corporation") is
an Ohio corporation organized for operation as a savings and loan holding
company. The accounting policies of the Corporation conform to generally
accepted accounting principles and prevailing practices within the banking and
thrift industry. A summary of the more significant accounting policies follows:
CONSOLIDATION POLICY: The Corporation and its subsidiaries,
MetroCapital Corporation and Metropolitan Savings Bank of Cleveland (the
"Bank"), and its wholly-owned subsidiaries, Kimberly Construction Company,
Incorporated, and Metropolitan Savings Service Corporation and its wholly-owned
subsidiary Metropolitan Securities Corporation are included in the accompanying
consolidated financial statements. All significant intercompany balances have
been eliminated.
INDUSTRY SEGMENT INFORMATION: Metropolitan Financial Corp. is a savings
and loan holding company engaged in the business of originating and purchasing
multifamily and nonresidential real estate loans primarily in Ohio, New Jersey,
Michigan, California, Kentucky and Pennsylvania and one-to-four family
residential real estate loans primarily in Northeast Ohio. The majority of the
Corporation's income is derived from commercial and retail lending activities.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS: In preparing
financial statements, management must make estimates and assumptions. These
estimates and assumptions affect the amounts reported for assets, liabilities,
revenues and expenses as well as affecting the disclosures provided. Future
results could differ from current estimates. Areas involving the use of
management's estimates and assumptions primarily include the allowance for
losses on loans, the valuation of loan servicing rights, the value of loans held
for sale, fair value of certain securities, the carrying value and amortization
of intangibles, the determination and carrying value of impaired loans, and the
fair value of financial instruments. Estimates that are more susceptible to
change in the near term include the allowance for losses on loans, the valuation
of servicing rights, the value of loans held for sale and the fair value of
securities.
FAIR VALUES OF FINANCIAL INSTRUMENTS: Fair values of financial
instruments are estimated using relevant market information and other
assumptions, as more fully disclosed in Note 15. Fair value estimates involve
uncertainties and matters of significant judgment regarding interest rates,
credit risk, prepayments, and other factors, especially in the absence of broad
markets for particular items. Changes in assumptions or in market conditions
could significantly affect the estimates. The fair value estimates of existing
on- and off-balance sheet financial instruments do not include the value of
anticipated future business or the values of assets and liabilities not
considered financial instruments.
STATEMENT OF CASH FLOWS: For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from depository institutions,
interest bearing deposits, investments purchased with an initial maturity of
three months or less, overnight repurchase agreements and federal funds sold.
Generally, federal funds and overnight repurchase agreements are sold for
one-day periods. The Corporation reports net cash flows for deposit transactions
and deposits made with other financial institutions.
SECURITIES: The Corporation classifies debt and mortgage-backed
securities as held to maturity or available for sale. The Corporation classifies
marketable equity securities as available for sale.
Securities classified as held to maturity are those that management has
the positive intent and ability to hold to maturity. Securities held to maturity
are stated at cost, adjusted for amortization of premiums and accretion of
discounts.
Securities classified as available for sale are those that management
intends to sell or that could be sold for liquidity, investment management, or
similar reasons, even if there is not a present intention for such a sale.
Securities available for sale are carried at fair value with unrealized gains
and losses included as a separate component of shareholders' equity, net of tax.
Gains or losses on dispositions are based on net proceeds and the adjusted
carrying amount of securities sold, using the specific identification method.
LOANS: All loans are held for investment unless specifically designated
as held for sale. When the Bank originates or purchases loans, it makes a
determination whether or not to classify loans as held for sale. The Bank
re-evaluates its intention to hold or sell loans at each balance sheet date
based on the current environment and, if appropriate, reclassifies loans as held
for sale. Sales of loans are dependent upon various factors including interest
rate movements, deposit flows, the availability and attractiveness of other
sources of funds, loan demand by borrowers, and liquidity and capital
requirements.
Loans held for investment are stated at the principal amount
outstanding adjusted for amortization of premiums and accretion of discounts
using the interest method. At December 31, 1997 and 1996, management had the
intent and the Bank had the ability to hold all loans being held for investment
for the foreseeable future.
Loans held for sale are recorded at the lower of cost or market. When
the Bank purchases real estate loans and simultaneously writes an option giving
the holder the right to purchase those loans, those loans are designated as held
for sale. Gains and losses on the sale of loans are determined by the identified
loan method and are reflected in operations at the time of the settlement of the
sale.
ALLOWANCE FOR LOSSES ON LOANS: Because some loans may not be repaid in
full, an allowance for losses on loans is maintained. Increases to the allowance
are recorded by a provision for loan losses charged to expense. Estimating the
risk of loss and the amount of loss on any loan is necessarily subjective.
Accordingly, the allowance is maintained by management at a level considered
adequate to cover possible losses that are currently anticipated based on past
loss experience, general economic conditions, information about specific
borrower situations including their financial position and collateral values,
and other factors and estimates which are subject to change over time. While
management may periodically allocate portions of the allowance for specific
problem loans, the whole allowance is available for any loan charge-offs that
occur. A loan is charged off against the allowance by management as a loss when
deemed uncollectible, although collection efforts continue and future recoveries
may occur.
Loans considered to be impaired are reduced to the present value of
expected future cash flows or to the fair value of collateral, by allocating a
portion of the allowance for losses on loans to such loans. If these allocations
require an increase in the allowance for losses on loans, such increase is
reported as a provision for loan
F-8
<PAGE> 102
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
losses. Management excludes all consumer loans and residential single family
loans with balances less than $200,000 from its review for impairment. All
impaired loans are placed on nonaccrual status.
REAL ESTATE OWNED: Real estate owned is comprised of properties
acquired through a foreclosure proceeding or acceptance of a deed in lieu of
foreclosure. These properties are recorded at fair value, less estimated selling
costs. Any reduction from carrying value of the related loan to fair value at
the time of acquisition is accounted for as a loan loss. Any subsequent
reduction in fair value is reflected in a valuation allowance account through a
charge to income. Expenses to carry real estate owned are charged to operations
as incurred.
PREMISES AND EQUIPMENT: Premises and equipment are recorded at cost
less accumulated depreciation and amortization. Depreciation is computed using
the straight-line method over the estimated useful lives of the related assets
for financial reporting purposes. For tax purposes, depreciation on certain
assets is computed using accelerated methods. Maintenance and repairs are
charged to expense as incurred and improvements are capitalized.
Long-term assets are reviewed for impairment when events indicate their
carrying amount may not be recoverable from future undiscounted cash flows. If
impaired, the assets are recorded at fair value based on discounted cash flows.
INTANGIBLE ASSETS: Intangible assets resulting from the acquisition of
the Bank are being amortized to expense on a straight-line basis over a period
of 25 years beginning in July 1987. This amount is a reduction from the Bank's
shareholders' equity in calculating tangible capital for regulatory purposes.
LOAN SERVICING RIGHTS: Effective January 1, 1995, the Corporation
adopted Statement of Financial Accounting Standards (SFAS) No. 122 "Accounting
for Mortgage Servicing Rights." This statement requires lenders who sell or
securitize originated loans and retain servicing rights to recognize as separate
assets the rights to service mortgage loans for others. Effective January 1,
1997, SFAS No. 125 "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities" superseded SFAS No. 122 and was adopted by
the Corporation. SFAS No. 125 provided new guidance on the determination of the
value of mortgage servicing rights and when to recognize the sale of loans
without changing the concept of assigning value to mortgage servicing rights
when a loan is sold or securitized and the servicing is retained. Both
statements were adopted prospectively.
Purchased mortgage servicing rights are initially valued at cost. When
loans are sold or securitized and servicing rights are retained, those rights
are valued by allocating the book value of the loans between the loans or
securities and the servicing rights based on the relative fair value of each.
Servicing rights that have been capitalized are amortized in proportion to and
over the period of estimated servicing income. Servicing rights are assessed for
impairment periodically by estimating the future net servicing income of the
portfolio based on management's estimate of remaining loan lives. For purposes
of measuring impairment, management stratifies loans by loan type, interest
rate, and investor.
INTEREST INCOME ON LOANS: Interest on loans is accrued over the term of
the loans based upon the principal outstanding. Management reviews loans
delinquent 90 days or more to determine if interest accrual should be
discontinued based on the estimated fair market value of the collateral. The
carrying values of impaired loans are periodically adjusted to reflect cash
payments, revised estimates of future cash flows and increases in the present
value of expected cash flows due to the passage of time. Cash payments
representing interest income are reported as such and other cash payments are
reported as reductions in carrying value.
LOAN FEES AND COSTS: Origination and commitment fees received for
loans, net of direct origination costs, are deferred and amortized to interest
income over the contractual life of the loan using the level yield method. The
net amount deferred is reported in the consolidated statements of financial
condition as a reduction of loans.
LOAN OPTION INCOME: The Bank purchases real estate loans for sale and
simultaneously writes an option giving the holder the option to purchase those
loans at a specified price within a specified time period. At the time the
transaction is complete the Bank recognizes a non-refundable fee in income.
INCOME TAXES: The Corporation and its subsidiaries are included in the
consolidated federal income tax return of the Corporation. Income taxes are
provided on a consolidated basis and allocated to each entity based on its
proportionate share of consolidated income. Deferred income taxes are provided
on items of income or expense that are recognized for financial reporting
purposes in periods different than when those items are recognized for income
tax purposes. A valuation allowance, if needed, reduces deferred tax assets to
the amount expected to be realized.
STOCK OPTIONS: As of January 1, 1996, Metropolitan adopted SFAS No.
123, "Accounting for Stock-based Compensation," which encourages a fair-value
based accounting method for stock based compensation arrangements. Metropolitan
has elected to disclose pro forma net income and earnings per share amounts as
permitted by this statement. For the periods presented, no expense has been
recognized as the market price of the common shares exceeds the price on the
grant date.
TRUST DEPARTMENT ASSETS AND INCOME: Property held by the Corporation in
a fiduciary or other capacity for its trust customers is not included in the
accompanying consolidated financial statements since such items are not assets
of the Corporation.
EARNINGS PER SHARE: The accounting standard for computing earnings per
share was revised for 1997, and all earnings per share data previously reported
have been restated to follow the new standard.
Basic and diluted earnings per share are computed based on weighted
average shares outstanding during the period. Basic earnings per share has been
computed by dividing net income by the weighted average shares outstanding.
Diluted earnings per share has been computed by dividing net income by the
diluted weighted average shares outstanding. Diluted weighted average shares
were calculated assuming the exercise of stock options less the treasury shares
assumed to be purchased from the proceeds using the average market price of the
Corporation's stock. All per share information has been retroactively adjusted
to reflect the effect of the stock dividends and stock splits.
F-9
<PAGE> 103
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
FINANCIAL STATEMENT PRESENTATION: Certain previously reported
consolidated financial statement amounts have been reclassified to conform to
the 1997 presentation.
NOTE 2--SECURITIES
The amortized cost, gross unrealized gains and losses, and fair values
of investment securities at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997
-----------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- -------- ------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
Mutual funds $ 1,705,879 $ 1,705,879
Mortgage-backed securities 141,148,819 $2,077,015 $(59,180) 143,166,654
------------ ---------- -------- ------------
142,854,698 2,077,015 (59,180) 144,872,533
HELD TO MATURITY
Tax-exempt municipal bond 4,740,000 4,740,000
------------ ---------- -------- ------------
$147,594,698 $2,077,015 $(59,180) $149,612,533
============ ========== ======== ============
<CAPTION>
1996
-----------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- -------- ------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Treasury securities $ 6,093,443 $ 40,176 $(69,244) $ 6,064,375
Mutual funds 2,009,083 2,009,083
FNMA preferred stock 5,000,000 100,000 5,100,000
----------- ----------- -------- -----------
Total investment
securities 13,102,526 140,176 (69,244) 13,173,458
Mortgage-backed securities 55,719,015 954,642 (1,363) 56,672,294
----------- ----------- -------- -----------
$68,821,541 $1,094,818 $(70,607) $69,845,752
=========== ========== ======== ===========
</TABLE>
The amortized cost and fair value of debt securities at December 31,
1997, by contractual maturity are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------------- -------------
<S> <C> <C>
Securities held to maturity due after ten years $ 4,740,000 $ 4,740,000
Mortgage-backed securities available for sale 141,148,819 143,166,654
--------------- -------------
Total debt securities $ 145,888,819 $ 147,906,654
=============== =============
</TABLE>
Proceeds from the sale of mortgage-backed securities available for sale
were $3,636,772 in 1996 and $29,142,705 in 1995. Proceeds from the sale of
securities available for sale were $16,582,643 in 1997, $16,690,055 in 1996, and
$7,000,000 in 1995. Gross gains realized on those sales were $102,955 in 1997,
$133,706 in 1996 and $475,587 in 1995. Gross losses of $10,617 and $87,006 were
realized in 1997 and 1995, respectively.
Certain securities with a carrying value of $76,606,671 and a market
value of $77,760,890 at December 31, 1997, were pledged to secure reverse
repurchase agreements. Other securities with carrying values of $107,047 and
$2,196,169 and market values of $114,166 and $2,214,834 were pledged to the
State of Ohio to enable Metropolitan to engage in trust activities and the
Federal Reserve Bank to enable Metropolitan to receive treasury, tax and loan
payments, respectively.
F-10
<PAGE> 104
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
NOTE 3--LOANS RECEIVABLE
The composition of the loan portfolio at December 31, 1997 and 1996 is
as follows:
<TABLE>
<CAPTION>
1997
-------------------------------------------------------
ORIGINATED PURCHASED TOTAL
--------------- ------------- -------------
<S> <C> <C> <C>
Real estate loans
Construction loans
Residential single family $ 67,985,876 $ 67,985,876
Commercial 19,200,000 19,200,000
Land 29,076,961 29,076,961
Loans in process (46,833,171) (46,833,171)
--------------- -------------
Construction loans, net 69,429,666 69,429,666
Permanent loans
Residential single family 127,227,343 $ 19,458,082 146,685,425
Multifamily 89,689,810 104,759,993 194,449,803
Commercial 51,605,536 114,987,215 166,592,751
Other 565,795 565,795
--------------- ------------- -------------
Total real estate loans 338,518,150 239,205,290 577,723,440
Consumer loans 45,758,041 22,832,076 68,590,117
Business loans and other loans 57,496,142 57,496,142
--------------- ------------- -------------
Total loans $ 441,772,333 $ 262,037,366 703,809,699
=============== ============= -------------
Discount on loans, net (425,466)
Deferred loan fees, net (4,107,746)
Allowance for losses on loans (5,621,879)
------------
$693,654,608
============
<CAPTION>
1996
-------------------------------------------------------
ORIGINATED PURCHASED TOTAL
--------------- ------------- -------------
<S> <C> <C> <C>
Real estate loans
Construction loans
Residential single family $ 47,999,248 $ 47,999,248
Commercial 9,825,000 9,825,000
Land 13,735,638 13,735,638
Loans in process (31,758,069) (31,758,069)
-------------- ------------
Construction loans, net 39,801,817 39,801,817
Permanent loans
Residential single family 91,358,204 $ 23,399,646 114,757,850
Multifamily 165,202,852 111,341,902 276,544,754
Commercial 43,006,141 92,629,301 135,635,442
Other 137,538 137,538
--------------- ------------- -------------
Total real estate loans 339,506,552 227,370,849 566,877,401
Consumer loans 38,601,020 15,577,578 54,178,598
Business loans and other loans 23,507,560 23,507,560
--------------- ------------- -------------
Total loans $ 401,615,132 $ 242,948,427 644,563,559
=============== ============= -------------
Discount on loans, net (559,593)
Deferred loan fees, net (2,336,016)
Allowance for losses on loans (4,175,015)
------------
$637,492,935
============
</TABLE>
Loans with adjustable rates, included above, totaled $485,259,000 and
$465,306,000 at December 31, 1997 and 1996, respectively.
F-11
<PAGE> 105
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
Metropolitan's real estate loans are secured by property in the
following states:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Ohio 60% 62%
California 11 8
Michigan 5 7
Pennsylvania 5 6
Other 19 17
---- ----
100% 100%
=== ===
</TABLE>
Activity in the allowance for losses on loans is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1997 1996 1995
------------ -------------- --------
<S> <C> <C> <C>
Balance at beginning of year $4,175,015 $2,764,664 $1,910,714
Provision for loan losses 2,340,000 1,635,541 958,573
Net charge-offs (893,136) (225,190) (104,623)
---------- ---------- ----------
Balance at end of year $5,621,879 $4,175,015 $2,764,664
========== ========== ==========
</TABLE>
Management analyzes loans on an individual basis and considers a loan
to be impaired when it is probable that all principal and interest amounts will
not be collected according to the loan contract based on current information and
events. Loans which are past due two payments or less and that management feels
are probable of being paid current within 90 days are not considered to be
impaired loans.
Information regarding impaired loans is as follows at December 31:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Balance of impaired loans $ 516,498 $3,495,006
Less portion for which no allowance for losses on
loans is allocated 516,498 2,773,777
---------- ----------
Portion of impaired loan balance for which an allowance
for losses on loans is allocated $ 0 $ 721,229
========== ==========
Portion of allowance for losses on loans allocated to
the impaired loan balance $ 0 $ 241,269
========== ==========
</TABLE>
Information regarding impaired loans is as follows for the year ended
December 31:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Average investment in impaired loans during the year $ 944,283 $4,220,286
========== ==========
Interest income recognized during impairment $ 16,691 $ 48,146
========== ==========
Interest income recognized on cash basis during the year $ 16,691 $ 48,146
========== ==========
</TABLE>
The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of business with Metropolitan's and the
Bank's directors, officers, significant shareholders and associates on
substantially the same terms, including interest rates and collateral on loans,
as those prevailing at the time for comparable transactions with other persons,
and that do not involve more than the normal risk of collectibility or present
other unfavorable terms. Loans to such related parties totaled $1,296,000 and
$1,372,000 at December 31, 1997 and 1996, respectively.
F-12
<PAGE> 106
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
NOTE 4--PREMISES AND EQUIPMENT
Premises and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Land $ 2,752,946 $ 2,969,274
Office buildings 5,334,323 3,684,536
Leasehold improvements 2,783,785 2,329,573
Furniture, fixtures and equipment 6,389,966 4,899,961
Construction in progress 458,515 678,209
------------- -------------
Total 17,719,535 14,561,553
Accumulated depreciation 3,791,624 3,229,314
------------- -------------
$13,927,911 $11,332,239
=========== ===========
</TABLE>
Depreciation expense was $978,193, $683,718, and $519,533 for the years
ended December 31, 1997, 1996 and 1995, respectively.
The Bank leases certain of its branches and corporate headquarters
space under lease agreements whose lease terms are renewable periodically. Rent
expense for the years ended December 31, 1997, 1996 and 1995 was $923,395,
$874,164, and $839,849, respectively.
The future minimum annual rental commitments as of December 31, 1997
for all noncancellable leases are as follows:
<TABLE>
<S> <C>
1998 $ 960,133
1999 917,775
2000 914,973
2001 172,702
2002 118,424
Thereafter 344,161
------------
$3,428,168
============
</TABLE>
NOTE 5--REAL ESTATE OWNED
Activity in the allowance for loss on real estate owned is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------------------
1997 1996 1995
------------ ---------- -------
<S> <C> <C> <C>
Balance at beginning of year $ 57,000 $15,000 $ 0
Provision for loss 0 42,000 15,000
Charge-offs (57,000) 0 0
-------- ------- --------
Balance at end of year $ 0 $57,000 $ 15,000
======== ======= ========
</TABLE>
F-13
<PAGE> 107
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
NOTE 6--LOAN SERVICING
Mortgage loans serviced for others are not included in the accompanying
consolidated statements of financial condition. The unpaid principal balances of
these loans are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Mortgage loan portfolios serviced for
FHLMC $ 656,816,894 $ 713,289,564
FNMA 507,345,160 353,863,253
Other 26,023,287 35,361,907
-------------- --------------
$1,190,185,341 $1,102,514,724
============== ==============
</TABLE>
Custodial balances maintained in noninterest-bearing deposit accounts
with the Bank in connection with the foregoing loan servicing were approximately
$18,894,000 and $12,895,000 at December 31, 1997 and 1996, respectively.
Following is an analysis of the changes in loan servicing rights
acquired for the year ended December 31:
<TABLE>
<CAPTION>
1997 1996
-------------- --------
<S> <C> <C>
Balance at beginning of year $ 7,286,403 $ 8,587,831
Additions 2,055,908 732,262
Amortization (1,682,793) (2,033,690)
------------- ------------
Balance at end of year $ 7,659,518 $ 7,286,403
============== =============
</TABLE>
Following is an analysis of the changes in loan servicing rights
originated for the year ended December 31:
<TABLE>
<CAPTION>
1997 1996
-------------- ---------
<S> <C> <C>
Balance at beginning of year $ 764,434 $ 541,727
Additions 1,157,451 333,507
Amortization (357,429) (110,800)
----------- ---------
Balance at end of year $1,564,456 $ 764,434
========== ==========
</TABLE>
The Corporation did not have a valuation allowance associated with loan
servicing rights at any time during the years ended December 31, 1997, 1996, and
1995.
NOTE 7--DEPOSITS
Deposits consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1997 1996
------------------------------- --------------------------
AMOUNT PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C>
Noninterest-bearing deposits $ 46,234,027 6% $ 30,850,882 5%
============= =============
Interest-bearing checking
accounts--2.08% to 3.20% $ 43,080,404 6 $ 39,363,322 6
Passbook savings and
statement savings--
2.72% to 5.46% 170,442,615 23 176,430,162 29
Certificates of deposit 478,024,815 65 375,460,151 60
------------- ---- ------------- ----
Total interest-bearing
deposits $691,547,834 94 $591,253,635 95
============ ---- ============ ----
$737,781,861 100% $622,104,517 100%
============ === ============ ===
</TABLE>
F-14
<PAGE> 108
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
At December 31, 1997, scheduled maturities of certificates of deposit
are as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
YEAR INTEREST
ENDED AMOUNT RATE
----- ------ ----
<S> <C> <C>
1998 $334,571,633 5.82%
1999 115,282,966 6.16%
2000 22,906,179 6.93%
2001 3,185,158 5.91%
2002 1,783,722 6.05%
Thereafter 295,157 6.95%
------------
$478,024,815 5.96%
============
</TABLE>
The aggregate amount of certificates of deposit with balances of
$100,000 or more was approximately $86,884,000 and $58,516,000 at December 31,
1997 and 1996, respectively. The Bank also accepts out-of-state time deposits
from individuals and entities, predominantly credit unions. At December 31,
1997, approximately $57.7 million of time deposits, or 12.1% of Metropolitan's
time deposits, were held by these entities. At December 31, 1996, approximately
$61.5 million of time deposits, or 9.9% of Metropolitan's time deposits, were
held by these entities.
Related party deposits totaled $1,116,000 and $2,164,000 at December
31, 1997 and 1996, respectively.
NOTE 8--BORROWINGS
Borrowings consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
-------------------- -------------
<S> <C> <C>
Federal Home Loan Bank advances
(5.7% and 5.5% at December 31, 1997
and 1996, respectively) $ 41,000,000 $ 59,500,000
Reverse repurchase agreements
(5.7% and 5.6% at December 31, 1997
and 1996, respectively) 74,496,000 23,500,000
Commercial bank line of credit (8.5%
at December 31, 1997--variable rate) 1,500,000
Subordinated debt maturing
December 31, 2001 (10% fixed rate) 4,873,673 4,873,673
Subordinated debt maturing
January 1, 2005 (9.625% fixed rate) 14,000,000 14,000,000
------------ ------------
$135,869,673 $101,873,673
============ ============
</TABLE>
At December 31, 1997, scheduled payments on borrowings are as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
YEAR INTEREST
ENDED AMOUNT RATE
----- ------ ----
<S> <C> <C>
1998 $ 42,417,556 5.64%
1999 23,367,566 5.70%
2000 402,764 9.25%
2001 8,431,787 8.85%
2002 47,250,000 5.77%
Thereafter 14,000,000 10.48%
------------
$135,869,673 6.40%
============
</TABLE>
F-15
<PAGE> 109
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
Federal Home Loan Bank advances are collateralized by FHLB stock and
one-to-four family first mortgage loans with an aggregate carrying value of
approximately $147,000,000 and $89,250,000 at December 31, 1997 and 1996,
respectively. In addition, Metropolitan also has a $50,000,000 cash management
line with the Federal Home Loan Bank which at December 31, 1997 was unused.
The Corporation has a commercial line of credit agreement with the
Huntington National Bank. The maximum borrowing under the line is $4,000,000.
The line has a revolving term until May, 1998, at which time any then
outstanding balance converts to a term loan with quarterly principal payments
based on a 60-month amortization with a balloon payment due at maturity in May,
2001. As collateral for the loan, the largest shareholder, Robert Kaye, has
agreed to pledge a portion of his common shares in an amount at least equal to
200% of any outstanding balance. At December 31, 1997, the outstanding balance
under this agreement was $1,500,000.
In 1993 and early 1994, the Corporation issued subordinated notes
("1993 subordinated notes") totaling $4,873,673. Interest on the notes is paid
quarterly and principal will be repaid when the notes mature December 31, 2001.
Total issuance costs of approximately $185,000 were incurred and are being
amortized on a straight line basis over the life of the notes. The notes are
unsecured. The notes may be redeemed prior to maturity by paying a prepayment
premium. The prepayment premium is 6% through October 25, 1998 and decreases by
1% during each year following that date.
During 1995, the Corporation issued subordinated notes ("1995
subordinated notes") totaling $14,000,000. Interest on the notes is paid
quarterly and principal will be repaid when the notes mature January 1, 2005.
Total issuance costs of approximately $1,170,000 are being amortized on a
straight line basis over the life of the notes. The notes are unsecured. The
notes may not be redeemed prior to December 1, 1998. From that date through
November 30, 1999, the notes may be redeemed by paying a 3.0% premium. From
December 1, 1999 through November 30, 2000, the notes may be redeemed by paying
a 1.5% premium. Thereafter, the notes may be redeemed at par.
The following tables set forth certain information about borrowings
during the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------
1997 1996
------------------ --------------------
<S> <C> <C>
MAXIMUM MONTH-END BALANCES:
FHLB advances $73,700,000 $71,150,000
1993 subordinated notes 4,873,673 4,873,673
1995 subordinated notes 14,000,000 14,000,000
Commercial bank line of credit 4,000,000
Reverse repurchase agreements 74,496,000 23,500,000
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------
1997 1996
------------------ --------------------
<S> <C> <C>
AVERAGE BALANCE:
FHLB advances $59,324,587 $50,545,916
1993 subordinated notes 4,873,673 4,873,673
1995 subordinated notes 14,000,000 14,000,000
Commercial bank line of credit 113,699
Reverse repurchase agreements 38,843,324 4,479,839
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------
1997 1996
------------------ --------------------
<S> <C> <C>
WEIGHTED AVERAGE INTEREST RATE:
FHLB advances 5.65% 5.43%
1993 subordinated notes 10.47 10.47
1995 subordinated notes 10.48 10.48
Commercial bank line of credit 8.98
Reverse repurchase agreements 5.73 5.61
</TABLE>
F-16
<PAGE> 110
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
NOTE 9--INCOME TAXES
The provision for income taxes consists of the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995
---------------- ---------------- --------------
<S> <C> <C> <C>
Current tax provision:
Federal expense $4,478,325 $1,278,303 $2,164,026
State expense 145,000
---------- ---------- ----------
Total current expense 4,623,325 1,278,303 2,164,026
Deferred federal benefit (1,131,325) (183,303) (9,326)
---------- ---------- ----------
$3,492,000 $1,095,000 $2,154,700
========== ========== ==========
</TABLE>
Deferred income taxes are provided for temporary differences. The
components of the Corporation's net deferred tax asset (liability) consist of
the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------
1997 1996
------------ -------------
<S> <C> <C>
Deferred tax assets
Deferred loan fees $ 124,872 $ 196,538
Loan servicing rights 426,811 377,977
Bad debt deduction 1,051,179 99,990
Other 19,859 17,530
------------ -------------
1,622,721 692,035
------------ -------------
Deferred tax liabilities
Debt issuance costs (359,542)
Employment contract (100,891) (104,768)
Depreciation expense (95,103) (59,370)
Stock dividends on FHLB stock (290,287) (163,526)
Other (1,162) (876)
------------ -------------
(487,443) (688,082)
------------ -------------
Net deferred tax asset $ 1,135,278 $ 3,953
============ =============
</TABLE>
A reconciliation from income taxes at the statutory rate to the
effective provision for income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Statutory rate 35% 34% 34%
Income taxes at statutory rate $3,253,210 $ 895,527 $1,937,020
Officer's life premium 9,610 30,441 55,185
Amortization of purchased
intangibles 92,051 97,962 134,414
Tax exempt income (64,286)
Current state expense 94,250
Utilization of capital
loss carryforward (35,000)
Business expense limitation 62,684 67,368 41,753
Other 79,481 3,702 (13,672)
---------- ---------- ----------
Provision for income taxes $3,492,000 $1,095,000 $2,154,700
========== ========== ==========
</TABLE>
Taxes attributable to security's gains and (losses) totaled $(2,682),
$45,460 and $121,548 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Prior to January 1, 1996, the Bank was able to use the
percentage-of-taxable income method of computing its tax bad debt deduction if
it was more favorable than the specific charge-off method. During 1996,
legislation was passed which removed the option of using the percentage of
taxable income method of computing the tax bad debt deduction. The change was
retroactive to 1988 with the additional tax due over a six year period beginning
in 1996, 1997, or 1998 based on the current level of loan activity. The changes
to the tax liability related to 1995 and prior years did not result in any
additional tax expense in 1996 because deferred taxes had been provided on the
benefit of the percentage of taxable income method of computing the bad debt
deduction in each of those years.
F-17
<PAGE> 111
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
NOTE 10--SALARY DEFERRAL--401(K) PLAN
The Corporation maintains a 401(k) plan covering substantially all
employees who have attained the age of 21 and have completed one year of service
with the Corporation. This is a salary deferral plan, which calls for matching
contributions by the Corporation based on a percentage (50%) of each
participant's voluntary contribution (limited to a maximum of eight percent (8%)
of a covered employee's annual compensation). In addition to the Corporation's
required matching contribution, a contribution to the plan may be made at the
discretion of the Board of Directors. Employee voluntary contributions are
vested at all times, whereas employer contributions vest 20% per year through
year five at which time employer contributions are fully vested. The
Corporation's matching contributions were $166,895, $126,599 and $96,902 for the
years ended December 31, 1997, 1996 and 1995, respectively. No discretionary
contributions have been made by the Corporation for the periods presented.
NOTE 11--STOCK OPTION PLAN
On October 28, 1997, the Board of Directors of Metropolitan adopted,
subject to the approval of Metropolitan's shareholders, the Metropolitan
Financial Corp. 1997 Stock Option Plan for key employees and officers of the
Corporation. The Plan is intended to encourage their continued employment with
Metropolitan and to provide them with additional incentives to promote the
development and long-term financial success of Metropolitan.
Subject to adjustment under certain circumstances, the maximum number
of Common Shares that may be issued under the plan is 650,000, which reflects an
adjustment for the 2-for-1 stock split completed in December, 1997. The Plan
provides for the grant of options, which may qualify as either incentive stock
options or nonqualified options. Grants of options will be made by the
Compensation and Organization Committee of the Board of Directors.
The exercise price of an option, whether an incentive stock option or a
nonqualified option, will not be less than the fair market value of the Common
Shares on the date of grant. On October 28, 1997, the Compensation and
Organization Committee of the Board of Directors approved grants of 80,000
incentive stock options and 320,000 nonqualified options.
An option may be exercised in one or more installments at the time or
times provided in the option instrument. Generally, options granted to employees
will become exercisable with respect to one-half of the Common Shares covered by
the option on the third anniversary, and one-fourth of the Common Shares covered
by the option on the fourth and fifth anniversaries of the date of grant.
Options granted under the Plan will expire no later than ten years after grant
in the case of an incentive stock option and ten years and one month after grant
in the case of a nonqualified option.
A summary of option activity is presented below:
STOCK OPTION ACTIVITY:
<TABLE>
<CAPTION>
1997
---------------------------------------------------------------
INCENTIVE STOCK OPTIONS NONQUALIFIED OPTIONS
----------------------- --------------------
SHARES OPTION PRICE SHARES OPTION PRICE
------ ------------ ------ ------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year 0 0
Granted 80,000 $ 10.13 320,000 $10.13-$11.14
Exercised 0 0
Forfeited 0 0
------ ------- -------------
Outstanding at end of year 80,000 $ 10.13 320,000 $10.13-$11.14
====== =======
Closing stock price
on date of grant $ 10.13 $ 10.13
Assumptions used:
Expected option life 10 years 5 years
Risk-free interest rate 5.97% 5.75%
Expected stock price
volatility 33.00% 33.00%
Expected dividends 0 0
Estimated fair value of options granted:
Granted at $10.13 $ 4.55 $ 2.53
Granted at $11.14 $ 1.77
</TABLE>
F-18
<PAGE> 112
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
PRO FORMA DISCLOSURES:
For purposes of providing the required disclosures under SFAS No. 123,
"Accounting for Stock Based Compensation," the Black Scholes option pricing
model was used to estimate the value of these options. The Black Scholes model
was developed to estimate the fair value of equity options. Had compensation
costs been determined in accordance with SFAS No. 123, net income and earnings
per share would be affected as summarized in the schedule below (In thousands,
except per share data):
<TABLE>
<S> <C>
Net income--as reported $5,803
Net income--pro forma 5,614
Basic and diluted earnings
per share--as reported $ 0.82
Basic and diluted earnings
per share--pro forma 0.79
</TABLE>
NOTE 12--COMMITMENTS AND CONTINGENCIES
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK. The Bank can be a
party to financial instruments with off-balance-sheet risk in the normal course
of business to meet financing needs of its customers. These financial
instruments include commitments to make loans. The Bank's exposure to credit
loss in the event of nonperformance by the other party to the financial
instrument for commitments to make loans is represented by the contractual
amount of those instruments. The Bank follows the same credit policy to make
such commitments as is followed for those loans recorded in the financial
statements.
As of December 31, 1997, the Bank had fixed and variable rate
commitments to originate and/or purchase loans (at market rates) of
approximately $22,343,000 and $49,443,000, respectively. In addition, the Bank
had firm commitments to sell fixed rate loans totaling $2,210,000 at December
31, 1997. Metropolitan's commitments to originate and purchase loans are for
loans at rates ranging from 6.5% to 16% and commitment periods up to one year.
During 1997 and 1996, the Corporation purchased approximately
$12,816,000 and $16,675,000 of mortgage loans and sold non-refundable options to
a third party to purchase these same loans at a later date. The Corporation
recognized a gain of $320,464, $695,798, and $559,256 on the sale of these
options during the years ended December 31, 1997, 1996, and 1995, respectively.
At December 31, 1997, all options had been exercised and there were no loans
held for sale in connection with outstanding purchase options. At December 31,
1996, loans with a carrying value of $6,409,841 were held for sale in connection
with outstanding purchase options.
RESERVE REQUIREMENTS. The Bank is required to maintain $2,955,000 of
cash on hand or on deposit with the Federal Reserve to meet regulatory reserve
requirements at December 31, 1997. These funds do not earn interest.
LIQUIDITY REQUIREMENT. The Corporation is required to maintain cash or
short-term investments equal to six months interest on the 1995 subordinated
notes or approximately $675,000 as a condition of the indenture agreement
related to the 1995 subordinated notes.
NOTE 13--RESTRICTIONS ON RETAINED EARNINGS AND CAPITAL REQUIREMENTS
In connection with the initial public offering of stock completed in
October, 1996, the Board of Directors approved a 3,125,635-for-1 stock split,
effected in the form of a stock dividend during October 1996. In addition, the
Board of Directors approved a 2-for-1 stock split in the fourth quarter, 1997,
increasing the number of shares outstanding to 7,051,270.
Prior to 1996, the Bank was permitted, under the Internal Revenue Code,
to determine taxable income after deducting a provision for bad debts in excess
of such provision recorded in the financial statements. Accordingly, retained
earnings at December 31, 1997 and 1996, includes approximately $2,883,000 for
which no provision for federal income taxes has been made. If this portion of
retained earnings is used in the future for any purpose other than to absorb bad
debts, it will be added to future taxable income.
The Bank is subject to regulatory capital requirements administered by
federal regulatory agencies. Capital adequacy guidelines and prompt corrective
action regulations involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items calculated under regulatory accounting
practices. Capital amounts and classifications are also subject to qualitative
judgments by regulators about components, risk weightings, and other factors,
and the regulators can lower classifications in certain cases. Failure to meet
various capital requirements can initiate regulatory action that could have a
direct material effect on the financial statements.
The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized, although these
terms are not used to represent overall financial condition. If adequately
capitalized, regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required.
The minimum requirements are:
F-19
<PAGE> 113
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
CAPITAL TO RISK- TIER 1
WEIGHTED ASSETS CAPITAL
---------------------- TO ADJUSTED
TOTAL TIER 1 TOTAL ASSETS
----- ------ ------------
<S> <C> <C> <C>
Well capitalized 10% 6% 5%
Adequately capitalized 8% 4% 4%
Undercapitalized 6% 3% 3%
</TABLE>
At year end, the Bank's actual capital levels (in thousands) and
minimum required levels were:
<TABLE>
<CAPTION>
MINIMUM REQUIRED
TO BE WELL
CAPITALIZED
MINIMUM REQUIRED UNDER PROMPT
FOR CAPITAL CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION REGULATIONS
----------------------- ----------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
1997
Total capital
(to risk weighted assets) $54,343 8.39% $51,836 8.0% $64,796 10.0%
Tier 1 (core) capital
(to risk weighted assets) $50,215 7.75% $25,918 4.0% $38,877 6.0%
Tier 1 (core) capital
(to adjusted total assets) $50,215 5.47% $36,738 4.0% $45,923 5.0%
Tangible capital
(to adjusted total assets) $49,901 5.43% $13,777 1.5% N/A
1996
Total capital
(to risk weighted assets) $45,761 8.46% $43,274 8.0% $54,093 10.0%
Tier 1 (core) capital
(to risk weighted assets) $42,592 7.87% $21,637 4.0% $32,456 6.0%
Tier 1 (core) capital
(to adjusted total assets) $42,592 5.58% $30,545 4.0% $38,181 5.0%
Tangible capital
(to adjusted total assets) $42,342 5.54% $11,454 1.5% N/A
</TABLE>
The Bank at year-end 1997 was categorized as adequately capitalized. At
December 31, 1997, the most restrictive regulatory constraint on the payment of
dividends from the Bank to the holding company and the retention of the
adequately capitalized status was the total capital (to risk weighted capital)
ratio. Management is not aware of any event or circumstances after December 31,
1997 that would change the capital category.
A savings association which fails to meet one or more of the applicable
capital requirements is subject to various regulatory limitations and sanctions,
including a prohibition on growth and the issuance of a capital directive by the
Office of Thrift Supervision ("OTS") requiring the following: an increase in
capital; reduction of rates paid on savings accounts; cessation of or
limitations on deposit-taking and lending; limitations on operational
expenditures; an increase in liquidity; and such other actions deemed necessary
or appropriate by the OTS. In addition, a conservator or receiver may be
appointed under certain circumstances.
The appropriate federal banking agency has the authority to reclassify
a well-capitalized institution as adequately capitalized, and to treat an
adequately capitalized or undercapitalized institution as if it were in the next
lower capital category, if it is determined, after notice and an opportunity for
a hearing, to be in an unsafe or unsound condition or to have received and not
corrected a less-than-satisfactory rating for any of the categories of asset
quality, management, earnings or liquidity in its most recent examination. As a
result of such classification or determination, the appropriate federal banking
agency may require an adequately capitalized or under-capitalized institution to
comply with certain mandatory and discretionary supervisory actions. A
significantly undercapitalized savings association may not be reclassified,
however, as critically undercapitalized.
The terms of the 1993 subordinated notes prohibit the Corporation from
paying any cash dividends on common stock until those notes are paid off. The
terms of the 1995 subordinated notes and related indenture agreement along with
the Huntington National Bank line of credit prohibit the Corporation from paying
cash dividends unless the Corporation's ratio of tangible equity to total assets
exceeds 7.0%.
F-20
<PAGE> 114
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
NOTE 14--RELATED PARTY TRANSACTIONS
In the years ended December 31, 1997, 1996 and 1995 the Corporation
expensed $96,000 per year for management fees relating to services provided by
an affiliate.
Certain directors and executive officers of the Corporation and its
subsidiaries hold an interest in the 1993 subordinated notes. The aggregate
interest in the subordinated debt held by related parties totaled $1,265,284 at
December 31, 1997 and 1996. In addition, the Corporation's 401(k) salary
deferral plan held a $400,000 interest in the subordinated debt at December 31,
1997 and 1996.
NOTE 15--FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires that the Corporation disclose the estimated fair values of its
financial instruments. The following table shows those values and the related
carrying values. Items which are not financial instruments are not included.
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
---------------------------- -------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Cash and equivalents $ 22,510,688 $ 22,510,688 $ 16,522,577 $ 16,522,577
Securities 6,445,879 6,445,879 13,173,458 13,173,458
Mortgage-backed securities 143,166,654 143,166,654 56,672,294 56,672,294
Loans, net 707,884,738 732,123,284 646,465,881 658,869,077
Federal Home Loan Bank stock 5,349,700 5,349,700 3,988,600 3,988,600
Loan servicing rights 9,223,974 11,707,000 8,050,837 8,830,101
Accrued interest receivable 5,752,161 5,752,161 4,790,661 4,790,661
Demand and savings deposits (260,223,821) (260,223,821) (246,644,366) (246,644,366)
Time deposits (478,024,815) (478,415,186) (375,460,151) (376,934,368)
Borrowings (135,869,673) (135,692,553) (101,873,673) (99,724,946)
Accrued interest payable (3,272,815) (3,272,815) (4,120,163) (4,120,163)
</TABLE>
While these estimates of fair value are based on management's judgment
of the most appropriate factors, there is no assurance that were the Corporation
to have disposed of such items at December 31, 1997, the estimated fair values
would necessarily have been realized at that date, since market values may
differ depending on various circumstances. The estimated fair values at December
31, 1997 should not necessarily be considered to apply at subsequent dates.
For purposes of the above disclosures of estimated fair value, the
following assumptions were used. The estimated fair value for cash and
equivalents, accrued interest receivable and accrued interest payable is
considered to approximate cost due to the short term nature of these
instruments. The estimated fair value for securities and mortgage-backed
securities is based on quoted market values for the individual securities or for
equivalent securities. Loans were segregated into three main groups: those with
adjustable rates, those with fixed rates which are held for sale and those with
fixed rates held for investment. For the loans held for sale, the fair value was
estimated based on quoted market price. The fixed and adjustable rate loans held
for investment were further divided between those secured by one- to four-family
real estate and those secured by multifamily and commercial real estate. For
these loans, estimated fair value was determined using a discounted cash flow
analysis. The estimated fair value of Federal Home Loan Bank stock is considered
to approximate cost since it may be redeemed at par under certain circumstances.
The carrying amount of loan servicing rights includes loan servicing rights
acquired and loan servicing rights originated after the adoption of SFAS No.
122. The estimated fair value of the servicing rights is based on an independent
appraisal in 1997 and a discounted cash flow analysis in 1996. The estimated
fair value of demand and savings deposits, which have no stated maturity, is
equal to the amount payable. The estimated fair value for certificates of
deposit, Federal Home Loan Bank advances and the subordinated debt is based on
estimates of the rate the Corporation would pay on such deposits, advances and
debt, applied for the time period until maturity using a discounted cash flow
analysis. The estimated fair value of commitments is not materially different
than the nominal value.
Other assets and liabilities of the Corporation that are not defined as
financial instruments are not included in the above disclosures, such as
property and equipment. Also, nonfinancial instruments typically not recognized
in financial statements nevertheless may have value but are not included in the
above disclosures. These include, among other items, the estimated earnings
power of core deposit accounts, the trained work force, customer goodwill and
similar items.
NOTE 16--CONDENSED FINANCIAL INFORMATION
Below is condensed financial information of Metropolitan Financial
Corp. (parent company only). In this information, the parent's investment in
subsidiaries is stated at cost plus equity in undistributed earnings of the
subsidiaries since acquisition. This information should be read in conjunction
with the consolidated financial statements.
F-21
<PAGE> 115
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
PARENT COMPANY ONLY
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 349,563 $ 180,112
Securities available for sale 1,705,879 2,009,083
Loans receivable 50,000 50,000
Investment in Metropolitan Savings Bank 54,234,523 46,383,503
Intangible assets 50,601 54,090
Prepaid expenses and other assets 1,198,148 1,198,757
----------- -----------
Total assets $57,588,714 $49,875,545
=========== ===========
LIABILITIES
Borrowings $20,373,673 $18,873,673
Other liabilities 553,785 757,503
----------- -----------
Total liabilities 20,927,458 19,631,176
=========== ===========
SHAREHOLDERS' EQUITY
Common stock
Additional paid-in capital 11,101,383 11,101,383
Retained earnings 24,269,873 18,466,986
Unrealized gain on securities
available for sale, net of tax 1,290,000 676,000
----------- -----------
Total shareholders' equity 36,661,256 30,244,369
----------- -----------
Total liabilities and
shareholders' equity $57,588,714 $49,875,545
=========== ===========
</TABLE>
PARENT COMPANY ONLY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Interest on loans and securities $ 107,505 $ 97,909 $ 7,211
Interest on borrowings 1,997,341 1,982,259 958,804
----------- ----------- -----------
Net interest expense (1,889,836) (1,884,350) (951,593)
Noninterest income
Dividends from Metropolitan
Savings Bank 1,500,000 1,400,000 850,000
Other operating income 3,647 1,541 89,845
----------- ----------- -----------
Total noninterest income 1,503,647 1,401,541 939,845
----------- ----------- -----------
Noninterest expense
Amortization of intangibles 3,490 3,490 3,490
State franchise taxes 21,111 24,672 4,833
Other operating expenses 246,244 249,507 315,424
----------- ----------- -----------
Total noninterest expense 270,845 277,669 323,747
----------- ----------- -----------
Income before income taxes (657,034) (760,478) (335,495)
Federal income tax benefit (723,000) (702,000) (361,000)
----------- ----------- -----------
Net income before equity in
undistributed net income of
Metropolitan Savings Bank 65,966 (58,478) 25,505
Equity in undistributed net income
of Metropolitan Savings Bank 5,736,921 1,597,381 3,516,914
----------- ----------- -----------
Net income $ 5,802,887 $ 1,538,903 $ 3,542,419
=========== =========== ===========
</TABLE>
(continued)
F-22
<PAGE> 116
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
PARENT COMPANY ONLY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,802,887 $ 1,538,903 $ 3,542,419
Adjustments to reconcile net
income to net cash provided by
operating activities:
Equity in undistributed net
income of Metropolitan Savings Bank (5,736,921) (1,597,381) (3,516,914)
Amortization 3,490 3,490 3,490
Change in other assets and liabilities (203,209) 351,706 (950,460)
------------ ------------ ------------
Net cash from operating activities (133,753) 296,718 (921,465)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities 400,000 7,428,600
Purchase of securities available
for sale (96,796) (8,335,440) (1,102,243)
Capital contributions to Metropolitan
Savings Bank (1,500,000) (7,300,000) (4,520,000)
------------ ------------ ------------
Net cash from investing activities (1,196,796) (8,206,840) (5,622,243)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 19,000,000
Repayment of borrowings (8,280,000)
Net activity on lines of credit 1,500,000
Proceeds from issuance of stock 3,300,000
------------ ------------ ------------
Net cash from financing activities 1,500,000 3,300,000 10,720,000
------------ ------------ ------------
Net change in cash and cash
equivalents 169,451 (4,610,122) 4,176,292
Cash and cash equivalents at
beginning of year 180,112 4,790,234 613,942
------------ ------------ ------------
Cash and cash equivalents at
end of year $ 349,563 $ 180,112 $ 4,790,234
============ ============ ============
</TABLE>
NOTE 17--FEDERAL DEPOSIT INSURANCE PREMIUMS
On September 30, 1996, legislation was enacted which required the
Federal Deposit Insurance Corporation to impose a special assessment on Savings
Association Insurance Fund ("SAIF") insured deposits in order to recapitalize
the SAIF and provide an opportunity to mitigate the premium disparity between
SAIF and Bank Insurance Fund insured deposits. The assessment of 65.7 basis
points on deposits as of March 31, 1995 resulted in the Bank paying $2,927,800,
which was expensed September 30, 1996.
F-23
<PAGE> 117
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996, AND 1995
NOTE 18--QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED:
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1997
Interest income $ 16,123 $ 16,492 $ 17,540 $ 19,192
Net interest income 6,438 6,523 6,983 7,699
Provision for loan losses 585 585 585 585
Net income 1,211 1,293 1,489 1,810
Basic earnings per share $ 0.17 $ 0.18 $ 0.21 $ 0.26
Diluted earnings per share $ 0.17 $ 0.18 $ 0.21 $ 0.23
1996
Interest income $ 12,184 $ 12,804 $ 14,008 $ 15,456
Net interest income 4,551 4,988 5,389 6,408
Provision for loan losses 307 379 650 300
Net income (loss) 716 865 (1,129) 1,087
Basic earnings (loss) per share $ 0.11 $ 0.14 $ (0.18) $ 0.17
Diluted earnings (loss) per share $ 0.11 $ 0.14 $ (0.18) $ 0.17
</TABLE>
F-24
<PAGE> 118
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION, THE TRUST
ISSUER OR THE UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES
IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary............................... 1
Summary Consolidated Financial and
Other Data.......................... 7
Risk Factors.......................... 9
Use of Proceeds....................... 16
Market for the Preferred Securities... 17
Accounting Treatment.................. 17
Ratio of Earnings to Fixed Charges.... 18
Capitalization........................ 18
Selected Consolidated Financial and
Other Data.......................... 19
Management's Discussion and Analysis
of
Financial Condition and
Results of Operations............... 21
Business.............................. 31
Regulation and Supervision............ 51
Management............................ 58
Description of the Preferred
Securities.......................... 64
Description of the Junior Subordinated
Debentures.......................... 72
Description of the Guarantee.......... 79
Relationship Among the Preferred
Securities
the Junior Subordinated Debentures,
the Expense Agreement and the
Guarantee........................... 81
Description of the 1995 Notes......... 82
Certain Federal Income Tax
Consequences........................ 83
ERISA Considerations.................. 85
Underwriting.......................... 85
Validity of Securities................ 86
Experts............................... 86
Available Information................. 87
Index to Consolidated Financial
Statements.......................... F-1
============================================
</TABLE>
======================================================
[METROPOLITAN LOGO]
$25,000,000
METROPOLITAN
CAPITAL TRUST I
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT
$10 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
METROPOLITAN
FINANCIAL CORP.
------------------------
PROSPECTUS
------------------------
[RYAN, BECK LOGO]
, 1998
======================================================
<PAGE> 119
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses payable by Metropolitan
Financial Corp. ("Metropolitan" or the "Corporation") in connection with the
offering of the securities being registered, other than underwriting
commissions. All of the amounts shown are estimated except the Securities and
Exchange Commission ("SEC") registration fee, the Nasdaq National Market
("Nasdaq") filing fee and the National Association of Securities Dealers, Inc.
("NASD") filing fee. All of such expenses will be paid by Metropolitan.
<TABLE>
<S> <C>
SEC registration fee.............................................................................$ 8,481.25
Nasdaq filing fee................................................................................ 14,375.00
NASD filing fee.................................................................................. 3,375.00
Trustees' fees and expenses...................................................................... 10,000.00
Legal fees and expenses.......................................................................... 137,500.00
Accounting fees and expenses..................................................................... 12,000.00
Printing expenses................................................................................ 80,000.00
Underwriter expenses............................................................................. 10,000.00
Miscellaneous expenses........................................................................... 4,268.75
----------
Total............................................................................................$ 280,000.00
----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Ohio law, Ohio corporations are authorized to indemnify
directors, officers, employees, and agents within prescribed limits and must
indemnify them under certain circumstances. Ohio law does not provide statutory
authorization for a corporation to indemnify directors, officers, employees, and
agents for settlements, fines, or judgments in the context of derivative suits.
However, it provides that directors (but not officers, employees, and agents)
are entitled to mandatory advancement of expenses, including attorneys' fees,
incurred in defending any action, including derivative actions, brought against
the director, provided the director agrees to cooperate with the corporation
concerning the matter and to repay the amount advanced if it is proved by clear
and convincing evidence that his act or failure to act was done with deliberate
intent to cause injury to the corporation or with reckless disregard for the
corporation's best interests.
Ohio law does not authorize payment of judgments to a director,
officer, employee, or agent after a finding of negligence or misconduct in a
derivative suit absent a court order. Indemnification is required, however, to
the extent such person succeeds on the merits. In all other cases, if a
director, officer, employee, or agent acting in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, indemnification is discretionary except as otherwise provided by a
corporation's articles, code of regulations, or by contract except with respect
to the advancement of expenses of directors.
Under Ohio law, a director is not liable for monetary damages unless it
is proved by clear and convincing evidence that his action or failure to act was
undertaken with deliberate intent to cause injury to the corporation or with
reckless disregard for the best interests of the corporation. There is, however,
no comparable provision limiting the liability of officers, employees, or agents
of a corporation. The statutory right to indemnification is not exclusive in
Ohio, and Ohio corporations may, among other things, procure insurance for such
persons.
Metropolitan's Amended and Restated Code of Regulations provides that
Metropolitan shall indemnify, subject to certain limitations, any person (and
the heirs, executors and administrators of each such person) made or threatened
to be made a party to any
II-1
<PAGE> 120
action, suit, proceeding or claim by reason of the fact that he is or was a
director or officer of Metropolitan or of another corporation for which he was
serving as a director or officer at the request of Metropolitan for all expenses
and liabilities incurred by him in connection with the defense of any such
action, suit or proceeding or claim.
Under a directors' and officers' liability insurance policy, directors
and officers of Metropolitan are insured against certain liabilities, including
certain liabilities under the Securities Act.
Under the Trust Agreement, Metropolitan will agree to indemnify each of
the Trust Issuer Trustees or any predecessor trustee for the Trust Issuer, and
to hold harmless against, any loss, damage, claim, liability or expense incurred
without negligence or willful misconduct on its part, arising out of or in
connection with the acceptance of the administration of the Trust Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties under the Trust Agreement.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
No securities of the Corporation that were not registered under the
Securities Act have been issued or sold by the Corporation within the last three
years.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
1 Form of Underwriting Agreement*
3.1 Amended and Restated Articles of Incorporation of the
Corporation (filed as Exhibit 2 to the Corporation's
Form 8-A, filed October 15, 1996 and incorporated
herein by reference)
3.2 Amended and Restated Code of Regulations of the
Corporation (filed as Exhibit 3 to the Corporation's
Form 8-A, filed October 15, 1996 and incorporated
herein by reference)
4.1 Indenture of the Corporation relating to the Junior
Subordinated Debentures
4.2 Form of Certificate of Junior Subordinated Debenture
(included as Exhibit A to Exhibit 4.1)
4.3 Certificate of Trust of Metropolitan Capital Trust I
4.4 Amended and Restated Trust Agreement of Metropolitan
Capital Trust I
4.5 Form of Trust Preferred Security Certificate for
Metropolitan Capital Trust I (included as Exhibit C
to Exhibit 4.4)
4.6 Form of Guarantee of the Corporation relating to the
Trust Preferred Securities
</TABLE>
II-2
<PAGE> 121
<TABLE>
<S> <C>
4.7 Agreement as to Expenses and Liabilities (included as
Exhibit D to Exhibit 4.4)
5.1 Opinion and consent of Thompson Hine & Flory LLP as
to legality of the Junior Subordinated Debentures and
the Guarantee to be issued by the Corporation *
5.2 Opinion and consent of Richards, Layton & Finger,
P.A. as to legality of the Trust Preferred Securities
to be issued by Metropolitan Capital Trust I *
8 Opinion of Thompson Hine & Flory LLP as to certain
federal income tax matters *
10.1 Incentive Pay Plan (filed as Exhibit 10.1 to the
Corporation's Form 10-K, filed March 30, 1998 and
incorporated herein by reference) **
10.2 Metropolitan Financial Corp. 1997 Stock Option Plan
(filed as Exhibit A to the Corporation's Definitive
Proxy Statement, filed March 27, 1998 and
incorporated herein by reference) **
12 Computation of ratio of earnings to fixed charges
21 List of subsidiaries of the Corporation (filed as
Exhibit 21 to the Corporation's Form 10-K, filed
March 28, 1996 and incorporated herein by reference)
23.1 Consent of Crowe, Chizek and Company LLP
23.2 Consent of Thompson Hine & Flory LLP (included in
Exhibit 5.1) *
23.3 Consent of Richards, Layton & Finger, P.A. (included
in Exhibit 5.2) *
24 Power of Attorney
25.1 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Indenture
25.2 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Amended and
Restated Trust Agreement
25.3 Form T-1 Statement of Eligibility of Wilmington Trust
Company under the Guarantee for the benefit of the
holders of the Trust Preferred Securities
99.1 Specimen Subordinated Note relating to the 9 5/8%
Subordinated Notes due January 1, 2005 (found at
Sections 2.2 and 2.3 of the Form of Indenture filed
as Exhibit 4.1 to the Corporation's Amendment No. 1
to Registration Statement on Form S-1, filed November
13, 1995 and incorporated herein by reference)
99.2 Form of Indenture entered into December 1, 1995
between the Corporation and Boatmen's Trust Company
(filed as Exhibit 4.1 to the Corporation's Amendment
No. 1 to Registration Statement on Form S-1, filed
November 13, 1995 and incorporated herein by
reference)
</TABLE>
II-3
<PAGE> 122
<TABLE>
<S> <C>
99.3 Specimen Subordinated Note relating to the 10%
Subordinated Notes due December 31, 2001 (filed as
Exhibit 99.1 to the Corporation's Registration
Statement on Form S-1, filed October 20, 1995 and
incorporated herein by reference)
99.4 The Restated Loan Agreement by and between The
Huntington National Bank and the Corporation dated as
of October 16, 1996 (filed as Exhibit 99.4 to the
Corporation's Amendment No. 1 to Registration
Statement on Form S-1, filed October 18, 1996 and
incorporated herein by reference)
<FN>
*To be filed by amendment.
**Indicates that the exhibit is a management contract or compensatory plan or
arrangement.
</TABLE>
(b) Financial Statement Schedules
Parent Company Financial Statements
Incorporated by reference from Note 16 to the
Corporation's Consolidated Financial Statements
included in the prospectus filed as a part of this
Registration Statement.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, directors, officers and controlling
persons of the Registrants pursuant to the foregoing provisions, or otherwise,
the Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a trustee, director, officer or
controlling person of the Registrants in the successful defense of any action,
suit or proceeding) is asserted by such trustee, director, officer or
controlling person in connection with the securities being registered, the
Registrants will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE> 123
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
Metropolitan Financial Corp. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Mayfield Heights, State of Ohio, on the 8th day of April, 1998.
METROPOLITAN FINANCIAL CORP.
By:/s/ David G. Lodge
------------------------------------------------------
David G. Lodge
President, Assistant Secretary and Assistant Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
By:/s/ Robert M. Kaye
---------------------
Robert M. Kaye Chairman of the Board, Chief Executive Officer April 8, 1998
and Director (Principal Executive Officer)
By:/s/ David G. Lodge
---------------------
David G. Lodge President, Assistant Secretary, Assistant April 8, 1998
Treasurer and Director (Principal Financial
and Accounting Officer)
By:/s/ Malvin E. Bank
---------------------
Malvin E. Bank Director April 8, 1998
By:/s/ Robert R. Broadbent
---------------------
Robert R. Broadbent Director April 8, 1998
By:/s/ Marjorie M. Carlson
---------------------
Marjorie M. Carlson Director April 8, 1998
By:/s/ Lois K. Goodman
---------------------
Lois K. Goodman Director April 8, 1998
By:/s/ Marguerite B. Humphrey
---------------------
Marguerite B. Humphrey Director April 8, 1998
By:/s/ James A. Karman
---------------------
James A. Karman Director April 8, 1998
By:/s/ Ralph D. Ketchum
---------------------
Ralph D. Ketchum Director April 8, 1998
</TABLE>
II-5
<PAGE> 124
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
By:/s/ Alfonse M. Mattia
------------------------
Alfonse M. Mattia Director April 8, 1998
By:/s/ David P. Miller
------------------------
David P. Miller Director April 8, 1998
By:/s/ Judith Z. Adam
------------------------
Judith Z. Adam, Attorney-in- April 8, 1998
Fact for the Officers and Directors
signing in the capacities indicated
Pursuant to the requirements of the Securities Act of 1933,
Metropolitan Capital Trust I has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Mayfield Heights, State of Ohio, on the 8th day of April, 1998.
METROPOLITAN CAPITAL TRUST I
By: METROPOLITAN FINANCIAL CORP., AS DEPOSITOR
By: /s/ David G. Lodge
------------------------------------------------------
David G. Lodge
President, Assistant Secretary and Assistant Treasurer
</TABLE>
II-6
<PAGE> 125
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
1 Form of Underwriting Agreement *
3.1 Amended and Restated Articles of Incorporation of the
Corporation (filed as Exhibit 2 to the Corporation's
Form 8-A, filed October 15, 1996 and incorporated
herein by reference)
3.2 Amended and Restated Code of Regulations of the
Corporation (filed as Exhibit 3 to the Corporation's
Form 8-A, filed October 15, 1996 and incorporated
herein by reference)
4.1 Indenture of the Corporation relating to the Junior
Subordinated Debentures
4.2 Form of Certificate of Junior Subordinated Debenture
(included as Exhibit A to Exhibit 4.1)
4.3 Certificate of Trust of Metropolitan Capital Trust I
4.4 Amended and Restated Trust Agreement of Metropolitan
Capital Trust I
4.5 Form of Trust Preferred Security Certificate for
Metropolitan Capital Trust I (included as Exhibit C
to Exhibit 4.4)
4.6 Form of Guarantee of the Corporation relating to the
Trust Preferred Securities
4.7 Agreement as to Expenses and Liabilities (included as
Exhibit D to Exhibit 4.4)
5.1 Opinion and consent of Thompson Hine & Flory LLP as
to legality of the Junior Subordinated Debentures and
the Guarantee to be issued by the Corporation *
5.2 Opinion and consent of Richards, Layton & Finger,
P.A. as to legality of the Trust Preferred Securities
to be issued by Metropolitan Capital Trust I *
8 Opinion of Thompson Hine & Flory LLP as to certain
federal income tax matters *
10.1 Incentive Pay Plan (filed as Exhibit 10.1 to the
Corporation's Form 10-K, filed March 30, 1998 and
incorporated herein by reference)
10.2 Metropolitan Financial Corp. 1997 Stock Option Plan
(filed as Exhibit A to the Corporation's Definitive
Proxy Statement, filed March 27, 1998 and
incorporated herein by reference)
12 Computation of ratio of earnings to fixed charges
21 List of subsidiaries of the Corporation (filed as
Exhibit 21 to the Corporation's Form 10-K, filed
March 28, 1996 and incorporated herein by reference)
23.1 Consent of Crowe, Chizek and Company LLP
</TABLE>
II-7
<PAGE> 126
<TABLE>
<S> <C>
23.2 Consent of Thompson Hine & Flory LLP (included in
Exhibit 5.1) *
23.3 Consent of Richard, Layton & Finger, P.A. (included
in Exhibit 5.2) *
24 Power of Attorney
25.1 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Indenture
25.2 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Amended and
Restated Trust Agreement
25.3 Form T-1 Statement of Eligibility of Wilmington Trust
Company under the Guarantee for the benefit of the
holders of the Trust Preferred Securities
99.1 Specimen Subordinated Note relating to the 9 5/8%
Subordinated Notes due January 1, 2005 (found at
Sections 2.2 and 2.3 of the Form of Indenture filed
as Exhibit 4.1 to the Corporation's Amendment No. 1
to Registration Statement on Form S-1, filed November
13, 1995 and incorporated herein by reference)
99.2 Form of Indenture entered into December 1, 1995
between the Corporation and Boatmen's Trust Company
(filed as Exhibit 4.1 to the Corporation's Amendment
No. 1 to Registration Statement on Form S-1, filed
November 13, 1995 and incorporated herein by
reference)
99.3 Specimen Subordinated Note relating to the 10%
Subordinated Notes due December 31, 2001 (filed as
Exhibit 99.1 to the Corporation's Registration
Statement on Form S-1, filed October 20, 1995 and
incorporated herein by reference)
99.4 The Restated Loan Agreement by and between The
Huntington National Bank and the Corporation dated as
of October 16, 1996 (filed as Exhibit 99.4 to the
Corporation's Amendment No. 1 to Registration
Statement on Form S-1, filed October 18, 1996 and
incorporated herein by reference)
<FN>
*To be filed by amendment.
</TABLE>
II-8
<PAGE> 1
Exhibit 4.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
METROPOLITAN FINANCIAL CORP.
AND
WILMINGTON TRUST COMPANY,
AS TRUSTEE
INDENTURE
______% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
DUE JUNE 30, 2028
DATED AS OF ________________, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
PAGE
----
ARTICLE I DEFINITIONS 2
Section 1.1 Definitions of Terms 2
ARTICLE II ISSUE, DESCRIPTION, TERMS, CONDITIONS 10
REGISTRATION AND EXCHANGE OF THE
DEBENTURES
Section 2.1 Designation And Principal Amount 10
Section 2.2 Maturity 10
Section 2.3 Form And Payment 10
Section 2.4 Interest 11
Section 2.4A Defaulted Interest 11
Section 2.5 Execution And Authentications 12
Section 2.6 Registration of Transfer And Exchange 13
Section 2.7 Temporary Debentures 14
Section 2.7A Global Securities 15
Section 2.8 Mutilated, Destroyed, Lost or Stolen Debentures 16
Section 2.9 Cancellation 17
Section 2.10 Benefit of Indenture 17
Section 2.11 Authenticating Agent 17
Section 2.12 Right of Set-off 18
Section 2.13 Cusip Numbers 17
ARTICLE III REDEMPTION OF DEBENTURES 18
Section 3.1 Redemption 18
Section 3.2 Special Event Redemption 19
Section 3.3 Optional Redemption by Corporation 19
Section 3.4 Notice of Redemption 20
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
PAGE
----
<S> <C> <C>
Section 3.5 Payment Upon Redemption 21
Section 3.6 No Sinking Fund 21
ARTICLE IV EXTENSION OF INTEREST PAYMENT 21
PERIOD
Section 4.1 Extension of Interest Payment Period 21
Section 4.2 Notice of Extension 22
Section 4.3 Limitation on Transactions 23
ARTICLE V PARTICULAR COVENANTS OF THE 23
CORPORATION
Section 5.1 Payment of Principal And Interest 23
Section 5.2 Maintenance of Agency 23
Section 5.3 Paying Agents 24
Section 5.4 Appointment to Fill Vacancy in Office of Trustee 25
Section 5.5 Compliance With Consolidation Provisions 25
Section 5.6 Limitations on Transactions 25
Section 5.7 Covenants as to The Trust 26
Section 5.8 Covenants as to Purchases 26
ARTICLE VI DEBENTURE HOLDERS' LISTS AND 26
REPORTS BY THE CORPORATION AND THE
TRUSTEES
Section 6.1 Corporation to Furnish Trustee Names And 26
Addresses of Debenturesholders
Section 6.2 Preservation of Information Communications With 27
Debenture Holders
Section 6.3 Reports by The Corporation 27
Section 6.4 Reports by The Trustee 28
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
PAGE
----
<S> <C> <C>
Section 6.5 Statements As to Default 28
ARTICLE VII REMEDIES OF THE TRUSTEE AND 29
DEBENTURE HOLDERS ON EVENT OF
DEFAULT
Section 7.1 Events of Default 29
Section 7.2 Collection of Indebtedness And Suits For 30
Enforcement by Trustee
Section 7.3 Application of Moneys Collected 32
Section 7.4 Limitation on Suits 32
Section 7.5 Rights And Remedies Cumulative; Delay or 33
Omission Not Waiver
Section 7.6 Control by Debenture Holders 33
Section 7.7 Undertaking to Pay Costs 34
Section 7.8 Direct Action by Holders of Preferred Securities 34
ARTICLE VIII FORM OF DEBENTURE AND ORIGINAL 35
ISSUE
Section 8.1 Form of Debenture 35
Section 8.2 Original Issue of Debentures 35
ARTICLE IX CONCERNING THE TRUSTEE 35
Section 9.1 Certain Duties And Responsibilities 35
Section 9.2 Notice of Defaults 36
Section 9.3 Certain Rights of Trustee 37
Section 9.4 Trustee Not Responsible For Recitals, Etc. 38
Section 9.5 May Hold Debentures 38
Section 9.6 Moneys Held in Trust 38
Section 9.7 Compensation And Reimbursement 38
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
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----
<S> <C> <C>
Section 9.8 Reliance on Officers' Certificate 39
Section 9.9 Disqualification: Conflicting Interests 40
Section 9.10 Corporate Trustee Required Eligibility 40
Section 9.11 Resignation And Removal; Appointment of 40
Successor
Section 9.12 Acceptance of Appointment by Successor 41
Section 9.13 Merger, Conversion, Consolidation or Succession to 42
Business
Section 9.14 Preferential Collection of Claims Against The 42
Corporation
ARTICLE X CONCERNING THE DEBENTURE HOLDERS 43
Section 10.1 Evidence of Action by Holders 43
Section 10.2 Proof of Execution by Debenture Holders 43
Section 10.3 Who May Be Deemed Owners 44
Section 10.4 Certain Debentures Owned by Corporation 44
Disregarded
Section 10.5 Actions Binding on Future Debenture Holders 44
ARTICLE XI SUPPLEMENTAL INDENTURES 45
Section 11.1 Supplemental Indentures Without The Consent of 45
Debenture Holders
Section 11.2 Supplemental Indentures With Consent of Debenture 46
Holders
Section 11.3 Effect of Supplemental Indentures 46
Section 11.4 Debentures Affected by Supplemental Indentures 47
Section 11.5 Execution of Supplemental Indentures 47
ARTICLE XII SUCCESSOR CORPORATION 47
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
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----
<S> <C> <C>
Section 12.1 Corporation May Consolidate, Etc. 47
Section 12.2 Successor Corporation Substituted 48
Section 12.3 Evidence of Consolidation, Etc. to Trustee 49
ARTICLE XIII SATISFACTION AND DISCHARGE 49
Section 13.1 Satisfaction And Discharge of Indenture 49
Section 13.2 Discharge of Obligations 49
Section 13.3 Deposited Money to Be Held in Trust 50
Section 13.4 Payment of Monies Held by Paying Agents 50
Section 13.5 Repayment to Corporation 50
ARTICLE XIV IMMUNITY OF INCORPORATORS, 51
STOCKHOLDERS, OFFICERS AND
DIRECTORS
Section 14.1 No Recourse 51
ARTICLE XV MISCELLANEOUS PROVISIONS 51
Section 15.1 Effect on Successors And Assigns 51
Section 15.2 Actions by Successor 51
Section 15.3 Surrender of Corporation Powers 51
Section 15.4 Notices 52
Section 15.5 Governing Law 52
Section 15.6 Treatment of Debentures as Debt 52
Section 15.7 Compliance Certificates And Opinions 52
Section 15.8 Payments on Business Days 53
Section 15.9 Conflict With Trust Indenture Act 53
Section 15.10 Counterparts 53
Section 15.11 Separability 53
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
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<S> <C> <C>
Section 15.12 Assignment 53
Section 15.13 Acknowledgment of Rights 54
ARTICLE XVI SUBORDINATION OF DEBENTURES 54
Section 16.1 Agreement to Subordinate 54
Section 16.2 Default on Senior Debt or Subordinated Debt 54
Section 16.3 Liquidation; Dissolution; Bankruptcy 55
Section 16.4 Subrogation 56
Section 16.5 Trustee to Effectuate Subordination 57
Section 16.6 Notice by The Corporation 57
Section 16.7 Rights of The Trustee; Holders of Senior 58
Indebtedness
Section 16.8 Subordination May Not Be Impaired 58
</TABLE>
vi
<PAGE> 8
CROSS-REFERENCE TABLE
<TABLE>
<S> <C>
Section of Trust Indenture Act of 1939, as amended Section of Indenture
310(a) 9.10
310(b) 9.9
9.11
310(c) N/A
311(a) 9.14
311(b) 9.14
311(c) N/A
312(a) 6.1
6.2(a)
312(b) 6.2(c)
312(c) 6.2(c)
313(a) 6.4(a)
313(b) 6.4(a)
313(c) 6.4(a)
6.4(b)
313(d) 6.4(b)
314(a) 6.3(a)
6.3(b)
6.3(c)
6.5(a)
314(b) N/A
314(c) 15.7
314(d) N/A
</TABLE>
vii
<PAGE> 9
<TABLE>
<S> <C>
Section of Trust Indenture Act of 1939, as amended Section of Indenture
314(e) 15.7
314(f) N/A
315(a) 9.1(a)
9.1(b)
9.3
315(b) 9.2
315(c) 9.1(a)
315(d) 9.1(b)
315(e) 7.7
316(a) 1.1
7.6
316(b) 7.4(b)
316(c) 10.1(b)
317(a) 7.2(b)
317(b) 7.2(c)
318(a) 5.3
</TABLE>
Note: This Cross-Reference Table does not constitute part of this Indenture and
shall not affect the interpretation of any of its terms or provisions.
viii
<PAGE> 10
INDENTURE
INDENTURE, dated as of __________, 1998, between METROPOLITAN FINANCIAL
CORP., an Ohio corporation (the "Corporation"), and WILMINGTON TRUST COMPANY, a
Delaware banking corporation (the "Trustee").
RECITALS
WHEREAS, for its lawful corporate purposes, the Corporation has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of unsecured securities to be known as its _____% Junior Subordinated
Deferrable Interest Debentures due June 30, 2028 (hereinafter referred to as the
"Debentures"), the form and substance of such Debentures and the terms,
provisions and conditions thereof to be set forth as provided in this Indenture;
and
WHEREAS, Metropolitan Capital Trust I, a Delaware statutory business
trust (the "Trust"), has offered to the public $__________ aggregate liquidation
amount of its Preferred Securities (as defined herein) and proposes to invest
the proceeds from such offering, together with the proceeds of the issuance and
sale by the Trust to the Corporation of $________ aggregate liquidation amount
of its Common Securities (as defined herein), in $________ aggregate principal
amount of the Debentures; and
WHEREAS, the Corporation has requested that the Trustee execute and
deliver this Indenture; and
WHEREAS, all requirements necessary to make this Indenture a valid
instrument in accordance with its terms, and to make the Debentures, when
executed by the Corporation and authenticated and delivered by the Trustee, the
valid obligations of the Corporation, have been performed, and the execution and
delivery of this Indenture have been duly authorized in all respects; and
WHEREAS, to provide the terms and conditions upon which the Debentures
are to be authenticated, issued and delivered, the Corporation has duly
authorized the execution of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Corporation, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of
the Debentures by the holders thereof, it is mutually covenanted and agreed as
follows for the equal and ratable benefit of the holders of the Debentures and
intending to be legally bound hereby:
1
<PAGE> 11
ARTICLE I
DEFINITIONS
SECTION 1. 1 DEFINITIONS OF TERMS.
The terms defined in this Section 1.1 (except as in this Indenture
otherwise expressly provided or unless the context otherwise requires) for all
purposes of this Indenture and of any indenture supplemental hereto shall have
the respective meanings specified in this Section 1.1 and shall include the
plural as well as the singular. All other terms used in this Indenture that are
defined in the Trust Indenture Act, or that are by reference in the Trust
Indenture Act defined in the Securities Act (except as herein otherwise
expressly provided or unless the context otherwise requires), shall have the
meanings assigned to such terms in the Trust Indenture Act and in the Securities
Act as in force at the date of the execution of this instrument. All accounting
terms used herein and not expressly defined shall have the meanings assigned to
such terms in accordance with Generally Accepted Accounting Principles as in
effect at the time of computation.
"1995 Notes" has the meaning set forth in Section 3.1 hereof.
"1995 Notes Indenture" has the meaning set forth in Section 3.1 hereof.
"Additional Interest" shall have the meaning set forth in Section 2.4.
"Administrative Trustees" shall have the meaning set forth in the Trust
Agreement.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person; (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person; (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person; (d) a partnership in which the specified Person is a
general partner; (e) any officer or director of the specified Person; and (f) if
the specified Person is an individual, any entity of which the specified Person
is an executive officer, director or general partner.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Global Security, in each case to
the extent applicable to such transaction and as in effect from time to time.
"Authenticating Agent" means an authenticating agent with respect to
the Debentures appointed by the Trustee pursuant to Section 2.11.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
2
<PAGE> 12
"Board of Directors" means the Board of Directors of the Corporation or
any duly authorized committee of such Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Corporation to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification.
"Business Day" means, with respect to the Debentures, any day other
than a Saturday or a Sunday or a day on which banking institutions in the City
of New York are authorized or required by law, executive order or regulation to
close, or a day on which the principal Corporate Trust Office of the Trustee or
the Property Trustee is closed for business.
"Capital Treatment Event" means the receipt by the Trust of an Opinion
of Counsel to the effect that, as a result of any amendment to, or change
(including any proposed change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such proposed change pronouncement, action or decision is
announced on or after the date of original issuance of the Preferred Securities
under the Trust Agreement, there is more than an insubstantial risk that the
Preferred Securities would not constitute "Tier 1 Capital" (or the then
equivalent thereof) applied as if the Corporation (or its successor) were a bank
holding company for purposes of the capital adequacy guidelines of the Federal
Reserve (or any successor regulatory authority with jurisdiction over bank
holding companies), or any capital adequacy guidelines as then in effect and
applicable to the Corporation.
"Certificate" means a certificate signed by the principal executive
officer, the principal financial officer, the principal accounting officer, the
treasurer or any vice president of the Corporation. The Certificate need not
comply with the provisions of Section 15.7.
"Change in 1940 Act Law" shall have the meaning set forth in the
definition of "Investment Company Event."
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Securities" means undivided beneficial interests in the assets
of the Trust which rank pari passu with the Preferred Securities; provided,
however, that upon the occurrence of an Event of Default, the rights of holders
of Common Securities to payment in respect of (i) distributions and (ii)
payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of Preferred Securities.
3
<PAGE> 13
"Compounded Interest" shall have the meaning set forth in Section 4.1.
"Corporate Trust Office" means (i) when used with respect to the
Trustee, the office of the Trustee at which, at any particular time, its
corporate trust business shall be principally administered, which office at the
date hereof is located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890, Attention: Corporate Trust Administration, or (ii)
when used with respect to the Property Trustee, the office of the Property
Trustee, at which, at any particular time, its corporate trust business shall be
principally administered, which office at the date hereof is located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration.
"Corporation" means Metropolitan Financial Corp., a corporation duly
organized and existing under the laws of the State of Ohio, and, subject to the
provisions of Article XII, shall also include its successors and assigns.
"Coupon Rate" shall have the meaning set forth in Section 2.4.
"Custodian" means any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"Debentures" shall have the meaning set forth in the Recitals hereto.
"Debentureholder," "holder of Debentures," "registered holder," or
other similar term, means the Person or Persons in whose name or names a
particular Debenture shall be registered on the books of the Corporation or the
Trustee kept for that purpose in accordance with the terms of this Indenture.
"Debenture Register" shall have the meaning set forth in Section
2.6(b).
"Debt" means with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) all
indebtedness of such Person, whether incurred on or prior to the date of the
Indenture or thereafter incurred, for claims in respect of financial derivative
products, including interest rate, foreign exchange rate and commodity forward
contracts, options, swaps and similar arrangements; (vii) every obligation of
the type referred to in clauses (i) through (v) of another Person and all
dividends of another Person the payment of which,
4
<PAGE> 14
in either case, such Person has guaranteed or is responsible or liable, directly
or indirectly, as obligor or otherwise.
"Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.
"Defaulted Interest" has the meaning provided in Section 2.4A hereof.
"Deferred Interest" shall have the meaning set forth in Section 4.1.
"Depositary" means, with respect to the Debentures issuable or issued
in whole or in part in the form of one or more Global Securities, the Person
designated as Depositary by the Corporation pursuant to Section 2.3. The initial
Depositary shall be The DTC.
"Dissolution Event" means that as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Trust Agreement and the Debentures held by the Property Trustee are to be
distributed to the holders of the Trust Securities issued by the Trust pro rata
in accordance with the Trust Agreement.
"DTC" shall mean The Depository Trust Company.
"Event of Default" means, with respect to the Debentures, any event
specified in Section 7.1, which has continued for the period of time, if any,
and after the giving of the notice, if any, therein designated.
"Exchange Act" means the Securities Exchange Act of 1934, or any
successor statute, in each case as amended from time to time.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 4.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Generally Accepted Accounting Principles" means such accounting
principles as are generally accepted at the time of any computation required
hereunder.
"Global Security" means a Debenture evidencing all or part of the
Debentures, issued to the Depositary or its nominee, and registered in the name
of such Depositary or its nominee.
"Governmental Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged; or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America that, in either case, are not
callable or redeemable at the option of
5
<PAGE> 15
the issuer thereof, and shall also include a depositary receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act) as custodian with respect
to any such Governmental Obligation or a specific payment of principal of or
interest on any such Governmental Obligation held by such custodian for the
account of the holder of such depositary receipt; provided, however, that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary receipt from
any amount received by the custodian in respect of the Governmental Obligation
or the specific payment of principal of or interest on the Governmental
Obligation evidenced by such depositary receipt.
"Herein," "hereof," and "hereunder," and other words of similar import,
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into in accordance with the terms hereof.
"Interest Payment Date," when used with respect to any installment of
interest on the Debentures, shall have the meaning set forth in Section 2.4.
"Investment Company Act" means the Investment Company Act of 1940, and
any statute successor thereto, in each case as amended from time to time.
"Investment Company Event" means the receipt by the Trust of an Opinion
of Counsel, to the effect that, as a result of the occurrence of a change in law
or regulation or a change in interpretation or application of law or regulation
by any legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), the Trust is or shall be considered an "investment
company" that is required to be registered under the Investment Company Act,
which Change in 1940 Act Law becomes effective on or after the date of original
issuance of the Preferred Securities under the Trust Agreement.
"Maturity Date" means the date on which the Debentures mature and on
which the principal shall be due and payable together with all accrued and
unpaid interest thereon including Compounded Interest and Additional Interest,
if any, as set forth in Section 2.2.
"Ministerial Action" shall have the meaning set forth in Section 3.2.
"Officers' Certificate" means a certificate signed by the Chairman,
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Controller or an Assistant Controller or the Secretary or an Assistant
Secretary, of the Corporation, and delivered to the Trustee. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
6
<PAGE> 16
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the
definitions relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the
Officers' Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary
to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" means an opinion in writing of independent legal
counsel experienced in such matters as being opined upon, that is delivered to
the Trustee in accordance with the terms hereof.
"Outstanding" when used with reference to the Debentures, means,
subject to the provisions of Section 10.4, as of any particular time, all
Debentures theretofore authenticated and delivered by the Trustee under this
Indenture, except (a) Debentures theretofore canceled by the Trustee or any
paying agent, or delivered to the Trustee or any paying agent for cancellation
or that have previously been canceled; (b) Debentures or portions thereof for
the payment or redemption of which moneys or Governmental Obligations in the
necessary amount shall have been deposited in trust with the Trustee or with any
paying agent (other than the Corporation) or shall have been set aside and
segregated in trust by the Corporation (if the Corporation shall act as its own
paying agent); provided, however, that if such Debentures or portions of such
Debentures are to be redeemed prior to the maturity thereof, notice of such
redemption shall have been given as provided in Article III or provision
satisfactory to the Trustee shall have been made for giving such notice; (c)
Debentures in lieu of or in substitution for which other Debentures shall have
been authenticated and delivered pursuant to the terms of Section 2.6 and (d)
Debentures paid pursuant to Section 2.8.
"Person"' means any individual, corporation, partnership,
joint-venture, trust, limited liability company, joint-stock company,
unincorporated organization or government or any agency or political subdivision
thereof.
"Place of Payment" means the place or places where the principal of and
interest on the Debentures are payable in accordance with the terms of this
Indenture.
"Predecessor Debenture" means every previous Debenture evidencing all
or a portion of the same debt as that evidenced by such particular Debenture;
and, for the purposes of this definition, any Debenture authenticated and
delivered under Section 2.8 in lieu of a lost, destroyed or stolen Debenture
shall be deemed to evidence the same debt as the lost, destroyed or stolen
Debenture.
"Preferred Securities" means undivided beneficial interests in the
assets of the Trust which rank pari passu with Common Securities issued by the
Trust; provided, however, that upon the occurrence of an Event of Default, the
rights of holders of Common Securities to payment in respect
7
<PAGE> 17
of distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means the Preferred Securities
Guarantee Agreement dated __________, 1998, as amended from time to time, by and
between the Corporation, as guarantor, and the Trustee, executed and delivered
for the benefit of the Holders of the Preferred Securities.
"Property Trustee" has the meaning set forth in the Trust Agreement.
"Regular Record Date" means the Business Day next preceding any
Interest Payment Date.
"Responsible Officer" when used with respect to the Trustee means any
officer of the Trustee in its corporate trust administration who is responsible
for the administration of the Trust and whose name appears on the list of
Responsible Officers of the Trustee which shall be furnished by the Trustee to
the Corporation, as such list may be revised from time to time.
"Scheduled Maturity Date" means June 30, 2028.
"Securities Act" means the Securities Act of 1933, or any successor
statute, in each case as amended from time to time.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Corporation whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of this Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Debentures or to other Debt which is pari
passu with, or subordinated to, the Debentures; provided, however, that Senior
Debt shall not be deemed to include (i) any Debt of the Corporation which when
incurred and without respect to any election under Section 1111 (b) of the
United States Bankruptcy Code of 1978, as amended, was without recourse to the
Corporation; (ii) any Debt of the Corporation to any of its subsidiaries; and
(iii) any Debt to any employee of the Corporation.
"Senior Indebtedness" shall have the meaning set forth in Section 16.1.
"Special Event" means a Tax Event, an Investment Company Event or a
Capital Treatment Event.
"Subordinated Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Corporation whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of this Indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other Debt of the
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Corporation (other than the Debentures), except that Subordinated Debt shall not
include Debentures.
"Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries; (ii) any general
partnership, joint venture, trust or similar entity, at least a majority of
whose outstanding partnership or similar interests shall at the time be owned by
such Person, or by one or more of its Subsidiaries, or by such Person and one or
more of its Subsidiaries; and (iii) any limited partnership of which such Person
or any of its Subsidiaries is a general partner.
"'Tax Event" means the receipt by the Trust of an Opinion of Counsel,
to the effect that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or which pronouncement or decision is announced on or after
the date of issuance of the Preferred Securities under the Trust Agreement,
there is more than an insubstantial risk that (i) the Trust is, or shall be
within 90 days after the date of such Opinion of Counsel, subject to United
States federal income tax with respect to income received or accrued on the
Debentures; (ii) interest payable by the Corporation on the Debentures is not,
or within 90 days after the date of such Opinion of Counsel, shall not be,
deductible by the Corporation, in whole or in part, for United States federal
income tax purposes; or (iii) the Trust is, or shall be within 90 days after the
date of such Opinion of Counsel, subject to more than a de minimis amount of
other taxes, duties, assessments or other governmental charges. The Trust or the
Corporation shall request and receive such Opinion of Counsel with regard to
such matters within a reasonable period of time after the Trust or the
Corporation shall have become aware of the possible occurrence of any of the
events described in clauses (i) through (iii) above.
"Trust" means Metropolitan Capital Trust I, a Delaware statutory
business trust created by the Trust Agreement.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
__________, 1998, of the Trust, as amended, modified or supplemented in
accordance with the applicable provisions thereof, among the trustees of the
trust named therein, the Corporation, as depositor, and the holders from time to
time of undivided beneficial ownership interests in the assets of the Trust,
including all exhibits thereto, including, for all purposes of the Trust
Agreement, and any such modification, amendment or supplement, the provisions of
the Trust Indenture Act that are deemed to be a part of and govern the Trust
Agreement and any such modification, amendment or supplement, respectively.
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"Trustee" means Wilmington Trust Company and, subject to the provisions
of Article IX, shall also include its successors and assigns, and, if at any
time there is more than one Person acting in such capacity hereunder, "'Trustee"
shall mean each such Person.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, subject to the provisions of Sections 11.1, 11.2, and 12.1 and any
successor statute thereto, in each case as amended from time to time.
"Trust Securities" means the Common Securities and Preferred
Securities, collectively.
"Voting Stock" as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person having ordinary voting power for the election of a
majority of the directors (or the equivalent) of such Person, other than shares,
interests, participations or other equivalents having such power only by reason
of the occurrence of a contingency.
ARTICLE II
ISSUE, DESCRIPTION, TERMS, CONDITIONS REGISTRATION
AND EXCHANGE OF THE DEBENTURES
SECTION 2.1 DESIGNATION AND PRINCIPAL AMOUNT.
There is hereby authorized Debentures designated the "____% Junior
Subordinated Deferrable Interest Debentures due June 30, 2028," limited in
aggregate principal amount to $_________ which amount shall be as set forth in
any written order of the Corporation for the authentication and delivery of
Debentures pursuant to Section 2.5.
SECTION 2.2 MATURITY.
The Maturity Date shall be the Scheduled Maturity Date.
SECTION 2.3 FORM AND PAYMENT.
The Debentures shall be issued in fully registered certificated form
without interest coupons. Principal and interest on the Debentures issued in
certificated form shall be payable, the transfer of such Debentures shall be
registrable and such Debentures shall be exchangeable for Debentures bearing
identical terms and provisions at the office or agency of the Trustee; provided,
however, that payment of interest may be made at the option of the Corporation
by check mailed to the holder at such address as shall appear in the Debenture
Register or by wire transfer to an account maintained by the holder as specified
in the Debenture Register, provided that the holder provides proper wire
transfer instructions by the Regular Record Date. Notwithstanding the foregoing,
so long as the holder of any Debentures is the Property Trustee, the payment of
the principal of and interest
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(including Compounded Interest and Additional Interest, if any) on such
Debentures held by the Property Trustee shall be made at such place and to such
account as may be designated by the Property Trustee.
Debentures shall be issuable in whole or in part in the form of one or
more Global Securities and, in such case, the Depositary for such Global
Securities shall be DTC.
SECTION 2.4 INTEREST.
(a) Each Debenture shall bear interest at the rate of ______% per annum
(the "Coupon Rate") from the original date of issuance until the principal
thereof becomes due and payable, and on any overdue principal and (to the extent
that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the Coupon Rate, compounded quarterly,
payable (subject to the provisions of Article IV) quarterly in arrears on June
30, September 30, December 31 and March 31 of each year (each, an "Interest
Payment Date," commencing on June 30, 1998), to the Person in whose name such
Debenture or any Predecessor Debenture is registered at the close of business on
the Regular Record Date next preceding such Interest Payment Date.
(b) The amount of interest payable for any period shall be computed on
the basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than a
full quarterly period for which interest is computed, shall be computed on the
basis of the actual number of days elapsed in such period. In the event that any
date on which interest is payable on the Debentures is not a Business Day, then
payment of interest payable on such date shall be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable.
(c) If, at any time while the Property Trustee is the holder of any
Debentures, the Trust or the Property Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any case, the Corporation shall pay as additional interest ("Additional
Interest") on the Debentures held by the Property Trustee, such additional
amounts as shall be required so that the net amounts received and retained by
the Trust and the Property Trustee after paying such taxes, duties, assessments
or other governmental charges shall be equal to the amounts the Trust and the
Property Trustee would have received had no such taxes, duties, assessments or
other governmental charges been imposed.
SECTION 2.4A DEFAULTED INTEREST.
Any interest on any Debenture that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall, notwithstanding the
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provisions of Section 2.4(a), forthwith cease to be payable to the holder on the
relevant Regular Record Date by virtue of having been such holder; and such
Defaulted Interest shall be paid by the Corporation, at its election, as
provided in clause (a) or clause (b) below:
(a) The Corporation may make payment of any Defaulted Interest on
Debentures to the Persons in whose names such Debentures (or their respective
Predecessor Debentures) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be fixed in
the following manner: the Corporation shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each such Debenture and the
date of the proposed payment, and at the same time the Corporation shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as herein provided. Thereupon the
Trustee shall fix a special record date for the payment of such Defaulted
Interest which shall not be more than 15 nor less than 10 days prior to the date
of the proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly notify
the Corporation of such special record date and, in the name and at the expense
of the Corporation, shall cause notice of the proposed payment of such Defaulted
Interest and the special record date therefor to be mailed, first class postage
prepaid, to each Debentureholder at his or her address as it appears in the
Debenture Register, not less than 10 days prior to such special record date.
Notice of the proposed payment of such Defaulted Interest and the special record
date therefor having been mailed as aforesaid, such Defaulted Interest shall be
paid to the Persons in whose names such Debentures (or their respective
Predecessor Debentures) are registered on such special record date and shall be
no longer payable pursuant to the following clause (b).
(b) The Corporation may make payment of any Defaulted Interest on any
Debentures in any other lawful manner not inconsistent with the requirements of
any securities exchange on which such Debentures may be listed, and upon such
notice as may be required by such exchange if, after notice given by the
Corporation to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.
SECTION 2.5 EXECUTION AND AUTHENTICATIONS.
(a) The Debentures shall be signed on behalf of the Corporation by its
Chairman, President or one of its Vice Presidents, under its corporate seal
attested by its Secretary or one of its Assistant Secretaries. Signatures may be
in the form of a manual or facsimile signature. The Corporation may use the
facsimile signature of any Person who shall have been a Chairman, President or
Vice President thereof, or of any Person who shall have been a Secretary or
Assistant Secretary thereof, notwithstanding the fact that at the time the
Debentures shall be authenticated and delivered or disposed of such Person shall
have ceased to be the Chairman, President or a Vice President, or the Secretary
or an Assistant Secretary, of the Corporation. The seal of the Corporation may
be in the form of a facsimile of such seal and may be impressed, affixed,
imprinted or otherwise
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reproduced on the Debentures. The Debentures may contain such notations, legends
or endorsements required by law, stock exchange rule or usage. Each Debenture
shall be dated the date of its authentication by the Trustee.
(b) A Debenture shall not be valid until authenticated manually by an
authorized signatory of the Trustee, or by an Authenticating Agent. Such
signature shall be conclusive evidence that the Debenture so authenticated has
been duly authenticated and delivered hereunder and that the holder is entitled
to the benefits of this Indenture.
(c) At any time and from time to time after the execution and delivery
of this Indenture, the Corporation may deliver Debentures executed by the
Corporation to the Trustee for authentication, together with a written order of
the Corporation for the authentication and delivery of such Debentures signed by
its Chairman, President or any Vice President and its Secretary or any Assistant
Secretary, and the Trustee in accordance with such written order shall
authenticate and make available for delivery such Debentures.
(d) In authenticating such Debentures and accepting the additional
responsibilities under this Indenture in relation to such Debentures, the
Trustee shall be entitled to receive, and (subject to Section 9.1) shall be
fully protected in relying upon, an Opinion of Counsel stating that the form and
terms thereof have been established in conformity with the provisions of this
Indenture.
(e) The Trustee shall not be required to authenticate such Debentures
if the issue of such Debentures pursuant to this Indenture shall affect the
Trustee's own rights, duties or immunities under the Debentures and this
Indenture or otherwise in a manner that is not reasonably acceptable to the
Trustee.
SECTION 2.6 REGISTRATION OF TRANSFER AND EXCHANGE.
(a) Debentures may be exchanged upon presentation thereof at the office
or agency of the Corporation designated for such purpose, for other Debentures
and for a like aggregate principal amount, upon payment of a sum sufficient to
cover any tax or other governmental charge in relation thereto, all as provided
in this Section 2.6. In respect of any Debentures so surrendered for exchange,
the Corporation shall execute, the Trustee shall authenticate and such office or
agency shall deliver in exchange therefor the Debenture or Debentures that the
Debenture holder making the exchange shall be entitled to receive, bearing
numbers not contemporaneously outstanding.
(b) The Corporation shall keep, or cause to be kept, at its office or
agency designated for such purpose or such other location designated by the
Corporation a register or registers (herein referred to as the "Debenture
Register") in which, subject to such reasonable regulations as it may prescribe,
the Corporation shall register the Debentures and the transfers of Debentures as
in this Article II provided and which at all reasonable times shall be open for
inspection by the Trustee. The registrar for the purpose of registering
Debentures and transfer of Debentures as herein provided shall be appointed as
authorized by Board Resolution (the "Debenture Registrar"). Upon surrender
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for transfer of any Debenture at the office or agency of the Corporation
designated for such purpose, the Corporation shall execute, the Trustee shall
authenticate and such office or agency shall make available for delivery in the
name of the transferee or transferees a new Debenture or Debentures for a like
aggregate principal amount. All Debentures presented or surrendered for exchange
or registration of transfer, as provided in this Section 2.6, shall be
accompanied (if so required by the Corporation or the Debenture Registrar) by a
written instrument or instruments of transfer, in form satisfactory to the
Corporation or the Debenture Registrar, duly executed by the registered holder
or by such holder's duly authorized attorney in writing.
(c) No service charge shall be made for any exchange or registration of
transfer of Debentures, or issue of new Debentures in case of partial
redemption, but the Corporation may require payment of a sum sufficient to cover
any tax or other governmental charge in relation thereto, other than exchanges
pursuant to Section 2.7, Section 3.5(b) and Section 11.4 not involving any
transfer.
(d) The Corporation shall not be required (i) to issue, exchange or
register the transfer of any Debentures during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
less than all the Outstanding Debentures and ending at the close of business on
the day of such mailing; nor (ii) to register the transfer of or exchange any
Debentures or portions thereof called for redemption.
(e) Notwithstanding any other provision of this Indenture, transfers
and exchanges of Debentures and beneficial interests in a Global Security,
whether pursuant to this Article II, Section 3.5, Article IX or otherwise, shall
be made only in accordance with this Section 2.6(e).
(i) A Debenture that is not a Global Security may be
transferred, in whole or in part, to a Person who takes
delivery in the form of another Debenture that is not a Global
Security or may be exchanged, in whole or in part, for another
Debenture that is not a Global Security, as provided in this
Section 2.6.
(ii) A beneficial interest in a Global Security may be
transferred or exchanged for a Debenture that is not a Global
Security only as provided in Section 2.7A.
SECTION 2.7 TEMPORARY DEBENTURES.
Pending the preparation of definitive Debentures, the Corporation may
execute, and the Trustee shall authenticate and deliver, temporary Debentures
(printed, lithographed, or typewritten). Such temporary Debentures shall be
substantially in the form of the definitive Debentures in lieu of which they are
issued, but with such omissions, insertions and variations as may be appropriate
for temporary Debentures, all as may be determined by the Corporation. Every
temporary Debenture shall be executed by the Corporation and be authenticated by
the Trustee upon the same conditions and in substantially the same manner, and
with like effect, as the definitive Debentures. Without unnecessary delay the
Corporation shall execute and shall furnish definitive Debentures and
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thereupon any or all temporary Debentures may be surrendered in exchange
therefor (without charge to the holders), at the office or agency of the
Corporation designated for such purpose, and the Trustee shall authenticate and
such office or agency shall deliver in exchange for such temporary Debentures an
equal aggregate principal amount of definitive Debentures, unless the
Corporation advises the Trustee to the effect that definitive Debentures need
not be executed and furnished until further notice from the Corporation. Until
so exchanged, the temporary Debentures shall be entitled to the same benefits
under this Indenture as definitive Debentures authenticated and delivered
hereunder.
SECTION 2.7A GLOBAL SECURITIES.
(a) Each Global Security issued under this Indenture shall be
registered in the name of the Depositary designated by the Corporation for such
Global Security or a nominee thereof and delivered to such Depositary or a
nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Debentures registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary advises the Trustee in writing that such
Depositary is no longer willing or able to properly discharge its
responsibilities as Depositary with respect to such Global Security, and the
Corporation is unable to locate a qualified successor, (ii) the Corporation
executes and delivers to the Trustee a Corporation Order stating that the
Corporation elects to terminate the book-entry system through the Depositary, or
(iii) there shall have occurred and be continuing an Event of Default.
(c) If any Global Security is to be exchanged for other Debentures or
cancelled in whole, it shall be surrendered by or on behalf of the Depositary or
its nominee to the Securities Registrar for exchange or cancellation as provided
in this Article II. If any Global Security is to be exchanged for other
Debentures or cancelled in part, or if another Debenture is to be exchanged in
whole or in part for a beneficial interest in any Global Security, then either
(i) such Global Security shall be so surrendered for exchange or cancellation as
provided in this Article II or (ii) the principal amount thereof shall be
reduced or increased by an amount equal to the portion thereof to be so
exchanged or cancelled, or equal to the principal amount of such Debenture to be
so exchanged for a beneficial interest therein, as the case may be, by means of
an appropriate adjustment made on the records of the Securities Registrar,
whereupon the Trustee, in accordance with Applicable Procedures, shall instruct
the Depositary or its authorized representative to make a corresponding
adjustment to its records. Upon any such surrender or adjustment of a Global
Security by the Depositary, accompanied by registration instructions, the
Trustee shall, subject to Section 2.6 and as otherwise provided in this Article
II, authenticate and make available for delivery any Debentures issuable in
exchange for such Global Security (or any portion thereof) in accordance with
the instructions of the Depositary. The Trustee shall not be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be fully protected in relying on, such instructions.
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(d) Except as otherwise provided in the preceding provisions of this
Section 2.7A, every Debenture authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Article II, Section 3.5 or Article IX or
otherwise, shall be authenticated and delivered in the form of, and shall be, a
Global Security, unless such Debenture is registered in the name of a Person
other than the Depositary for such Global Security or a nominee thereof.
(e) The Depositary or its nominee, as the registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
this Indenture and the Debenture, and owners of beneficial interests in a Global
Security shall hold such interests pursuant to Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Security shall be
shown only on, and the transfer of such interest shall be effected only through,
records maintained by the Depositary or its nominee or agent. Neither the
Trustee nor the Securities Registrar shall have any liability in respect of any
transfers effected by the Depositary.
(f) The rights of owners of beneficial interests in a Global Security
shall be exercised only through the Depositary and shall be limited to those
established by law and agreements between such owners and the Depositary and/or
its Agent Members.
SECTION 2.8 MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES.
(a) In case any temporary or definitive Debenture shall become
mutilated or be destroyed, lost or stolen, the Corporation (subject to the next
succeeding sentence) shall execute, and upon the Corporation's request the
Trustee (subject as aforesaid) shall authenticate and make available for
delivery, a new Debenture bearing a number not contemporaneously outstanding, in
exchange and substitution for the mutilated Debenture, or in lieu of and in
substitution for the Debenture so destroyed, lost or stolen. In every case the
applicant for a substituted Debenture shall furnish to the Corporation and the
Trustee such security or indemnity as may be required by them to save each of
them harmless, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Corporation and the Trustee evidence to their
satisfaction of the destruction, loss or theft of the applicant's Debenture and
of the ownership thereof. The Trustee may authenticate any such substituted
Debenture and make available for delivery the same upon the written request or
authorization of any officer of the Corporation. Upon the issuance of any
substituted Debenture, the Corporation may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith. In case any Debenture that has matured or is about
to mature shall become mutilated or be destroyed, lost or stolen, the
Corporation may, instead of issuing a substitute Debenture, pay or authorize the
payment of the same (without surrender thereof except in the case of a mutilated
Debenture) if the applicant for such payment shall furnish to the Corporation
and the Trustee such security or indemnity as they may require to save them
harmless, and, in case of destruction, loss or theft, evidence to the
satisfaction of the Corporation and the Trustee of the destruction, loss or
theft of such Debenture and of the ownership thereof.
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(b) Every replacement Debenture issued pursuant to the provisions of
this Section 2.8 shall constitute an additional contractual obligation of the
Corporation whether or not the mutilated, destroyed, lost or stolen Debenture
shall be found at any time, or be enforceable by anyone, and shall be entitled
to all the benefits of this Indenture equally and proportionately with any and
all other Debentures duly issued hereunder. All Debentures shall be held and
owned upon the express condition that the foregoing provisions are exclusive
with respect to the replacement or payment of mutilated, destroyed, lost or
stolen Debentures, and shall preclude (to the extent lawful) any and all other
rights or remedies, notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
SECTION 2.9 CANCELLATION.
All Debentures surrendered for the purpose of payment, redemption,
exchange or registration of transfer shall, if surrendered to the Corporation or
any paying agent, be delivered to the Trustee for cancellation, or, if
surrendered to the Trustee, shall be canceled by it, and no Debentures shall be
issued in lieu thereof except as expressly required or permitted by any of the
provisions of this Indenture. On request of the Corporation at the time of such
surrender, the Trustee shall deliver to the Corporation canceled Debentures held
by the Trustee. In the absence of such request the Trustee may dispose of
canceled Debentures in accordance with its standard procedures. If the
Corporation shall otherwise acquire any of the Debentures, however, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Debentures unless and until the same are
delivered to the Trustee for cancellation.
SECTION 2.10 BENEFIT OF INDENTURE.
Nothing in this Indenture or in the Debentures, express or implied,
shall give or be construed to give to any Person, other than the parties hereto
and the holders of the Debentures (and, with respect to the provisions of
Article XVI, the holders of Senior Indebtedness) any legal or equitable right,
remedy or claim under or in respect of this Indenture, or under any covenant,
condition or provision herein contained; all such covenants, conditions, and
provisions being for the sole benefit of the parties hereto and of the holders
of the Debentures (and, with respect to the provisions of Article XVI, the
holders of Senior Indebtedness).
SECTION 2.11 AUTHENTICATING AGENT.
(a) So long as any of the Debentures remain Outstanding there may be an
Authenticating Agent for any or all such Debentures, which the Trustee shall
have the right to appoint. Said Authenticating Agent shall be authorized to act
on behalf of the Trustee to authenticate Debentures issued upon exchange,
transfer or partial redemption thereof, and Debentures so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. All references in
this Indenture to the authentication of Debentures by the Trustee shall be
deemed to include authentication by an Authenticating Agent.
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Each Authenticating Agent shall be acceptable to the Corporation and shall be a
corporation that has a combined capital and surplus, as most recently reported
or determined by it, sufficient under the laws of any jurisdiction under which
it is organized or in which it is doing business to conduct a trust business,
and that is otherwise authorized under such laws to conduct such business and is
subject to supervision or examination by federal or state authorities. If at any
time any Authenticating Agent shall cease to be eligible in accordance with
these provisions, it shall resign immediately.
(b) Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Corporation. The Trustee may at
any time (and upon request by the Corporation shall) terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent and to the Corporation. Upon resignation, termination or
cessation of eligibility of any Authenticating Agent, the Trustee may appoint an
eligible successor Authenticating Agent acceptable to the Corporation. Any
successor Authenticating Agent, upon acceptance of its appointment hereunder,
shall become vested with all the rights, powers and duties of its predecessor
hereunder as if originally named as an Authenticating Agent pursuant hereto.
SECTION 2.12 RIGHT OF SET-OFF.
With respect to the Debentures initially issued to the Trust,
notwithstanding anything to the contrary herein, the Corporation shall have the
right to set-off any payment it is otherwise required to make in respect of any
such Debenture to the extent the Corporation has theretofore made, or is
concurrently on the date of such payment making, a payment under the Preferred
Securities Guarantee relating to such Debenture or to a holder of Preferred
Securities pursuant to an action undertaken under Section 7.8 of this Indenture.
SECTION 2.13 CUSIP NUMBERS.
The Corporation in issuing the Debentures may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Debentureholders; PROVIDED that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Debentures or as contained in any notice
of a redemption and that reliance may be placed only on the other identification
numbers printed on the Debentures, and any such redemption shall not be affected
by any defect in or omission or such numbers. The Corporation will promptly
notify the Trustee of any change in the CUSIP numbers.
ARTICLE III
REDEMPTION OF DEBENTURES
SECTION 3.1 REDEMPTION.
Subject to the Corporation having received prior regulatory approval,
if then required under applicable capital guidelines or regulatory policies, and
subject to any applicable restrictions set forth in the indenture (the "1995
Notes Indenture") for the Corporation's 9.625% subordinated notes due January 1,
2005 (the "1995 Notes") on payments other than the payment of interest with
respect to
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Funded Indebtedness (as defined in the 1995 Notes Indenture) at any time the
1995 Notes are outstanding (as defined in the 1995 Notes Indenture), the
Corporation may redeem the Debentures issued hereunder on and after the dates
set forth in and in accordance with the terms of this Article III.
SECTION 3.2 SPECIAL EVENT REDEMPTION.
Subject to the Corporation having received prior regulatory approval,
if then required under applicable capital guidelines or regulatory policies, and
subject to any applicable restrictions set forth in the 1995 Notes Indenture for
1995 Notes on payments other than the payment of interest with respect to Funded
Indebtedness (as defined in the 1995 Notes Indenture) at any time the 1995 Notes
are outstanding (as defined in the 1995 Notes Indenture), if a Special Event has
occurred and is continuing, then, notwithstanding Section 3.3, the Corporation
shall have the right upon not less than 30 days nor more than 60 days notice to
the holders of the Debentures to redeem the Debentures, in whole but not in
part, for cash within 90 days following the occurrence of such Special Event
(the "90-Day Period") at a redemption price equal to 100% of the principal
amount to be redeemed plus any accrued and unpaid interest thereon to the date
of such redemption (the "Redemption Price"), provided that if such Special Event
is a Tax Event and at the time there is available to the Corporation the
opportunity to eliminate, within the 90-Day Period, such Tax Event by taking
some ministerial action (a "Ministerial Action"), such as filing a form or
making an election, or pursuing some other similar reasonable measure which has
no adverse effect on the Corporation, the Trust or the holders of the Trust
Securities, the Corporation shall pursue such Ministerial Action in lieu of
redemption, and, provided further, that the Corporation shall have no right to
redeem the Debentures while the Trust is pursuing any Ministerial Action
pursuant to its obligations under the Trust Agreement. The Redemption Price
shall be paid prior to 12:00 noon, New York time, on the date of such redemption
or such earlier time as the Corporation determines, provided that the
Corporation shall deposit with the Trustee an amount sufficient to pay the
Redemption Price by 10:00 a.m., New York time, on the date such Redemption Price
is to be paid.
SECTION 3.3 OPTIONAL REDEMPTION BY CORPORATION.
Except as otherwise may be specified in this Indenture but not in
limitation of Section 3.2, the Corporation shall have the right to redeem the
Debentures, in whole or in part, from time to time, on or after _________, 2003,
at a Redemption Price equal to 100% of the principal amount to be redeemed plus
any accrued and unpaid interest thereon to the date of such redemption. Any
redemption pursuant to this Section 3.3 shall be made upon not less than 30 days
nor more than 60 days notice to the holder of the Debentures, at the Redemption
Price. If the Debentures are only partially redeemed pursuant to this Section
3.3, the Debentures shall be redeemed pro rata or by lot or in such other manner
as the Trustee shall deem appropriate and fair in its discretion. The Redemption
Price shall be paid prior to 12:00 noon, New York time, on the date of such
redemption or at such earlier time as the Corporation determines provided that
the Corporation shall deposit with the Trustee an amount sufficient to pay the
Redemption Price by 10:00 a.m., New York time, on the date such Redemption Price
is to be paid.
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SECTION 3.4 NOTICE OF REDEMPTION.
(a) In case the Corporation shall desire to exercise such right to
redeem all or a portion of the Debentures in accordance with the right reserved
so to do, the Corporation shall, or shall cause the Trustee to, upon receipt of
45 days written notice from the Corporation, give notice of such redemption to
holders of the Debentures to be redeemed by mailing, first class postage
prepaid, a notice of such redemption not less than 30 days and not more than 60
days before the date fixed for redemption to such holders at their last
addresses as they shall appear upon the Debenture Register unless a shorter
period is specified in the Debentures to be redeemed. Any notice that is mailed
in the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the registered holder receives the notice. In any case,
failure duly to give such notice to the holder of any Debenture designated for
redemption in whole or in part, or any defect in the notice, shall not affect
the validity of the proceedings for the redemption of any other Debentures. In
the case of any redemption of Debentures prior to the expiration of any
restriction on such redemption provided in the terms of such Debentures or
elsewhere in this Indenture, the Corporation shall furnish the Trustee with an
Officers' Certificate evidencing compliance with any such restriction. Each such
notice of redemption shall identify the Debenture to be redeemed (including
CUSIP numbers, if any) and shall specify the date fixed for redemption and the
Redemption Price and shall state that payment of the Redemption Price shall be
made at the office or agency of the Corporation or at the Corporate Trust
Office, upon presentation and surrender of such Debentures, that interest
accrued to the date fixed for redemption shall be paid as specified in said
notice and that from and after said date interest shall cease to accrue. If less
than all the Debentures are to be redeemed, the notice to the holders of the
Debentures shall specify the particular Debentures to be redeemed. If the
Debentures are to be redeemed in part only, the notice shall state the portion
of the principal amount thereof to be redeemed and shall state that on and after
the redemption date, upon surrender of such Debenture, a new Debenture or
Debentures in principal amount equal to the unredeemed portion thereof shall be
issued.
(b) If less than all the Debentures are to be redeemed, the Corporation
shall give the Trustee at least 45 days notice in advance of the date fixed for
redemption as to the aggregate principal amount of Debentures to be redeemed,
and thereupon the Trustee shall select, by lot or in such other manner as it
shall deem appropriate and fair in its discretion, the portion or portions
(equal to $10 or any integral multiple thereof) of the Debentures to be redeemed
and shall thereafter promptly notify the Corporation in writing of the numbers
of the Debentures to be redeemed, in whole or in part. The Corporation may, if
and whenever it shall so elect pursuant to the terms hereof, by delivery of
instructions signed on its behalf by its Chairman, President or any Vice
President, instruct the Trustee or any paying agent to call all or any part of
the Debentures for redemption and to give notice of redemption in the manner set
forth in this Section 3.4, such notice to be in the name of the Corporation or
its own name as the Trustee or such paying agent may deem advisable. In any case
in which notice of redemption is to be given by the Trustee or any such paying
agent, the Corporation shall deliver or cause to be delivered to, or permit to
remain with, the Trustee or such paying agent, as the case may be, such
Debenture Register, transfer books or other records, or
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suitable copies or extracts therefrom, sufficient to enable the Trustee or such
paying agent to give any notice by mail that may be required under the
provisions of this Section 3.4.
SECTION 3.5 PAYMENT UPON REDEMPTION.
(a) If the giving of notice of redemption shall have been completed as
above provided, subject to the provisions of Section 3.2 the Debentures or
portions of Debentures to be redeemed specified in such notice shall become due
and payable on the date and at the place stated in such notice at the applicable
Redemption Price, and interest on such Debentures or portions of Debentures
shall cease to accrue on and after the date fixed for redemption, unless the
Corporation shall default in the payment of such Redemption Price with respect
to any such Debenture or portion thereof. On presentation and surrender of such
Debentures on or after the date fixed for redemption at the place of payment
specified in the notice, said Debentures shall be paid and redeemed at the
Redemption Price (but if the date fixed for redemption is an Interest Payment
Date, the interest installment payable on such date shall not be part of the
Redemption Price and shall be payable instead to the registered holder at the
close of business on the Regular Record Date next preceding such Interest
Payment Date).
(b) Subject to the provisions of Article II, upon presentation of any
Debenture that is to be redeemed in part only, the Corporation shall execute and
the Trustee shall authenticate and the office or agency where the Debenture is
presented shall make available for delivery to the holder thereof, at the
expense of the Corporation, a new Debenture of authorized denomination in
principal amount equal to the unredeemed portion of the Debenture so presented.
SECTION 3.6 NO SINKING FUND.
The Debentures are not entitled to the benefit of any sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1 EXTENSION OF INTEREST PAYMENT PERIOD.
So long as no Event of Default has occurred and is continuing, the
Corporation shall have the right, at any time and from time to time during the
term of the Debentures, to defer payments of interest by extending the interest
payment period of such Debentures for a period not exceeding 20 consecutive
quarters (the "Extended Interest Payment Period"), during which Extended
Interest Payment Period no interest shall be due and payable; provided that no
Extended Interest Payment Period may extend beyond the Maturity Date. Interest,
which has been deferred because of the extension of the interest payment period
pursuant to this Section 4.1, shall bear interest thereon at the rate of ____%
per annum, compounded quarterly during the Extended Interest Payment Period (the
"Compounded Interest"). At the end of the Extended Interest Payment Period, the
Corporation
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shall calculate (and deliver such calculation to the Trustee) and pay all
interest accrued and unpaid on the Debentures, including any Additional Interest
and Compounded Interest in respect of such period (together, "Deferred
Interest") that shall be payable to the holders of the Debentures in whose names
the Debentures are registered in the Debenture Register as of the close of
business on the Regular Record Date immediately preceding the end of the
Extended Interest Payment Period. Before the termination of any Extended
Interest Payment Period, the Corporation may further extend such period,
provided that such period together with all such further extensions thereof
shall not exceed 20 consecutive quarters, or extend beyond the Maturity Date of
the Debentures. Upon the termination of any Extended Interest Payment Period and
upon the payment of all Deferred Interest then due, the Corporation may commence
a new Extended Interest Payment Period, subject to the foregoing requirements.
No interest shall be due and payable during an Extended Interest Payment Period,
except at the end thereof, but the Corporation may prepay at any time all or any
portion of the interest accrued during an Extended Interest Payment Period,
which prepayments shall be payable to the holders of the Debentures in whose
names the Debentures are registered in the Debenture Register as of the close of
business on the Regular Record Date immediately preceding the date of
prepayment.
SECTION 4.2 NOTICE OF EXTENSION.
(a) If the Property Trustee is the only registered holder of the
Debentures at the time the Corporation selects an Extended Interest Payment
Period, the Corporation shall give written notice to the Administrative
Trustees, the Property Trustee and the Trustee of its selection of such Extended
Interest Payment Period at least one Business Day before the earlier of (i) the
next succeeding date on which Distributions (as such term is defined in the
Trust Agreement) on the Trust Securities issued by the Trust are payable; or
(ii) the date the Trust is required to give notice of the record date or the
date such Distributions are payable to The Nasdaq Stock Market's National Market
of other applicable self-regulatory organization or to holders of the Preferred
Securities issued by the Trust, but in any event at least one Business Day
before such record date.
(b) If the Property Trustee is not the only holder of the Debentures at
the time the Corporation selects an Extended Interest Payment Period, the
Corporation shall give the holders of the Debentures and the Trustee written
notice of its selection of such Extended Interest Payment Period at least one
Business Day before the earlier of (i) the next succeeding Interest Payment
Date; or (ii) the date the Corporation is required to give notice of the record
or payment date of such interest payment to The Nasdaq Stock Market's National
Market or other applicable self-regulatory organization or to holders of the
Debentures, but in any event at least one Business Day before such record date.
(c) The quarter in which any notice is given pursuant to paragraphs (a)
or (b) of this Section 4.2 shall be counted as one of the 20 quarters permitted
in the Minimum Extended Interest Payment Period permitted under Section 4.1.
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SECTION 4.3 LIMITATION ON TRANSACTIONS.
If (i) the Corporation shall exercise its right to defer payment of
interest as provided in Section 4.1; (ii) there shall have occurred any Event of
Default that is continuing; or (iii) the Corporation is in default with respect
to its obligations under the Preferred Securities Guarantee, then (a) the
Corporation will not declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Corporation's capital stock (other than (1) the reclassification of any
class of the Corporation's capital stock into another class of its capital
stock; (2) dividends or distributions payable in any class of the Corporation's
common stock, (3) any declaration of a dividend in connection with the
implementation of a shareholder rights plan, or the issuance of stock under any
such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (4) payments under the Preferred Securities Guarantee and (5)
purchases of the Corporation's common stock related to the rights under any of
the Corporation's benefit plans for its or its subsidiaries' directors, officers
or employees); (b) the Corporation will not make any payment of interest,
principal or premium, if any, or repay, repurchase or redeem any debt securities
issued by the Corporation which rank pari passu with or junior to the
Debentures; provided, however, that notwithstanding the foregoing the
Corporation may make payments pursuant to its obligations under the Preferred
Securities Guarantee; and (c) the Corporation shall not redeem, purchase or
acquire less than all of the outstanding Debentures or any of the Preferred
Securities.
ARTICLE V
PARTICULAR COVENANTS OF THE CORPORATION
SECTION 5.1 PAYMENT OF PRINCIPAL AND INTEREST.
The Corporation shall duly and punctually pay or cause to be paid the
principal of and interest on the Debentures at the time and place and in the
manner provided herein.
SECTION 5.2 MAINTENANCE OF AGENCY.
So long as any of the Debentures remain Outstanding, the Corporation
shall maintain a designated office or agency in the Place of Payment where (i)
Debentures may be presented for payment; (ii) Debentures may be presented as
hereinabove authorized for registration of transfer and exchange; and (iii)
notice and demands to or upon the Corporation in respect of the Debentures and
this Indenture may be given or served, such designation to continue with respect
to such office or agency until the Corporation shall, by written notice signed
by its Chairman, President or a Vice President and delivered to the Trustee,
designate some other office or agency for such purposes or any of them. If at
any time the Corporation shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Corporation hereby appoints the Trustee as its
agent to receive all such presentations, notices and demands. In addition to any
such office or agency, the Corporation may from time to time designate one or
more offices or agencies where the Debentures may be presented for registration
or transfer and for exchange in
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the manner provided herein, and the Corporation may from time to time rescind
such designation as the Corporation may deem desirable or expedient; provided,
however, that no such designation or rescission shall in any manner relieve the
Corporation of its obligation to maintain any such office or agency in the Place
of Payment for such purposes. The Corporation shall give the Trustee prompt
written notice of any such designation or rescission thereof.
SECTION 5.3 PAYING AGENTS.
(a) If the Corporation shall appoint one or more paying agents for the
Debentures, other than the Trustee, the Corporation shall cause each such paying
agent to execute and deliver to the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 5.3:
(i) that it shall hold all sums held by it as such agent for
the payment of the principal of or interest on the Debentures
(whether such sums have been paid to it by the Corporation or
by any other obligor of such Debentures) in trust for the
benefit of the Persons entitled thereto;
(ii) that it shall give the Trustee prompt written notice of
any failure by the Corporation (or by any other obligor of
such Debentures) to make any payment of the principal of or
interest on the Debentures when the same shall be due and
payable;
(iii) that it shall, at any time during the continuance of any
failure referred to in the preceding paragraph (a)(ii) above,
upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such paying agent; and
(iv) that it shall perform all other duties of paying agent as
set forth in this Indenture.
(b) If the Corporation shall act as its own paying agent with respect
to the Debentures, it shall on or before each due date of the principal of or
interest on such Debentures, set aside, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay such principal
or interest so becoming due on Debentures until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and shall promptly notify
the Trustee of such action, or any failure (by it or any other obligor on such
Debentures) to take such action. Whenever the Corporation shall have one or more
paying agents for the Debentures, it shall, prior to each due date of the
principal of or interest on any Debentures, deposit with the paying agent a sum
sufficient to pay the principal or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal or interest,
and (unless such paying agent is the Trustee) the Corporation shall promptly
notify the Trustee of this action or failure so to act.
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(c) Notwithstanding anything in this Section 5.3 to the contrary, (i)
the agreement to hold sums in trust as provided in this Section 5.3 is subject
to the provisions of Section 13.3 and 13.4; and (ii) the Corporation may at any
time, for the purpose of obtaining the satisfaction and discharge of this
Indenture or for any other purpose, pay, or direct any paying agent to pay, to
the Trustee all sums held in trust by the Corporation or such paying agent, such
sums to be held by the Trustee upon the same terms and conditions as those upon
which such sums were held by the Corporation or such paying agent; and, upon
such payment by any paying agent to the Trustee, such paying agent shall be
released from all further liability with respect to such money.
SECTION 5.4 APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE.
The Corporation, whenever necessary to avoid or fill a vacancy in the
office of Trustee, shall appoint, in the manner provided in Section 9.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 5.5 COMPLIANCE WITH CONSOLIDATION PROVISIONS.
The Corporation shall not, while any of the Debentures remain
outstanding, consolidate with, or merge into, or merge into itself, or convey,
transfer or lease all or substantially all of its property and assets to any
other entity and no entity shall consolidate with or merge into the Corporation
or convey, transfer or lease substantially all of its properties and assets to
the Corporation, unless the provisions of Article XII hereof are complied with.
SECTION 5.6 LIMITATION ON TRANSACTIONS.
If Debentures are issued to the Trust or a trustee of the Trust in
connection with the issuance of Trust Securities by the Trust and (i) there
shall have occurred any event that would constitute an Event of Default; (ii)
the Corporation shall be in default with respect to its payment of any
obligations under the Preferred Securities Guarantee relating to the Trust; or
(iii) the Corporation shall have given notice of its election to defer payments
of interest on such Debentures by extending the interest payment period as
provided in this Indenture and such period, or any extension thereof, shall be
continuing, then (a) the Corporation may not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of Corporation's capital stock (other
than (1) the reclassification of any class of the Corporation's capital stock
into another class of capital stock, (2) dividends or distributions payable in
any class of the Corporation's common stock, (3) any declaration of a dividend
in connection with the implementation of a shareholder rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (4) payments under the Preferred
Securities Guarantee and (5) purchases of the Corporation's common stock related
to the rights under any of the Corporation's benefit plans for its or its
subsidiaries' directors, officers or employees); (b) the Corporation shall not
make any payment of interest, principal or premium, if any, or repay, repurchase
or redeem any debt securities issued by the Corporation which rank pari passu
with or junior to the Debentures; provided, however, that the Corporation may
make payments
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pursuant to its obligations under the Preferred Securities Guarantee; and (c)
the Corporation shall not redeem, purchase or acquire less than all of the
outstanding Debentures or any of the Preferred Securities.
SECTION 5.7 COVENANTS AS TO THE TRUST.
For so long as such Trust Securities of the Trust remain outstanding,
the Corporation shall (i) maintain 100% direct or indirect ownership of the
Common Securities of the Trust; provided, however, that any permitted successor
of the Corporation under this Indenture may succeed to the Corporation's
ownership of the Common Securities; (ii) not voluntarily terminate, wind up or
liquidate the Trust, except upon prior regulatory approval if then so required
under applicable capital guidelines or regulatory policies, and use its
reasonable efforts to cause the Trust (a) to remain a business trust, except in
connection with a distribution of Debentures, the redemption of all of the Trust
Securities of the Trust or certain mergers, consolidations or amalgamations,
each as permitted by the Trust Agreement; and (b) to otherwise continue not to
be treated as an association taxable as a corporation or partnership for United
States federal income tax purposes; and (iii) use its reasonable efforts to
cause each holder of Trust Securities to be treated as owning an individual
beneficial interest in the Debentures. In connection with the distribution of
the Debentures to the holders of the Preferred Securities issued by the Trust
upon a Dissolution Event, the Corporation shall use its best efforts to list
such Debentures on The Nasdaq Stock Market's National Market or on such other
exchange as the Preferred Securities are then listed.
SECTION 5.8 COVENANTS AS TO PURCHASES.
Prior to _______, 2003, the Corporation shall not purchase any
Debentures, in whole or in part, from the Trust, except as otherwise permitted
by Section 3.2.
ARTICLE VI
DEBENTUREHOLDERS' LISTS AND REPORTS BY
THE CORPORATION AND THE TRUSTEE
SECTION 6.1 CORPORATION TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
DEBENTURE HOLDERS
The Corporation shall furnish or cause to be furnished to the Trustee a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the holders of the Debentures as of each _________ and _______ of
each year and at such other times as the Trustee may request in writing ;
provided that the Corporation shall not be obligated to furnish or cause to
furnish such list at any time that the list shall not differ in any respect from
the most recent list furnished to the Trustee by the Corporation; provided,
however, that, in either case, no such list need be furnished if the Trustee
shall be the Debenture Registrar.
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SECTION 6.2 PRESERVATION OF INFORMATION COMMUNICATIONS WITH
DEBENTUREHOLDERS
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Debentures contained in the most recent list furnished to it as provided in
Section 6.1 and as to the names and addresses of holders of Debentures received
by the Trustee in its capacity as registrar for the Debentures (if acting in
such capacity) or in any other capacity in respect of the Debentures.
(b) The Trustee may destroy any list furnished to it as provided in
Section 6.1 upon receipt of a new list so furnished.
(c) Debentureholders may communicate as provided in Section 312(b) of
the Trust Indenture Act with other Debentureholders with respect to their rights
under this Indenture or under the Debentures. The Trustee shall comply with the
provisions of said Section and shall be entitled to the protections provided by
Section 312(c) of the Trust Indenture Act.
SECTION 6.3 REPORTS BY THE CORPORATION.
(a) The Corporation covenants and agrees to file with the Trustee,
within 15 days after the Corporation is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) that the
Corporation may be required to file with the Commission pursuant to Section 13
or Section 15(d) of the Exchange Act; or, if the Corporation is not required to
file information, documents or reports pursuant to either of such Sections, then
to file with the Trustee and the Commission, in accordance with the rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports that may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations.
(b) The Corporation covenants and agrees to file with the Trustee and
the Commission, in accordance with the rules and regulations prescribed from to
time by the Commission, such additional information, documents and reports with
respect to compliance by the Corporation with the conditions and covenants
provided for in this Indenture as may be required from time to time by such
rules and regulations.
(c) The Corporation covenants and agrees to transmit to the
Debentureholders, in the manner and to the extent provided in Section 313(c) of
the Trust Indenture Act, within 30 days after the filing thereof with the
Trustee, such summaries of any information, documents and reports required to be
filed by the Corporation pursuant to subsections (a) and (b) of this Section 6.3
as may be required by rules and regulations prescribed from time to time by the
Commission.
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(d) Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Corporation's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 6.4 REPORTS BY THE TRUSTEE.
(a) The Trustee shall transmit to Debentureholders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to Section 313 of the Trust Indenture Act at the times and in the
manner provided pursuant thereto. If required by Section 313(a) of the Trust
Indenture Act, the Trustee shall, within sixty days after each ______ following
the date of this Indenture deliver to Debentureholders a brief report, dated as
of such _____, which complies with the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such transmission
to Debentureholders, be filed by the Trustee with each stock exchange, if any,
upon which the Debentures are listed, with the Commission and with the
Corporation. Corporation will promptly notify the Trustee when any Debentures
become listed on any stock exchange.
SECTION 6.5 STATEMENTS AS TO DEFAULT.
(a) The Corporation will deliver to the Trustee annually, within 120
days after the end of each of its fiscal years, a certificate, from its
principal executive officer, principal financial officer or principal accounting
officer, stating whether or not to the best knowledge of the signer thereof the
Corporation is in compliance (without regard to periods of grace or notice
requirements) with all conditions and covenants under this Indenture, and if the
Corporation shall not be in compliance, specifying such non-compliance and the
nature and status thereof of which such signer may have knowledge.
(b) The Corporation shall deliver to the Trustee, as soon as possible
and in any event within five days after the Corporation becomes aware of the
occurrence of any Event of Default or an event which, with notice or the lapse
of time or both, would constitute an Event of Default, an Officers' Certificate
setting forth the details of such Event of Default or Default and the action
which the Corporation proposes to take with respect thereto.
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ARTICLE VII
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT.
(a) Whenever used herein with respect to the Debentures, "Event of
Default" means any one or more of the following events that has occurred and is
continuing:
(i) the Corporation defaults in the payment of any installment
of interest (including Additional Interest or Compounded
Interest, if any) upon any of the Debentures, as and when the
same shall become due and payable, and continuance of such
default for a period of 30 days; provided, however, that a
valid extension of an interest payment period by the
Corporation in accordance with the terms of Article IV of this
Indenture shall not constitute a default in the payment of
interest for this purpose;
(ii) the Corporation defaults in the payment of the principal
on the Debentures as and when the same shall become due and
payable whether at maturity, upon redemption, by declaration
of acceleration of maturity or otherwise;
(iii) the Corporation fails to observe or perform any other of
its covenants or agreements with respect to the Debentures for
a period of 90 days after the date on which written notice of
such failure, requiring the same to be remedied and stating
that such notice is a "Notice of Default" hereunder, shall
have been given to the Corporation by the Trustee, by
registered or certified mail, or to the Corporation and the
Trustee by the holders of at least 25% in aggregate principal
amount of the Debentures at the time Outstanding;
(iv) the Corporation pursuant to or within the meaning of any
Bankruptcy Law (i) commences a voluntary case; (ii) consents
to the entry of an order for relief against it in an
involuntary case; (iii) consents to the appointment of a
Custodian of it or for all or substantially all of its
property; or (iv) makes a general assignment for the benefit
of its creditors;
(v) a court of competent jurisdiction enters an order under
any Bankruptcy Law that (i) is for relief against the
Corporation in an involuntary case; (ii) appoints a Custodian
of the Corporation for all or substantially all of its
property; or (iii) orders the liquidation of the Corporation,
and the order or decree remains unstayed and in effect for 60
days; or
(vi) the Trust shall have voluntarily or involuntarily
dissolved, wound-up its business or otherwise terminated its
existence except in connection with (i) the
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distribution of Debentures to holders of Trust Securities in
liquidation of their interests in the Trust; (ii) the
redemption of all of the outstanding Trust Securities of the
Trust; or (iii) certain mergers, consolidations or
amalgamations, each as permitted by the Trust Agreement.
(b) In each and every such case, unless the principal of all the
Debentures shall have already become due and payable, either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Debentures
then Outstanding hereunder, by notice in writing to the Corporation (and to the
Trustee if given by such Debentureholders) may declare the principal of all the
Debentures to be due and payable immediately, and upon any such declaration the
same shall become and shall be immediately due and payable, notwithstanding
anything contained in this Indenture or in the Debentures.
(c) At any time after the principal of the Debentures shall have been
so declared due and payable, and before any judgment or decree for the payment
of the moneys due shall have been obtained or entered as hereinafter provided,
the holders of a majority in aggregate principal amount of the Debentures then
Outstanding hereunder, by written notice to the Corporation and the Trustee, may
rescind and annul such declaration and its consequences if: (i) the Corporation
has paid or deposited with the Trustee a sum sufficient to pay all matured
installments of interest (including Additional Interest and Compounded Interest,
if any) upon all the Debentures and the principal of any and all Debentures that
shall have become due otherwise than by acceleration (and, without duplication
of any of the foregoing, interest upon such principal, and upon overdue
installments of interest, at the rate per annum expressed in the Debentures to
the date of such payment or deposit) and the amount payable to the Trustee under
Section 9.7; and (ii) any and all Events of Default under this Indenture, other
than the nonpayment of principal on Debentures that shall not have become due by
their terms, shall have been remedied or waived as provided in Section 7.6. No
such rescission and annulment shall extend to or shall affect any subsequent
default or impair any right consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any right with
respect to Debentures under this Indenture and such proceedings shall have been
discontinued or abandoned because of such rescission or annulment or for any
other reason or shall have been determined adversely to the Trustee, then and in
every such case the Corporation and the Trustee shall be restored respectively
to their former positions and rights hereunder, and all rights, remedies and
powers of the Corporation and the Trustee shall continue as though no such
proceedings had been taken.
SECTION 7.2 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
(a) The Corporation covenants that (1) in case it shall default in the
payment of any installment of interest (including Additional Interest and
Compounded Interest) on any of the Debentures, and such default shall have
continued for a period of 90 Business Days; or (2) in case it shall default in
the payment of the principal of any of the Debentures when the same shall have
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become due and payable, whether upon maturity of the Debentures or upon
redemption or upon declaration or otherwise, then, upon demand of the Trustee,
the Corporation shall pay to the Trustee, for the benefit of the holders of the
Debentures, the whole amount that then shall have been become due and payable on
all such Debentures for principal or interest, or both, as the case may be, with
interest upon the overdue principal and (if the Debentures are held by the Trust
or a trustee of the Trust, without duplication of any other amounts paid by the
Trust or trustee in respect thereof) upon overdue installments of interest at
the rate per annum expressed in the Debentures; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, and the amount payable to the Trustee and its counsel under Section
9.7.
(b) If the Corporation shall fail to pay such amounts forthwith upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any action or proceedings at law or
in equity for the collection of the sums so due and unpaid, and may prosecute
any such action or proceeding to judgment or final decree, and may enforce any
such judgment or final decree against the Corporation or other obligor upon the
Debentures and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Corporation or other obligor
upon the Debentures, wherever situated.
(c) In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, readjustment, arrangement, composition or judicial proceedings
affecting the Corporation or the creditors or property of either, the Trustee
shall have power to intervene in such proceedings and take any action therein
that may be permitted by the court and shall (except as may be otherwise
provided by law) be entitled to file such proofs of claim and other papers and
documents as may be necessary or advisable in order to have the claims of the
Trustee and of the holders of the Debentures allowed for the entire amount due
and payable by the Corporation under this Indenture at the date of institution
of such proceedings and for any additional amount that may become due and
payable by the Corporation after such date, and to collect and receive any
moneys or other property payable or deliverable on any such claim, and to
distribute the same after the deduction of the amount payable to the Trustee and
its counsel under Section 9.7; and any receiver, assignee or trustee in
bankruptcy or reorganization is hereby authorized by each of the holders of the
Debentures to make such payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments directly to such
Debentureholders, to pay to the Trustee any amount due it under Section 9.7.
(d) All rights of action and of asserting claims under this Indenture,
or under any of the terms established with respect to Debentures, may be
enforced by the Trustee without the possession of any of such Debentures, or the
production thereof at any trial or other proceeding relating thereto, and any
such suit or proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for payment to the Trustee of any amounts due under Section 9.7, be
for the ratable benefit of the holders of the Debentures. In case of an Event of
Default hereunder, the Trustee may in its discretion proceed to protect and
enforce the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
of such rights, either at law or in equity
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or in bankruptcy or otherwise, whether for the specific enforcement of any
covenant or agreement contained in this Indenture or in aid of the exercise of
any power granted in this Indenture, or to enforce any other legal or equitable
right vested in the Trustee by this Indenture or by law. Nothing contained
herein shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Debentureholder any plan of reorganization,
arrangement, adjustment or composition affecting the Debentures or the rights of
any holder thereof or to authorize the Trustee to vote in respect of the claim
of any Debentureholder in any such proceeding.
SECTION 7.3 APPLICATION OF MONEYS COLLECTED.
Any moneys collected by the Trustee pursuant to this Article VII with
respect to the Debentures shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such moneys on
account of principal or interest, upon presentation of the Debentures, and
notation thereon of the payment, if only partially paid, and upon surrender
thereof if fully paid:
FIRST: To the payment of costs and expenses of collection and
of all amounts payable to the Trustee under Section 9.7;
SECOND: To the payment of all Senior Indebtedness of the
Corporation if and to the extent required by Article XVI; and
THIRD: To the payment of the amounts then due and unpaid upon
the Debentures for principal and interest, in respect of which
or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according
to the amounts due and payable on such Debentures for
principal and interest, respectively.
FOURTH: Any remaining balance to the Corporation.
SECTION 7.4 LIMITATION ON SUITS.
(a) No holder of any Debenture shall have any right by virtue or by
availing of any provision of this Indenture to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Indenture
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless (i) such holder previously shall have given to the Trustee
written notice of an Event of Default and of the continuance thereof with
respect to the Debentures specifying such Event of Default, as hereinbefore
provided; (ii) the holders of not less than 25% in aggregate principal amount of
the Debentures then Outstanding shall have made written request upon the Trustee
to institute such action, suit or proceeding in its own name as trustee
hereunder; (iii) such holder or holders shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby; and (iv) the Trustee for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
failed to institute
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any such action, suit or proceeding; and (v) during such 60 day period, the
holders of a majority in principal amount of the Debentures do not give the
Trustee a direction inconsistent with the request.
(b) Notwithstanding anything contained herein to the contrary or any
other provisions of this Indenture, the right of any holder of the Debentures to
receive payment of the principal of and interest on the Debentures, as therein
provided, on or after the respective due dates expressed in such Debenture (or
in the case of redemption, on the redemption date), or to institute suit for the
enforcement of any such payment on or after such respective dates (or redemption
date), shall not be impaired or affected without the consent of such holder and
by accepting a Debenture hereunder it is expressly understood, intended and
covenanted by the taker and holder of every Debenture with every other such
taker and holder and the Trustee, that no one or more holders of Debentures
shall have any right in any manner whatsoever by virtue or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of the
holders of any other of such Debentures, or to obtain or seek to obtain priority
over or preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Debentures. For the protection and enforcement
of the provisions of this Section 7.4, each and every Debentureholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
SECTION 7.5 RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER.
(a) Except as otherwise provided in Section 2.8, all powers and
remedies given by this Article VII to the Trustee or to the Debentureholders
shall, to the extent permitted by law, be deemed cumulative and not exclusive of
any other powers and remedies available to the Trustee or the holders of the
Debentures, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture or
otherwise established with respect to such Debentures.
(b) No delay or omission of the Trustee or of any holder of any of the
Debentures to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or an acquiescence
therein; and, subject to the provisions of Section 7.4, every power and remedy
given by this Article VII or by law to the Trustee or the Debentureholders may
be exercised from time to time, and as often as shall be deemed expedient, by
the Trustee or by the Debentureholders.
SECTION 7.6 CONTROL BY DEBENTUREHOLDERS.
.
The holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding, determined in accordance with Section 10.4,
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee; provided, however, that such direction shall not
be in conflict with any rule of law or with this Indenture. Subject to the
provisions of Section 9.1,
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the Trustee shall have the right to decline to follow any such direction if the
Trustee in good faith shall, by a Responsible Officer or Officers of the
Trustee, determine that the proceeding so directed would involve the Trustee in
personal liability. The holders of a majority in aggregate principal amount of
the Debentures at the time Outstanding affected thereby, determined in
accordance with Section 10.4, may on behalf of the holders of all of the
Debentures waive any past default in the performance of any of the covenants
contained herein and its consequences, except (i) a default in the payment of
the principal of or interest on, any of the Debentures as and when the same
shall become due by the terms of such Debentures otherwise than by acceleration
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal, other than principal maturing because of
the acceleration, has been deposited with the Trustee (in accordance with
Section 7.1(c)); (ii) a default in the covenants contained in Section 4.3; or
(iii) in respect of a covenant or provision hereof which cannot be modified or
amended without the consent of the holder of each Outstanding Debenture
affected; provided, however, that if the Debentures are held by the Trust or a
trustee of the Trust, such waiver or modification to such waiver shall not be
effective until the holders of a majority in liquidation preference of Trust
Securities of the Trust shall have consented to such waiver or modification to
such waiver; provided further, that if the consent of the holder of each
Outstanding Debenture is required, such waiver shall not be effective until each
holder of the Trust Securities of the Trust shall have consented to such waiver.
Upon any such waiver, the default covered thereby shall be deemed to be cured
for all purposes of this Indenture and the Corporation, the Trustee and the
holders of the Debentures shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 7.7 UNDERTAKING TO PAY COSTS.
All parties to this Indenture agree, and each holder of any Debentures
by such holder's acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees and expenses, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 7.7 shall not apply to any suit instituted by
the Trustee, to any suit instituted by any Debentureholder, or group of
Debentureholders, holding more than 10% in aggregate principal amount of the
Outstanding Debentures, or to any suit instituted by any Debentureholder for the
enforcement of the payment of the principal of or interest on the Debentures, on
or after the respective due dates expressed in such Debenture or established
pursuant to this Indenture.
SECTION 7.8 DIRECT ACTION BY HOLDERS OF PREFERRED SECURITIES.
Any registered holder of the Preferred Securities issued by the Trust
shall have the right, upon the occurrence of an Event of Default described in
Section 7.1(a)(i) or 7.1(a)(ii), to institute
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a suit directly against the Corporation for enforcement of payment to such
holder of principal of and (subject to Sections 2.4 and 4.1) interest (including
any Additional Interest) on the Debentures having a principal amount equal to
the aggregate Liquidation Amount (as defined in the Trust Agreement) of such
Preferred Securities held by such holder. The Corporation may not amend this
Indenture to remove this right to institute a suit directly against the
Corporation without the prior consent of the holders of all the Preferred
Securities.
ARTICLE VIII
FORM OF DEBENTURE AND ORIGINAL ISSUE
SECTION 8.1 FORM OF DEBENTURE.
The Debenture and the Trustee's Certificate of Authentication to be
endorsed thereon are to be substantially in the forms contained as Exhibit A
attached hereto and incorporated herein by reference.
SECTION 8.2 ORIGINAL ISSUE OF DEBENTURES.
Debentures in the aggregate principal amount of up to $____________
may, upon execution of this Indenture, be executed by the Corporation and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and make available for delivery said Debentures to or upon the
written order of the Corporation, signed by its Chairman, its President, or any
Vice President and its Treasurer or an Assistant Treasurer, without any further
action by the Corporation.
ARTICLE IX
CONCERNING THE TRUSTEE
SECTION 9.1 CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default that may have occurred, shall
undertake to perform with respect to the Debentures such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
shall be read into this Indenture against the Trustee. In case an Event of
Default has occurred that has not been cured or waived, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(1) prior to the occurrence of an Event of Default and after the curing
or waiving of all Events of Default that may have occurred:
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(i) the duties and obligations of the Trustee shall, with
respect to the Debentures, be determined solely by the express
provisions of this Indenture, and the Trustee shall not be
liable with respect to the Debentures except for the
performance of such duties and obligations as are specifically
set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on the part of the Trustee,
the Trustee may with respect to the Indenture conclusively
rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Indenture;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the
direction of the holders of not less than a majority in principal
amount of the Debentures at the time outstanding (within the meaning of
Section 316(a) of the Trust Indenture Act) relating to the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee
under this Indenture with respect to the Debentures; and
(4) none of the provisions contained in this Indenture shall require
the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if there is reasonable ground
for believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Indenture or adequate
indemnity against such risk is not reasonably assured to it.
SECTION 9.2 NOTICE OF DEFAULTS.
The Trustee shall transmit by mail to all holders of the Debentures, in
the manner and to the extent provided in Section 313(c) of the Trust Indenture
Act, notice of any default hereunder, within 90 days after the occurrence
thereof; provided, however, that, except in the case of any default in the
payment of the principal or interest (including Additional Interest and
Compounded Interest, if any) on any Debenture, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of the directors and/or Responsible Officers of
the Trustee determines in good faith that the withholding of such notice is in
the interests of the holders of such Debentures. For the purposes of this
Section 9.2, the term "default" means
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any event which is, or after notice or lapse of time or both, would become, an
Event of Default with respect to the Debentures.
SECTION 9.3 CERTAIN RIGHTS OF TRUSTEE.
Except as otherwise provided in Section 9.1 or elsewhere in this
Indenture:
(a) The Trustee may conclusively rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
security or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) Any request, direction, order or demand of the Corporation
mentioned herein shall be sufficiently evidenced by a Board Resolution or an
instrument signed in the name of the Corporation by the Chairman, President or
any Vice President and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer thereof (unless other evidence in respect
thereof is specifically prescribed herein);
(c) The Trustee shall not be deemed to have knowledge of a default or
an Event of Default, other than an Event of Default specified in Section
7.1(a)(i) or (ii), unless and until it receives notification of such Event of
Default from the Corporation or by holders of at least 25% of the aggregate
principal amount of the Debentures at the time Outstanding;
(d) The Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted hereunder in good faith and in reliance thereon;
(e) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Debentureholders, pursuant to the provisions of this
Indenture, unless such Debentureholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligation, upon the occurrence of an Event
of Default (that has not been cured or waived) to exercise with respect to the
Debentures such of the rights and powers vested in it by this Indenture, and to
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs;
(f) The Trustee shall not be liable for any action taken or omitted to
be taken by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture;
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent,
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order, approval, bond, security, or other papers or documents, but the Trustee
in its discretion may make such inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
inquiry or investigation, it shall be entitled to examine the books, records and
premises of the Corporation, personally or by agent or attorney; and
(h) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 9.4 TRUSTEE NOT RESPONSIBLE FOR RECITALS, ETC.
(a) The Recitals contained herein and in the Debentures, except the
certificates of authentication, shall be taken as the statements of the
Corporation, and the Trustee assumes no responsibility for the correctness of
the same.
(b) The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Debentures.
(c) The Trustee shall not be accountable for the use or application by
the Corporation of any of the Debentures or of the proceeds of such Debentures,
or for the use or application of any moneys paid over by the Trustee in
accordance with any provision of this Indenture, or for the use or application
of any moneys received by any paying agent other than the Trustee.
SECTION 9.5 MAY HOLD DEBENTURES.
The Trustee or any paying agent or registrar for the Debentures, in its
individual or any other capacity, may become the owner or pledgee of Debentures
and, subject to Sections 9.9 and 9.14, may otherwise deal with the Corporation
with the same rights it would have if it were not Trustee, paying agent or
Debenture Registrar.
SECTION 9.6 MONEYS HELD IN TRUST.
Subject to the provisions of Section 13.5, all moneys received by the
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any moneys received by it hereunder except such as it
may agree in writing with the Corporation to pay thereon.
SECTION 9.7 COMPENSATION AND REIMBURSEMENT.
The Corporation agrees:
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(1) to pay to the Trustee from time to time such compensation as the
Corporation and the Trustee shall from time to time agree in writing for all
services rendered by it hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee or any predecessor Trustee and
their agents for, and to hold them harmless against, any and all loss, damage,
claims, liability or expense, including taxes (other than taxes based upon,
measured by or determined by the income of the Trustee), arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder, except to the extent that such loss, damage, claim,
liability or expense is due to its own negligence or bad faith.
The Trustee shall have a lien prior to the Debentures as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 9.7, except with respect to funds
held in trust for the benefit of the holders of particular Debentures. When the
Trustee incurs expenses or renders services in connection with an Event of
Default specified in Section 7.1(a)(iv), Section 7.1(a)(v) or 7.1(a)(vi), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Bankruptcy Law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 9.8 RELIANCE ON OFFICERS' CERTIFICATE.
Except as otherwise provided in Section 9.1, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
suffering or omitting to take any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may, in the
absence of negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to the
Trustee and such certificate, in the absence of negligence or bad faith on the
part of the Trustee, shall be full warrant to the Trustee for any action taken,
suffered or omitted to be taken by it under the provisions of this Indenture
upon the faith thereof.
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SECTION 9.9 DISQUALIFICATION: CONFLICTING INTERESTS.
If the Trustee has or shall acquire any "conflicting interest" within
the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the
Corporation shall in all respects comply with the provisions of Section 310(b)
of the Trust Indenture Act; provided, however, that for purposes of the first
proviso contained in Section 310 (b) of the Trust Indenture Act, the Trust
Agreement and Preferred Securities Guarantee shall be deemed to be specifically
described in this Indenture.
SECTION 9.10 CORPORATE TRUSTEE REQUIRED ELIGIBILITY.
There shall at all times be a Trustee with respect to the Debentures
issued hereunder which shall at all times be a corporation organized and doing
business under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia or a corporation or other
Person permitted to act as trustee by the Commission, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000, and subject to supervision or examination by federal, state,
territorial, or District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section 9.10, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. The Corporation may not, nor may any Person
directly or indirectly controlling, controlled by, or under common control with
the Corporation, serve as Trustee. In case at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section 9.10, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.11.
SECTION 9.11 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) The Trustee or any successor hereafter appointed, may at any time
resign by giving written notice thereof to the Corporation and by transmitting
notice of resignation by mail, first class postage prepaid, to the
Debentureholders, as their names and addresses appear upon the Debenture
Register. Upon receiving such notice of resignation, the Corporation shall
promptly appoint a successor trustee with respect to Debentures by written
instrument, in duplicate, executed by order of the Board of Directors, one copy
of which instrument shall be delivered to the resigning Trustee and one copy to
the successor trustee. If no successor trustee shall have been so appointed and
have accepted appointment within 30 days after the mailing of such notice of
resignation, the resigning Trustee may petition at the expense of the
Corporation any court of competent jurisdiction for the appointment of a
successor trustee with respect to Debentures, or any Debentureholder who has
been a bona fide holder of a Debenture or Debentures for at least six months
may, subject to the provisions of Section 9.9, on behalf of himself and all
others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon after such notice, if any, as it may
deem proper, appoint a successor trustee.
(b) In case at any time any one of the following shall occur
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(i) the Trustee shall fail to comply with the provisions of
Section 9.9 after written request therefor by the Corporation
or by any Debentureholder who has been a bona fide holder of a
Debenture or Debentures for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.10 and shall fail to resign after
written request therefor by the Corporation or by any such
Debentureholder; or
(iii) the Trustee shall become incapable of acting, or shall
be adjudged bankrupt or insolvent, or commence a voluntary
bankruptcy proceeding, or a receiver of the Trustee or of its
property shall be appointed or consented to, or any public
officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, the
Corporation may remove the Trustee with respect to all
Debentures and appoint a successor trustee by written
instrument, in duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be delivered to
the Trustee so removed and one copy to the successor trustee,
or, subject to the provisions of Section 9.9, unless the
Trustee's duty to resign is stayed as provided herein, any
Debentureholder who has been a bona fide holder of a Debenture
or Debentures for at least six months may, on behalf of that
holder and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and
the appointment of a successor trustee. Such court may
thereupon after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding may at any time remove the Trustee by so
notifying the Trustee and the Corporation and may appoint a successor Trustee
with the consent of the Corporation. If no successor trustee shall have been so
appointed and have accepted appointment within 30 days after such notification,
the Trustee may petition at the expense of the Corporation any court of
competent jurisdiction for the appointment of a successor trustee with respect
to Debentures, or any Debentureholder who has been a bona fide holder of a
Debenture or Debentures for at least six months may, subject to the provisions
of Section 9.9, on behalf of himself and all others similarly situated, petition
any such court for the appointment of a successor trustee. Such court may
appoint a successor trustee.
(d) No resignation or removal of the Trustee and no appointment of a
successor trustee with respect to the Debentures pursuant to any of the
provisions of this Section 9.11 shall become effective until acceptance of
appointment by the successor trustee as provided in Section 9.12.
SECTION 9.12 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor trustee with
respect to the Debentures, every successor trustee so appointed shall execute,
acknowledge and deliver to the Corporation and to the retiring Trustee an
instrument accepting such appointment, and thereupon the
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resignation or removal of the retiring Trustee shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on the request of the Corporation or the successor trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor trustee all the rights, powers, and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
trustee all property and money held by such retiring Trustee hereunder.
(b) Upon request of any successor trustee, the Corporation shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor trustee all such rights, powers and trusts referred
to in paragraph (a) of this Section 9.12.
(c) No successor trustee shall accept its appointment unless at the
time of such acceptance such successor trustee shall be qualified and eligible
under this Article IX.
(d) Upon acceptance of appointment by a successor trustee as provided
in this Section 9.12, the Corporation shall transmit notice of the succession of
such trustee hereunder by mail, first class postage prepaid, to the
Debentureholders, as their names and addresses appear upon the Debenture
Register. If the Corporation fails to transmit such notice within ten days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be transmitted at the expense of the Corporation.
SECTION 9.13 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided that
such corporation shall be qualified under the provisions of Section 9.9 and
eligible under the provisions of Section 9.10, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. In case any Debentures shall
have been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Debentures so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Debentures.
SECTION 9.14 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE CORPORATION.
The Trustee shall comply with Section 31l(a) of the Trust Indenture
Act, excluding any creditor relationship described in Section 311(b) of the
Trust Indenture Act. A Trustee who has resigned or been removed shall be subject
to Section 311(a) of the Trust Indenture Act to the extent included therein.
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ARTICLE X
CONCERNING THE DEBENTUREHOLDERS
SECTION 10.1 EVIDENCE OF ACTION BY HOLDERS.
(a) Whenever in this Indenture it is provided that the holders of a
majority or specified percentage in aggregate principal amount of the Debentures
may take any action (including the making of any demand or request, the giving
of any notice, consent or waiver or the taking of any other action), the fact
that at the time of taking any such action the holders of such majority or
specified percentage have joined therein may be evidenced by any instrument or
any number of instruments of similar tenor executed by such holders of
Debentures in Person or by agent or proxy appointed in writing.
(b) If the Corporation shall solicit from the Debentureholders any
request, demand, authorization, direction, notice, consent, waiver or other
action, the Corporation may, at its option, as evidenced by an Officers'
Certificate, fix in advance a record date for the determination of
Debentureholders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other action, but the Corporation shall
have no obligation to do so. If such a record date is fixed, such request,
demand, authorization, direction, notice, consent, waiver or other action may be
given before or after the record date, but only the Debentureholders of record
at the close of business on the record date shall be computed to be
Debentureholders for the purposes of determining whether Debentureholders of the
requisite proportion of Outstanding Debentures have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other action, and for that purpose the Outstanding Debentures shall be
computed as of the record date; provided, however, that no such authorization,
agreement or consent by such Debentureholders on the record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.
SECTION 10.2 PROOF OF EXECUTION BY DEBENTUREHOLDERS.
Subject to the provisions of Section 9.1, proof of the execution of any
instrument by a Debentureholder (such proof shall not require notarization) or
his agent or proxy and proof of the holding by any Person of any of the
Debentures shall be sufficient if made in the following manner:
(a) The fact and date of the execution by any such Person of any
instrument may be proved in any reasonable manner acceptable to the Trustee.
(b) The ownership of Debentures shall be proved by the Debenture
Register of such Debentures or by a certificate of the Debenture Registrar
thereof.
(c) The Trustee may require such additional proof of any matter
referred to in this Section 10.2 as it shall deem necessary.
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SECTION 10.3 WHO MAY BE DEEMED OWNERS.
Prior to the due presentment for registration of transfer of any
Debenture, the Corporation, the Trustee, any paying agent, any Authenticating
Agent and any Debenture Registrar may deem and treat the Person in whose name
such Debenture shall be registered upon the books of the Corporation as the
absolute owner of such Debenture (whether or not such Debenture shall be overdue
and notwithstanding any notice of ownership or writing thereon made by anyone
other than the Debenture Registrar) for the purpose of receiving payment of or
on account of the principal of and interest on such Debenture (subject to
Section 2.3) and for all other purposes; and neither the Corporation nor the
Trustee nor any paying agent nor any Authenticating Agent nor any Debenture
Registrar shall be affected by any notice to the contrary.
SECTION 10.4 CERTAIN DEBENTURES OWNED BY CORPORATION DISREGARDED.
In determining whether the holders of the requisite aggregate principal
amount of Debentures have concurred in any direction, consent or waiver under
this Indenture, the Debentures that are owned by the Corporation or any other
obligor on the Debentures or by any Person directly or indirectly controlling or
controlled by, or under common control with, the Corporation or any other
obligor on the Debentures shall be disregarded and deemed not to be Outstanding
for the purpose of any such determination, except that for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, consent or waiver, only Debentures that a Responsible Officer of the
Trustee actually knows are so owned shall be so disregarded. The Debentures so
owned that have been pledged in good faith may be regarded as Outstanding for
the purposes of this Section 10.4, if the pledgee shall establish to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Debentures and that the pledgee is not a Person directly or indirectly,
controlling or controlled by, or under direct or indirect common control with,
the Corporation or any such other obligor. In case of a dispute as to such
right, any decision by the Trustee taken upon the advice of counsel shall be
full protection to the Trustee.
SECTION 10.5 ACTIONS BINDING ON FUTURE DEBENTUREHOLDERS.
At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 10.1, of the taking of any action by the holders of the
majority or percentage in aggregate principal amount of the Debentures specified
in this Indenture in connection with such action, any holder of a Debenture that
is shown by the evidence to be included in the Debentures the holders of which
have consented to such action may, by filing written notice with the Trustee,
and upon proof of holding as provided in Section 10.2, revoke such action so far
as concerns such Debenture. Except as aforesaid any such action taken by the
holder of any Debenture shall be conclusive and binding upon such holder and
upon all future holders and owners of such Debenture, and of any Debenture
issued in exchange therefor, on registration of transfer thereof or in place
thereof, irrespective of whether or not any notation in regard thereto is made
upon such Debenture. Any action taken by the holders of the majority or
percentage in aggregate principal amount of the Debentures specified in this
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Indenture in connection with such action shall be conclusively binding upon the
Corporation, the Trustee and the holders of all the Debentures.
ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.1 SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF
DEBENTUREHOLDERS.
In addition to any supplemental indenture otherwise authorized by this
Indenture, the Corporation and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act as then in effect), without the
consent of the Debentureholders, for one or more of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency herein, in the
Debentures;
(b) to comply with Article X;
(c) to provide for uncertificated Debentures in addition to or in place
of certificated Debentures;
(d) to add to the covenants of the Corporation for the benefit of the
holders of all or any of the Debentures or to surrender any right or power
herein conferred upon the Corporation;
(e) to evidence the succession of another corporation to the
Corporation, and the assumption by any such successor of the covenants of the
Corporation herein and in the Debentures contained;
(f) to convey, transfer, assign, mortgage or pledge to or with the
Trustee any property or assets which the Corporation may desire to convey,
transfer, assign, mortgage or pledge;
(g) to add to, delete from, or revise the conditions, limitations, and
restrictions on the authorized amount, terms, or purposes of issue,
authentication, and delivery of Debentures, as herein set forth;
(h) to make any change that does not adversely affect the rights of any
Debentureholder in any material respect;
(i) to provide for the issuance of and establish the form and terms and
conditions of the Debentures, to establish the form of any certifications
required to be furnished pursuant to the terms of this Indenture or of the
Debentures, or to add to the rights of the holders of the Debentures; or
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(j) to qualify or maintain the qualification of this Indenture under
the Trust Indenture Act.
The Trustee is hereby authorized to join with the Corporation in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into any such supplemental indenture
that adversely affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise. Any supplemental indenture authorized by the provisions
of this Section 11.1 may be executed by the Corporation and the Trustee without
the consent of the holders of any of the Debentures at the time Outstanding,
notwithstanding any of the provisions of Section 11.2.
SECTION 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF DEBENTUREHOLDERS.
With the consent (evidenced as provided in Section 10.1) of the holders
of not less than a majority in aggregate principal amount of the Debentures at
the time Outstanding, the Corporation, when authorized by Board Resolutions, and
the Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as then in effect) for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Indenture or of any supplemental indenture or of modifying in any manner not
covered by Section 11.1 the rights of the holders of the Debentures under this
Indenture; provided, however, that no such supplemental indenture shall without
the consent of the holders of each Debenture then Outstanding and affected
thereby, (i) extend the fixed maturity of any Debentures, reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon (other than the Corporation's right to defer interest pursuant to this
Indenture), without the consent of the holder of each Debenture so affected; or
(ii) reduce the aforesaid percentage of Debentures, the holders of which are
required to consent to any such supplemental indenture; provided further, that
if the Debentures are held by the Trust or a trustee of the Trust, such
supplemental indenture shall not be effective until the holders of a majority in
liquidation preference of Trust Securities of the Trust shall have consented to
such supplemental indenture; provided further, that if the consent of the holder
of each Outstanding Debenture is required, such supplemental indenture shall not
be effective until each holder of the Trust Securities of the Trust shall have
consented to such supplemental indenture. It shall not be necessary for the
consent of the Debentureholders affected thereby under this Section 11.2 to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such consent shall approve the substance thereof.
SECTION 11.3 EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture pursuant to the
provisions of this Article XI, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Corporation and the holders of Debentures shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and
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all the terms and conditions of any such supplemental indenture shall be and be
deemed to be part of the terms and conditions of this Indenture for any and all
purposes.
SECTION 11.4 DEBENTURES AFFECTED BY SUPPLEMENTAL INDENTURES.
Debentures affected by a supplemental indenture that are authenticated
and delivered after the execution of such supplemental indenture pursuant to the
provisions of this Article XI may bear a notation in form approved by the
Corporation, provided such form meets the requirements of any exchange upon
which the Debentures may be listed, as to any matter provided for in such
supplemental indenture. If the Corporation shall so determine, new Debentures so
modified as to conform, in the opinion of the Board of Directors of the
Corporation, to any modification of this Indenture contained in any such
supplemental indenture may be prepared by the Corporation, authenticated by the
Trustee and delivered in exchange for the Debentures then Outstanding.
SECTION 11.5 EXECUTION OF SUPPLEMENTAL INDENTURES.
(a) Upon the request of the Corporation, accompanied by Board
Resolutions authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Debentureholders
required to consent thereto as aforesaid, the Trustee shall join with the
Corporation in the execution of such supplemental indenture unless such
supplemental indenture adversely affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion but shall not be obligated to enter into such supplemental
indenture. The Trustee, subject to the provisions of Section 9.1, may receive an
Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant to this Article XI is authorized or permitted by, and conforms
to, the terms of this Article XI and that it is proper for the Trustee under the
provisions of this Article XI to join in the execution thereof.
(b) Promptly after the execution by the Corporation and the Trustee of
any supplemental indenture pursuant to the provisions of this Section 11.5, the
Trustee shall transmit by mail, first class postage prepaid, a notice, setting
forth in general terms the substance of such supplemental indenture, to the
Debentureholders as their names and addresses appear upon the Debenture
Register. Any failure of the Trustee to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture.
ARTICLE XII
SUCCESSOR CORPORATION
SECTION 12.1 CORPORATION MAY CONSOLIDATE, ETC.
Nothing contained in this Indenture or in any of the Debentures shall
prevent any consolidation or merger of the Corporation with or into any other
corporation or corporations (whether or not affiliated with the Corporation, as
the case may be), or successive consolidations or
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mergers in which the Corporation, as the case may be, or its successor or
successors shall be a party or parties, or shall prevent any sale, conveyance,
transfer or other disposition of the property of the Corporation, as the case
may be, or its successor or successors as an entirety, or substantially as an
entirety, to any other corporation (whether or not affiliated with the
Corporation, as the case may be, or its successor or successors) authorized to
acquire and operate the same; provided, however, the Corporation hereby
covenants and agrees that, (i) upon any such consolidation, merger, sale,
conveyance, transfer or other disposition, the due and punctual payment, in the
case of the Corporation, of the principal of and interest on all of the
Debentures, according to their tenor and the due and punctual performance and
observance of all the covenants and conditions of this Indenture to be kept or
performed by the Corporation as the case may be, shall be expressly assumed, by
supplemental indenture (which shall conform to the provisions of the Trust
Indenture Act, as then in effect) satisfactory in form to the Trustee executed
and delivered to the Trustee by the entity formed by such consolidation, or into
which the Corporation, as the case may be, shall have been merged, or by the
entity which shall have acquired such property; (ii) in case the Corporation
consolidates with or merges into another Person or conveys or transfers its
properties and assets substantially then as an entirety to any Person, the
successor Person is organized under the laws of the United States or any state
or the District of Columbia; and (iii) immediately after giving effect thereto,
no Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be continuing.
SECTION 12.2 SUCCESSOR CORPORATION SUBSTITUTED.
(a) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition and upon the assumption by the successor
corporation, by supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of, in the case of the Corporation, the
due and punctual payment of the principal of and interest on all of the
Debentures Outstanding and the due and punctual performance of all of the
covenants and conditions of this Indenture to be performed by the Corporation,
as the case may be, such successor corporation shall succeed to and be
substituted for the Corporation, with the same effect as if it had been named as
the Corporation herein, and thereupon the predecessor corporation shall be
relieved of all obligations and covenants under this Indenture and the
Debentures.
(b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and form (but not in
substance) may be made in the Debentures thereafter to be issued as may be
appropriate.
(c) Nothing contained in this Indenture or in any of the Debentures
shall prevent the Corporation from merging into itself or acquiring by purchase
or otherwise all or any part of the property of any other Person (whether or not
affiliated with the Corporation).
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SECTION 12.3 EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE.
The Trustee, subject to the provisions of Section 9.1, may receive an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance, transfer or other disposition, and any such assumption, comply
with the provisions of this Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE
SECTION 13.1 SATISFACTION AND DISCHARGE OF INDENTURE.
If at any time: (a) the Corporation shall have delivered to the Trustee
for cancellation all Debentures theretofore authenticated (other than any
Debentures that shall have been destroyed, lost or stolen and that shall have
been replaced or paid as provided in Section 2.8 and Debentures for whose
payment money or Governmental Obligations have theretofore been deposited in
trust or segregated and held in trust by the Corporation (and thereupon repaid
to the Corporation or retained by Corporation and discharged from such trust, as
provided in Section 13.5)); or (b) all such Debentures not theretofore delivered
to the Trustee for cancellation shall have become due and payable, or are by
their terms to become due and payable within one year or are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption, and the Corporation shall deposit or cause
to be deposited with the Trustee as trust funds the entire amount in moneys or
Governmental Obligations sufficient or a combination thereof, sufficient in the
opinion of a nationally recognized firm of independent public accountants
expressed in written certification thereof delivered to the Trustee, to pay at
maturity or upon redemption all Debentures not theretofore delivered to the
Trustee for cancellation, including principal and interest due or to become due
to such date of maturity or date fixed for redemption, as the case may be, and
if the Corporation shall also pay or cause to be paid all other sums payable
hereunder by the Corporation; then this Indenture shall thereupon cease to be of
further effect except for the provisions of Sections 2.3, 2.6, 2.8, 5.1, 5.2,
5.3 and 9.10, that shall survive until the date of maturity or redemption date,
as the case may be, and Sections 9.7 and 13.5, that shall survive to such date
and thereafter, and the Trustee, on demand of the Corporation and at the cost
and expense of the Corporation, shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture.
SECTION 13.2 DISCHARGE OF OBLIGATIONS.
If at any time all Debentures not heretofore delivered to the Trustee
for cancellation or that have not become due and payable as described in Section
13.1 shall have been paid by the Corporation by depositing irrevocably with the
Trustee as trust funds monies or an amount of Governmental Obligations
sufficient to pay at maturity or upon redemption all Debentures not theretofore
delivered to the Trustee for cancellation, including principal and interest due
or to become due to such date of maturity or date fixed for redemption, as the
case may be, and if the
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Corporation shall also pay or cause to be paid all other sums payable hereunder
by the Corporation, then after the date such moneys or Governmental Obligations,
as the case may be, are deposited with the Trustee, the obligations of the
Corporation under this Indenture shall cease to be of further effect except for
the provisions of Sections 2.3, 2.6, 2.8, 5.1, 5.2, 5.3, 9.7, 9.10 and 13.5
hereof that shall survive until such Debentures shall mature and be paid.
Thereafter, Sections 9.7 and 13.5 shall survive.
SECTION 13.3 DEPOSITED MONEYS TO BE HELD IN TRUST.
All monies or Governmental Obligations deposited with the Trustee
pursuant to Sections 13.1 or 13.2 shall be held in trust and shall be available
for payment as due, either directly or through any paying agent (including the
Corporation acting as its own paying agent), to the holders of the Debentures
for the payment or redemption of which such moneys or Governmental Obligations
have been deposited with the Trustee.
The Corporation shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the Government Obligations
deposited pursuant to Section 13.1 or the principal and interest received in
respect thereof, other than any such tax, fee or other charge which by law is
for the account of the holders of Outstanding Debentures.
SECTION 13.4 PAYMENT OF MONIES HELD BY PAYING AGENTS.
In connection with the satisfaction and discharge of this Indenture,
all monies or Governmental Obligations then held by any paying agent under the
provisions of this Indenture shall, upon demand of the Corporation, be paid to
the Trustee and thereupon such paying agent shall be released from all further
liability with respect to such monies or Governmental Obligations.
SECTION 13.5 REPAYMENT TO CORPORATION.
Any monies or Governmental Obligations deposited with any paying agent
or the Trustee, or then held by the Corporation in trust, for payment of
principal of or interest on the Debentures that are not applied but remain
unclaimed by the holders of such Debentures for at least two years after the
date upon which the principal of or interest on such Debentures shall have
respectively become due and payable, shall be repaid to the Corporation or
retained by Corporation, as the case may be, on May 31 of each year and shall be
discharged from such trust; and thereupon the paying agent and the Trustee shall
be released from all further liability with respect to such monies or
Governmental Obligations and the holder of any of the Debentures entitled to
receive such payment shall thereafter, as an unsecured general creditor, look
only to the Corporation for the payment thereof.
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ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 14.1 NO RECOURSE.
No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of the Debentures, or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, stockholder, officer or
director, past, present or future as such, of the Corporation or of any
predecessor or successor corporation, either directly or through the Corporation
or any such predecessor or successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that this Indenture and the
obligations issued hereunder are solely corporate obligations, and that no such
personal liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers or directors as such, of the Corporation
or of any predecessor or successor corporation, or any of them, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Debentures or implied therefrom; and that any and all such personal
liability of every name and nature, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims against,
every such incorporator, stockholder, officer or director as such, because of
the creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Debentures or implied therefrom, are hereby expressly waived and released as
a condition of, and as a consideration for, the execution of this Indenture and
the issuance of such Debentures.
ARTICLE XV
MISCELLANEOUS PROVISIONS
SECTION 15.1 EFFECT ON SUCCESSORS AND ASSIGNS.
All the covenants, stipulations, promises and agreements in this
Indenture contained by or on behalf of the Corporation shall bind its respective
successors and assigns, whether so expressed or not.
SECTION 15.2 ACTIONS BY SUCCESSOR.
Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Corporation shall and may be done and performed with like force and effect by
the corresponding board, committee or officer of any corporation that shall at
the time be the lawful sole successor of the Corporation.
SECTION 15.3 SURRENDER OF CORPORATION POWERS.
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The Corporation by instrument in writing executed by appropriate
authority of its Board of Directors and delivered to the Trustee may surrender
any of the powers reserved to the Corporation, and thereupon such power so
surrendered shall terminate both as to the Corporation, as the case may be, and
as to any successor corporation.
SECTION 15.4 NOTICES.
Except as otherwise expressly provided herein any notice or demand that
by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Debentures to or on the Corporation
may be given or served by being deposited first class postage prepaid in a
post-office letter box addressed (until another address is filed in writing by
the Corporation with the Trustee), as follows: Metropolitan Financial Corp.,
6001 Landerhaven Drive, Mayfield Heights, Ohio 44124, Attention: President. Any
notice, election, request or demand by the Corporation or any Debentureholder to
or upon the Trustee shall be deemed to have been sufficiently given or made, for
all purposes, if given or made in writing at the Corporate Trust Office of the
Trustee.
SECTION 15.5 GOVERNING LAW.
This Indenture and each Debenture shall be deemed to be a contract made
under the internal laws of the State of Delaware and for all purposes shall be
construed in accordance with the laws of said State without regard to conflicts
of law principles.
SECTION 15.6 TREATMENT OF DEBENTURES AS DEBT.
It is intended that the Debentures shall be treated as indebtedness and
not as equity for federal income tax purposes. The provisions of this Indenture
shall be interpreted to further this intention.
SECTION 15.7 COMPLIANCE CERTIFICATES AND OPINIONS.
(a) Upon any application, request or demand by the Corporation to the
Trustee to take any action under any of the provisions of this Indenture,
including but not limited to actions which relate to the authentication and
delivery of the Debentures and to the satisfaction and discharge of the
Indenture, the Corporation shall furnish to the Trustee an Officers' Certificate
stating that all conditions precedent provided for in this Indenture relating to
the proposed action (including any covenants compliance with which constitutes a
condition precedent) have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent have been
complied with.
(b) Each certificate or opinion of the Corporation provided for in this
Indenture with respect to compliance with a condition or covenant in this
Indenture (other than the certificates provided for in Section 6.3(d)) shall
include (1) a statement that the Person making such certificate
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or opinion has read such covenant or condition; (2) a brief statement as to the
nature and scope of the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are based; (3) a statement
that, in the opinion of such Person, he has made such examination or
investigation as, in the opinion of such Person, is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (4) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been complied with.
SECTION 15.8 PAYMENTS ON BUSINESS DAYS.
In any case where the date of maturity of interest or principal of any
Debenture or the date of redemption of any Debenture shall not be a Business
Day, then payment of interest or principal may (subject to Section 2.4) be made
on the next succeeding Business Day with the same force and effect as if made on
the nominal date of maturity or redemption, and no interest shall accrue for the
period after such nominal date.
SECTION 15.9 CONFLICT WITH TRUST INDENTURE ACT.
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 15.10 COUNTERPARTS.
This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
SECTION 15.11 SEPARABILITY.
In case any one or more of the provisions contained in this Indenture
or in the Debentures shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of the Debentures,
but this Indenture and the Debentures shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
SECTION 15.12 ASSIGNMENT.
The Corporation shall have the right at all times to assign any of its
respective rights or obligations under this Indenture to a direct or indirect
wholly owned Subsidiary of the Corporation, provided that, in the event of any
such assignment, the Corporation shall remain liable for all such obligations.
Subject to the foregoing, this Indenture is binding upon and inures to the
benefit of the parties hereto and their respective successors and assigns. This
Indenture may not otherwise be assigned by the parties hereto.
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SECTION 15.13 ACKNOWLEDGMENT OF RIGHTS.
The Corporation acknowledges that, with respect to any Debentures held
by the Trust or a trustee of the Trust, if the Property Trustee fails to enforce
its rights under this Indenture as the holder of the Debentures held as the
assets of the Trust, any holder of Preferred Securities may institute legal
proceedings directly against the Corporation to enforce such Property Trustee's
rights under this Indenture without first instituting any legal proceedings
against such Property Trustee or any other person or entity. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Corporation to pay interest or principal
on the Debentures on the date such interest or principal is otherwise payable
(or in the case of redemption, on the redemption date), the Corporation
acknowledges that a holder of Preferred Securities may directly institute a
proceeding for enforcement of payment to such holder of the principal of or
interest on the Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder on or after the
respective due date specified in the Debentures.
ARTICLE XVI
SUBORDINATION OF DEBENTURES
SECTION 16.1 AGREEMENT TO SUBORDINATE.
The Corporation covenants and agrees, and each holder of Debentures
issued hereunder by such holder's acceptance thereof likewise covenants and
agrees, that all Debentures shall be issued subject to the provisions of this
Article XVI; and each holder of a Debenture, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by such
provisions. The payment by the Corporation of the principal of and interest on
all Debentures issued hereunder shall, to the extent and in the manner
hereinafter set forth, be subordinated and junior in right of payment to the
prior payment in full of all Senior Debt and Subordinated Debt (collectively,
"Senior Indebtedness") to the extent provided herein, whether outstanding at the
date of this Indenture or thereafter incurred. No provision of this Article XVI
shall prevent the occurrence of any default or Event of Default hereunder.
SECTION 16.2 DEFAULT ON SENIOR DEBT OR SUBORDINATED DEBT.
In the event and during the continuation of any default by the
Corporation in the payment of principal, premium, interest or any other payment
due on any Senior Indebtedness of the Corporation, or in the event that the
maturity of any Senior Indebtedness of the Corporation has been accelerated
because of a default, then, in either case, no payment shall be made by the
Corporation with respect to the principal (including redemption payments) of or
interest on the Debentures. In the event that, notwithstanding the foregoing,
any payment shall be received by the Trustee when such payment is prohibited by
the preceding sentence of this Section 16.2, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture
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pursuant to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, but only to the extent that the holders of the
Senior Indebtedness (or their representative or representatives or a trustee)
notify the Corporation or the Trustee in writing within 90 days of such payment
of the amounts then due and owing on the Senior Indebtedness and only the
amounts specified in such notice to the Trustee shall be paid to the holders of
Senior Indebtedness.
SECTION 16.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
(a) Upon any payment by the Corporation or distribution of assets of
the Corporation of any kind or character, whether in cash, property or
securities, to creditors upon any liquidation, dissolution or winding-up,
reorganization, assignment for the benefit of creditors, marshaling of assets or
any bankruptcy, insolvency, debt restructuring or similar proceedings in
connection with any insolvency or bankruptcy proceeding of the Corporation, all
amounts due upon all Senior Indebtedness of the Corporation shall first be paid
in full, or payment thereof provided for in money in accordance with its terms,
before any payment is made by the Corporation on account of the principal or
interest on the Debentures; and upon any such liquidation, dissolution,
winding-up, reorganization, assignment for the benefit of creditors, marshaling
of assets, any payment by the Corporation, or distribution of assets of the
Corporation of any kind or character, whether in cash, property or securities,
to which the holders of the Debentures or the Trustee would be entitled to
receive from the Corporation, except for the provisions of this Article XVI,
shall be paid by the Corporation or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution,
or by the holders of the Debentures or by the Trustee under this Indenture if
received by them or it, directly to the holders of Senior Indebtedness of the
Corporation (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders, as calculated by the Corporation) or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay such Senior Indebtedness in full, in money or money's worth,
after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness, before any payment or distribution is made
to the holders of Debentures or to the Trustee.
(b) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Corporation of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received by
the Trustee before all Senior Indebtedness of the Corporation is paid in full,
or provision is made for such payment in money in accordance with its terms,
such payment or distribution shall be held in trust for the benefit of and shall
be paid over or delivered to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated by
the Corporation, for application to the payment of all Senior Indebtedness of
the Corporation, as the case may be, remaining unpaid to the extent necessary to
pay such Senior Indebtedness in full in money in
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accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the benefit of the holders of such Senior Indebtedness.
(c) For purposes of this Article XVI, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Corporation as
reorganized or readjusted, or securities of the Corporation or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this Article
XVI with respect to the Debentures to the payment of all Senior Indebtedness of
the Corporation, as the case may be, that may at the time be outstanding,
provided that (i) such Senior Indebtedness is assumed by the new corporation, if
any, resulting from any such reorganization or readjustment; and (ii) the rights
of the holders of such Senior Indebtedness are not, without the consent of such
holders, altered by such reorganization or readjustment. The consolidation of
the Corporation with, or the merger of the Corporation into, another corporation
or the liquidation or dissolution of the Corporation following the conveyance or
transfer of its property as an entirety, or substantially as an entirety, to
another corporation upon the terms and conditions provided for in Article XII
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section 16.3 if such other corporation shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the conditions
stated in Article XII. Nothing in Section 16.2 or in this Section 16.3 shall
apply to claims of, or payments to, the Trustee under or pursuant to Section
9.7.
SECTION 16.4 SUBROGATION.
(a) Subject to the payment in full of all Senior Indebtedness of the
Corporation, the rights of the holders of the Debentures shall be subrogated to
the rights of the holders of such Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Corporation, as the case
may be, applicable to such Senior Indebtedness until the principal of and
interest on the Debentures shall be paid in full; and for the purposes of such
subrogation, no payments or distributions to the holders of such Senior
Indebtedness of any cash, property or securities to which the holders of the
Debentures or the Trustee would be entitled except for the provisions of this
Article XVI, and no payment over pursuant to the provisions of this Article XVI
to or for the benefit of the holders of such Senior Indebtedness by holders of
the Debentures or the Trustee, shall, as between the Corporation, its creditors
other than holders of Senior Indebtedness of the Corporation, and the holders of
the Debentures, be deemed to be a payment by the Corporation to or on account of
such Senior Indebtedness. It is understood that the provisions of this Article
XVI are and are intended solely for the purposes of defining the relative rights
of the holders of the Debentures, on the one hand, and the holders of such
Senior Indebtedness on the other hand.
(b) Nothing contained in this Article XVI or elsewhere in this
Indenture or in the Debentures is intended to or shall impair, as between the
Corporation, its creditors (other than the holders of Senior Indebtedness of the
Corporation), and the holders of the Debentures, the obligation of the
Corporation, which is absolute and unconditional, to pay to the holders of the
Debentures the principal of and interest on the Debentures as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the holders of the
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Debentures and creditors of the Corporation, as the case may be, other than the
holders of Senior Indebtedness of the Corporation, nor shall anything herein or
therein prevent the Trustee or the holder of any Debenture from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article XVI of the holders
of such Senior Indebtedness in respect of cash, property or securities of the
Corporation, as the case may be, received upon the exercise of any such remedy.
(c) Upon any payment or distribution of assets of the Corporation
referred to in this Article XVI, the Trustee, subject to the provisions of
Article IX, and the holders of the Debentures shall be entitled to conclusively
rely upon any order or decree made by any court of competent jurisdiction in
which such dissolution, winding-up, liquidation or reorganization proceedings
are pending, or a certificate of the receiver, trustee in bankruptcy,
liquidation trustee, agent or other Person making such payment or distribution,
delivered to the Trustee or to the holders of the Debentures, for the purposes
of ascertaining the Persons entitled to participate in such distribution, the
holders of Senior Indebtedness and other indebtedness of the Corporation, as the
case may be, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
XVI.
SECTION 16.5 TRUSTEE TO EFFECTUATE SUBORDINATION.
Each holder of Debentures by such holder's acceptance thereof
authorizes and directs the Trustee on such holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article XVI and appoints the Trustee such holder's attorney-in-fact for any
and all such purposes.
SECTION 16.6 NOTICE BY THE CORPORATION.
(a) The Corporation shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Corporation that would prohibit
the making of any payment of monies to or by the Trustee in respect of the
Debentures pursuant to the provisions of this Article XVI. Notwithstanding the
provisions of this Article XVI or any other provisions of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts that
would prohibit the making of any payment of monies to or by the Trustee in
respect of the Debentures pursuant to the provisions of this Article XVI, unless
and until a Responsible Officer of the Trustee shall have received written
notice thereof from the Corporation or a holder or holders of Senior
Indebtedness or from any trustee therefor, and before the receipt of any such
written notice, the Trustee, subject to the provisions of Section 9.1, shall be
entitled in all respects to assume that no such facts exist; provided, however,
that if the Trustee shall not have received the notice provided for in this
Section 16.6 at least two Business Days prior to the date upon which by the
terms hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of or interest on any Debenture), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
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purposes for which they were received, and shall not be affected by any notice
to the contrary that may be received by it within two Business Days prior to
such date.
(b) The Trustee, subject to the provisions of Section 9.1, shall be
entitled to conclusively rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior Indebtedness of the
Corporation (or a trustee on behalf of such holder) to establish that such
notice has been given by a holder of such Senior Indebtedness or a trustee on
behalf of any such holder or holders. In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of such Senior Indebtedness to participate in any payment or
distribution pursuant to this Article XVI, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of such Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article XVI, and, if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 16.7 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS.
(a) The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XVI in respect of any Senior Indebtedness at
any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder. The Trustee's right to compensation and reimbursement
of expenses as set forth in Section 9.7 shall not be subject to the
subordination provisions of this Article XVI.
(b) With respect to the holders of Senior Indebtedness of the
Corporation, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article XVI, and
no implied covenants or obligations with respect to the holders of such Senior
Indebtedness shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to have any fiduciary duty to the holders of such Senior
Indebtedness and, subject to the provisions of Section 9.1, the Trustee shall
not be liable to any holder of such Senior Indebtedness if it shall in good
faith mistakenly pay over or deliver to holders of Debentures, the Corporation
or any other Person money or assets to which any holder of such Senior
Indebtedness shall be entitled by virtue of this Article XVI or otherwise.
SECTION 16.8 SUBORDINATION MAY NOT BE IMPAIRED.
(a) No right of any present or future holder of any Senior Indebtedness
of the Corporation to enforce subordination as herein provided shall at any time
in any way be prejudiced or impaired by any act or failure to act on the part of
the Corporation or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Corporation with the terms, provisions
and covenants of this Indenture, regardless of any knowledge thereof that any
such holder may have or otherwise be charged with.
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(b) Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Corporation may, at any
time and from time to time, without the consent of or notice to the Trustee or
the holders of the Debentures, without incurring responsibility to the holders
of the Debentures and without impairing or releasing the subordination provided
in this Article XVI or the obligations hereunder of the holders of the
Debentures to the holders of such Senior Indebtedness, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend
or supplement in any manner such Senior Indebtedness or any instrument
evidencing the same or any agreement under which such Senior Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release
any Person liable in any manner for the collection of such Senior Indebtedness;
and (iv) exercise or refrain from exercising any rights against the Corporation
and any other Person.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed all as of the day and year first above written.
METROPOLITAN FINANCIAL CORP.
By: _______________________________
Name: David G. Lodge
Title: President
WILMINGTON TRUST COMPANY, AS TRUSTEE
By: _______________________________
Name: _______________________________
Title: _______________________________
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EXHIBIT A
FACE OF DEBENTURE
NO. $__________
CUSIP NO. ___________
METROPOLITAN FINANCIAL CORP.
_____% SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE JUNE 30, 2028
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
METROPOLITAN FINANCIAL CORP., an Ohio corporation (the "Corporation"),
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to WILMINGTON TRUST
COMPANY, as Property Trustee for Metropolitan Capital Trust I, or registered
assigns, the principal sum of Dollars ($_____________) on June 30, 2028 (the
"Stated Maturity"), and to pay interest on said principal sum from _________,
1998, or from the most recent interest payment date (each such date, an
"Interest Payment Date") to which interest has been paid or duly provided for,
quarterly (subject to deferral as set forth herein) in arrears on June 30,
September 30, December 31 and March 31 of each year commencing June 30, 1998, at
the rate of _____% per annum until the principal hereof shall have become due
and payable, and on any overdue principal and (without duplication) on any
overdue installment of interest at the rate of _____% per annum compounded
quarterly. The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year of twelve 30-day months and in
accordance with the other provisions of the Indenture. In the event that any
date on which interest is otherwise payable on this Debenture is not a Business
Day, then payment of interest payable on such date shall be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the preceding Business
Day, in each case with the same force and effect as if made on such date. The
interest installment payable in respect of any Interest Payment Date shall, as
provided in the Indenture, be paid to the person in whose name this Debenture
(or one or more Predecessor Debentures, as defined in said Indenture) is
registered at the close of business on the Regular Record Date for such interest
installment, which shall be the Business Day next preceding such Interest
Payment Date unless otherwise provided in the Indenture. Any such interest
installment not punctually paid or duly provided for shall forthwith cease to be
payable to the registered holders on such Regular Record Date and may be paid to
the Person in whose name this Debenture (or one or more Predecessor Debentures)
is registered at the
<PAGE> 70
close of business on a special record date to be fixed by the Trustee for the
payment of such defaulted interest, notice whereof shall be given to the
registered holders of the Debentures not less than 10 days prior to such special
record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Debentures may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture. The principal of and the
interest on this Debenture shall be payable at the office or agency of the
Trustee maintained for that purpose in any coin or currency of the United States
of America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Corporation by check mailed to the registered holder at such
address as shall appear in the Debenture Register or by wire transfer to an
account maintained by the holder as specified in the Debenture Register provided
that the holder provides proper wire transfer instructions by the Regular Record
Date. Notwithstanding the foregoing, so long as the holder of this Debenture is
the Property Trustee, the payment of the principal of and interest on this
Debenture shall be made at such place and to such account as may be designated
by the Property Trustee.
The indebtedness evidenced by this Debenture is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Debenture is issued subject
to the provisions of the Indenture with respect thereto. Each holder of this
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions; (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided; and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
This Debenture shall be deemed to be a contract made under the laws of
the State of Delaware and for all purposes shall be construed in accordance with
the laws of Delaware without regard to conflicts of laws principles.
The provisions of this Debenture are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
<PAGE> 71
IN WITNESS WHEREOF, the Corporation has caused this instrument to be
executed.
METROPOLITAN FINANCIAL CORP.
By: _________________________
Name: David G. Lodge
Title: President
Attest: ________________________
By: ________________________
Name: ________________________
Title: ________________________
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the
within-mentioned Indenture.
Dated:
WILMINGTON TRUST COMPANY as or Authentication Agent
Trustee
By: __________________________ By: ___________________
Authorized Signatory
<PAGE> 72
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfer this Security
certificate to:
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert assignees social security or tax identification number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
______________ agent to transfer this Security certificate on the books
of the Corporation. The agent may substitute another to act for him or her.
Date:______________________
Signature:___________________________________________________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:_________________________________________________
________________________________
1. Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities and
Exchange Act of 1934, as amended.
2
<PAGE> 73
REVERSE OF DEBENTURE
______% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
(CONTINUED )
This Debenture is one of the subordinated debentures of the Corporation
(herein sometimes referred to as the "Debentures"), specified in the Indenture,
all issued or to be issued under and pursuant to an Indenture dated as of
___________, 1998 (the "Indenture") duly executed and delivered between the
Corporation and Wilmington Trust Company, as Trustee (the "Trustee"), to which
Indenture reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Trustee, the
Corporation and the holders of the Debentures. The Debentures are limited in
aggregate principal amount as specified in the Indenture.
The Corporation has the right to redeem this Debenture at the option of
the Corporation, without premium or penalty (i) at any time on or after
_________, 2003 in whole or in part, or (ii) at any time in certain
circumstances in whole (but not in part) upon the occurrence of a Special Event,
in each case at a Redemption Price equal to 100% of the principal amount plus
any accrued but unpaid interest, to the date of such redemption (the "Redemption
Price"). The Redemption Price shall be paid prior to 12:00 noon, New York time,
on the date of such redemption or at such earlier time as the Corporation
determines. Any redemption pursuant to this paragraph shall be made upon not
less than 30 days nor more than 60 days notice, at the Redemption Price. If the
Debentures are only partially redeemed by the Corporation, the Debentures shall
be redeemed pro rata or by lot or by any other method the Trustee deems fair and
appropriate.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures for the unredeemed portion hereof shall be issued in the
name of the holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Corporation and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time Outstanding, to execute
supplemental indentures for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or of modifying in any manner the rights of the holders
of the Debentures; provided, however, that no such supplemental indenture shall
(i) extend the fixed maturity of the Debentures, or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon
(except for deferrals of interest as described below), without at a minimum the
consent of the holder of each Debenture so affected; or (ii) reduce the
aforesaid percentage of Debentures, the holders of which are required to consent
to any such supplemental indenture, without at a minimum the consent of the
holders of each Debenture then Outstanding and affected thereby. The Indenture
also contains provisions permitting the holders of a majority in aggregate
<PAGE> 74
principal amount of the Debentures at the time Outstanding, on behalf of all of
the holders of the Debentures, to waive any past default in the performance of
any of the covenants contained in the Indenture and its consequences, with
certain exceptions including certain defaults in the payment of the principal of
or interest on any of the Debentures. Any such consent or waiver by the
registered holder of this Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such holder and upon all future
holders and owners of this Debenture and of any Debenture issued in exchange
therefor or in place thereof (whether by registration of transfer or otherwise
or whether any notation of such consent or waiver is made upon this Debenture).
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Corporation,
which is absolute and unconditional, to pay the principal and interest on this
Debenture at the time and place and at the rate and in the money herein
prescribed.
So long as no Event of Default has occurred and is continuing, the
Corporation shall have the right at any time during the term of the Debentures
and from time to time to extend the interest payment period of such Debentures
for a period not exceeding 20 consecutive quarters (an "Extended Interest
Payment Period"), at the end of which period the Corporation shall pay all
interest then accrued and unpaid (together with interest thereon at the same
rate and compounded quarterly to the extent that payment of such interest is
enforceable under applicable law). Before the termination of any such Extended
Interest Payment Period, the Corporation may further extend such Extended
Interest Payment Period, provided that such Extended Interest Payment Period as
so extended together with all such further extensions thereof shall not exceed
20 consecutive quarters and no Extended Interest Payment Period shall extend
beyond the Stated Maturity. At the termination of any such Extended Interest
Payment Period and upon the payment of all accrued and unpaid interest and any
additional interest then due thereon, the Corporation may commence a new
Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations therein
set forth, this Debenture is transferable by the registered holder hereof on the
Debenture Register of the Corporation, upon surrender of this Debenture for
registration of transfer at the office or agency of the Trustee accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Corporation or the Trustee duly executed by the registered holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Debentures of
authorized denominations and for the same aggregate principal amount shall be
issued to the designated transferee or transferees. No service charge shall be
made for any such transfer, but the Corporation may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto subject to certain exceptions.
Prior to due presentment for registration of transfer of this
Debenture, the Corporation, the Trustee, any paying agent and the Debenture
Registrar may deem and treat the registered holder hereof as the absolute owner
hereof (whether or not this Debenture shall be overdue and notwithstanding any
notice of ownership or writing hereon made by anyone other than the Debenture
2
<PAGE> 75
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and interest due hereon and for all other purposes, and neither
the Corporation nor the Trustee nor any paying agent nor any Debenture Registrar
shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect of the Indenture, against any incorporator, stockholder, officer or
director, past, present or future, as such, of the Corporation or any
predecessor or successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of the
consideration for the issuance hereof, expressly waived and released. The
Debentures are issuable only in registered form without coupons in denominations
of $10 and any integral multiple thereof.
All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Note is unsecured by any collateral, including the assets of the
Corporation or any of its subsidiaries or other affiliates.
3
<PAGE> 1
Exhibit 4.3
CERTIFICATE OF TRUST OF
METROPOLITAN CAPITAL TRUST I
----------------------------
THIS Certificate of Trust of Metropolitan Capital Trust I (the
"Trust"), dated April 7, 1998, is being duly executed and filed by
Wilmington Trust Company, a Delaware banking corporation, as trustee, to
form a business trust under the Delaware Business Trust Act (12 Del. C.
ss.3801 et seq.).
1. NAME. The name of the business trust formed hereby is
Metropolitan Capital Trust I.
2. DELAWARE TRUSTEE. The name and business address of the
trustee of the Trust in the State of Delaware is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware,
19890-0001, Attention:
Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be
effective upon filing.
IN WITNESS WHEREOF, the undersigned, being the sole
trustee of the Trust, has executed this Certificate of Trust as of the date
first-above written.
WILMINGTON TRUST COMPANY,
as trustee
By: /s/ James P. Lawler
---------------------------------
Name: James P. Lawler
Title: Vice President
<PAGE> 1
Exhibit 4.4
AMENDED AND RESTATED TRUST AGREEMENT
AMONG
METROPOLITAN FINANCIAL CORP., AS DEPOSITOR
WILMINGTON TRUST COMPANY, AS PROPERTY TRUSTEE
AND
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF __________, 1998
METROPOLITAN CAPITAL TRUST I
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
ARTICLE I DEFINED TERMS......................................................................3
Section 101. Definitions........................................................................3
ARTICLE II ESTABLISHMENT OF THE TRUST........................................................12
Section 201. Name..............................................................................12
Section 202. Office of the Delaware Trustee; Principal Place of Business.......................12
Section 203. Initial Contribution of Trust Property; Organizational Expenses...................12
Section 204. Issuance of the Preferred Securities..............................................12
Section 205. Issuance of The Common Securities; Subscription And
Purchase of Debentures..........................................................13
Section 206. Declaration of Trust..............................................................13
Section 207. Authorization to Enter Into Certain Transactions..................................14
Section 208. Assets of Trust...................................................................18
Section 209. Title to Trust Property...........................................................18
ARTICLE III PAYMENT ACCOUNT...................................................................18
Section 301. Payment Account...................................................................18
ARTICLE IV DISTRIBUTIONS; REDEMPTION.........................................................19
Section 401. Distributions.....................................................................19
Section 402. Redemption........................................................................20
Section 403. Subordination of Common Securities................................................22
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
PAGE
----
Section 404. Payment Procedures................................................................23
Section 405. Tax Returns And Reports...........................................................23
Section 406. Payment of Taxes, Duties, Etc. of The Trust.......................................23
Section 407. Payments Under Indenture..........................................................23
ARTICLE V TRUST SECURITIES CERTIFICATES.....................................................24
Section 501. Initial Ownership.................................................................24
Section 502. The Trust Securities Certificates.................................................24
Section 503. Execution And Delivery of Trust Securities Certificates...........................24
Section 503A. Global Preferred Securities.......................................................25
Section 504. Registration of Transfer and Exchange of Preferred
Securities Certificates.........................................................27
Section 505. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates................28
Section 506. Persons Deemed Securityholders....................................................29
Section 507. Access to List of Securityholders' Names And Addresses............................29
Section 508. Maintenance of Office or Agency...................................................30
Section 509. Appointment of Paying Agent.......................................................30
Section 510. Ownership of Common Securities by Depositor.......................................31
Section 511. Notices to Clearing Agency........................................................31
Section 511A. Definitive Preferred Securities Certificate And Temporary
Preferred Securities............................................................31
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
Section 512. Rights of Securityholders.........................................................32
Section 513. CUSIP Numbers.....................................................................32
ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING.........................................33
Section 601. Limitations on Voting Rights......................................................33
Section 602. Notice of Meetings................................................................34
Section 603. Meetings of Preferred Securityholders.............................................34
Section 604. Voting Rights.....................................................................35
Section 605. Proxies, Etc......................................................................35
Section 606. Securityholder Action by Written Consent..........................................35
Section 607. Record Date For Voting And Other Purposes.........................................35
Section 608. Acts of Securityholders...........................................................35
Section 609. Inspection of Records.............................................................36
ARTICLE VII REPRESENTATIONS AND WARRANTIES....................................................37
Section 701. Representations And Warranties of The Property Trustee............................37
Section 702. Representations And Warranties of Depositor.......................................38
ARTICLE VIII TRUSTEES..........................................................................38
Section 801. Certain Duties and Responsibilities...............................................38
Section 802. Certain Notices...................................................................40
Section 803. Certain Rights of Property Trustee................................................40
Section 804. Not Responsible For Recitals or Issuance of Securities............................42
</TABLE>
-iii-
<PAGE> 5
<TABLE>
PAGE
----
<S> <C> <C>
Section 805. May Hold Securities...............................................................42
Section 806. Compensation; Indemnity; Fees.....................................................43
Section 807. Corporate Property Trustee Required; Eligibility of Trustees......................44
Section 808. Conflicting Interests.............................................................44
Section 809. Co-trustees And Separate Trustee..................................................44
Section 810. Resignation And Removal; Appointment of Successor.................................46
Section 811. Acceptance of Appointment by Successor............................................47
Section 812. Merger, Conversion, Consolidation or Succession to Business.......................48
Section 813. Preferential Collection of Claims Against Depositor or Trust......................48
Section 814. Reports by Property Trustee.......................................................48
Section 815. Reports to The Property Trustee...................................................49
Section 816. Evidence of Compliance With Conditions Precedent..................................49
Section 817. Number of Trustees................................................................49
Section 818. Delegation of Power...............................................................50
Section 819. Voting............................................................................50
ARTICLE IX DISSOLUTION, LIQUIDATION AND MERGER...............................................50
Section 901. Dissolution Upon Expiration Date..................................................50
Section 902. Early Dissolution.................................................................51
Section 903. Termination.......................................................................51
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
Section 904. Liquidation.......................................................................51
Section 905. Mergers, Consolidations, Amalgamations or Replacements of
The Trust.......................................................................53
ARTICLE X MISCELLANEOUS PROVISIONS..........................................................54
Section 1001. Limitation of Rights of Securityholders...........................................54
Section 1002. Amendment.........................................................................54
Section 1003. Separability......................................................................55
Section 1004. Governing Law.....................................................................55
Section 1005. Payments Due on Non-business Day..................................................55
Section 1006. Successors........................................................................55
Section 1007. Headings..........................................................................55
Section 1008. Reports, Notices And Demands......................................................55
Section 1009. Agreement Not to Petition.........................................................57
Section 1010. Trust Indenture Act; Conflict With Trust Indenture Act............................57
Section 1011. Acceptance of Terms of Trust Agreement, Guarantee
And Indenture...................................................................58
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depository Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Expense Agreement
Exhibit E Form of Preferred Securities Certificate
</TABLE>
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<PAGE> 7
CROSS-REFERENCE TABLE
<TABLE>
<S> <C> <C>
Section of Section of Amended
Trust Indenture Act and Restated
of 1939, as amended Trust Agreement
------------------- ---------------
310(a)(1) 807
310(a)(2) 807
310(a)(3) 807
310(a)(4) 207(a)(ii)
310(a)(5) Not Applicable
310(b) 808
311(a) 813
311(b) 813
312(a) 507
312(b) 507
312(c) 507
313(a) 814(a)
313(b) 814(a)
313(c) 814(a)
313(d) 814(b)
314(a)(1) 815
314(a)(2) 815
314(a)(3) 815
314(a)(4) 816
314(b) Not Applicable
314(c)(1) 816
314(c)(2) 816
314(c)(3) Not Applicable
314(d) Not Applicable
314(e) 101,816
314(f) Not Applicable
315(a) 801, 803
315(b) 802
315(c) 801
315(d) 801, 803
315(e) Not Applicable
316(a)(1) Not Applicable
316(a)(2) Not Applicable
316(b) 1002(c)
316(c) 607
</TABLE>
<PAGE> 8
317(a)(1) Not Applicable
317(a)(2) Not Applicable
317(b) 509
318(a) 1010
Note: This Cross-Reference Table does not constitute part of this Agreement and
shall not affect any interpretation of any of its terms or provisions.
<PAGE> 9
AMENDED AND RESTATED TRUST AGREEMENT
AMENDED AND RESTATED TRUST AGREEMENT, dated as of __________, 1998,
among (i) Metropolitan Financial Corp., an Ohio corporation (including any
successors or assigns, the "Depositor"), (ii) Wilmington Trust Company, a
Delaware banking corporation, as property trustee (in such capacity, the
"Property Trustee" and, in its separate corporate capacity and not in its
capacity as Property Trustee, the "Bank"), (iii) Judith Z. Adam, an individual,
and David W. Gifford, an individual, each of whose address is c/o Metropolitan
Financial Corp., 6001 Landerhaven Drive, Mayfield Heights, Ohio 44124 (each an
"Administrative Trustee" and collectively the "Administrative Trustees") (the
Property Trustee and the Administrative Trustees referred to collectively as the
"Trustees"), and (v) the several Holders (as hereinafter defined).
RECITALS
WHEREAS, the Depositor and the Property Trustee have heretofore duly
declared and established a business trust, Metropolitan Capital Trust I,
pursuant to the Delaware Business Trust Act by the entering into of that certain
Trust Agreement, dated as of April __, 1998 (the "Original Trust Agreement"),
and by the execution and filing by the Property Trustee, the Depositor and the
Administrative Trustees with the Secretary of State of the State of Delaware of
the Certificate of Trust, filed on April __, 1998, the form of which is attached
as Exhibit A; and
WHEREAS, the Depositor and the Trustees desire to amend and restate the
Original Trust Agreement in its entirety as set forth herein to provide for,
among other things, (i) the issuance of the Common Securities (as defined
herein) by the Trust (as defined herein) to the Depositor; (ii) the issuance and
sale of the Preferred Securities (as defined herein) by the Trust pursuant to
the Underwriting Agreement (as defined herein); and (iii) the acquisition by the
Trust from the Depositor of all of the right, title and interest in the
Debentures (as defined herein).
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each party for the benefit of the
other parties and for the benefit of the Securityholders (as defined herein)
hereby amends and restates the Original Trust Agreement in its entirety and
agrees as follows.
-2-
<PAGE> 10
ARTICLE I
DEFINED TERMS
SECTION 101. DEFINITIONS.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article I have the meanings assigned to
them in this Article I and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Trust Agreement; and
(d) the words "herein", "hereof and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 608.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of additional interest
accrued on interest in arrears and paid by the Depositor on a Like Amount of
Debentures for such period.
"Additional Interest" has the meaning specified in Section 1.1 of the
Indenture.
"Administrative Trustee" means each of the Persons identified as an
"Administrative Trustee" in the preamble to this Trust Agreement solely in such
Person's capacity as Administrative Trustee of the Trust formed and continued
hereunder and not in such Person's individual capacity, or such Administrative
Trustee's successor in interest in such capacity, or any successor trustee
appointed as herein provided.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person; (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person; (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person; (d) a partnership in which the specified person is a
general partner; (e) any officer or director of the specified Person; and (f) if
the
-3-
<PAGE> 11
specified Person is an individual, any entity of which the specified Person is
an executive officer, director or general partner.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Preferred Security or beneficial interest
therein, the rules and procedures of the Depositary for such Preferred Security,
in each case to the extent applicable to such transaction and as in effect from
time to time.
"Bank" has the meaning specified in the Preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in
the premises adjudging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking liquidation or reorganization of or in respect
of such Person under the United States Bankruptcy Code of 1978, as amended, or
any other similar applicable federal or state law, and the continuance of any
such decree or order unvacated and unstayed for a period of 90 days; or the
commencement of an involuntary case under the United States Bankruptcy Code of
1978, as amended, in respect of such Person, which shall continue undismissed
for a period of 90 days or entry of an order for relief in such case and such
order shall have remained in force unvacated and unstayed for a period of 90
days; or the entry of a decree or order of a court having jurisdiction in the
premises for the appointment on the ground of insolvency or bankruptcy of a
receiver, custodian, liquidator, trustee or assignee in bankruptcy or insolvency
of such Person or of its property, or for the winding up or liquidation of its
affairs, and such decree or order shall have remained in force unvacated and
unstayed for a period of 60 days; or
(b) the institution by such Person of proceedings to be adjudicated a
voluntary bankrupt, or the consent by such Person to the filing of a bankruptcy
proceeding against it, or the filing by such Person of a petition or answer or
consent seeking liquidation or reorganization under the United States Bankruptcy
Code of 1978, as amended, or other similar applicable Federal or State law, or
the consent by such Person to the filing of any such petition or to the
appointment on the ground of insolvency or bankruptcy of a receiver or custodian
or liquidator or trustee or assignee in bankruptcy or insolvency of such Person
or of its property, or the making by such person of a general assignment for the
benefit of creditors.
"Bankruptcy Laws" has the meaning specified in Section 1009.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board of Directors, or such committee of the Board of
Directors or officers of the Depositor to which authority to act on behalf of
the Board of Directors has been delegated, and to be in full force and effect on
the date of such certification, and delivered to the appropriate Trustee.
-4-
<PAGE> 12
"Business Day" means any day other than a Saturday or Sunday or a day
on which banking institutions in the City of New York are authorized or required
by law, executive order or regulation to close, or a day on which the principal
Corporate Trust Office of the Property Trustee or of the Debenture Trustee is
closed for business.
"Capital Treatment Event" has the meaning specified in Section 1.1 of
the Indenture.
"Certificate Depositary Agreement" means the agreement among the Trust,
the Depositor and DTC, as the initial Clearing Agency, dated as of the Closing
Date, substantially in the form attached as Exhibit B, as the same may be
amended and supplemented from time to time.
"Certificate of Trust" means the certificate of trust filed with the
Secretary of State of the State of Delaware with respect to the Trust, as
amended or restated from time to time.
"Change in 1940 Act Law" shall have the meaning set forth in the
definition of "Investment Company Event."
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act. DTC shall be the initial
Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time Clearing Agency
effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, or any successor
statute, in each case as amended from time to time.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Security" means an undivided beneficial interest in the assets
of the Trust, having a Liquidation Amount of $10 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein. Common Securities rank pari
passu with the Preferred Securities; provided, however, that upon the occurrence
of an Event of Default, the right of holders of Common Securities to payment in
respect of (i) distributions, and (ii) payments upon liquidation, redemption and
otherwise are subordinated to the right of holders of Preferred Securities.
-5-
<PAGE> 13
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit C.
"Corporate Trust Office" means (i) when used with respect to the
Property Trustee, the principal corporate trust office of the Property Trustee
located in Wilmington, Delaware, and (ii) when used with respect to the
Debenture Trustee, the principal corporate trust office of the Debenture Trustee
located in Wilmington, Delaware.
"Debenture Event of Default" means an "Event of Default" as defined in
Section 7.1 of the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Tax Event" means a "Tax Event" as specified in Section 1.1
of the Indenture.
"Debenture Trustee" means Wilmington Trust Company, a banking
corporation organized under the laws of the State of Delaware, and any successor
thereto, as trustee under the Indenture.
"Debentures" means the aggregate principal amount of the Depositor's
____% Junior Subordinated Deferrable Interest Debentures due 2028, issued
pursuant to the Indenture.
"Definitive Preferred Securities Certificates" means the Preferred
Securities Certificates issued in certificated, fully registered form
(non-global) as provided in Section 503A.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Delaware Code Sections 3801 et seq. as it may be amended from
time to time.
"Depositor" has the meaning specified in the Preamble to this Trust
Agreement.
"Depositary" means with respect any Preferred Securities issuable or
issued in whole or in part in the form of one or more Global Preferred
Securities, the Person designated as Depositary by the Depositor.
"Distribution Date" has the meaning specified in Section 401(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 401(b).
"DTC" means The Depository Trust Company.
-6-
<PAGE> 14
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust or the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such default
for a period of 30 days; or
(c) default by the Trust or the Property Trustee in the payment of any
Redemption Price of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in this Trust Agreement (other than a
covenant or warranty a default in the performance of which or the breach of
which is dealt with in clause (b) or (c), above) and continuation of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Trustee or Trustees by the
Holders of at least 25% in aggregate Liquidation Amount of the Outstanding
Preferred Securities a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor property Trustee
within 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, or any
successor statute, in each case as amended from time to time.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 901.
"Extended Interest Payment Period" has the meaning specified in Section
4.1 of the Indenture.
"Global Preferred Securities Certificate" means a Preferred Securities
Certificate evidencing ownership of Global Preferred Securities.
"Global Preferred Security" means a Preferred Security, the ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 503A.
-7-
<PAGE> 15
"Guarantee" means the Preferred Securities Guarantee Agreement executed
and delivered by the Depositor, as guarantor, and Wilmington Trust Company, as
Preferred Guarantee Trustee, contemporaneously with the execution and delivery
of this Trust Agreement, for the benefit of the Holders of the Preferred
Securities, as amended from time to time.
"Indenture" means the Indenture, dated as of ___________, 1998 between
the Depositor and the Debenture Trustee, as trustee, as amended or supplemented
from time to time.
"Investment Company Act," means the Investment Company Act of 1940, or
any successor statute, in each case as amended from time to time.
"Investment Company Event" has the meaning specified in Section 1.1 of
the Indenture.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Debentures to be contemporaneously redeemed in accordance with the
Indenture and the proceeds of which shall be used to pay the Redemption Price of
such Trust Securities; and (b) with respect to a distribution of Debentures to
Holders of Trust Securities in connection with a termination or liquidation of
the Trust, Debentures having a principal amount equal to the Liquidation Amount
of the Trust Securities of the Holder to whom such Debentures are distributed.
Each Debenture distributed pursuant to clause (b) above shall carry with it
accumulated interest in an amount equal to the accumulated and unpaid interest
then due on such Debentures.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be
distributed to Holders of Trust Securities in connection with a dissolution and
liquidation of the Trust pursuant to Section 904(a).
"Liquidation Distribution" has the meaning specified in Section 904(d).
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, President or a Vice President and by the Chief Financial Officer, the
Treasurer or an Assistant Treasurer or the Controller or an Assistant Controller
or the Secretary or an Assistant Secretary, of the Depositor, and delivered to
the appropriate Trustee. One of the officers signing an Officers' Certificate
given pursuant to Section 314(a)(4) of the Trust Indenture Act shall be the
principal executive, financial or accounting officer of the Depositor. Any
Officers' Certificate delivered with respect to compliance with a condition or
covenant provided for in this Trust Agreement shall include:
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(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer upon which the statements contained in
the certificate are based in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means an opinion in writing of legal counsel, who
may be counsel for the Trust, the Property Trustee, or the Depositor, but not an
employee of any thereof, and who shall be reasonably acceptable to the Property
Trustee.
"Original Trust Agreement" has the meaning specified in the Recitals to
this Trust Agreement.
"Outstanding", when used with respect to Preferred Securities, means,
as of the date of determination, all Preferred Securities theretofore executed
and delivered under this Trust Agreement, except:
(a) Preferred Securities theretofore canceled by the Property Trustee
or delivered to the Property Trustee for cancellation;
(b) Preferred Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee or any
Paying Agent for the Holders of such Preferred Securities; provided that, if
such Preferred Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Trust Agreement; and
(c) Preferred Securities which have been paid or in exchange for or in
lieu of which other Preferred Securities have been executed and delivered
pursuant to Sections 504, 505 and 511A; provided, however, that in determining
whether the Holders of the requisite Liquidation Amount of the Outstanding
Preferred Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Preferred Securities owned by the
Depositor, any Trustee or any Affiliate of the Depositor or any Trustee shall be
disregarded and deemed not to be Outstanding, except that (a) in determining
whether any Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Preferred Securities
that such Trustee actually knows to be so owned shall be so disregarded and (b)
the foregoing shall not
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apply at any time when all of the outstanding Preferred Securities are owned by
the Depositor, one or more of the Trustees and/or any such Affiliate. Preferred
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Administrative
Trustees the pledgee's right so to act with respect to such Preferred Securities
and that the pledgee is not the Depositor or any Affiliate of the Depositor.
"Owners" means each Person who is the beneficial owner of a beneficial
interest in a Global Preferred Security as reflected in the records of the
Clearing Agency or, if a Clearing Agency participant is not the Owner, then as
reflected in the records of a Person maintaining an account with such Clearing
Agency (directly or indirectly, in accordance with the rules of such Clearing
Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 509 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its trust
department for the benefit of the established pursuant to Section 301 and
Securityholders in which all amounts paid in respect of the Debentures shall be
held and from which the Property Trustee shall make payments to the
Securityholders in accordance with Sections 401 and 402 or any other applicable
provisions hereof.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the
assets of the Trust, having a Liquidation Amount of $10 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Preferred Securities Certificate", means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached as Exhibit
E.
"Property Trustee" means the Person identified as the "Property
Trustee," in the Preamble to this Trust Agreement solely in its capacity as
Property Trustee of the Trust and not in its individual capacity, or its
successor in interest in such capacity, or any successor property trustee
appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated maturity
of the Debentures shall be a Redemption Date for a Like Amount of Trust
Securities.
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"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date in an amount equal to the interest and
other sums (exclusive of principal) paid by the Depositor upon and in respect of
the concurrent redemption of a Like Amount of Debentures, allocated on a pro
rata basis (based on Liquidation Amounts) among the Trust Securities being
redeemed on the Redemption Date.
"Relevant Trustee" shall have the meaning specified in Section 810.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 504.
"Securityholder" or "Holder" means a Person in whose name a Trust
Security or Securities is registered in the Securities Register; any such Person
is a beneficial owner within the meaning of the Delaware Business Trust Act.
"Trust" means the Metropolitan Capital Trust I, a Delaware business
trust continued hereby.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including all exhibits hereto, including, for all
purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment or
supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as in force at the date as of which this instrument was executed;
provided, however, that in the event the Trust Indenture Act of 1939, as
amended, is amended after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures; (b) any cash on deposit in,
or owing to, the Payment Account; and (c) all proceeds and rights in respect of
the foregoing and any other property and assets for the time being held or
deemed to be held by the Property Trustee pursuant to the terms of this Trust
Agreement.
"Trust Security" means any one of the Common Securities or the
Preferred Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee and the
Administrative Trustees.
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"Underwriting Agreement" means the Underwriting Agreement, dated as of
_________, 1998, including exhibits, among the Trust, the Depositor and the
Underwriter named therein.
ARTICLE II
ESTABLISHMENT OF THE TRUST
SECTION 201. NAME.
The Trust created and continued hereby shall be known as "Metropolitan
Capital Trust I," as such name may be modified from time to time by the
Administrative Trustees following written notice to the Holders of Trust
Securities and the other Trustees, in which name the Trustees may engage in the
transactions contemplated hereby, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS.
The address of the Property Trustee in the State of Delaware is Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration, or such other address in the State of Delaware
as the Property Trustee may designate by written notice to the Securityholders
and the Depositor. The principal place of business of the Property Trustee is in
the State of Delaware. The principal executive office of the Trust is c/o
Metropolitan Financial Corp., 6001 Landerhaven Drive, Mayfield Heights, Ohio
44124.
SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL
EXPENSES.
The Trustees acknowledge receipt in trust from the Depositor in
connection with the Original Trust Agreement of the sum of $10.00, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Trust as they arise or shall, upon request of any Trustee,
promptly reimburse such Trustee for any such expenses paid by such Trustee. The
Depositor shall make no claim upon the Trust Property for the payment of such
expenses.
SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES.
The Depositor on behalf of the Trust and pursuant to the Original Trust
Agreement, executed and delivered the Underwriting Agreement. Contemporaneously
with the execution and delivery of this Trust Agreement, an Administrative
Trustee, on behalf of the Trust, shall execute in accordance with Section 502
and deliver in accordance with the Underwriting Agreement, Preferred Securities
Certificates, registered in the name of the Persons entitled thereto, in an
aggregate amount of 2,500,000 Preferred Securities having an aggregate
Liquidation Amount of $25,000,000 against receipt of the aggregate purchase
price of such Preferred Securities of $25,000,000, which amount such
Administrative Trustee shall promptly deliver to the Property Trustee. If the
underwriters
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exercise their Option and there is an Option Closing Date (as such terms are
defined in the Underwriting Agreement), then an Administrative Trustee, on
behalf of the Trust, shall execute in accordance with Section 502 and deliver in
accordance with the Underwriting Agreement, additional Preferred Securities
Certificates, registered in the name of the Persons entitled thereto, in an
aggregate amount of up to 375,000 Preferred Securities having an aggregate
Liquidation Amount of up to $3,750,000 against receipt of the aggregate purchase
price of such Preferred Securities of $3,750,000, which amount such
Administrative Trustee shall promptly deliver to the Property Trustee.
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE
OF DEBENTURES.
(a) Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 502 and deliver to the Depositor, Common Securities
Certificates, registered in the name of the Depositor in an aggregate amount of
Common Securities having an aggregate Liquidation Amount of $_________ against
payment by the Depositor of such amount, which amount such Administrative
Trustee shall promptly deliver to the Property Trustee. Contemporaneously
therewith, an Administrative Trustee on behalf of the Trust, shall subscribe to
and purchase from the Depositor corresponding amounts of Debentures, registered
in the name of the Property Trustee on behalf of the Trust and having an
aggregate principal amount equal to $___________(being the sum of the amounts
delivered to the Property Trustee pursuant to (i) the second sentence of Section
204; and (ii) the first sentence of Section 205(a)), and, in satisfaction of the
purchase price for such Debentures, the Property Trustee, on behalf of the
Trust, shall deliver to the Depositor the sum of
$---------.
(b) If the underwriters exercise the Option and there is an Option
Closing Date, then an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 502 and deliver to the Depositor, additional
Common Securities Certificates, registered in the name of the Depositor, in an
aggregate amount of Common Securities having an aggregate Liquidation Amount of
up to $________ against payment by the Depositor of such amount to an
Administrative Trustee, which amount such Administrative Trustee shall promptly
deliver to the Property Trustee. Contemporaneously therewith, an Administrative
Trustee, on behalf of the Trust, shall subscribe to and purchase from the
Depositor additional amounts of Debentures, registered in the name of the Trust
and having an aggregate principal amount of up to $____________ and, in
satisfaction of the purchase price of such Debentures, the Property Trustee, on
behalf of the Trust, shall deliver to the Depositor the amount received from one
of the Administrative Trustees pursuant to (i) the last sentence of Section 204;
and (ii) the first sentence of this Section 205(b)).
SECTION 206. DECLARATION OF TRUST.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Trust Securities and use the proceeds from such sale to acquire the
Debentures; and (b) to engage in those activities
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necessary, convenient or incidental thereto. The Depositor hereby appoints the
Trustees as trustees of the Trust, to have all the rights, powers and duties to
the extent set forth herein, and the Trustees hereby accept such appointment.
The Property Trustee hereby declares that it shall hold the Trust Property in
trust upon and subject to the conditions set forth herein for the benefit of the
Securityholders. The Administrative Trustees shall have all rights, powers and
duties set forth herein and in accordance with applicable law with respect to
accomplishing the purposes of the Trust. The Property Trustee shall be one of
the Trustees of the Trust for the purpose of fulfilling the requirements of
Section 3807 of the Delaware Business Trust Act.
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
(a) The Trustees shall conduct the affairs of the Trust in accordance
with the terms of this Trust Agreement. Subject to the limitations set forth in
paragraph (b) of this Section 207 and Article VIII, and in accordance with the
following provisions (i) and (ii), the Administrative Trustees shall have the
authority to enter into all transactions and agreements determined by the
Administrative Trustees to be appropriate in exercising the authority, express
or implied, otherwise granted to the Administrative Trustees under this Trust
Agreement, and to perform all acts in furtherance thereof, including without
limitation, the following:
(i) As among the Trustees, each Administrative Trustee shall
have the power and authority to act on behalf of the Trust
with respect to the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, the
Expense Agreement, Certificate Depositary Agreement
and such other agreements or documents as may be
necessary or desirable in connection with the
purposes and function of the Trust;
(C) assisting in the registration of the Preferred
Securities under the Securities Act of 1933, as
amended, and under state securities or blue sky laws,
and the qualification of this Trust Agreement as a
trust indenture under the Trust Indenture Act;
(D) assisting in the listing of the Preferred
Securities upon The Nasdaq Stock Market's National
Market or such securities exchange or exchanges as
shall be determined by the Depositor and the
registration of the Preferred Securities under the
Exchange Act, and the preparation and filing of all
periodic and other reports and other documents
pursuant to the foregoing;
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(E) the sending of notices (other than notices of
default) and other information regarding the Trust
Securities and the Debentures to the Securityholders
in accordance with this Trust Agreement;
(F) the appointment of a Paying Agent, authenticating
agent and Securities Registrar in accordance with
this Trust Agreement;
(G) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of
the Trust and the preparation, execution and filing
of the certificate of cancellation with the Secretary
of State of the State of Delaware;
(H) to take all action that may be necessary or
appropriate for the preservation and the continuation
of the Trust's valid existence, rights, franchises
and privileges as a statutory business trust under
the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to
protect the limited liability of the Holders of the
Preferred Securities or to enable the Trust to effect
the purposes for which the Trust was created;
(I) assisting in the registration or listing of the
Preferred Securities with DTC or upon such other
trading facilities or exchanges as shall be
determined by the Depositor and the preparation and
filing of all periodic and other reports and other
documents pursuant to the foregoing; and
(J) the taking of any action incidental to the
foregoing as the Administrative Trustees may from
time to time determine is necessary or advisable to
give effect to the terms of this Trust Agreement for
the benefit of the Securityholders (without
consideration of the effect of any such action on any
particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall have
the power, duty and authority to act on behalf of the Trust
with respect to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and
any other payments made in respect of the
Debentures in the Payment Account;
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(D) the distribution of amounts owed to the
Securityholders in respect of the Trust Securities in
accordance with the terms of this Trust Agreement;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the
Debentures to the Securityholders in accordance with
this Trust Agreement;
(G) the distribution of the Trust Property in
accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of
the Trust and the execution of the certificate of
cancellation with the Secretary of State of the State
of Delaware;
(I) after an Event of Default, the taking of any
action incidental to the foregoing as the Property
Trustee may from time to time determine is necessary
or advisable to give effect to the terms of this
Trust Agreement and protect and conserve the Trust
Property for the benefit of the Securityholders
(without consideration of the effect of any such
action on any particular Securityholder);
(J) registering transfers of the Trust Securities in
accordance with this Trust Agreement; and
(K) except as otherwise provided in this Section
207(a)(ii), the Property Trustee shall have none of
the duties, liabilities, powers or the authority of
the Administrative Trustees set forth in Section
207(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement; (ii) sell,
assign, transfer, exchange, mortgage, pledge, setoff or otherwise dispose of any
of the Trust Property or interests therein, including to Securityholders, except
as expressly provided herein; (iii) take any action that would cause the Trust
to fail or cease to qualify as a "grantor trust" for United States federal
income tax purposes; (iv) incur any indebtedness for borrowed money or issue any
other debt; or (v) take or consent to any action that would result in the
placement of a Lien on any of the Trust Property. The Administrative Trustees
shall defend all claims and demands of all Persons at
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any time claiming any Lien on any of the Trust Property adverse to the interest
of the Trust or the Securityholders in their capacity as Securityholders.
(c) In connection with the issuance and sale of the Preferred
Securities, the Depositor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the date
of this Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a
registration statement on the appropriate form in relation to
the Preferred Securities and the Debentures, including any
amendments thereto;
(ii) the determination of the states in which to take
appropriate action to qualify or register for sale all or part
of the Preferred Securities and to do any and all such acts,
other than actions which must be taken by or on behalf of the
Trust, and advise the Trustees of actions they must take on
behalf of the Trust, and prepare for execution and filing any
documents to be executed and filed by the Trust or on behalf
of the Trust, as the Depositor deems necessary or advisable in
order to comply with the applicable laws of any such States;
(iii) the preparation for filing by the Trust and execution on
behalf of the Trust of an application to The Nasdaq Stock
Market's National Market or a national stock exchange or other
organizations for listing of any Preferred Securities and to
file or cause an Administrative Trustee to file thereafter
with such exchange or organization such notifications and
documents as may be necessary from time to time;
(iv) the preparation for filing by the Trust with the
Commission and the execution on behalf of the Trust of a
registration statement on Form 8-A relating to the
registration of the Preferred Securities under Section 12(b)
or 12(g) of the Exchange Act, including any amendments
thereto;
(v) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale
of the Preferred Securities; and
(vi) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrative
Trustees are authorized and directed to conduct the affairs of the Trust and to
operate the Trust so that the Trust shall not be deemed to be an "investment
company" required to be registered under the Investment Company Act, shall be
classified as a "grantor trust" and not as an association taxable as a
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corporation for United States federal income tax purposes and so that the
Debentures shall be treated as indebtedness of the Depositor for United States
federal income tax purposes. In this connection, subject to Section 1002, the
Depositor and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law or this Trust Agreement, that each of the
Depositor and the Administrative Trustees determines in their discretion to be
necessary or desirable for such purposes.
SECTION 208. ASSETS OF TRUST.
The assets of the Trust shall consist of the Trust Property.
SECTION 209. TITLE TO TRUST PROPERTY.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Securityholders in accordance with
this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 301. PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making deposits and
withdrawals from the Payment Account in accordance with this Trust Agreement.
All monies and other property deposited or held from time to time in the Payment
Account shall be held by the Property Trustee in the Payment Account for the
exclusive benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments provided for
herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest on, and any other
payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
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ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 401. DISTRIBUTIONS.
The Trust Securities represent undivided beneficial interests in the
Trust Property, and Distributions (including Additional Amounts) will be made on
the Trust Securities at the rate and on the dates that payments of interest
(including of Additional Interest, as defined in the Indenture) are made on the
Debentures. Accordingly:
(a) Distributions on the Trust Securities shall be cumulative, and
shall accumulate whether or not there are funds of the Trust available for the
payment of Distributions. Distributions shall accumulate from __________,1998,
and, except during any Extended Interest Payment Period with respect to the
Debentures, shall be payable quarterly in arrears on June 30, September 30,
December 31 and March 31 each year, commencing on June 30, 1998. If any date on
which a Distribution is otherwise payable on the Trust Securities is not a
Business Day, then the payment of such Distribution shall be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay) except that, if such Business Day is in the next
succeeding calendar year, payment of such Distribution shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date (each date on which distributions are payable in
accordance with this Section 401(a), a "Distribution Date").
(b) Assuming payments of interest on the Debentures are made when due
(and before giving effect to Additional Amounts, if applicable), Distributions
on the Trust Securities shall be payable at a rate of ____% per annum of the
Liquidation Amount of the Trust Securities. The amount of Distributions payable
for any full period shall be computed on the basis of a 360 day year of twelve
30-day months. Subject to the last sentence in Section 401(a), the amount of
Distributions for any period shorter than a full quarterly period for which
Distributions are computed shall be computed on the basis of the actual number
of days elapsed in such period. During any Extended Interest Payment Period with
respect to the Debentures, Distributions on the Preferred Securities shall be
deferred for a period equal to the Extended Interest Payment Period and shall be
payable to the Holders in whose names the Trust Securities are registered in the
Securities Register as of the close of business on the 15th day of the month in
which the Extended Interest Payment Period ends. The amount of Distributions
payable for any period shall include the Additional Amounts, if any.
(c) Distributions on the Trust Securities shall be made by the Property
Trustee solely from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand and
immediately available in the Payment Account for the payment of such
Distributions.
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(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
shall be the 15th day of the month in which the Distribution is payable
(determined without giving effect to the last sentence of Section 401(a)).
SECTION 402. REDEMPTION.
(a) On each Debenture Redemption Date and on the stated maturity of the
Debentures the Trust shall be required to redeem a Like Amount of Trust
Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee in the
name of and at the expense of the Trust by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date to
each Holder of Trust Securities to be redeemed, at such Holder's address
appearing in the Securities Register. The Property Trustee shall have no
responsibility for the accuracy of any CUSIP number contained in such notice.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are to
be redeemed, the identification and the aggregate Liquidation
Amount of the particular Trust Securities to be redeemed;
(v) that, on the Redemption Date, the Redemption Price shall
become due and payable upon each such Trust Security to be
redeemed and that Distributions thereon shall cease to
accumulate on and after said date with respect to each such
Trust Security; and
(vi) the place or places where the Trust Securities are to be
surrendered for the payment of the Redemption Price.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Debentures. Redemptions of the Trust Securities shall be made and
the Redemption Price shall be payable on each Redemption Date only to the extent
that the Trust has immediately available funds then on hand and available in the
Payment Account for the payment of such Redemption Price.
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(d) If the Property Trustee gives a notice of redemption in respect of
any Preferred Securities, then, by 10:00 a.m., New York City time, on the
Redemption Date, subject to Section 402(c), the Property Trustee will, so long
as any of the Preferred Securities are in book- entry-only form, irrevocably
deposit with the Clearing Agency for the Preferred Securities funds sufficient
to pay the applicable Redemption Price and will give such Clearing Agency
irrevocable instructions and authority to pay the Redemption Price to the
appropriate beneficial holders thereof. If any of the Preferred Securities are
no longer in book-entry-only form, the Property Trustee, subject to Section
402(c), will provide the Paying Agent with irrevocable instructions and
authority to pay the Redemption Price to the Holders thereof upon surrender of
their Preferred Securities Certificates. Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date for any Trust
Securities called for redemption shall be payable to the Holders of such Trust
Securities as they appear on the Securities Register for the Trust Securities on
the relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then upon the
date of such deposit, all rights of Securityholders holding Trust Securities so
called for redemption shall cease, except the right of such Securityholders to
receive the Redemption Price and any Distributions payable on or prior to the
Redemption Date to which such Securityholders may otherwise be entitled, but
without interest, and such Securities shall cease to be Outstanding. In the
event that any date on which any Redemption Price is payable is not a Business
Day, then payment of the Redemption Price payable on such date shall be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
falls in the next calendar year, such payment shall be made on the immediately
preceding Business Day, in each case, with the same force and effect as if made
on such date. In the event that payment of the Redemption Price in respect of
any Trust Securities called for redemption is improperly withheld or refused and
not paid either by the Trust or by the Depositor pursuant to the Guarantee,
Distributions on such Trust Securities shall continue to accumulate, at the then
applicable rate, from the Redemption Date originally established by the Trust
for such Trust Securities to the date such Redemption Price is actually paid, in
which case the actual payment date shall be the date fixed for redemption for
purposes of calculating the Redemption Price, and for periods after the
Redemption Date originally established the provisions of the third sentence of
this paragraph (d) shall cease to apply.
(e) Payment of the Redemption Price on the Trust Securities shall be
made to the record holders thereof as they appear on the Securities Register for
the Trust Securities on the relevant record date, which shall be one Business
Day prior to the relevant Redemption Date; provided, however, in the event that
not all the Preferred Securities remain in book-entry form, the relevant record
date for all Trust Securities shall be the date 15 days prior to the relevant
Redemption Date.
(f) Subject to Section 403(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities. The particular Preferred Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption Date by the
Property Trustee from the
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Outstanding Preferred Securities not previously called for redemption, by such
method (including, without limitation, by lot) as the Property Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions (equal to $10 or an integral multiple of $10 in excess thereof), of
the Liquidation Amount of Preferred Securities of a denomination larger than
$10. The Property Trustee shall promptly notify the Securities Registrar in
writing of the Preferred Securities selected for redemption and, in the case of
any Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of this Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of
Preferred Securities shall relate, in the case of any Preferred Securities
redeemed or to be redeemed only in part, to the portion of the Liquidation
Amount of Preferred Securities which has been or is to be redeemed.
SECTION 403. SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 402(f), pro rata among the Common
Securities and the Preferred Securities based on the Liquidation Amount of the
Trust Securities, provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of Default
shall have occurred and be continuing, no payment of any Distribution (including
Additional Amounts, if applicable) on, or Redemption Price of, any Common
Security, and no other payment on account of the redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions (including Additional Amounts,
if applicable) on all Outstanding Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all Outstanding
Preferred Securities then called for redemption, shall have been made or
provided for, and all funds immediately available to the Property Trustee shall
first be applied to the payment in full in cash of all Distributions (including
Additional Amounts, if applicable) on, or the Redemption Price of, Preferred
Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting
from a Debenture Event of Default, the Holder of Common Securities shall be
deemed to have waived any right to act with respect to any such Event of Default
under this Trust Agreement until the effect of all such Debenture Events of
Default with respect to the Preferred Securities shall have been cured, waived
or otherwise eliminated. Until any such Event of Default under this Trust
Agreement resulting from a Debenture Event of Default shall have been so cured,
waived or otherwise eliminated, the Property Trustee shall act solely on behalf
of the Holders of the Preferred Securities and not the Holder of the Common
Securities, and only the Holders of the Preferred Securities shall have the
right to direct the Property Trustee to act on their behalf.
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SECTION 404. PAYMENT PROCEDURES.
Payments of Distributions (including Additional Amounts, if applicable)
in respect of the Preferred Securities shall be made by check mailed to the
address of the Person entitled thereto as such address shall appear on the
Securities Register or, if any Preferred Securities are held by a Clearing
Agency, such Distributions shall be made to the Clearing Agency in immediately
available funds, which will credit the relevant accounts on the applicable
Distribution Dates. Payments in respect of the Common Securities shall be made
in such manner as shall be mutually agreed between the Property Trustee and the
Common Securityholder.
SECTION 405. TAX RETURNS AND REPORTS.
The Administrative Trustees shall prepare (or cause to be prepared), at
the Depositor's expense, and file all United States federal, state and local tax
and information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared and filed) the appropriate Internal Revenue Service
Form required to be filed in respect of the Trust in each taxable year of the
Trust; and (b) prepare and furnish (or cause to be prepared and furnished) to
each Securityholder the appropriate Internal Revenue Service form required to be
furnished to such Securityholder or the information required to be provided on
such form. The Administrative Trustees shall provide the Depositor with a copy
of all such returns and reports promptly after such filing or furnishing. The
Property Trustee shall comply with United States federal withholding and backup
withholding tax laws and information reporting requirements with respect to any
payments to Securityholders under the Trust Securities.
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST.
Upon receipt under the Debentures of Additional Interest, the Property
Trustee, at the written direction of an Administrative Trustee or the Depositor,
shall promptly pay any taxes, duties or governmental charges of whatsoever
nature (other than withholding taxes) imposed on the Trust by the United States
or any other taxing authority.
SECTION 407. PAYMENTS UNDER INDENTURE.
Any amount payable hereunder to any Holder of Preferred Securities
shall be reduced by the amount of any corresponding payment such Holder (or any
related Owner) has directly received under the Indenture pursuant to Section 7.8
thereof and 512(b) hereof and under the Guarantee.
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ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 501. INITIAL OWNERSHIP.
Upon the creation of the Trust and the contribution by the Depositor
pursuant to Section 203 and until the issuance of the Trust Securities, and at
any time during which no Trust Securities are outstanding, the Depositor shall
be the sole beneficial owner of the Trust.
SECTION 502. THE TRUST SECURITIES CERTIFICATES.
(a) The Preferred Securities Certificates shall be issued in minimum
denominations of $10 Liquidation Amount and integral multiples of $10 in excess
thereof, and the Common Securities Certificates shall be issued in denominations
of $10 Liquidation Amount and integral multiples thereof. The Trust Securities
Certificates shall be executed on behalf of the Trust by manual, facsimile or
imprinted signature of at least one Administrative Trustee and the Property
Trustee shall authenticate and register the Preferred Securities Certificates,
except as provided in Section 503. Trust Securities Certificates bearing the
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Trust, shall be validly issued
and entitled to the benefits of this Trust Agreement, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
delivery of such Trust Securities Certificates or did not hold such offices at
the date of delivery of such Trust Securities Certificates. A transferee of a
Trust Securities Certificate shall become a Securityholder, and shall be
entitled to the rights and subject to the obligations of a Securityholder
hereunder, upon due registration of such Trust Securities Certificate in such
transferee's name pursuant to Sections 504 and 511A.
(b) Upon their original issuance, Preferred Securities Certificates
shall be issued in the form of one or more fully registered Global Preferred
Securities Certificates which will be deposited with or on behalf of the
Depositary and registered in the name of the Depositary or Depositary's nominee.
Unless and until it is exchangeable in whole or in part for the Preferred
Securities in definitive form, a global security may not be transferred except
as a whole by the Depositary to a nominee of the Depositary or by a nominee of
the Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor of such Depositary or a nominee of
such successor.
(c) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
SECTION 503. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES.
On the Closing Date and on the date on which the Underwriters exercise
the option to purchase additional Preferred Securities, as applicable (the
"Option Closing Date"), the
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Administrative Trustees shall cause Trust Securities Certificates, in an
aggregate Liquidation Amount as provided in Sections 204 and 205, to be executed
by manual, facsimile or imprinted signature on behalf of the Trust by at least
one of the Administrative Trustees and delivered to the Property Trustee and
upon such delivery, the Property Trustee shall authenticate and register the
Preferred Securities Certificates and make available for delivery such Preferred
Securities Certificates upon the written order of the Depositor, executed by its
Chairman of the Board, or President or any Vice President and the Chief
Financial Officer, Treasurer or an Assistant Treasurer or Secretary or Assistant
Secretary without further corporate action by the Depositor, in authorized
denominations.
SECTION 503A. GLOBAL PREFERRED SECURITIES.
(a) Each Global Preferred Security issued under this Trust Agreement
shall be registered in the name of the Clearing Agency designated by the
Depositor for the related Global Preferred Securities or a nominee thereof and
delivered to such Clearing Agency or a nominee thereof or custodian therefor.
(b) Notwithstanding any other provision in this Trust Agreement, no
Global Preferred Securities may be exchanged in whole or in part for Preferred
Securities registered, and no transfer of Global Preferred Securities in whole
or in part may be registered, in the name of any Person other than the Clearing
Agency for such Global Preferred Securities or a nominee thereof unless (a) the
Clearing Agency advises the Property Trustee in writing that the Clearing Agency
is no longer willing or able to properly discharge its responsibilities with
respect to the Global Preferred Securities, and the Administrative Trustees are
unable to locate a qualified successor, (b) the Trust at its option advises the
Clearing Agency in writing that it elects to eliminate the global system through
the Clearing Agency, (c) after the occurrence of a Debenture Event of Default in
the circumstances described in Section 511A(a) or (d) pursuant to the following
sentence. All or any portion of a Global Preferred Security may be exchanged for
a Preferred Security that has a like aggregate principal amount and is not a
Global Preferred Security upon 20 days' prior written request made by the
Clearing Agency or its authorized representative to the Property Trustee;
provided, however that no Definitive Preferred Security shall be issued in an
amount representing less than $100,000 in aggregate Liquidation Amount of
Preferred Securities. Upon the occurrence of any event specified in clause (a),
(b) or (c) above, the Administrative Trustees shall notify the Clearing Agency
and the Clearing Agency shall notify all Owners of beneficial interests in
Global Preferred Securities, the Delaware Trustee, the Property Trustee and the
Administrative Trustees of the occurrence of such event and of the availability
of the Definitive Preferred Securities to such Owners requesting the same;
provided, however, that no Definitive Preferred Securities shall be issued in an
amount representing less than $10 in aggregate Liquidation Amount of Preferred
Securities. Upon surrender to the Administrative Trustees of the typewritten
Preferred Securities Certificate or certificates representing the Global
Preferred Securities held by the Clearing Agency, accompanied by registration
instructions, the Administrative Trustees, or any one of them, shall execute
Definitive Preferred Securities Certificates in accordance with the instructions
of the
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Clearing Agency. Neither the Securities Registrar nor the Trustees shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of the Definitive Preferred Securities Certificate, the Trustees shall recognize
the Holder of a Definitive Preferred Securities Certificate as a Securityholder.
Definitive Preferred Securities Certificates shall be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrative Trustees, as evidenced by the execution thereof by the
Administrative Trustees or any one of them.
(c) If any Global Preferred Security is to be exchanged for Definitive
Preferred Securities Certificates or cancelled in part, or if Definitive
Preferred Securities Certificates are to be exchanged in whole or in part for a
Global Preferred Security, then either (i) such Global Preferred Security shall
be so surrendered for exchange or cancellation as provided in this Article V or
(ii) the aggregate Liquidation Amount represented by such Global Preferred
Security shall be reduced, subject to Section 502, or increased, by an amount
equal to the Liquidation Amount represented by that portion of the Global
Preferred Security to be so exchanged or cancelled, or equal to the Liquidation
Amount represented by such Definitive Preferred Securities Certificates to be so
exchanged for beneficial interests in the Global Preferred Security represented
thereby, as the case may be, by means of an appropriate adjustment made on the
records of the Securities Registrar, whereupon the Property Trustee, in
accordance with the Applicable Procedures, shall instruct the Clearing Agency or
its authorized representative to make a corresponding adjustment to its records.
Upon surrender to the Administrative Trustees or the Securities Registrar of the
Global Preferred Security by the Clearing Agency, accompanied by registration
instructions, the Administrative Trustees, or any one of them, shall execute the
Definitive Preferred Securities Certificates in accordance with the instructions
of the Clearing Agency and Section 502 hereof; provided, however, that no
Definitive Preferred Securities Certificates shall be issued in an amount
representing less than $10 in aggregate Liquidation Amount of Preferred
Securities. None of the Securities Registrar, the Trustees or the Administrative
Trustees shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Preferred Securities Certificates, the Trustees
and Administrative Trustees shall recognize the Holders of the Definitive
Preferred Securities Certificates as Securityholders. The Definitive Preferred
Securities Certificates shall be printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Administrative
Trustees, as evidenced by the execution thereof by the Administrative Trustees
or any one of them.
(d) Every Preferred Security executed and delivered upon registration
of, transfer of, or in exchange for or in lieu of, a Global Preferred Security
or any portion thereof, whether pursuant to this Article V or Article IV or
otherwise, shall be executed and delivered in the form of, and shall be, a
Global Preferred Security, unless such Preferred Security is registered in the
name of a Person other than the Clearing Agency for such Global Preferred
Security or a nominee thereof.
(e) The Clearing Agency or its nominee, as registered owner of a Global
Preferred Security, shall be the Holder of such Global Preferred Security for
all purposes under this Trust
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Agreement and the Global Preferred Security, and Owners with respect to a Global
Preferred Security shall hold such interests pursuant to the Applicable
Procedures. The Securities Registrar and the Trustees shall be entitled to deal
with the Clearing Agency for all purposes of this Trust Agreement relating to
the Global Preferred Securities (including the payment of the Liquidation Amount
of and Distributions on the beneficial interests in Global Preferred Securities
represented thereby and the giving of instructions or directions to Owners of
Global Preferred Securities represented thereby) as the sole Holder of the
Global Preferred Securities represented thereby and shall have no obligations to
the Owners thereof. Neither the Property Trustee nor the Securities Registrar
shall have any liability in respect of any transfers effected by the Clearing
Agency.
The rights of the Owners of the Global Preferred Securities shall be
exercised only through the Clearing Agency and shall be limited to those
established by law, the Applicable Procedures and agreements between such Owners
and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the
Certificate Depository Agreement, unless and until Definitive Preferred
Securities Certificates are issued pursuant hereto, the Clearing Agency will
make global transfers among the Clearing Agency Participants and receive and
transmit payments on the Preferred Securities to such Clearing Agency
Participants.
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED SECURITIES
CERTIFICATES.
(a) The Property Trustee shall keep or cause to be kept, at the office
or agency maintained pursuant to Section 508, a register or registers for the
purpose of registering Trust Securities Certificates and transfers and exchanges
of Preferred Securities Certificates (herein referred to as the "Securities
Register") in which the registrar and transfer agent (the "Securities
Registrar"), subject to such reasonable regulations as it may prescribe, shall
provide for the registration of Preferred Securities Certificates and Common
Securities Certificates (subject to Section 510 in the case of the Common
Securities Certificates) and registration of transfers and exchanges of
Preferred Securities Certificates as herein provided. The Property Trustee shall
be the initial Securities Registrar.
Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 508, the
Administrative Trustees or any one of them shall execute and the Property
Trustee shall authenticate and make available for delivery, in the name of the
designated transferee or transferees, one or more new Preferred Securities
Certificates in authorized denominations of a like aggregate Liquidation Amount
dated the date of execution by such Administrative Trustee or Trustees. The
Securities Registrar shall not be required to register the transfer of any
Preferred Securities that have been called for redemption. At the option of a
Holder, Preferred Securities Certificates may be exchanged for other Preferred
Securities Certificates in authorized denominations of the same class and of a
like aggregate Liquidation Amount upon surrender of the Preferred Securities
Certificates to be exchanged at the office or agency maintained pursuant to
Section 508.
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Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Property Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly authorized
in writing. Each Preferred Securities Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by the
Property Trustee in accordance with its customary practice. The Trust shall not
be required to (i) issue, register the transfer of, or exchange any Preferred
Securities during a period beginning at the opening of business 15 calendar days
before the date of mailing of a notice of redemption of any Preferred Securities
called for redemption and ending at the close of business on the day of such
mailing; or (ii) register the transfer of or exchange of any Preferred
Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any such Preferred Securities being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Preferred
Securities Certificates.
(b) Trust Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Trust Agreement. To
the fullest extent permitted by law, any transfer or purported transfer of any
Trust Security not made in accordance with this Trust Agreement shall be null
and void. Notwithstanding any other provisions of this Trust Agreement,
transfers and exchanges of Trust Securities and beneficial interests in Global
Securities, shall be made only in accordance with the following:
(i) Subject to Section 503A, a Trust Security that is not a
Global Preferred Security may be transferred, in whole or in
part, to a Person who takes delivery in the form of another
Trust Security that is not a Global Security as provided in
Section 504(a).
(ii) Subject to Section 503A and this Section 504, Preferred
Securities shall be freely transferable.
(iii) A beneficial interest in Global Preferred Security may
be exchanged for a Preferred Security that is not a Global
Preferred Security as provided in Section 503A.
SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES.
If (a) any mutilated Trust Securities Certificate shall be surrendered
to the Securities Registrar, or if the Securities Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Securities Certificate, and (b) there shall be delivered to the Securities
Registrar and the Administrative Trustees such security or indemnity as may be
required by them
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to save each of them harmless, then in the absence of notice that such Trust
Securities Certificate shall have been acquired by a bona fide purchaser, the
Administrative Trustees, or any one of them, on behalf of the Trust shall
execute by manual, facsimile or imprinted signature and the Property Trustee in
the case of a Preferred Securities Certificate shall authenticate and make
available for delivery, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities
Certificate of like class, tenor and denomination. In connection with the
issuance of any new Trust Securities Certificate under this Section 505, the
Administrative Trustees or the Securities Registrar may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. Any duplicate Trust Securities Certificate issued
pursuant to this Section 505 shall constitute conclusive evidence of an
undivided beneficial interest in the assets of the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Trust Securities
Certificate shall be found at any time.
SECTION 506. PERSONS DEEMED SECURITYHOLDERS.
The Trustees, the Paying Agent, the Securities Registrar and Depositor
shall treat any Persons in whose name any Trust Securities are issued as the
owner of such Trust Securities for the purpose of receiving Distributions and
for all other purposes whatsoever, and neither the Trust, the Trustees, the
Administrative Trustees, the Securities Registrar nor the Depositor shall be
bound by any notice to the contrary.
SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES.
At any time when the Property Trustee is not also acting as the
Securities Registrar, the Administrative Trustees or the Depositor shall furnish
or cause to be furnished to the Property Trustee a list, in such form as the
Property Trustee may reasonably require, of the names and addresses of the
Securityholders as of _________ and ________ of each year and at such other
times as the Property Trustee may request in writing, in each case to the extent
such information is in the possession or control of the Administrative Trustees
or the Depositor or any paying agents of either and is not identical to a
previously supplied list or has not otherwise been received by the Property
Trustee in its capacity as Securities Registrar, and Trustee shall preserve, in
as current a form as reasonably practicable the most recent list so furnished to
or received by it. To the extent applicable, the Depositor and Property Trustee
shall comply with the other provisions of Section 312(a) of the Trust Indenture
Act. The rights of Securityholders to communicate with other Securityholders
with respect to their rights under this Trust Agreement or under the Trust
Securities, and the corresponding rights of the Trustee shall be as provided in
the Trust Indenture Act. Each Holder and each Owner shall be deemed to have
agreed not to hold the Depositor, the Property Trustee or the Administrative
Trustees accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
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SECTION 508. MAINTENANCE OF OFFICE OR AGENCY.
The Property Trustee shall designate, with the consent of the
Administrative Trustees, which consent shall not be unreasonably withheld, an
office or offices or agency or agencies where Preferred Securities Certificates
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Trustees in respect of the Trust Securities
Certificates may be served. The Property Trustee initially designates its
corporate trust office at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890, Attn: Corporate Trust Administration, as the
principal corporate trust office for such purposes. The Property Trustee shall
give prompt written notice to the Depositor, the Administrative Trustees and to
the Securityholders of any change in the location of the Securities Register or
any such office or agency.
SECTION 509. APPOINTMENT OF PAYING AGENT.
The Paying Agent shall make Distributions to Securityholders from the
Payment Account and shall report the amounts of such Distributions to the
Property Trustee and the Administrative Trustees. Any Paying Agent shall have
the revocable power to withdraw funds from the Payment Account for the purpose
of making the Distributions referred to above. The Property Trustee may revoke
such power and remove the Paying Agent if such Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its obligation
under this Trust Agreement in any material respect. The Paying Agent shall
initially be the Property Trustee, and any co-paying agent chosen by the
Property Trustee, and acceptable to the Administrative Trustees and the
Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustee and the
Property Trustee. In the event that the Property Trustee shall no longer be the
Paying Agent or a successor Paying Agent shall resign or its authority to act be
revoked, the Property Trustee shall appoint a successor that is reasonably
acceptable to the Administrative Trustees to act as Paying Agent to execute and
deliver to the Trustees an instrument in which such successor Paying Agent or
additional Paying Agent shall agree with the Trustees that as Paying Agent, such
successor Paying Agent or additional Paying Agent shall hold all sums, if any,
held by it for payment to the Securityholders in trust for the benefit of the
Securityholders entitled thereto until such sums shall be paid to such
Securityholders, and the Paying Agent, if other than the Property Trustee, shall
give such Property Trustee notice of any default in the making of any payment on
the Trust Securities. The Paying Agent shall return all unclaimed funds to the
Property Trustee and, upon removal of a Paying Agent, such Paying Agent shall
also return all funds in its possession to the Property Trustee. The provisions
of Sections 801, 803 and 806 shall apply to the Property Trustee also in its
role as Paying Agent, for so long as the Property Trustee shall act as Paying
Agent and, to the extent applicable, to any other paying agent appointed
hereunder. Any reference in this Trust Agreement to the Paying Agent shall
include any co-paying agent unless the context requires otherwise.
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SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR.
On the Closing Date, the Depositor shall acquire and retain beneficial
and record ownership of the Common Securities. To the fullest extent permitted
by law, any attempted transfer of the Common Securities (other than a transfer
pursuant to Section 12.1 of the Indenture) shall be void. The Administrative
Trustees shall cause each Common Securities Certificate issued to the Depositor
to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO A
SUCCESSOR IN INTEREST TO METROPOLITAN FINANCIAL CORP. IN COMPLIANCE WITH
APPLICABLE LAW AND SECTION 510 OF THAT CERTAIN AMENDED AND RESTATED TRUST
AGREEMENT DATED ____________________, 1998, AMONG METROPOLITAN FINANCIAL CORP.,
AS DEPOSITOR, WILMINGTON TRUST COMPANY, AS PROPERTY TRUSTEE, AND THE
ADMINISTRATIVE TRUSTEES NAMED THEREIN."
SECTION 511. NOTICES TO CLEARING AGENCY.
To the extent that a notice or other communication to the Holders is
required under this Trust Agreement, for so long as all Preferred Securities are
represented by a Global Preferred Securities Certificate, the Trustees shall
give all such notices and communications specified herein to be given to the
Clearing Agency, and shall have no obligations to the Owners.
SECTION 511A. DEFINITIVE PREFERRED SECURITIES CERTIFICATE AND TEMPORARY
PREFERRED SECURITIES.
(a) If (a) the Clearing Agency advises the Trustees in writing that the
Clearing Agency is no longer willing or able to discharge properly its
responsibilities with respect to the Preferred Securities, and the Depositor is
unable to locate a qualified successor, (b) the Trust at its option advises the
Trustees in writing that it elects to terminate the book-entry system through
the Clearing Agency or (c) after the occurrence of a Debenture Event of Default,
Holders of a beneficial interest in Preferred Securities representing beneficial
interests aggregating at least a majority of the Liquidation Amount advise the
Administrative Trustees in writing that the continuation of a book-entry system
though the Clearing Agency is no longer in the best interest of the Holders of
Preferred Securities, then the Administrative Trustees shall notify the Clearing
Agency and the Clearing Agency shall notify the Holders of Preferred Securities
and the other Trustees of the occurrence of such event and of the availability
of a Definitive Preferred Security to Holders of such class requesting the same.
(b) Pending the preparation of permanent Definitive Preferred
Securities Certificates, an Administrative Trustee may cause to be executed and
delivered on behalf of the Trust temporary Preferred Securities (the "Temporary
Preferred Securities"), which Temporary Preferred Securities are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the Definitive Preferred Securities
Certificates in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other
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variations as the officers executing such Temporary Preferred Securities may
determine, as evidenced by their execution thereof.
If Temporary Preferred Securities are issued, an Administrative Trustee
will cause Definitive Preferred Securities Certificates to be prepared without
unreasonable delay. After the preparation of the Definitive Preferred Securities
Certificates, the Temporary Preferred Securities shall be exchangeable for
Definitive Preferred Securities Certificates upon surrender of the Temporary
Preferred Securities at any office or agency of the Depositor designated herein,
without charge to the Holder. Upon surrender for cancellation of any one or more
Temporary Preferred Securities, the Depositor shall execute and an
Administrative Trustee shall execute by manual, facsimile or imprinted signature
and the Property Trustee shall authenticate and make available for delivery in
exchange therefor a like principal amount of Definitive Preferred Securities
Certificates of authorized denominations. Until so exchanged the Temporary
Preferred Securities shall in all respects be entitled to the same benefits as
Definitive Preferred Securities Certificates.
SECTION 512. RIGHTS OF SECURITYHOLDERS.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 209, and
the Securityholders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Trust Securities and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust Securities
shall have no preemptive or similar rights. When issued and delivered to Holders
of the Trust Securities against payment of the purchase price therefor, the
Trust Securities shall be fully paid and nonassessable, undivided beneficial
interests in the assets of the Trust. The Holders of the Trust Securities, in
their capacities as such, shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if,
upon a Debenture Event of Default arising from the failure to pay interest or
principal on the Debentures, any Holders of Preferred Securities then
Outstanding shall, to the fullest extent permitted by law and subject to the
terms of this Trust Agreement and the Indenture, have the right to institute a
proceeding directly against the Depositor for enforcement of payment to such
Holder of principal of or interest on the Debentures having a principal amount
equal to the Liquidation Amount of the Preferred Securities of such Holder.
SECTION 513. CUSIP NUMBERS.
The Depositor in issuing the Debentures may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to
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holders; provided that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Debentures or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Debentures, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Depositor will promptly notify the Property Trustee of any change in the
CUSIP numbers.
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 601. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section 601, in Sections 512, 810 and
1002 and in the Indenture and as otherwise required by law, no Holder of
Preferred Securities shall have any right to vote or in any manner otherwise
control the administration, operation and management of the Trust or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Trust Securities Certificates, be construed so as
to constitute the Securityholders from time to time as partners or members of an
association.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures; (ii) waive any past default which is waivable under Article VII of
the Indenture; (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable; or (iv) consent to
any amendment, modification or termination of the Indenture or the Debentures,
where such consent shall be required, without, in each case, obtaining the prior
approval of the Holders of at least a majority in Liquidation Amount of all
Outstanding Preferred Securities; provided, however, that where a consent under
the Indenture would require the consent of each Holder of Outstanding Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior written consent of each Holder of Preferred Securities. The Trustees
shall not revoke any action previously authorized or approved by a vote of the
Holders of the Outstanding Preferred Securities, except by a subsequent vote of
the Holders of the Outstanding Preferred Securities. The Property Trustee shall
notify each Holder of Outstanding Preferred Securities of any notice of default
received from the Debenture Trustee with respect to the Debentures. In addition
to obtaining the foregoing approvals of the Holders of the Preferred Securities,
prior to taking any of the foregoing actions, the Administrative Trustees shall
provide to the Property Trustee, at the expense of the Depositor, an Opinion of
Counsel to the effect that the Trust shall continue to be classified as a
grantor trust and not as an association taxable as a corporation for United
States federal income tax purposes on account of such action.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Trustees otherwise propose to effect, (i) any action that would adversely
affect in any material respect the
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powers, preferences or special rights of the Preferred Securities, whether by
way of amendment to the Trust Agreement or otherwise; or (ii) the dissolution,
winding-up or termination of the Trust, other than pursuant to the terms of this
Trust Agreement, then the Holders of Outstanding Preferred Securities as a class
shall be entitled to vote on such amendment or proposal and such amendment or
proposal shall not be effective except with the approval of the Holders of at
least a majority in Liquidation Amount of the Outstanding Preferred Securities.
No amendment to this Trust Agreement may be made if, as a result of such
amendment, the Trust would cease to be classified as a grantor trust or would be
classified as an association taxable as a corporation for United States federal
income tax purposes.
SECTION 602. NOTICE OF MEETINGS.
Notice of all meetings of the Preferred Securityholders, stating the
time, place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 1008 to each Preferred Securityholder of record, at his
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
SECTION 603. MEETINGS OF PREFERRED SECURITYHOLDERS.
(a) No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Securityholders to
vote on any matter in respect of which Preferred Securityholders are entitled to
vote upon the written request of the Preferred Securityholders of record of 25%
of the Outstanding Preferred Securities (based upon their aggregate Liquidation
Amount) and the Administrative Trustees or the Property Trustee may, at any time
in their discretion, call a meeting of Preferred Securityholders to vote on any
matters as to which the Preferred Securityholders are entitled to vote.
(b) Preferred Securityholders of record of 50% of the Outstanding
Preferred Securities (based upon their aggregate Liquidation Amount), present in
person or by proxy shall constitute a quorum at any meeting of Securityholders.
(c) If a quorum is present at a meeting, an affirmative vote by the
Preferred Securityholders of record present, in person or by proxy, holding more
than a majority of the Preferred Securities (based upon their aggregate
Liquidation Amount) held by the Preferred Securityholders of record present,
either in person or by proxy, at such meeting shall constitute the action of the
Securityholders unless this Trust Agreement requires a greater number of
affirmative votes.
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SECTION 604. VOTING RIGHTS.
Securityholders shall be entitled to one vote for each $10 of
Liquidation Amount represented by their Trust Securities in respect of any
matter as to which such Securityholders are entitled to vote.
SECTION 605. PROXIES, ETC.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
When Trust Securities are held jointly by several Persons, any one of them may
vote at any meeting in person or by proxy in respect of such Trust Securities,
but if more than one of them shall be present at such meeting in person or by
proxy, and such joint owners or their proxies so present disagree as to any vote
to be cast, such vote shall not be received in respect of such Trust Securities.
A proxy purporting to be executed by or on behalf of a Securityholder shall be
deemed valid unless challenged at or prior to its exercise, and, the burden of
proving invalidity shall rest on the challenger. No proxy shall be valid more
than three years after its date of execution.
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT.
Any action which may be taken by Securityholders at a meeting may be
taken without a meeting if Securityholders holding a majority of all Outstanding
Trust Securities (based upon their aggregate Liquidation Amount) entitled to
vote in respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent to the
action in writing.
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any Distribution on the Trust Securities, in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees may from time to time fix a date, not
more than 90 days prior to the date of any meeting of Securityholders or the
payment of any Distribution or other action as the case may be, as a record date
for the determination of the identity of the Securityholders of record for such
purposes.
SECTION 608. ACTS OF SECURITYHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Trust Agreement to be
given, made or taken by Securityholders may
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be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Securityholders in person or by an agent duly appointed in
writing, and, except as otherwise expressly provided herein, such action shall
become effective when such instrument or instruments are delivered to an
Administrative Trustee. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Securityholders signing such instrument or instruments. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Trust Agreement and (subject to Section 801)
conclusive in favor of the Trustees, if made in the manner provided in this
Section 608.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which any Trustee receiving the same deems sufficient.
(c) The ownership of Preferred Securities shall be proved by the
Securities Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Securityholder of any Trust Security shall bind every
future Securityholder of the same Trust Security and the Securityholder of every
Trust Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
(e) Without limiting the foregoing, a Securityholder entitled hereunder
to take any action hereunder with regard to any particular Trust Security may do
so with regard to all or any part of the Liquidation Amount of such Trust
Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any part of such Liquidation
Amount.
SECTION 609. INSPECTION OF RECORDS.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection and copying by
Securityholders and their authorized representatives during normal business
hours for any purpose reasonably related to such Securityholder's interest as a
Securityholder.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE.
The Property Trustee as of the date hereof hereby represents and
warrants for the benefit of the Depositor and the Securityholders that:
(a) the Property Trustee is a Delaware banking corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware;
(b) the Property Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust Agreement
and has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(c) the Property Trustee has its principal place of business in the
State of Delaware;
(d) this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and constitutes the valid and legally binding
agreement of the Property Trustee enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors rights and to general equity principles;
(e) the execution, delivery and performance by the Property Trustee of
this Trust Agreement has been duly authorized by all necessary corporate or
other action on the part of the Property Trustee and does not require any
approval of stockholders of the Property Trustee and such execution delivery and
performance shall not (i) violate the charter or by-laws of the Property
Trustee; (ii) violate any provision of, or constitute, with or without notice or
lapse of time, a default under, or result in the creation or imposition of, any
Lien on any properties included in the Trust Property pursuant to the provisions
of any indenture, mortgage, credit agreement, license or other agreement or
instrument to which the Property Trustee is a party or by which it is bound; or
(iii) violate any law, governmental rule or regulation of the State of Delaware
governing the banking or trust powers of the Property Trustee or (as appropriate
in context) or any order, judgment or decree applicable to the Property Trustee;
(f) neither the authorization, execution or delivery by the Property
Trustee of this Trust Agreement nor the consummation of any of the transactions
by the Property Trustee contemplated herein or therein requires the consent or
approval of, the giving of notice to, the registration with or the taking of any
other action with respect to any governmental authority or agency under any
existing Delaware law governing the banking or trust powers of the Property
Trustee, as the case may be;
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(g) to the best of the Property Trustee's knowledge, there are no
proceedings pending or, to the best of the Property Trustee's knowledge,
threatened against or affecting the Property Trustee in any court or before any
governmental authority, agency or arbitration board or tribunal which,
individually or in the aggregate, would materially and adversely affect the
Trust or would question the right, power and authority of the Property Trustee
to enter into or perform its obligations as one of the Trustees under this Trust
Agreement; and
(h) The Property Trustee satisfies the requirements of Section 3807 of
the Delaware Business Trust Act.
SECTION 702. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued on the Closing Date or the
Option Closing Date, if applicable, on behalf of the Trust have been duly
authorized and, shall have been, duly and validly executed, issued and delivered
by the Administrative Trustees pursuant to the terms and provisions of, and in
accordance with the requirements of, this Trust Agreement and the
Securityholders shall be, as of such date, entitled to the benefits of this
Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by
the Trust (or the Trustees on behalf of the Trust) under the laws of the State
of Delaware or any political subdivision thereof in connection with the
execution, delivery and performance by the Bank or the Property Trustee, as the
case may be, of this Trust Agreement.
ARTICLE VIII
TRUSTEES
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Trust Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. No Administrative Trustee shall be liable for its act or omissions hereunder
except as a result of its own gross negligence or bad faith or willful
misconduct. The Property Trustee's liability shall be determined under the Trust
Indenture Act. Whether or not therein expressly so provided, every provision of
this Trust Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustees shall be subject to the provisions of this
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Section 801. To the extent that, at law or in equity, an Administrative Trustee
has duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to the Securityholders, such Administrative Trustee shall not be liable
to the Trust or to any Securityholder for such Trustee's good faith reliance on
the provisions of this Trust Agreement. The provisions of this Trust Agreement,
to the extent that they restrict the duties and liabilities of the
Administrative Trustees otherwise existing at law or in equity, are agreed by
the Depositor and the Securityholders to replace such other duties and
liabilities of the Administrative Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and proceeds
from the Trust Property and only to the extent that there shall be sufficient
revenue or proceeds from the Trust Property to enable the Property Trustee or a
Paying Agent to make payments in accordance with the terms hereof. With respect
to the relationship of each Securityholder and the Trustee, each Securityholder,
by its acceptance of a Trust Security, agrees that it shall look solely to the
revenue and proceeds from the Trust Property to the extent legally available for
distribution to it as herein provided and that the Trustees are not personally
liable to it for any amount distributable in respect of any Trust Security or
for any other liability in respect of any Trust Security. This Section 801(b)
does not limit the liability of the Trustees expressly set forth elsewhere in
this Trust Agreement or, in the case of the Property Trustee, in the Trust
Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the
Property Trustee, unless it shall be proved that the Property
Trustee was negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than
a majority in Liquidation Amount of the Trust Securities
relating to the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee,
or exercising any trust or power conferred upon the Property
Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the
Debentures and the Payment Account shall be to deal with such
Property in a similar manner as the Property Trustee deals
with similar property for its own account, subject to the
protections and limitations on liability afforded to the
Property Trustee under this Trust Agreement and the Trust
Indenture Act;
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(iv) the Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree
in writing with the Depositor and money held by the Property
Trustee need not be segregated from other funds held by it
except in relation to the Payment Account maintained by the
Property Trustee pursuant to Section 301 and except to the
extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or
the Depositor with their respective duties under this Trust
Agreement, nor shall the Property Trustee be liable for the
negligence, default or misconduct of the Administrative
Trustees or the Depositor.
SECTION 802. CERTAIN NOTICES.
Within 90 days after the occurrence of any Event of Default actually
known to the Property Trustee or, to the extent Section 315(b) of the Trust
Indenture Act applies, within 90 days after the occurrence of any default
hereunder known to the Property Trustee, the Property Trustee shall transmit, in
the manner and to the extent provided in Section 313(c) of the Trust Indenture
Act notice of such Event of Default or default to the Securityholders, the
Administrative Trustees and the Depositor, unless such Event of Default shall
have been cured or waived.
(b) The Administrative Trustees shall transmit, to the Securityholders
and the Property Trustee in the manner and to the extent provided in Section
1008 hereof and, to the extent applicable, Section 313(c) of the Trust Indenture
Act, notice of the Depositor's election to begin or further extend an Extended
Interest Payment Period on the Debentures (unless such election shall have been
revoked) within the time specified for transmitting such notice to the holders
of the Debentures pursuant to the Indenture as originally executed.
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE.
Subject to the provisions of Section 801:
(a) the Property Trustee may conclusively rely and shall be protected
in acting or refraining from acting in good faith upon any resolution, Opinion
of Counsel, certificate, written representation of a Holder or transferee,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action; or
(ii) in construing any of the provisions of this Trust Agreement the Property
Trustee finds the same ambiguous or inconsistent with other provisions contained
herein; or (iii) the Property Trustee is unsure of the application of any
provision
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of this Trust Agreement, then, except as to any matter as to which the Preferred
Securityholders are entitled to vote under the terms of this Trust Agreement,
the Property Trustee shall deliver a notice to the Depositor requesting written
instructions of the Depositor as to the course of action to be taken and the
Property Trustee shall take such action, or refrain from taking such action, as
the Property Trustee shall be instructed in writing to take, or to refrain from
taking, by the Depositor, and shall have no liability for acting in accordance
with such instructions; provided, however, that if the Property Trustee does not
receive such instructions of the Depositor within 10 Business Days after it has
delivered such notice, or such reasonably shorter period of time set forth in
such notice (which to the extent practicable shall not be less than 2 Business
Days), it may, but shall be under no duty to, take or refrain from taking such
action not inconsistent with this Trust Agreement as it shall deem advisable and
in the best interests of the Securityholders, in which event the Property
Trustee shall have no liability except for its own bad faith, negligence or
willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by
an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly delivered by
the Depositor or the Administrative Trustees;
(e) the Property Trustee shall have no duty on behalf of the Trust to
see to any recording, filing or registration of any instrument (including any
financing or continuation statement) or any filing under tax or securities laws
or any re-recording, refiling, or reregistration thereof;
(f) the Property Trustee may consult with counsel of its choice (which
counsel may be counsel to the Depositor or any of its Affiliates) and the advice
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon, and in accordance with such advice, the Property
Trustee shall have the right at any time to seek instructions concerning the
administration of this Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Securityholders pursuant to this Trust Agreement, unless
such Securityholders shall have offered to the Property Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request,
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consent, order, approval, bond, debenture, note or other evidence of
indebtedness or other paper or document, unless requested in writing to do so by
one or more Securityholders, but the Property Trustee may make such further
inquiry or investigation into such facts or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys, provided that the Property Trustee shall be responsible for
its own negligence or recklessness with respect to selection of any agent or
attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the Property
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder the Property
Trustee (i) may request written instructions from the Holders of the Trust
Securities which written instructions may only be followed by Trustee if given
by the Holders of the same proportion in Liquidation Amount of the Trust
Securities as would be entitled to direct the Property Trustee under the terms
of the Trust Securities in respect of such remedy, right or action; (ii) may
refrain from enforcing such remedy or right or taking such other action until
such instructions are received; and (iii) shall be protected in acting in
accordance with such written instructions; and
(k) except as otherwise expressly provided by this Trust Agreement, the
Property Trustee shall not be under any obligation to take any action that is
discretionary under the provisions of this Trust Agreement. No provision of this
Trust Agreement shall be deemed to impose any duty or obligation on the Property
Trustee to perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it, in any jurisdiction in which it shall be
illegal, or in which the Property Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts, or to exercise
any such right, power, duty or obligation. No permissive power or authority
available to the Property Trustee shall be construed to be a duty.
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The Recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the Debentures.
SECTION 805. MAY HOLD SECURITIES.
Any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, subject to Sections 808 and 813 and except as provided in the
definition of the term "Outstanding" in Article I, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
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SECTION 806. COMPENSATION; INDEMNITY; FEES.
The Depositor agrees:
(a) to pay to the Trustees from time to time such compensation as the
Trustees and the Depositor may agree in writing for all services rendered by
them hereunder (which compensation shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this Trust
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to such Trustee's negligence, bad faith or
willful misconduct (or, in the case of the Administrative Trustees, any such
expense, disbursement or advance as may be attributable to its, his or her gross
negligence, bad faith or willful misconduct); and
(c) to indemnify each of the Trustees or any predecessor Trustee for,
and to hold the Trustees harmless against, any and all loss, damage, claim,
liability, penalty or expense, including taxes (other than taxes based on the
income of the Trustee) incurred without negligence or willful misconduct on its
part, arising out of or in connection with the acceptance or administration of
this Trust Agreement, including the costs and expenses of defending itself
against any claim or liability in connection with the acceptance, exercise or
performance of any of its powers or duties hereunder, except any such expense,
disbursement or advance as may be attributable to such Trustee's negligence, bad
faith or willful misconduct (or, in the case of the Administrative Trustees, any
such expense, disbursement or advance as may be attributable to its, his or her
gross negligence, bad faith or willful misconduct).
The provisions of this Section 806 shall survive the termination of
this Trust Agreement or the earlier resignations or removal of any Trustee.
No Trustee may claim any Lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 806.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 7.1(a)(iv), Section 7.1(a)(v) or
7.1(a)(vi) of the Indenture, the expenses (including reasonable charges and
expenses of its counsel) and the compensation for the services are intended to
constitute expenses of administration under any applicable Bankruptcy Law.
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SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this Section
807, the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Property Trustee with respect to the Trust
Securities shall cease to be eligible in accordance with the provisions of this
Section 807, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article VIII.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) One of the Trustees with respect to the Trust Securities at all
times shall meet the requirements of Section 3807 of the Delaware Business Trust
Act.
SECTION 808. CONFLICTING INTERESTS.
If the Property Trustee has or shall acquire a "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture Act, if applicable,
the Property Trustee and Company shall in all respects comply with the
provisions of Section 310 of the Trust Indenture Act and, to the extent not
inconsistent therewith, this Trust Agreement; provided, however, that for
purposes of the first proviso contained in Section 310 (b) of the Trust
Indenture Act, the Indenture and Preferred Securities Guarantee shall be deemed
to be specifically described in this Trust Agreement.
SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE.
(a) Unless an Event of Default shall have occurred and be continuing,
at any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, the Depositor shall have power to appoint,
and upon the written request of the Property Trustee, the Depositor shall for
such purpose join with the Property Trustee in the execution, delivery and
performance of any instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Property Trustee either to act as
co-trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section 809. If the Depositor does not
join in
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such appointment within 15 days after the receipt by it of a request so to do,
or in case a Debenture Event of Default has occurred and is continuing, the
Property Trustee alone shall have power to make such appointment. Any co-trustee
or separate trustee appointed pursuant to this Section 809 shall either be (i) a
natural person who is at least 21 years of age and a resident of the United
States; or (ii) a legal entity with its principal place of business in the
United States that shall act through one or more persons authorized to bind such
entity.
(b) Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged, and delivered
by the Depositor.
(c) Every co-trustee or separate trustee shall, to the extent permitted
by law, but to such extent only, be appointed subject to the following terms,
namely:
(i) The Trust Securities shall be executed and delivered and
all rights, powers, duties and obligations hereunder in
respect of the custody of securities, cash and other personal
property held by, or required to be deposited or pledged with,
the Trustees specified hereunder, shall be exercised, solely
by such Trustees and not by such co-trustee or separate
trustee.
(ii) The rights, powers, duties and obligations hereby
conferred or imposed upon the Property Trustee in respect of
any property covered by such appointment shall be conferred or
imposed upon and exercised or performed by the Property
Trustee or by the Property Trustee and such co-trustee or
separate trustee jointly, as shall be provided in the
instrument appointing such co-trustee or separate trustee,
except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Property
Trustee shall be incompetent or unqualified to perform such
act, in which event such rights, powers, duties and
obligations shall be exercised and performed by such
co-trustee or separate trustee.
(iii) The Property Trustee at any time, by an instrument in
writing executed by it, with the written concurrence of the
Depositor, may accept the resignation of or remove any
co-trustee or separate trustee appointed under this Section
809, and, in case a Debenture Event of Default has occurred
and is continuing, the Property Trustee shall have the power
to accept the resignation of, or remove, any such co-trustee
or separate trustee without the concurrence of the Depositor.
Upon the written request of the Property Trustee, the
Depositor shall join with the Property Trustee in the
execution, delivery and performance of all instruments
necessary or proper to effectuate such resignation or removal.
A successor to any co-trustee or separate trustee so resigned
or removed may be appointed in the manner provided in this
Section 809.
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(iv) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the
Property Trustee or any other trustee hereunder.
(v) The Property Trustee shall not be liable by reason of any
act of a co-trustee or separate trustee.
(vi) Any Act of Holders delivered to the Property Trustee
shall be deemed to have been delivered to each such co-trustee
and separate trustee.
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of any Trustee (the "Relevant Trustee")
and no appointment of a successor Trustee pursuant to this Article VIII shall
become effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 811.
(b) Subject to the immediately preceding paragraph, the Relevant
Trustee may resign at any time with respect to the Trust Securities by giving
written notice thereof to the Securityholders. If the instrument of acceptance
by the successor Trustee required by Section 811 shall not have been delivered
to the Relevant Trustee within 30 days after the giving of such notice of
resignation, the Relevant Trustee may petition, at the expense of the Depositor,
any court of competent jurisdiction for the appointment of a successor Relevant
Trustee with respect to the Trust Securities.
(c) Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee may be removed at such time by Act of the
Holders of a majority in Liquidation Amount of the Preferred Securities,
delivered to the Relevant Trustee (in its individual capacity and on behalf of
the Trust). An Administrative Trustee may be removed by the Common
Securityholder at any time. In no event will the Holders of the Preferred
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Common Securityholder. If an instrument of acceptance by a Successor Trustee
required by Section 8.11 shall have not been delivered to the Relevant Trustee
within 30 days after the giving of such notice of removal, the Relevant Trustee
may petition, at the expense of the Depositor, any court of competent
jurisdiction for the appointment of a Successor Relevant Trustee with respect to
the Trust Securities.
(d) If any Trustee shall resign, be removed or become incapable of
acting as Trustee, or if a vacancy shall occur in the office of any Trustee for
any cause, at a time when no Debenture Event of Default shall have occurred and
be continuing, the Common Securityholder, by act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees with respect to the Trust Securities and the Trust, and the successor
Trustee shall comply with the applicable requirements of Section 811. If the
Property Trustee shall resign, be removed
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or become incapable of continuing to act as the Property Trustee at a time when
a Debenture Event of Default shall have occurred and is continuing, the
Preferred Securityholders, by Act of the Securityholders of a majority in
Liquidation Amount of the Preferred Securities then Outstanding delivered to the
retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee
or Trustees with respect to the Trust Securities and the Trust, and such
successor Trustee shall comply with the applicable requirements of Section 811.
If an Administrative Trustee shall resign, be removed or become incapable of
acting as Administrative Trustee, at a time when a Debenture Event of Default
shall have occurred and be continuing, the Common Securityholder, by Act of the
Common Securityholder delivered to an Administrative Trustee, shall promptly
appoint a successor Administrative Trustee or Administrative Trustees with
respect to the Trust Securities and the Trust, and such successor Administrative
Trustee or Administrative Trustees shall comply with the applicable requirements
of Section 811. If no successor Relevant Trustee with respect to the Trust
Securities shall have been so appointed by the Common Securityholder or the
Preferred Securityholders and accepted appointment in the manner required by
Section 811, any Securityholder who has been a Securityholder of Trust
Securities on behalf of himself and all others similarly situated may petition a
court of competent jurisdiction for the appointment of a successor Trustee with
respect to the Trust Securities.
(e) The Administrative Trustee shall give notice of each resignation
and each removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 1008 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
(f) Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee who is a natural person dies
or becomes, in the opinion of the Depositor, incompetent or incapacitated, the
vacancy created by such death, incompetence or incapacity may be filled by (a)
the unanimous act of the remaining Administrative Trustees if there are at least
two of them; or (b) otherwise by the Depositor (with the successor in each case
being a Person who satisfies the eligibility requirement for Administrative
Trustees as forth in Section 807).
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Relevant
Trustee with respect to the Trust Securities and the Trust, the retiring
Relevant Trustee and each successor Relevant Trustee with respect to the Trust
Securities shall execute and deliver an instrument hereto wherein each successor
Relevant Trustee shall accept such appointment and which shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor Relevant Trustee all the rights, powers, trusts and
duties of the retiring Relevant Trustee with respect to the Trust Securities and
the Trust and, upon the execution and delivery of such instrument, the
resignation or removal of the retiring Relevant Trustee shall become effective
to the extent provided therein and each such successor Relevant Trustee, without
any further act, deed or conveyance, shall
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become vested with all the rights, powers, trusts and duties of the retiring
Relevant Trustee with respect to the Trust Securities and the Trust, but, on
request of the Trust or any successor Relevant Trustee such retiring Relevant
Trustee shall upon payment of its charges hereunder, duly assign, transfer and
deliver to such successor Relevant Trustee all Trust Property, all proceeds
thereof and money held by such retiring Relevant Trustee hereunder with respect
to the Trust Securities and the Trust.
(b) Upon request of any such successor Relevant Trustee, the Trust
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the immediately preceding paragraph, as the case may be.
(c) No successor Relevant Trustee shall accept its appointment unless
at the time of such acceptance such successor Relevant Trustee shall be
qualified and eligible under this Article VIII.
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any Person into which the Property Trustee may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Relevant Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of such Relevant Trustee, shall be the successor of such Relevant
Trustee hereunder, provided such Person shall be otherwise qualified and
eligible under this Article VIII, without the execution or filing of any paper
or any further act on the part of any of the parties hereto.
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST.
If and when the Property Trustee shall be or become, directly or
indirectly, a creditor of the Depositor or the Trust (or any other obligor upon
the Debentures or the Trust Securities), excluding any creditor relationship
described in Section 311(b) of the Trust Indenture Act, the Property Trustee
shall be subject to and shall take all actions necessary in order to comply with
the provisions of Section 311(a) of Trust Indenture Act regarding the collection
of claims against the Depositor or Trust (or any such other obligor), to the
extent applicable.
SECTION 814. REPORTS BY PROPERTY TRUSTEE.
(a) The Property Trustee shall transmit to Securityholders entitled to
receive the same under Section 313(c) of the Trust Indenture Act by mail such
reports concerning the Property Trustee and its actions under this Trust
Agreement as may be required pursuant to Section 313(b) of the Trust Indenture
Act at the times provided pursuant thereto. If required by Section 313(a) of the
Trust Indenture Act, the Property Trustee shall, within sixty days after each
May 15 following the date of the Trust Agreement, deliver to Securityholders
entitled to receive the same under Section 313(c)
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of the Trust Indenture Act by mail a brief report, dated as of such May 15,
which complies with the provisions of such Section 313(a).
(b) A copy of each such report provided for in this Section 814 shall,
at the time of such transmission to Holders, be filed by the Property Trustee
with The Nasdaq Stock Market's National Market, and each national securities
exchange or other organization upon which the Trust Securities are listed, and
also with the Commission.
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE.
The Depositor and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form in
the manner and at the times required by Section 314 of the Trust Indenture Act.
Delivery of such reports, information and documents to the Property
Trustee is for information purposes only and the Property Trustee's receipt of
such shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including the
Depositor's compliance with any of its covenants hereunder (as to which the
Property Trustee is entitled to rely exclusively on Officers' Certificates).
The Depositor shall transmit to Securityholders, in the manner and to
the extent provided in Section 313(c) of the Trust Indenture Act, such summaries
of the above-referenced materials as may be required by Section 314(a)(3) of the
Trust Indenture Act.
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee (i) such evidence of compliance with
any conditions precedent, if any, provided for in this Trust Agreement that
relate to any of the matters set forth in Section 314(c) of the Trust Indenture
Act in accordance with the requirements of said Section and (ii) such
certificates, if any, as may be required by Section 314(a)(4) of the Trust
Indenture Act. Any certificate or opinion required to be given by an officer
pursuant to Section 314(a)(4) or 314(c)(1) of the Trust Indenture Act shall be
given in the form of an Officers' Certificate.
SECTION 817. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be three, provided that the Holder of
all of the Common Securities by written instrument may increase or decrease the
number of Administrative Trustees.
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(b) If a Trustee ceases to hold office for any reason and the number of
Administrative Trustees is not reduced pursuant to Section 817(a), or if the
number of Trustees is increased pursuant to Section 817(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 810.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to dissolve, terminate or annul the Trust. Whenever a vacancy in the number of
Administrative Trustees shall occur, until such vacancy is filled by the
appointment of an Administrative Trustee in accordance with Section 810, the
Administrative Trustees in office, regardless of their number (and
notwithstanding any other provision of this Agreement), shall have all the
powers granted to the Administrative Trustees and shall discharge all the duties
imposed upon the Administrative Trustees by this Trust Agreement.
SECTION 818. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section
207(a); and
(b) The Administrative Trustees shall have power to delegate from time
to time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Administrative Trustees or otherwise as the Administrative Trustees may
deem expedient, to the extent such delegation is not prohibited by applicable
law or contrary to the provisions of the Trust, as set forth herein.
SECTION 819. VOTING.
Except as otherwise provided in this Trust Agreement, the consent or
approval of the Administrative Trustees shall require consent or approval by not
less than a majority of the Administrative Trustees, unless there are only two,
in which case both must consent.
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
SECTION 901. DISSOLUTION UPON EXPIRATION DATE.
Unless earlier dissolved, the Trust shall automatically dissolve on
June 30, 2028 (the "Expiration Date") subject to distribution of the Trust
Property in accordance with Section 904.
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SECTION 902. EARLY DISSOLUTION.
The first to occur of any of the following events is an "Early
Termination Event" upon the occurrence of which the Trust shall be dissolved:
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b) delivery of written direction to the Property Trustee by the
Depositor at any time (which direction is wholly optional and within the
discretion of the Depositor) to dissolve the Trust and distribute the Debentures
to Securityholders in exchange for the Preferred Securities in accordance with
Section 904;
(c) the redemption of all of the Preferred Securities in connection
with the redemption of all of the Debentures; and
(d) an order for dissolution of the Trust shall have been entered by a
court of competent jurisdiction.
SECTION 903. TERMINATION.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall terminate upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 904, or upon the
redemption of all of the Trust Securities pursuant to Section 402, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust; (c) the discharge
of all administrative duties of the Administrative Trustees, including the
performance of any tax reporting obligations with respect to the Trust or the
Securityholders; and (d) the filing of a Certificate of Cancellation by the
Administrative Trustees under the Delaware Business Trust Act.
SECTION 904. LIQUIDATION.
(a) If an Early Termination Event specified in clause (a), (b), or (d)
of Section 902 occurs or upon the Expiration Date, the Trust shall be liquidated
by the Trustees as expeditiously as the Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to each Securityholder a Like Amount of Debentures,
subject to Section 904(d). Notice of liquidation shall be given by the Property
Trustee by first-class mail, postage prepaid, mailed not later than 30 nor more
than 60 days prior to the Liquidation Date to each Holder of Trust Securities at
such Holder's address appearing in the Securities Register. All notices of
liquidation shall:
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(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust
Securities shall no longer be deemed to be Outstanding and any
Trust Securities Certificates not surrendered for exchange
shall be deemed to represent a Like Amount of Debentures;
(iii) provide such information with respect to the mechanics
by which Holders may exchange Trust Securities Certificates
for Debentures, or, if Section 904(d) applies, receive a
Liquidation Distribution, as the Administrative Trustees shall
deem appropriate;
(iv) state the CUSIP number; and
(v) state the office or agency of the Trust where Securities
should be surrendered.
(b) Except where Section 902(c) or 904(d) applies, in order to effect
the liquidation of the Trust and distribution of the Debentures to
Securityholders, the Property Trustee shall establish a record date for such
distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Debentures in exchange for the
Outstanding Trust Securities Certificates.
(c) Except where Section 902(c) or 904(d) applies, after the
Liquidation Date, (i) the Trust Securities shall no longer be deemed to be
Outstanding; (ii) certificates representing a Like Amount of Debentures shall be
issued to holders of Trust Securities Certificates upon surrender of such
certificates to the Administrative Trustees or their agent for exchange; (iii)
the Depositor shall use its reasonable efforts to have the Debentures listed on
The Nasdaq Stock Market's National Market or SmallCap Market or on such other
securities exchange or other organization as the Preferred Securities are then
listed or traded; (iv) any Trust Securities Certificates not so surrendered for
exchange shall be deemed to represent a Like Amount of Debentures, accruing
interest at the rate and for the period provided for in the Debentures from the
last Distribution Date on which a Distribution was made on such Trust Securities
Certificates until such certificates are so surrendered (and until such
certificates are so surrendered, no payments of interest or principal shall be
made to holders of Trust Securities Certificates with respect to such
Debentures): and (v) all rights of Securityholders holding Trust Securities
shall cease, except the right of such Securityholders to receive Debentures upon
surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 904, whether because of an order for dissolution entered by a court of
competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Administrative Trustees not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
wound-up or terminated, by the Property Trustee in such manner as the Property
Trustee determines. In such
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event, Securityholders shall be entitled to receive out of the assets of the
Trust available for distribution to Securityholders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an amount
equal to the Liquidation Amount per Trust Security plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If, upon any such winding-up or termination, the Liquidation
Distribution can be paid only in part because the Trust has insufficient assets
available to pay in full the aggregate Liquidation Distribution, then, subject
to the next succeeding sentence, the amounts payable by the Trust on the Trust
Securities shall be paid on a pro rata basis (based upon Liquidation Amounts).
The Holder of the Common Securities shall be entitled to receive Liquidation
Distributions upon any such winding-up or termination pro rata (determined as
aforesaid) with Holders of Preferred Securities, except that, if a Debenture
Event of Default has occurred and is continuing, the Preferred Securities shall
have a priority over the Common Securities.
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE
TRUST.
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any Person, except pursuant to this Section 905
or Section 904. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the Holders of the Preferred
Securities or the Property Trustee, the Trust may merge with or into,
consolidate, amalgamate, be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any state; provided, that (i) such successor entity either (a)
expressly assumes all of the obligations of the Trust with respect to the
Preferred Securities; or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Preferred Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise; (ii) the Depositor expressly
appoints a trustee of such successor entity possessing substantially the same
powers and duties as the Property Trustee as the holder of the Debentures; (iii)
the Successor Securities are registered or listed, or any Successor Securities
shall be registered or listed upon notification of issuance, on any national
securities exchange or other organization on which the Preferred Securities are
then registered or listed (including, if applicable, the Nasdaq Stock Market's
National Market), if any; (iv) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any material
respect; (vi) such successor entity has a purpose substantially identical to
that of the Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Depositor has received an
Opinion of Counsel to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders of the Preferred
Securities (including any Successor Securities) in any material respect: and (b)
following such merger,
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consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Trust nor such successor entity shall be required to register as an
"investment company" under the Investment Company Act, and (viii) the Depositor
or any permitted successor or assignee owns all of the common securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
Holders of 100% in Liquidation Amount of the Preferred Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to any other Person or
permit any other Person to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease would cause the Trust or the successor entity to be classified
as other than a grantor trust for United States federal income tax purposes.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS.
The death, incapacity, dissolution, bankruptcy or termination of any
Person having an interest, beneficial or otherwise, in Trust Securities shall
not operate to terminate this Trust Agreement, nor dissolve, terminate or annul
the Trust, nor entitle the legal representatives or heirs of such Person or any
Securityholder for such Person, to claim an accounting, take any action or bring
any proceeding in any court for a partition or winding-up of the arrangements
contemplated hereby, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
SECTION 1002. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the
Trustees and the Depositor, without the consent of any Securityholders, (i) as
provided in Section 811 with respect to acceptance of appointment by a successor
Trustee; (ii) to cure any ambiguity, correct or supplement any provision herein
or therein which may be inconsistent with any other provision herein or therein,
or to make any other provisions with respect to matters or questions arising
under this Trust Agreement, that shall not be inconsistent with the other
provisions of this Trust Agreement; or (iii) to modify, eliminate or add to any
provisions of this Trust Agreement to such extent as shall be necessary to
ensure that the Trust shall be classified for United States federal income tax
purposes as a grantor trust at all times that any Trust Securities are
outstanding or to ensure that the Trust shall not be required to register as an
"investment company" under the Investment Company Act; provided, however, that
in the case of clause (ii), such action shall not adversely affect in any
material respect the interests of any Securityholder, and any such amendments of
this Trust Agreement shall become effective when notice thereof is given to the
Securityholders.
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(b) Except as provided in Section 601(c) or Section 1002(c) hereof, any
provision of this Trust Agreement may be amended by the Trustees and the
Depositor (i) with the consent of Trust Securityholders representing not less
than a majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding; and (ii) upon receipt by the Trustees of an Opinion of Counsel to
the effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment shall not affect the Trust's status
as a grantor trust for United Status federal income tax purposes or the Trust's
exemption from status of an "investment company" under the Investment Company
Act.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 603 or 606 hereof), this Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date; or (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date. Notwithstanding
any other provision herein, without the unanimous consent of the Securityholders
(such consent being obtained in accordance with Section 603 or 606 hereof), this
paragraph (c) of this Section 1002 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an "investment company" under the Investment Company Act or to fail or
cease to be classified as a grantor trust for United States federal income tax
purposes.
(e) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees shall promptly provide to the Depositor a copy of
such amendment.
(f) The Property Trustee shall not be required to enter into any
amendment to this Trust Agreement which adversely affects its own rights, duties
or immunities under this Trust Agreement. The Property Trustee shall be entitled
to receive an Opinion of Counsel and an Officers' Certificate stating that any
amendment to this Trust Agreement is in compliance with this Trust Agreement.
SECTION 1003. SEPARABILITY.
In case any provision in this Trust Agreement or in the Trust
Securities Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
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SECTION 1004. GOVERNING LAW.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT
AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES).
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY.
If the date fixed for any payment on any Trust Security shall be a day
that is not a Business Day, then such payment need not be made on such date but
may be made on the next succeeding day which is a Business Day (except as
otherwise provided in Sections 401(a) and 402(d)), with the same force and
effect as though made on the date fixed for such payment, and no distribution
shall accumulate thereon for the period after such date.
SECTION 1006. SUCCESSORS.
This Trust Agreement shall be binding upon and shall inure to the
benefit of any successor to the Depositor, the Trust or the Relevant Trustee(s),
including any successor by operation of law. The Depositor shall not assign its
obligations hereunder except as contemplated by Article XII of the Indenture and
unless the assignee thereof agrees in writing, in form and substance
satisfactory to the Corporate Trustee, to perform all of Depositor's obligations
hereunder with the same effect as if it had been named herein as Depositor.
SECTION 1007. HEADINGS.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
SECTION 1008. REPORTS, NOTICES AND DEMANDS.
Any report, notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be given or served
to or upon any Securityholder or the Depositor may be given or served in writing
by deposit thereof, first-class postage prepaid, in the United States mail, hand
delivery or facsimile transmission, in each case, addressed, (a) in the case of
a Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Depositor, to Metropolitan
Financial Corp., 6001 Landerhaven Drive, Mayfield Heights, Ohio 44124,
Attention: President, facsimile no.: 440-646-0103. Such notice, demand or other
communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
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<PAGE> 64
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee or the Administrative Trustees shall be given or
served in writing by deposit thereof, first-class postage prepaid, in the United
States mail, hand delivery or facsimile transmission, in each case addressed
(until another address is published by the Trust) as follows: (a) with respect
to the Property Trustee, to Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust
Administration; (b) with respect to the Trust or the Administrative Trustees, to
them at the address above for notices to the Depositor, marked "Attention:
Administrative Trustees of Metropolitan Capital Trust I." Such notice, demand or
other communication to or upon the Trust or the Property Trustee shall be deemed
to have been sufficiently given or made only upon actual receipt of the writing
by the Trust or the Property Trustee.
SECTION 1009. AGREEMENT NOT TO PETITION.
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been dissolved in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the United
States Bankruptcy Code of 1978, as amended) (collectively, "Bankruptcy Laws") or
otherwise join in the commencement of any proceeding against the Trust under any
Bankruptcy Law. In the event the Depositor takes action in violation of this
Section 1009, the Property Trustee agrees, for the benefit of Securityholders,
that at the expense of the Depositor (which expense shall be paid prior to the
filing), it shall file an answer with the bankruptcy court or otherwise properly
contest the filing of such petition by the Depositor against the Trust or the
commencement of such action and raise the defense that the Depositor has agreed
in writing not to take such action and should be estopped and precluded
therefrom. The provisions of this Section 1009 shall survive the termination of
this Trust Agreement.
SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Trust Agreement by any
of the provisions of the Trust Indenture Act, such required provision shall
control. If any provision of this Trust Agreement modifies or excludes any
provision of the Trust Indenture Act which may be so modified or
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<PAGE> 65
excluded, the latter provision shall be deemed to apply to this Trust Agreement
as so modified or to be excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND INDENTURE.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY
SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN
SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND
AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND
THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH
SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST
AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS AMONG THE TRUST AND SUCH
SECURITYHOLDER AND SUCH OTHERS.
METROPOLITAN FINANCIAL CORP., AS DEPOSITOR
By:__________________________________
Name: David G. Lodge
Title: President
WILMINGTON TRUST COMPANY, AS PROPERTY TRUSTEE
By:__________________________________
Name:________________________________
Title:_______________________________
_____________________________________
Name: Judith Z. Adam
Title: As Administrative Trustee
_____________________________________
Name: David W. Gifford
Title: As Administrative Trustee
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<PAGE> 66
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
EXCEPT TO A SUCCESSOR IN INTEREST
OF METROPOLITAN FINANCIAL CORP.
IN COMPLIANCE WITH
APPLICABLE LAW AND SECTION 510
OF THAT CERTAIN AMENDED AND
RESTATED TRUST AGREEMENT DATED ________, 1998,
AMONG METROPOLITAN FINANCIAL CORP., AS DEPOSITOR
WILMINGTON TRUST COMPANY, AS PROPERTY TRUSTEE,
AND THE ADMINISTRATIVE TRUSTEES NAMED THEREIN
CERTIFICATE NUMBER NUMBER OF COMMON SECURITIES
C-_ (______)
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
METROPOLITAN CAPITAL TRUST I
TRUST COMMON SECURITIES
(LIQUIDATION AMOUNT $10 PER COMMON SECURITY)
Metropolitan Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies that
Metropolitan Financial Corp. (the "Holder") is the registered owner of ______
common securities of the Trust, representing beneficial interests of the Trust
and designated the Trust Common Securities (liquidation amount $10 per Common
Security) (the "Common Securities"). Except as provided above, the Common
Securities are not transferable and any attempted transfer hereof shall be void.
The designations, rights, privileges, restrictions, preferences and other terms
and provisions of the Common Securities are set forth in, and the Common
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Amended and Restated Trust Agreement of the
Trust dated as of __________, 1998, as the same may be amended from time to time
(the "Trust Agreement"), including the designation of the terms of the Common
Securities as set forth therein. The Trust will furnish a copy of the Trust
Agreement to the Holder without charge upon written request to the Trust at its
principal place of business or registered office.
By receipt and acceptance of this certificate, the Holder agrees to be
bound by the Trust Agreement and is entitled to the benefits thereunder.
<PAGE> 67
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Common Securities as
evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ____ day of _______, 1998.
METROPOLITAN CAPITAL TRUST I
By:_______________________________
Name:_____________________________
Title: Administrative Trustee
<PAGE> 68
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT, dated as of _________, 1998, between Metropolitan Financial
Corp., an Ohio corporation (the "Corporation") having its principal office at
6001 Landerhaven Drive, Mayfield Heights, Ohio 44124, and Metropolitan Capital
Trust I, a Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to and receive debentures from the Corporation and to issue and
sell ____% Trust Preferred Securities, (the "Preferred Securities") with such
powers, preferences and special rights and restrictions are set forth in the
Amended and Restated Trust Agreement of the Trust, dated as of _________, 1998,
as the same may be amended from time to time (the "Trust Agreement");
WHEREAS, the Corporation will directly or indirectly own all of the
Common Securities of the Trust and will issue the debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase the Corporation hereby agrees shall benefit
the Corporation and which purchase the Corporation acknowledges will be made in
reliance upon the execution and delivery of this Agreement, the Corporation and
Trust hereby agree as follows:
ARTICLE I
Section 1.1. Guarantee by the Corporation.
Subject to the terms and conditions hereof, the Corporation hereby
irrevocably and unconditionally guarantees to each person or entity to whom the
Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the
full payment, when and as due, of any and all Obligations (as hereinafter
defined) to such Beneficiaries. As used herein, "Obligations" means any costs,
expenses or liabilities of the Trust, other than obligations of the Trust to pay
to holders of any Preferred Securities or other similar interests in the Trust
the amounts due such holders pursuant to the terms of the Preferred Securities
or such other similar interests, as the case may be. This Agreement is intended
to be for the benefit of, and to be enforceable by, all such Beneficiaries,
whether or not such Beneficiaries have received notice hereof.
Section 1.2. Term of Agreement.
This Agreement shall terminate and be of no further force and effect
upon the later of (a) the date on which full payment has been made of all
amounts payable to all holders of all the Preferred Securities or other similar
interests in the Trust (whether upon redemption, liquidation, exchange or
otherwise) and (b) the date on which there are no Beneficiaries remaining;
provided, however, that
1
<PAGE> 69
this Agreement shall continue to be effective or shall be reinstated, as the
case may be, if at any time any holder of Preferred Securities or similar
interests in the Trust or any Beneficiary must restore payment of any sums paid
under the Preferred Securities or similar interests in the Trust, under any
Obligation, under the Guarantee Agreement dated the date hereof by the
Corporation and Wilmington Trust Company, as guarantee trustee, or under the
Agreement for any reason whatsoever. This Agreement is continuing, irrevocable,
unconditional and absolute.
Section 1.3. Waiver of Notice.
The Corporation hereby waives notice of acceptance of this Agreement
and of any Obligation to which it applies or may apply, and the Corporation
hereby waives presentment, demand for payment, protest, notice of nonpayment,
notice of dishonor, notice of redemption and all other notices and demands.
Section 1.4. No Impairment.
The obligations, covenants, agreements and duties of the Corporation
under this Agreement shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other
obligation under, arising out of, or in connection with, the
Obligations;
(b) any failure, omission, delay or lack of diligence on the part of
the Beneficiaries to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Beneficiaries with respect to the
Obligations or any action on the part of the Trust granting indulgence
or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the
Trust or any of the assets of the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, the Corporation with respect to the happening of any of, the
foregoing.
Section 1.5 Enforcement.
A Beneficiary may enforce this Agreement directly against the
Corporation and the Corporation waives any right or remedy to require that any
action be brought against the Trust or any other person or entity before
proceeding against the Corporation.
2
<PAGE> 70
Section 1.6. Subrogation.
The Corporation shall be subrogated to all (if any) rights of the Trust
in respect of any amounts paid to the Beneficiaries by the Corporation under
this Agreement; provided, however, that the Corporation shall not (except to the
extent required by mandatory provisions of law) be entitled to enforce or
exercise any rights which it may acquire by way of subrogation of any indemnity,
reimbursement of other agreement, in all cases as a result of payment under this
Agreement, if, at the time of any such payment, any amounts are due and unpaid
under this Agreement.
ARTICLE II
Section 2.1. Binding Effect.
All guarantees and agreements contained in this Agreement shall bind
the successors, assigns, receivers, trustees and representatives of the
Corporation and shall inure to the benefit of the Beneficiaries.
Section 2.2 Amendment.
So long as there remains any Beneficiary or any Preferred Securities
are outstanding, this Agreement shall not be modified or amended in any manner
adverse to such Beneficiary or to the holders of the Preferred Securities.
Section 2.3 Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same against receipt
therefor by facsimile transmission (confirmed by mail) or by registered or
certified mail, addressed as follows (and if so given, shall be deemed given
when mailed):
Metropolitan Capital Trust I
c/o Metropolitan Financial Corp.
6001 Landerhaven Drive
Mayfield Heights, Ohio 44124
Facsimile No.: (440) 646-0103
Attention: President
Metropolitan Financial Corp.
6001 Landerhaven Drive
Mayfield Heights, Ohio 44124
Facsimile No.: (440) 646-0103
Attention: President
3
<PAGE> 71
Section 2.4. Choice of Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES THEREOF.
THE AGREEMENT is executed as of the day and year first above written.
METROPOLITAN FINANCIAL CORP.
By:____________________________
Name:__________________________
Title:_________________________
METROPOLITAN CAPITAL TRUST I
By:_____________________________
Name:___________________________
Title: Administrative Trustee
----------------------
4
<PAGE> 72
EXHIBIT E
Certificate Number Number of Preferred Securities
P-__ ___________
CUSIP NO. ______________
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
METROPOLITAN CAPITAL TRUST I
______% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
Metropolitan Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies
that___________ (the "Holder") is the registered owner of ________preferred
securities of the Trust representing an undivided beneficial interest in the
assets of the Trust and designated the Metropolitan Capital Trust I ____%
Cumulative Trust Preferred Securities (liquidation amount $10 per Preferred
Security) (the "Preferred Securities"). The Preferred Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer as provided in Section 504 of the Trust Agreement (as
defined below). The designations, rights, privileges, restrictions, preferences
and other terms and provisions of the Preferred Securities are set forth in, and
the Preferred Securities represented hereby are issued and shall in all respects
be subject to the terms and provisions of, the Amended and Restated Trust
Agreement of the Trust dated as of_________, 1998, as the same may be amended
from time to time (the "Trust Agreement"), including the designation of the
terms of Preferred Securities as set forth therein. The Holder is entitled to
the benefits of the Guarantee Agreement, as the same may be amended from time to
time, entered into by Metropolitan Financial Corp., a Delaware corporation, and
Wilmington Trust Company, as guarantee trustee, dated as of __________, 1998
(the "Guarantee"), to the extent provided therein. The Trust will furnish a copy
of the Trust Agreement and the Guarantee to the Holder without charge upon
written request to the Trust at its principal place of business or registered
office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
<PAGE> 73
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ______ day of _________, 1998.
METROPOLITAN CAPITAL TRUST I
By:___________________________________
Name:_________________________________
Title: Administrative Trustee
________________________________
This is one of the Preferred Securities referred to in the Trust
Agreement.
Dated: WILMINGTON TRUST COMPANY
as Trustee
By:_________________________________
Authorized Signatory
<PAGE> 74
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Preferred Securities Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date:_______________________________
Signature:___________________________
(Sign exactly as your name appears on the other side of this
Preferred Securities Certificate)
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the [Registrar], which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the [Registrar] in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE> 1
Exhibit 4.6
PREFERRED SECURITIES GUARANTEE AGREEMENT
BY AND BETWEEN
METROPOLITAN FINANCIAL CORP.
AND
WILMINGTON TRUST COMPANY
_____________, 1998
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page No.
<S> <C> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions and Interpretation
ARTICLE II TRUST INDENTURE ACT
Section 2.1 Trust Indenture Act; Application
Section 2.2 Lists of Holders of Securities
Section 2.3 Reports by the Preferred Guarantee Trustee Section 2.4
Periodic Reports to Preferred Guarantee Trustee Section
2.5 Evidence of Compliance with Conditions Precedent
Section 2.6 Events of Default; Waiver
Section 2.7 Event of Default; Notice
Section 2.8 Conflicting Interests
ARTICLE III POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
Section 3.1 Powers And Duties of The Preferred Guarantee Trustee
Section 3.2 Certain Rights of Preferred Guarantee Trustee
Section 3.3 Not Responsible For Recitals or Issuance of Guarantee
ARTICLE IV PREFERRED GUARANTEE TRUSTEE
Section 4.1 Preferred Guarantee Trustee; Eligibility
ARTICLE V GUARANTEE
Section 5.1 Guarantee
Section 5.2 Waiver of Notice and Demand
Section 5.3 Obligations Not Affected
Section 5.4 Rights of Holders
Section 5.5 Guarantee of Payment
Section 5.6 Subrogation
Section 5.7 Independent Obligations
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page No.
<S> <C> <C>
ARTICLE VI LIMITATION OF TRANSACTIONS;
SUBORDINATION
Section 6.1 Limitation of Transactions
Section 6.2 Ranking
ARTICLE VII TERMINATION
Section 7.1 Termination
ARTICLE VIII INDEMNIFICATION
Section 8.1 Exculpation
Section 8.2 Indemnification
ARTICLE IX MISCELLANEOUS
Section 9.1 Successors and Assigns
Section 9.2 Amendments
Section 9.3 Notices
Section 9.4 Benefit
Section 9.5 Governing Law
</TABLE>
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<PAGE> 4
CROSS REFERENCE TABLE
SECTION OF TRUST INDENTURE SECTION OF GUARANTEE AGREEMENT
ACT OF 1939, AS AMENDED
310(a) 4.1 (a)
310(b) 4.1 (c), 2.8
310(c) Not Applicable
31l(a) 2.2(b)
311(b) 2.2(b)
311(c) Not Applicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Not Applicable
314(c) 2.5
314(d) Not Applicable
314(e) 1.1,2.5,3.2
314(f) 2.1,3.2
315(a) 3. 1 (d)
315(b) 2.7
315(c) 3.1
315(d) 3. 1 (d)
315(e) Not Applicable
316(a) 1.1,2.6, 5.4
316(b) 5.1, 5 3
317(a) 3.1
317(b) Not Applicable
<PAGE> 5
CROSS REFERENCE TABLE
318(a) 2.1
318(b) 2.1
318(c) 2.1
Note: This Cross-Reference Table does not constitute part of this Agreement and
shall not affect the interpretation of any of its terms or provisions
<PAGE> 6
PREFERRED SECURITIES GUARANTEE AGREEMENT
THIS PREFERRED SECURITIES GUARANTEE AGREEMENT (this "Preferred
Securities Guarantee"), dated as of __________, 1998, is executed and delivered
by METROPOLITAN FINANCIAL CORP., an Ohio corporation (the "Guarantor"), and
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as trustee (the
"Preferred Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Preferred Securities (as defined herein) of
Metropolitan Capital Trust I, a Delaware statutory business trust (the "Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of _________, 1998, among the trustees of the Trust
named herein, the Guarantor, as depositor, and the holders from time to time of
undivided beneficial interests in the assets of the Trust, the Trust is issuing
on the date hereof preferred securities, having an aggregate liquidation amount
of $10 per share, designated the _____% Cumulative Trust Preferred Securities
(the "Preferred Securities") representing undivided beneficial ownership
interests in the assets of the Trust and having the terms set forth in the Trust
Agreement;
WHEREAS, the Preferred Securities will be issued by the Trust and the
proceeds thereof, together with the proceeds from the issuance of the Trust's
Common Securities, will be used to purchase the Junior Subordinated Debentures
due 2028 (the "Junior Subordinated Debentures") of the Guarantor which will be
deposited with Wilmington Trust Company, as Property Trustee under the Trust
Agreement, as trust assets; and
WHEREAS, as an incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1. 1 DEFINITIONS AND INTERPRETATION.
In this Preferred Securities Guarantee, unless the context otherwise
requires:
(a) capitalized terms used in this Preferred Securities Guarantee but
not defined in the preamble above have the respective meanings assigned to them
in this Section 1.1;
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<PAGE> 7
(b) terms defined in the Trust Agreement in effect on the date of
execution of this Preferred Securities Guarantee have the same meaning when used
in this Preferred Securities Guarantee unless otherwise defined herein;
(c) a term defined anywhere in this Preferred Securities Guarantee has
the same meaning throughout;
(d) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Preferred Securities Guarantee to Articles
and Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning when
used in this Preferred Securities Guarantee, unless otherwise defined in this
Preferred Securities Guarantee or unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a Saturday or Sunday or a day
on which banking institutions in the City of New York are authorized or required
by law, executive order or regulation to close or a day on which the Corporate
Trust Office of the Preferred Guarantee Trustee is closed for business.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Agreement is located at Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debentures" means the ____% Junior Subordinated Debentures due 2028,
of the Debenture Issuer held by the Property Trustee of the Trust.
"Debenture Issuer" means the Guarantor.
"Debt" means with respect to any Person, whether recourse is to all
or a portion of the assets of such Person and whether or not contingent: (i)
every obligation of such Person for money
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<PAGE> 8
borrowed; (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses; (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person; (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (v) every
capital lease obligation of such Person; (vi) all indebtedness of such person
whether incurred on or prior to the date of the Indenture or thereafter
incurred, for claims in respect of derivative products, including interest rate,
foreign exchange rate and commodity forward contracts, options and swaps and
similar arrangements; and (vii) every obligation of the type referred to in
clauses (i) through (vi) of another Person and all dividends of another Person
the payments of which, in either case, such Person has guaranteed or is
responsible or liable, directly or indirectly, as obligor or otherwise.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Preferred Securities Guarantee.
"Guarantor" means Metropolitan Financial Corp., an Ohio corporation.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by the Trust: (i) any accrued and unpaid Distributions (as defined
in the Trust Agreement) that are required to be paid on such Preferred
Securities, to the extent the Trust shall have funds available therefor, (ii)
the redemption price, including all accrued and unpaid Distributions to the date
of redemption (the "Redemption Price"), to the extent the Trust has funds
available therefor, with respect to any Preferred Securities called for
redemption by the Trust, and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Junior Subordinated Debentures to the Holders in exchange for
Preferred Securities as provided in the Trust Agreement or a redemption of all
of the Preferred Securities), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Preferred Securities to
the date of payment, to the extent the Trust shall have funds available therefor
(the "Liquidation Distribution"), and (b) the amount of assets of the Trust
remaining available for distribution to Holders in liquidation of the Trust.
"Holder" shall mean any holder, as registered on the books and records
of the Trust, of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.
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"Indenture" means the Indenture dated as of _________, 1998, among the
Debenture Issuer and Wilmington Trust Company, as trustee, and any indenture
supplemental thereto pursuant to which certain subordinated debt securities of
the Debenture Issuer are to be issued to the Property Trustee of the Trust.
"Junior Subordinated Debentures" shall have the meaning set forth in
the Recitals hereto.
"Liquidation Distribution" has the meaning provided therefor in the
definition of Guarantee Payments.
"Majority in liquidation amount of the Preferred Securities" means the
holders of more than 50% of the liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all of the Outstanding Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two authorized officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer upon which the statements contained in
the certificate are based in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means Wilmington Trust Company, until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.
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"Redemption Price" has the meaning provided therefor in the definition
of Guarantee Payments.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer of the Preferred Guarantee Trustee, including any
vice-president, any assistant vice-president, any assistant secretary, any
assistant treasurer or other officer customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officers knowledge of and familiarity with
the particular subject.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing or any
petition in bankruptcy or for reorganization relating to the Guarantor whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Junior Subordinated Debentures or to other
Debt which is pari passu with, or subordinated to, the Junior Subordinated
Debentures; provided however, that Senior Debt shall not be deemed to include
(i) any Debt of the Guarantor which when incurred and without respect to any
election under Section 1111 (b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Guarantor, (ii) any Debt of the Guarantor
to any of its subsidiaries and (iii) Debt to any employee of the Guarantor.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4. 1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by such
provisions.
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
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SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) The Guarantor shall provide the Preferred Guarantee Trustee with a
list, in such form as the Preferred Guarantee Trustee may reasonably require, of
the names and addresses of the Holders of the Preferred Securities ("List of
Holders") as of _________and _________ of each year, and at such other times as
Preferred Guarantee Trustee may reasonably request in writing; provided, that
the Guarantor shall not be obligated to provide such List of Holders at any time
the List of Holders does not differ from the most recent List of Holders given
to the Preferred Guarantee Trustee by the Guarantor. The Preferred Guarantee
Trustee shall preserve the list of Holders and all information contained therein
in as current a form as is reasonably practicable, but may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations
under Section 311(a) of the Trust Indenture Act (but excluding from the
operation of such Section a creditor relationship arising in the circumstances
described in Section 311(b) of the Trust Indenture Act) and under Section 312(b)
of the Trust Indenture Act.
SECTION 2.3 REPORTS BY THE PREFERRED GUARANTEE TRUSTEE.
The Preferred Guarantee Trustee shall provide to the Holders of the
Preferred Securities such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by, and otherwise
in compliance with, Section 313 of the Trust Indenture Act. The Preferred
Guarantee Trustee shall also comply with the requirements of Section 313 (d) of
the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE.
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 of the Trust
Indenture Act (if any) and the compliance certificate required by Section 314 of
the Trust Indenture Act in the form, in the manner and at the times required by
Section 314 of the Trust Indenture Act. Delivery of such reports, information
and documents to the Preferred Guarantee Trustee is for informational purposes
only and the Preferred Guarantee Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained herein, including the Guarantor's compliance with any of
its covenants hereunder (as to which the Preferred Guarantee Trustee is entitled
to rely exclusively on Officer's Certificates). The Guarantor also shall
transmit to the Holders of the Preferred Securities, in the manner and to the
extent provided in Section 313(c) of the Trust Indenture Act, such summaries of
the foregoing documents, reports and information as may be required by rules and
regulations prescribed by the Commission.
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
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The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act that may be required by such
Section. Any certificate or opinion required to be given by an officer pursuant
to Section 314(c) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER.
The Holders of a Majority in liquidation amount of Preferred Securities
may, by vote, on behalf of the Holders of all of the Preferred Securities, waive
any past Event of Default and its consequences. Upon such waiver, any such Event
of Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured, for every purpose of this Preferred
Securities Guarantee, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of a default hereunder, transmit by mail to the Holders of the
Preferred Securities in the manner and to the extent provided in Section 313(c)
of the Trust Indenture Act notice of all defaults hereunder actually known to
the Preferred Guarantee Trustee, unless such defaults have been cured before the
giving of such notice; provided, that except in the case of payment defaults,
the Preferred Guarantee Trustee shall be protected in withholding such notice if
and so long as the Preferred Guarantee Trustee determines in accordance with
Section 315(b) of the Trust Indenture Act in good faith that the withholding of
such notice is in the interest of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Preferred Guarantee Trustee shall
have received written notice, or of which a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Trust Agreement shall
have obtained actual knowledge.
SECTION 2.8 CONFLICTING INTERESTS.
The Trust Agreement and Indenture shall be deemed to be specifically
described in this Preferred Securities Guarantee for the purposes of clause (i)
of the first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.
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(a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the Preferred Securities,
and the Preferred Guarantee Trustee shall not transfer this Preferred Securities
Guarantee to any Person except a Holder of Preferred Securities exercising his
or her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee
Trustee on acceptance by such Successor Preferred Guarantee Trustee of its
appointment to act as Successor Preferred Guarantee Trustee. The right, title
and interest of the Preferred Guarantee Trustee shall automatically vest in any
Successor Preferred Guarantee Trustee, and such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Preferred Guarantee
Trustee.
(b) If an Event of Default has occurred and is continuing, the
Preferred Guarantee Trustee shall enforce this Preferred Securities Guarantee
for the benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6), the Preferred Guarantee Trustee shall exercise such of
the rights and powers vested in it by this Preferred Securities Guarantee, and
use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the Preferred
Guarantee Trustee shall be determined solely by the
express provisions of this Preferred Securities
Guarantee, and the Preferred Guarantee Trustee shall
not be liable except for the performance of such
duties and obligations as are specifically set forth
in this Preferred Securities Guarantee, and no
implied covenants or obligations shall be read into
this Preferred Securities Guarantee against the
Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Preferred Guarantee Trustee, the Preferred Guarantee
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed herein, upon any certificates or opinions
furnished to the Preferred Guarantee Trustee
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and conforming to the requirements of this Preferred
Securities Guarantee; but in the case of any such
certificates or opinions that by any provision hereof
are required to be furnished to the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee
shall be under a duty to examine the same to
determine whether or not they conform to the
requirements of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible
Officer of the Preferred Guarantee Trustee, unless it shall be
proved that the Preferred Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was
made;
(iii) the Preferred Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in
good faith in accordance with the direction of the Holders of
not less than a Majority in liquidation amount of the
Preferred Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the
Preferred Guarantee Trustee, or exercising any trust or power
conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its
own funds or otherwise incur personal financial liability in
the performance of any of its duties or in the exercise of any
of its rights or powers, if the Preferred Guarantee Trustee
shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it
under the terms of this Preferred Securities Guarantee or
indemnity, reasonably satisfactory to the Preferred Guarantee
Trustee, against such risk or liability is not reasonably
assured to it.
SECTION 3.2 CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) the Preferred Guarantee Trustee may conclusively rely, and
shall be fully protected in acting or refraining from acting
upon, any resolution, certificate, statement, instrument,
opinion, report notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by
this Preferred Securities Guarantee shall be sufficiently
evidenced by an Officers' Certificate;
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(iii) whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall
deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the
Preferred Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on
its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be
promptly delivered by the Guarantor;
(iv) the Preferred Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or
any rerecording, refiling or reregistration thereof);
(v) the Preferred Guarantee Trustee may consult with counsel
of its selection, and the advice or opinion of such counsel
with respect to legal matters shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion. Such counsel may be
counsel to the Guarantor or any of its Affiliates and may
include any of its employees. The Preferred Guarantee Trustee
shall have the right at any time to seek instructions
concerning the administration of this Preferred Securities
Guarantee from any court of competent jurisdiction;
(vi) the Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in
it by this Preferred Securities Guarantee at the request or
direction of any Holder, unless such Holder shall have
provided to the Preferred Guarantee Trustee such security and
indemnity, reasonably satisfactory to the Preferred Guarantee
Trustee, against the costs, expenses (including attorneys'
fees and expenses and the expenses of the Preferred Guarantee
Trustee's agents, nominees or custodians) and liabilities that
might be incurred by it in complying with such request or
direction, including such reasonable advances as may be
requested by the Preferred Guarantee Trustee; provided that,
nothing contained in this Section 3.2(a)(vi) shall be taken to
relieve the Preferred Guarantee Trustee, upon the occurrence
of an Event of Default, of its obligation to exercise the
rights and powers vested in it by this Preferred Securities
Guarantee;
(vii) the Preferred Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper
or document, but the Preferred Guarantee Trustee, in its
discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit;
(viii) the Preferred Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians
or attorneys, and the Preferred Guarantee Trustee shall not be
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responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder;
(ix) any action taken by the Preferred Guarantee Trustee or
its agents hereunder shall bind the Holders of the Preferred
Securities, and the signature of the Preferred Guarantee
Trustee or its agents alone shall be sufficient and effective
to perform any such action. No third party shall be required
to inquire as to the authority of the Preferred Guarantee
Trustee to so act or as to its compliance with any of the
terms and provisions of this Preferred Securities Guarantee,
both of which shall be conclusively evidenced by the Preferred
Guarantee Trustee's or its agent's taking such action;
(x) whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall
deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action
hereunder, the Preferred Guarantee Trustee (i) may request
written instructions from the Holders of a Majority in
liquidation amount of the Preferred Securities, (ii) may
refrain from enforcing such remedy or right or taking such
other action until such written instructions are received, and
(iii) shall be protected in relying on or acting in accordance
with such instructions.
(b) No provision of this Preferred Securities Guarantee shall be deemed
to impose any duty or obligation on the Preferred Guarantee Trustee to perform
any act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Preferred Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority available to
the Preferred Guarantee Trustee shall be construed to be a duty.
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The Recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Preferred Guarantee Trustee does not assume
any responsibility for their correctness. The Preferred Guarantee Trustee makes
no representation as to the validity or sufficiency of this Preferred Securities
Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Preferred Guarantee Trustee
which shall:
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(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a
corporation or Person permitted by the Securities and
Exchange Commission to act as an institutional trustee
under the Trust Indenture Act, authorized under such
laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000,
and subject to supervision or examination by Federal,
State, Territorial or District of Columbia authority. If
such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above,
then, for the purposes of this Section 4.1 (a)(ii), the
combined capital and surplus of such corporation shall
be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so
published.
(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1 (a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE
TRUSTEES.
(a) Subject to Section 4.2(c), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee may be removed for cause at any
time by Act (within the meaning of Section 608 of the Trust Agreement) of the
Holders of at least a Majority in liquidation amount of the Preferred
Securities, delivered to the Preferred Guarantee Trustee.
(c) The Preferred Guarantee Trustee shall not be removed in accordance
with Sections 4.2(a) and 4.2(b) until a Successor Preferred Guarantee Trustee
has been appointed and has accepted such appointment by written instrument
executed by such Successor Preferred Guarantee Trustee and delivered to the
Guarantor.
(d) The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been appointed
or until its removal or resignation. The Preferred Guarantee Trustee may resign
from office (without need for prior or subsequent accounting) by an instrument
in writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee
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Trustee has been appointed and has accepted such appointment by instrument in
writing executed by such Successor Preferred Guarantee Trustee and delivered to
the Guarantor and the resigning Preferred Guarantee Trustee.
(e) If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery of an instrument of resignation, the resigning Preferred
Guarantee Trustee may petition any court of competent jurisdiction for
appointment of a Successor Preferred Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a Successor Preferred Guarantee Trustee.
(f) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(g) Upon termination of this Preferred Securities Guarantee or removal
or resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2,
the Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued
to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 GUARANTEE.
The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Trust), as and when due, regardless of any defense, right of set-off
or counterclaim that the Trust may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Trust to pay such
amounts to the Holders.
SECTION 5.2 WAIVER OF NOTICE AND DEMAND.
The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Trust or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 5.3 OBLIGATIONS NOT AFFECTED.
The obligations, covenants, agreements and duties of the Guarantor
under this Preferred Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
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(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Junior Subordinated Debentures);
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Trust granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) any failure or omission to receive any regulatory approval or
consent required in connection with the Preferred Securities (or the common
equity securities issued by the Trust), including the failure to receive any
regulatory approval required in connection with the redemption of the Preferred
Securities;
(g) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(h) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 RIGHTS OF HOLDERS.
(a) The Guarantor expressly acknowledges that: (i) this Guarantee will
be deposited with the Preferred Guarantee Trustee to be held for the benefit of
the Holder; (ii) the Preferred Guarantee Trustee has the right to enforce this
Preferred Securities Guarantee; and (iii) Holders of a Majority in liquidation
amount of the Preferred Securities have the right to direct the time, method and
place
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of conducting any proceeding for any remedy available to the Preferred Guarantee
Trustee in respect of this Preferred Securities Guarantee or exercising any
trust or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee.
(b) Any Holder of Preferred Securities may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Preferred
Securities Guarantee, without first instituting a legal proceeding against the
Trust, the Preferred Guarantee Trustee or any other Person.
SECTION 5.5 GUARANTEE OF PAYMENT.
This Preferred Securities Guarantee creates a guarantee of payment and
not of collection. This Preferred Securities Guarantee will not be discharged
except by payment of the Guarantee Payments in full (without duplication of
amounts theretofore paid by the Trust).
SECTION 5.6 SUBROGATION.
The Guarantor shall be subrogated to all (if any) rights of the Holders
of Preferred Securities against the Trust in respect of any amounts paid to such
Holders by the Guarantor under this Preferred Securities Guarantee; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Preferred Securities
Guarantee, if, at the time of any such payment, any amounts are due and unpaid
under this Preferred Securities Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.7 INDEPENDENT OBLIGATIONS.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (h), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 LIMITATION OF TRANSACTIONS.
So long as any Preferred Securities remain outstanding, if there shall
have occurred an Event of Default under this Preferred Securities Guarantee, an
Event of Default under the Trust Agreement or during an Extended Interest
Payment Period (as defined in the Indenture), then (a) the Guarantor shall not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase,
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acquire or make a liquidation payment with respect to, any of its capital stock
(other than (i) the reclassification of any class of the Company's capital stock
into another class of capital stock, (ii) dividends or distributions payable in
any class of the Company's common stock, (iii) any declaration of a dividend in
connection with the implementation of a shareholder rights plan, or the issuance
of stock under any such plan in the future, or the redemption or repurchase of
any such rights pursuant thereto and (iv) purchases of the Company's common
stock related to the rights under any of the Company's benefit plans for its or
its subsidiaries' directors, officers or employees), and (b) the Guarantor shall
not make any payment of interest or principal on or repay, repurchase or redeem
any debt securities issued by the Guarantor which rank pari passu with or junior
to the Junior Subordinated Debentures; and (c) the Guarantor shall not redeem,
purchase or acquire less than all of the outstanding Debentures or any of the
Preferred Securities.
SECTION 6.2 RANKING.
This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all Senior Debt of the Guarantor, (ii) pari passu with the most
senior preferred securities or preference stock now or hereafter issued by the
Guarantor and with any guarantee now or hereafter entered into by the Guarantor
in respect to any preferred securities or preference stock of any Affiliate of
the Guarantor, and (iii) senior to the Guarantor's common stock.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION.
This Preferred Securities Guarantee shall terminate upon (i) full
payment of the Redemption Price of all Preferred Securities, (ii) upon full
payment of the amounts payable in accordance with the Trust Agreement upon
liquidation of the Trust, or (iii) upon distribution of the Junior Subordinated
Debentures to the Holders of the Preferred Securities. Notwithstanding the
foregoing, this Preferred Securities Guarantee shall continue to be effective or
shall be reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Covered Person for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith in accordance with this Preferred
Securities Guarantee and in a manner that such Indemnified Person reasonably
-16-
<PAGE> 22
believed to be within the scope of the authority conferred on such Indemnified
Person by this Preferred Securities Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.
SECTION 8.2 INDEMNIFICATION.
The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against, any and all loss, liability or
expense, including taxes (other than taxes based on the income of the Guarantee
Trustee) incurred without negligence or bad faith on the part of such
Indemnified Person, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against, or investigating, any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The obligation
to indemnify as set forth in this Section 8.2 shall survive the termination of
this Preferred Securities Guarantee. The provisions of this Section shall
survive the termination of the Guarantee Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 SUCCESSORS AND ASSIGNS.
All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then Outstanding. Guarantor shall not assign its
obligations hereunder except in connection with a consolidation, merger, sale or
other transaction involving the Guarantor that is permitted under Article XII of
the Indenture and unless the assignee thereof agrees in writing, in form and
substance reasonably satisfactory to the Preferred Guaranty Trustee, to perform
all the Guarantor's obligations hereunder with the same effect as if it had been
named herein as Guarantor, and any purported assignment that is not in
accordance with these provisions shall be void.
SECTION 9.2 AMENDMENTS.
-17-
<PAGE> 23
Except with respect to any changes that do not materially adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Preferred Securities Guarantee may only be amended with the
prior approval of the Holders of at least a Majority in liquidation amount of
the Preferred Securities. The provisions of Article VI of the Trust Agreement
with respect to meetings of Holders of the Preferred Securities apply to the
giving of such approval.
SECTION 9.3 NOTICES.
All notices provided for in this Preferred Securities Guarantee shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first-class mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Facsimile No. (302) 651-8882
Attention: Corporate Trust Administration
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders of the Preferred Securities):
Metropolitan Financial Corp.
6001 Landerhaven Drive
Mayfield Heights, Ohio 44124
Facsimile No. (440) 646-0103
Attention: President
(c) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.4 BENEFIT.
This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to Section 3.1 (a), is not
separately transferable from the Preferred Securities.
-18-
<PAGE> 24
SECTION 9.5 GOVERNING LAW.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This Preferred Securities Guarantee is executed as of the day and year
first above written.
METROPOLITAN FINANCIAL CORP., AS
GUARANTOR
By: ____________________________
Name: ____________________________
Title: ____________________________
WILMINGTON TRUST COMPANY, AS
PREFERRED GUARANTEE TRUSTEE
By: ____________________________
Name: ____________________________
Title: ____________________________
-19-
<PAGE> 1
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Corporation's consolidated ratios of
earnings to fixed charges for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Including interest on deposits 1.22x 1.08x 1.21x 1.34x 1.67x
Excluding interest on deposits 2.18x 1.50x 2.59x 5.32x 14.70x
</TABLE>
For purposes of computing the ratios of earning to fixed charges, earnings
represent income from continuing operations before income taxes, extraordinary
items and cumulative effect of a change in accounting principle plus fixed
charges. Fixed charges represent total interest expense, including and excluding
interest on deposits, as applicable, as well as the interest component of rental
expense.
-1-
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation in this registration statement of Metropolitan
Financial Corp. on Form S-1, of our report dated February 20, 1998 on the
consolidated financial statements of Metropolitan Financial Corp. As of December
31, 1997 and 1996 and for each of the three years in the period ended December
31, 1997. We also consent to the reference to our firm under the heading
"Experts" in the prospectus, which is part of this registration statement.
Crowe, Chizewk and Company LLP
Cleveland, Ohio
April 8, 1998
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Power
of Attorney has been signed by the following persons in the capacities and on
the dates indicated. Each of the directors and/or officers of Metropolitan
Financial Corp. whose signature appears below hereby appoints Judy Z. Adam,
David G. Lodge and Robert M. Kaye, and each of them severally, as his or her
attorney-in-fact to sign in his or her name and behalf, in any and all
capacities stated below and to file with the Securities and Exchange Commission
Metropolitan Financial Corp.'s Registration Statement on Form S-1 and any and
all amendments to the Registration Statement, making such changes in the
Registration Statement as appropriate, and generally to do all such things in
their behalf in their capacities as directors and/or officers to enable
Metropolitan Financial Corp. to comply with the provisions of the Securities Act
of 1933, and all requirements of the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
By: /s/ Robert M. Kaye Chairman of the Board, Chief Executive Officer April 3, 1998
--------------------------- and Director (Principal Executive Officer)
Robert M. Kaye
By: /s/ David G. Lodge President, Assistant Secretary, Assistant April 3, 1998
--------------------------- Treasurer and Director (Principal Financial and
David G. Lodge Accounting Officer)
By: /s/ Malvin E. Bank Director April 3, 1998
---------------------------
Malvin E. Bank
By: /s/ Robert R. Broadbent Director April 3, 1998
---------------------------
Robert R. Broadbent
By: /s/ Majorie M. Carlson Director April 3, 1998
---------------------------
Marjorie M. Carlson
By: /s/ Lois K. Goodman Director April 3, 1998
---------------------------
Lois K. Goodman
By: /s/ Marguerite B. Humphrey Director April 3, 1998
---------------------------
Marguerite B. Humphrey
By: /s/ James A. Karman Director April 3, 1998
---------------------------
James A. Karman
By: /s/ Ralph D. Ketchum Director April 3, 1998
---------------------------
Ralph D. Ketchum
By: /s/ Alfonse M. Mattia Director April 3, 1998
---------------------------
Alfonse M. Mattia
By: /s/ David P. Miller Director April 3, 1998
---------------------------
David P. Miller
</TABLE>
<PAGE> 1
Exhibit 25.1
Registration No.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
METROPOLITAN FINANCIAL CORP.
(Exact name of obligor as specified in its charter)
Ohio 34-1109469
(State of incorporation) (I.R.S. employer identification no.)
6001 Landerhaven Drive
Mayfield Heights, Ohio 44124
(Address of principal executive offices) (Zip Code)
____% Junior Subordinated Deferrable Interest Debentures of
Metropolitan Financial Corp.
(Title of the indenture securities)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 31st day
of March, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ Donald G. MacKelcan By:/s/ Emmett R. Harmon
--------------------------- -----------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and
property, and to appoint such officers and agents as the
business of the
<PAGE> 5
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for
money, to buy gold and silver bullion and foreign coins, to
buy and sell bills of exchange, and generally to use,
exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or
necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE> 6
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and
other property, any and all the rights, powers and
privileges of individual
3
<PAGE> 7
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it may
think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
4
<PAGE> 8
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or
inference from the terms of any other clause of this or any
other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of
this paragraph shall be regarded as independent objects,
purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of
5
<PAGE> 9
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to
6
<PAGE> 10
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
7
<PAGE> 11
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the
8
<PAGE> 12
Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called
for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
<PAGE> 13
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of
the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b)
and (c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
10
<PAGE> 14
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or
other entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the
determination of stockholders entitled to notice of and to vote on
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<PAGE> 15
such business combination, or immediately prior to the
consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
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<PAGE> 16
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,000,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its
<PAGE> 19
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who
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<PAGE> 20
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
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<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of
not more than
4
<PAGE> 22
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member
of any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board of
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<PAGE> 23
Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses
9
<PAGE> 27
under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: March 31, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- --------------------------------------------- ------------------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1997.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................236,646
Interest-bearing balances........................................................................... 0
Held-to-maturity securities............................................................................... 331,880
Available-for-sale securities.............................................................................1,258,661
Federal funds sold and securities purchased under agreements to resell...................................... 91,500
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,822,320
LESS: Allowance for loan and lease losses. . . . . . 59,373
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,762,947
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases)....................................................129,740
Other real estate owned...................................................................................... 2,106
Investments in unconsolidated subsidiaries and associated companies............................................ 22
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets.............................................................................................4,905
Other assets................................................................................................100,799
Total assets..............................................................................................5,919,206
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices.......................................................................................4,034,633
Noninterest-bearing . . . . . . . . 839,928
Interest-bearing. . . . . . . . . . 3,194,705
Federal funds purchased and Securities sold under agreements to repurchase................................. 575,827
Demand notes issued to the U.S. Treasury.....................................................................61,290
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................673,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).................................................................... 76,458
Total liabilities.........................................................................................5,464,208
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................385,018
Net unrealized holding gains (losses) on available-for-sale securities........................................7,362
Total equity capital........................................................................................454,998
Total liabilities, limited-life preferred stock, and equity capital.......................................5,919,206
</TABLE>
2
<PAGE> 1
Exhibit 25.2
Registration No.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
METROPOLITAN FINANCIAL CORP.
METROPOLITAN CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Ohio 34-1109469
Delaware Applied For
(State of incorporation) (I.R.S. employer identification no.)
6001 Landerhaven Drive
Mayfield Heights, Ohio 44124
(Address of principal executive offices) (Zip Code)
____% Trust Preferred Securities of
Metropolitan Capital Trust I
(Title of the indenture securities)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 31st day
of March, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ Donald G. MacKelcan By:/s/ Emmett R. Harmon
--------------------------- ---------------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and
property, and to appoint such officers and agents as the
business of the
<PAGE> 5
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for money,
to buy gold and silver bullion and foreign coins, to buy and
sell bills of exchange, and generally to use, exercise and
enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE> 6
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and
other property, any and all the rights, powers and
privileges of individual
3
<PAGE> 7
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it
may think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
4
<PAGE> 8
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
FOURTH: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of
5
<PAGE> 9
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to
6
<PAGE> 10
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
7
<PAGE> 11
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the
8
<PAGE> 12
Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called
for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
<PAGE> 13
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
10
<PAGE> 14
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on
11
<PAGE> 15
such business combination, or immediately prior to the consummation
of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
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<PAGE> 16
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,000,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
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<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE> 19
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more than nine
members who shall be selected by the Board of Directors from its own members and
who
2
<PAGE> 20
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board
of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than
4
<PAGE> 22
five (5) members who shall be selected by the Board of Directors from its
own members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board of
5
<PAGE> 23
Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized
to fix in advance a record date for the determination of the stockholders
entitled to notice of, and to vote at, any meeting of stockholders and any
adjournment thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses
9
<PAGE> 27
under applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: March 31, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- --------------------------------------- --------------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1997.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................236,646
Interest-bearing balances........................................................................... 0
Held-to-maturity securities............................................................................... 331,880
Available-for-sale securities.............................................................................1,258,661
Federal funds sold and securities purchased under agreements to resell...................................... 91,500
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,822,320
LESS: Allowance for loan and lease losses. . . . . . 59,373
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,762,947
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases)....................................................129,740
Other real estate owned...................................................................................... 2,106
Investments in unconsolidated subsidiaries and associated companies............................................ 22
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets.............................................................................................4,905
Other assets................................................................................................100,799
Total assets..............................................................................................5,919,206
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices.......................................................................................4,034,633
Noninterest-bearing . . . . . . . . 839,928
Interest-bearing. . . . . . . . . . 3,194,705
Federal funds purchased and Securities sold under agreements to repurchase................................. 575,827
Demand notes issued to the U.S. Treasury.....................................................................61,290
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................673,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).................................................................... 76,458
Total liabilities.........................................................................................5,464,208
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................385,018
Net unrealized holding gains (losses) on available-for-sale securities........................................7,362
Total equity capital........................................................................................454,998
Total liabilities, limited-life preferred stock, and equity capital.......................................5,919,206
</TABLE>
2
<PAGE> 1
Exhibit 25.3
Registration No.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
METROPOLITAN FINANCIAL CORP.
(Exact name of obligor as specified in its charter)
Ohio 34-1109469
(State of incorporation) (I.R.S. employer identification no.)
6001 Landerhaven Drive
Mayfield Heights, Ohio 44124
(Address of principal executive offices) (Zip Code)
Metropolitan Financial Corp. Guarantee with respect to
the Trust Preferred Securities
(Title of the indenture securities)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 31st day
of March, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Donald G. MacKelcan By:/s/ Emmett R. Harmon
---------------------------- -----------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and
property, and to appoint such officers and agents as the
business of the
<PAGE> 5
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for money,
to buy gold and silver bullion and foreign coins, to buy and
sell bills of exchange, and generally to use, exercise and
enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE> 6
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and
other property, any and all the rights, powers and
privileges of individual
3
<PAGE> 7
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it
may think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
4
<PAGE> 8
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of
5
<PAGE> 9
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to
6
<PAGE> 10
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
7
<PAGE> 11
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the
8
<PAGE> 12
Corporation may be removed at any time without
cause, but only by the affirmative vote of the holders of two-thirds
or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
<PAGE> 13
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
10
<PAGE> 14
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on
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<PAGE> 15
such business combination, or immediately prior to the consummation
of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
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<PAGE> 16
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,000,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
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<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its
<PAGE> 19
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who
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<PAGE> 20
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
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<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE> 22
five (5) members who shall be selected by the Board of Directors from
its own members who are not officers of the Company and who shall hold office
during the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member
of any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of
the Board of
5
<PAGE> 23
Directors shall preside at all meetings of the Board of Directors
at which the Chairman of the Board shall not be present and shall have such
further authority and powers and shall perform such duties as the Board of
Directors or the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses
9
<PAGE> 27
under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
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<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: March 31, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ------------------------------------------ --------------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1997.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................236,646
Interest-bearing balances........................................................................... 0
Held-to-maturity securities............................................................................... 331,880
Available-for-sale securities.............................................................................1,258,661
Federal funds sold and securities purchased under agreements to resell...................................... 91,500
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,822,320
LESS: Allowance for loan and lease losses. . . . . . 59,373
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,762,947
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases)....................................................129,740
Other real estate owned...................................................................................... 2,106
Investments in unconsolidated subsidiaries and associated companies............................................ 22
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets.............................................................................................4,905
Other assets................................................................................................100,799
Total assets..............................................................................................5,919,206
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices.......................................................................................4,034,633
Noninterest-bearing . . . . . . . . 839,928
Interest-bearing. . . . . . . . . . 3,194,705
Federal funds purchased and Securities sold under agreements to repurchase................................. 575,827
Demand notes issued to the U.S. Treasury.....................................................................61,290
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................673,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).................................................................... 76,458
Total liabilities.........................................................................................5,464,208
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................385,018
Net unrealized holding gains (losses) on available-for-sale securities........................................7,362
Total equity capital........................................................................................454,998
Total liabilities, limited-life preferred stock, and equity capital.......................................5,919,206
</TABLE>
2
