<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1999
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 II
(Exact name of Registrant as specified in its (Exact name of Registrant as specified in its trust
charter) agreement)
OHIO DELAWARE
(State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or
organization) organization)
34-1109469 APPLIED FOR
(I.R.S. Employer Identification Number) (I.R.S. Employer 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
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
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)
</TABLE>
------------------------
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. [ ]
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. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) PRICE(1) (2)(3)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common Stock,
with no par value, of
Metropolitan Financial
Corp. 690,000 $10.38 $7,162,200 $1,991.00
- -----------------------------------------------------------------------------------------------------------------------
% Trust Preferred
Securities of Metropolitan
Capital Trust II 3,450,000 $10.00 $34,500,000 $9,591.00
- -----------------------------------------------------------------------------------------------------------------------
% Junior Subordinated
Deferrable Interest
Debentures of Metropolitan
Financial Corp. (2) 3,450,000 N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Metropolitan Financial
Corp. Guarantee with
respect to the Trust
Preferred Securities (3) N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Total N/A N/A $41,662,200 $11,582.00
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</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 II.
(3) No separate consideration will be received for the Metropolitan Financial
Corp. Guarantee.
------------------------
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> 2
SUBJECT TO COMPLETION, DATED FEBRUARY 26, 1999
METROPOLITAN FINANCIAL CORP.
600,000 SHARES OF COMMON STOCK
$ PER SHARE
------------------------
METROPOLITAN CAPITAL TRUST II
$30,000,000
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED BY METROPOLITAN FINANCIAL CORP.
Metropolitan Logo
METROPOLITAN FINANCIAL CORP.
- - Metropolitan Financial Corp. is offering its Common Stock.
- - Metropolitan Financial Corp. lists its Common Stock on the Nasdaq Stock
Market's National Market under the symbol "METF."
- - On February , 1999, the last reported sale price of the Common Stock on the
Nasdaq Stock Market's National Market was $ .
METROPOLITAN CAPITAL TRUST II
- - The Trust is offering % Preferred Securities representing preferred
beneficial interests in the assets of the Trust.
- - The Trust's sole assets will be the % Junior Subordinated Debentures of
Metropolitan Financial Corp., which will mature on June 30, 2029.
- - The Trust will pay quarterly distributions on the Preferred Securities at an
annual rate of $ .
- - The Trust plans to list the Preferred Securities on the Nasdaq Stock Market's
National Market under the trading symbol "METFO."
WE URGE YOU TO READ CAREFULLY THE "RISK FACTORS" SECTION OF THIS PROSPECTUS,
BEGINNING ON PAGE 11, WHERE WE DESCRIBE CERTAIN RISKS ASSOCIATED WITH
METROPOLITAN AND WITH THE SECURITIES OFFERED BY THIS PROSPECTUS, ALONG WITH THE
REST OF THIS PROSPECTUS, BEFORE YOU MAKE YOUR INVESTMENT DECISION.
THE OFFERING
THE OFFERINGS OF COMMON STOCK AND PREFERRED SECURITIES ARE CONTINGENT UPON
THE SUCCESSFUL COMPLETION AND CLOSING OF EACH OTHER.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
COMMON STOCK PREFERRED SECURITIES
PER SHARE TOTAL PER SECURITY TOTAL
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Public Price........... $ $ Public Price........... $10.00 $30,000,000
Underwriting Underwriting
Discount............. Discount............... (1) (1)
Proceeds to Proceeds to the
Metropolitan Trust(2)............... $10.00 $30,000,000
Financial Corp.......
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Because the proceeds will be used by the Trust to purchase the % Junior
Subordinated Debentures of Metropolitan Financial Corp., Metropolitan
Financial Corp. will pay the Underwriter as compensation $0.375 per
security, or $1,125,000 in the aggregate.
(2) Metropolitan Financial Corp. will pay all expenses of this offering.
The Underwriter is offering the Common Stock and the Preferred Securities
on a firm commitment basis. The Underwriter has options to purchase up to 90,000
additional shares of Common Stock and up to 450,000 additional Preferred
Securities to cover over-allotments, if any, on the same terms and conditions as
set forth above. See "Underwriting."
THESE SECURITIES ARE NOT DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF A BANK
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[RYAN, BECK LOGO]
The date of this Prospectus is , 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 3
map
<PAGE> 4
SUMMARY
This summary highlights certain information from this prospectus. Because
this is a summary, it does not contain all of the information that may be
important to you. We urge you to read carefully the entire prospectus, including
the financial statements and related notes. Unless we indicate otherwise, we
have not adjusted the information in this prospectus to account for the
Underwriter's exercise of its over-allotment options.
METROPOLITAN FINANCIAL CORP.
Metropolitan Financial Corp. ("Metropolitan," "we," "us" or "our") is the
holding company for Metropolitan Bank & Trust Company (the "Bank"). The Bank is
our primary operating subsidiary. Metropolitan had total assets of $1.4 billion
at December 31, 1998. The Bank operates 17 full service branch offices that
primarily serve Northeastern Ohio. The Federal Deposit Insurance Corporation
insures the Bank's deposits up to applicable limits.
Our strategy is to maximize long-term profitability by pursuing balance
sheet growth. We seek to maintain strong growth by:
- continuing to focus on the origination and purchase of multifamily and
commercial real estate loans which provide higher yields than one-to
four-family residential loans;
- building a portfolio of business and consumer loans which provide higher
yields and shorter maturities than one-to four-family residential loans;
- maintaining our asset quality;
- increasing assets at a rate that keeps capital near minimum regulatory
guidelines;
- increasing retail deposits through marketing initiatives and continuing
to open new branches;
- supplementing retail deposit growth with borrowings and deposits we
primarily receive from other financial institutions; and
- re-investing retained earnings in the Bank and raising additional capital
when appropriate.
As a result of this strategy, our assets have increased from $479.4 million
at December 31, 1994 to $1.4 billion at December 31, 1998, an annual compound
growth rate of 29.9%. Our net income has approximately doubled over the same
period from $3.4 million for 1994 to $6.8 million for 1998.
The Bank originates multifamily and commercial real estate loans primarily
in Ohio, Southeastern Michigan, Central and Northern New Jersey, Northern
Kentucky, Western Pennsylvania and California. To further benefit from its
expertise in multifamily and commercial lending, the Bank purchases multifamily
and commercial real estate loans in other areas of the United States. We believe
that this degree of geographic diversity serves to protect us from the effect of
regional economic downturns.
At December 31, 1998, our loan portfolio totaled $1.0 billion. Of this
amount, $337.4 million, or 31.1%, were multifamily loans. We intend to continue
to focus on originating and purchasing adjustable rate, and to a lesser degree
fixed rate, multifamily loans. We believe that multifamily loans offer
attractive returns. We also believe that the
1
<PAGE> 5
Bank will continue to benefit from its experience in multifamily lending and
from its relationships with sources of multifamily lending it has developed over
the years.
At December 31, 1998, commercial real estate loans totaled $228.8 million,
or 21.1%, of our total loan portfolio. Over the past five years, this portion of
our portfolio has increased mainly through purchases. We plan to continue to add
commercial real estate loans to our portfolio through purchases and, to a lesser
extent, through originations. Due to regulatory limitations on commercial real
estate lending, we expect that the percentage of our loan portfolio consisting
of commercial real estate loans will remain stable. However, we expect the
dollar amount of commercial real estate loans in our portfolio to continue to
increase as we grow.
The Bank also originates residential loans secured by one-to four-family
homes in Northeastern Ohio. The Bank originates fixed rate residential loans
primarily for sale and originates adjustable rate residential loans to hold in
our portfolio. At December 31, 1998, residential real estate loans totaled
$189.2 million, or 17.4%, of our total loan portfolio. When the Bank sells its
fixed rate residential loans, the Bank retains the servicing rights to these
loans. The servicing rights are a source of fee income.
Maintaining asset quality is one of our top priorities. Net charge-offs
were 0.16% for 1998. At December 31, 1998, nonperforming loans represented 1.23%
of total loans, and nonperforming loans plus real estate owned represented 1.34%
of total assets.
In recent years, we have taken the following steps to make the Bank a full
service bank:
- creating a trust department to manage investment assets for individuals
and institutional clients;
- increasing the number of personnel in our business lending and consumer
loan departments; and
- changing the name of the Bank from Metropolitan Savings Bank to
Metropolitan Bank & Trust Company to better reflect the services we
provide.
We incorporated in Ohio in 1972. Our executive office is located at 6001
Landerhaven Drive, Mayfield Heights, Ohio 44124, and our telephone number is
(440) 646-1111.
METROPOLITAN CAPITAL TRUST II
Metropolitan Capital Trust II (the "Trust") is a statutory business trust
formed by us under Delaware law. The Trust was formed by:
- filing a certificate of trust with the Delaware Secretary of State on
February 23, 1999; and
- executing the trust agreement between Metropolitan, as depositor, and
Wilmington Trust Company, as property trustee.
The Trust exists solely to:
- issue and sell its Preferred Securities to the public;
- issue and sell its common securities to Metropolitan;
- use the proceeds from the sale of the Preferred Securities and its common
securities to purchase the % Junior Subordinated Debentures issued
by Metropolitan; and
2
<PAGE> 6
- engage in only those other activities necessary, advisable or incidental
to the items listed above (such as registering the transfer of the
Preferred Securities and its common securities).
We will purchase all of the common securities of the Trust. The Trust's
common securities purchased by us will represent 4% of the Trust's total
capitalization. The Preferred Securities will represent the remaining 96% of the
total capitalization of the Trust. The Junior Subordinated Debentures will be
the sole assets of the Trust, and payments under them will be the sole revenue
of the Trust. We will pay all fees and expenses relating to the Trust and the
offering of the Preferred Securities, as well as all of the ongoing costs and
expenses of the Trust, except that we will not be responsible for the Trust's
obligations under the Preferred Securities.
The Trust has no separate financial statements. The statements would not be
material because the Trust has no independent operations and exists solely for
the purposes outlined above.
The executive office of the Trust is 6001 Landerhaven Drive, Mayfield
Heights, Ohio 44124 and its telephone number is (440) 646-1111.
THE OFFERING
GENERAL
SECURITIES OFFERED.............. 600,000 shares of Common Stock and 3,000,000
Preferred Securities.
CONDITIONS TO THE CLOSING....... The offerings of Common Stock and Preferred
Securities are contingent upon the
successful completion and closing of each
other.
USE OF PROCEEDS................. The Trust will use all of the proceeds from
the sale of the Preferred Securities to
purchase Junior Subordinated Debentures from
Metropolitan. Metropolitan will use all of
the proceeds from the sale of the Common
Stock and the Junior Subordinated Debentures
for general corporate purposes, including,
but not limited to:
- capital contributions to the Bank to
support growth and for working capital;
- repayment of Metropolitan's $14.0 million
9.625% subordinated notes maturing January
1, 2005;
- repayment of the current balance on
Metropolitan's commercial bank line of
credit, which was $12.0 million on
February 26, 1999; and
- acquisitions of financial services
companies by either Metropolitan or the
Bank (although no agreements or
understandings with respect to any such
acquisition presently exist).
3
<PAGE> 7
RISK FACTORS.................... We urge you to read carefully the "Risk
Factors" section of this prospectus,
beginning on page 11, and the rest of this
prospectus before you make your investment
decision. In the "Risk Factors" section, we
describe some of the risks associated with
the securities offered by this Prospectus.
Because the sole source of funds for
distributions on and redemptions of the
Preferred Securities are payments on the
Junior Subordinated Debentures, you are also
making an investment decision with regard to
the Junior Subordinated Debentures.
Therefore, you should review carefully all
of the information regarding the Junior
Subordinated Debentures contained in this
prospectus.
COMMON STOCK OFFERING
THE ISSUER...................... Metropolitan Financial Corp., an Ohio
corporation.
PRICE TO PUBLIC................. $ per share.
COMMON STOCK OFFERED............ 600,000 shares (690,000 shares if the
Underwriter's over-allotment option is
exercised in full).
COMMON STOCK OUTSTANDING AFTER
THE OFFERING.................... 8,356,393 shares based upon 7,756,393 shares
outstanding on February 26, 1999
(8,446,393 shares if the Underwriter's
over-allotment option is exercised in full).
RESTRICTIONS ON DIVIDENDS....... There are restrictions on the declaration of
dividends on the Common Stock based on
lender covenants, the provisions of the
8.60% preferred securities sold during the
second quarter of 1998 by Metropolitan
Capital Trust I, and the provisions of the
Preferred Securities.
NASDAQ NATIONAL MARKET SYMBOL... "METF"
PREFERRED SECURITIES OFFERING
THE ISSUER...................... Metropolitan Capital Trust II, a Delaware
statutory business trust.
SECURITIES OFFERED.............. 3,000,000 Preferred Securities (3,450,000 if
the Underwriter's over-allotment option is
exercised in full). The Preferred Securities
represent undivided preferred beneficial
interests in the assets of the Trust. The
Junior Subordinated Debentures will be the
sole assets of the Trust.
OFFERING PRICE.................. $10 per Preferred Security (liquidation
amount $10).
DISTRIBUTIONS................... As a holder of Preferred Securities, you
will be entitled to receive cash
distributions at an annual
4
<PAGE> 8
rate of % of the liquidation amount of
$10 per Preferred Security. Distributions
will accumulate from , 1999, the date
of original issuance, and will be
cumulative. The Trust will pay the
distributions quarterly in arrears on March
31, June 30, September 30 and December 31 of
each year, beginning on June 30, 1999. See
"Description of the Preferred Securities."
JUNIOR SUBORDINATED
DEBENTURES...................... The Trust will invest the proceeds from the
sale of its common securities and the
Preferred Securities in the Junior
Subordinated Debentures. The Junior
Subordinated Debentures have a stated
maturity date of June 30, 2029. The Junior
Subordinated Debentures will rank equal in
right of payment to the $27.8 million
aggregate principal amount of debentures
Metropolitan sold during the second quarter
of 1998 to Metropolitan Capital Trust I. The
Junior Subordinated Debentures will rank
subordinate and junior in right of payment
to all indebtedness of Metropolitan not
specifically subordinated to, or equal in
rank to, the Junior Subordinated Debentures.
At December 31, 1998, Metropolitan, at the
holding company level, had $22.0 million in
outstanding indebtedness senior in right of
payment to the Junior Subordinated
Debentures. Metropolitan will repay this
indebtedness with a portion of the proceeds
from this offering. Metropolitan may from
time to time incur indebtedness constituting
indebtedness senior or equal in right of
payment to the Junior Subordinated
Debentures. There is no limitation on the
amount of indebtedness senior in right of
payment to the Junior Subordinated
Debentures which Metropolitan may issue. In
addition, because Metropolitan is a holding
company, its obligations under the Junior
Subordinated Debentures will effectively be
subordinated to all existing and future
liabilities and obligations of its
subsidiaries, including the Bank.
GUARANTEE....................... Metropolitan will guarantee the payment of
distributions on the Preferred Securities
and payments on liquidation of the Trust or
redemption of the Preferred Securities, but
only in each case to the extent of funds
held by the Trust. Through its collective
obligations under the Guarantee, the trust
agreement, the Junior Subordinated
Debentures, the trust indenture and the
trust expense agreement, Metropolitan will
fully, irrevocably and uncondition-
5
<PAGE> 9
ally guarantee, on a subordinated basis, all
of the Trust'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." Metropolitan's
obligations under the Guarantee will be
subordinate and junior in right of payment
to all of its indebtedness senior in right
of payment to the Junior Subordinated
Debentures.
RIGHT TO DEFER INTEREST
PAYMENTS........................ If Metropolitan is not in default under the
trust indenture, Metropolitan may defer
interest payments on the Junior Subordinated
Debentures at one or more times.
Metropolitan may defer these interest
payments for a period of up to twenty
consecutive quarters in each interest
deferral period. Before the end of any
interest deferral period, Metropolitan may
further defer the payment of interest.
However, no interest deferral period may
exceed twenty consecutive quarters or extend
beyond June 30, 2029, the stated maturity
date of the Junior Subordinated Debentures.
There is no limitation on the number of
times that Metropolitan may begin an
interest deferral period if Metropolitan is
not in default under the trust indenture. At
the end of any interest deferral period,
Metropolitan must pay all accrued and unpaid
interest. During an interest deferral
period, interest will continue to accrue. If
Metropolitan defers interest, you will be
required to accrue interest income for
United States federal income tax purposes
even though you do not receive any cash
distribution. See "Description of the Junior
Subordinated Debentures -- Right to Defer
Interest Payment Obligation" and "Federal
Income Tax Consequences -- Interest Income
and Original Issue Discount."
Metropolitan does not currently intend to
defer interest payments. However, if
Metropolitan does defer interest payments in
the future, the market price of the
Preferred Securities will likely be
adversely affected. Due to 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 optional deferrals.
REDEMPTION...................... Subject to the receipt of any required
regulatory approval, Metropolitan may, at
its option, redeem
6
<PAGE> 10
the Junior Subordinated Debentures before
June 30, 2029:
- at any time on or after June 30, 2004, in
whole or in part, or
- at any time, in whole but not in part,
within ninety days following the
occurrence and continuation of certain
regulatory or tax events, or if there is a
change in the Investment Company Act of
1940 that requires the Trust to register
under that law.
Upon any redemption, the redemption price
will be equal to 100% of the principal
amount of the redeemed Junior Subordinated
Debentures plus any accrued and unpaid
interest to the redemption date.
If Metropolitan redeems a particular dollar
amount of the Junior Subordinated Debentures
before their stated maturity date, the Trust
must redeem the same dollar amount of its
common securities and the Preferred
Securities. The Trust will redeem the
Preferred Securities upon repayment of the
Junior Subordinated Debentures at their
stated maturity. See "Description of the
Preferred Securities -- Redemption."
DISTRIBUTION OF THE JUNIOR
SUBORDINATED DEBENTURES UPON
LIQUIDATION OF THE TRUST...... Metropolitan may dissolve the Trust at any
time. After the satisfaction of liabilities
to the Trust's creditors, Metropolitan may
cause the Trust to liquidate and exchange
your Preferred Securities and the Trust's
common securities for the Junior
Subordinated Debentures. Metropolitan may be
required to obtain regulatory approval
before dissolving the Trust. See
"Description of the Preferred
Securities -- Liquidation Distribution upon
Dissolution."
If Metropolitan dissolves the Trust, after
the Trust satisfies its creditors, if any,
you will be entitled to receive $10 per
Preferred Security plus accumulated and
unpaid distributions to the date of payment.
This payment may be in the form of a
distribution of the Junior Subordinated
Debentures, subject to exceptions described
in this prospectus. See "Description of the
Preferred Securities -- Liquidation of the
Trust and Distribution of the Junior
Subordinated Debentures to Holders."
7
<PAGE> 11
VOTING RIGHTS................... You will have no voting rights with respect
to the Preferred Securities, except in
limited circumstances. See "Description of
the Preferred Securities -- Voting Rights;
Amendment of Trust Agreement."
ERISA CONSIDERATIONS............ Please read the "ERISA Considerations"
section of this prospectus for a discussion
of some of the restrictions on purchases of
the Preferred Securities by an employee
benefit plan.
NASDAQ NATIONAL MARKET SYMBOL... The Trust plans to list the Preferred
Securities on the Nasdaq Stock Market's
National Market under the trading symbol
"METFO."
8
<PAGE> 12
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table represents selected financial information which you
should read together with our Consolidated Financial Statements and related
notes, and the Management's Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1998 1997 1996(1) 1995 1994
---------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION
DATA:
Total assets.................. $1,363,434 $924,985 $769,076 $590,095 $479,384
Loans receivable, net......... 1,018,271 693,655 637,493 478,345 424,944
Loans held for sale........... 15,017 14,230 8,973 1,504 84
Mortgage-backed securities.... 198,295 143,167 56,672 39,156 16,785
Securities.................... 35,661 6,446 13,173 22,806 7,641
Intangible assets............. 2,724 2,987 3,239 3,188 3,409
Loan servicing rights......... 13,412 9,224 8,051 9,130 4,825
Deposits...................... 1,051,357 737,782 622,105 503,742 436,198
Borrowings.................... 215,486 135,870 101,874 46,874 15,504
Preferred securities(2)....... 27,750 -- -- -- --
Shareholders' equity.......... 42,645 36,661 30,244 25,466 20,280
SELECTED OPERATIONS DATA:
Total interest income......... $ 85,728 $ 69,346 $ 54,452 $ 43,435 $ 31,639
Total interest expense........ 53,784 41,703 33,116 26,816 15,992
---------- -------- -------- -------- --------
Net interest income......... 31,944 27,643 21,336 16,619 15,647
Provision for loan losses..... 2,650 2,340 1,636 959 766
---------- -------- -------- -------- --------
Net interest income after
provision for loan
losses................... 29,294 25,303 19,700 15,660 14,881
Loan servicing income, net.... 788 1,293 1,204 1,068 642
Net gain on sale of loans and
securities.................. 3,523 580 336 833 86
Other noninterest income...... 3,005 2,268 2,233 2,323 873
Noninterest expense........... (25,522) (20,149) (20,839) (14,187) (11,058)
---------- -------- -------- -------- --------
Income before income taxes
and extraordinary item... 11,088 9,295 2,634 5,697 5,424
Income tax expense............ (4,049) (3,492) (1,095) (2,155) (1,987)
Extraordinary item(3)......... (245) -- -- -- --
---------- -------- -------- -------- --------
Net income.................... $ 6,794 $ 5,803 $ 1,539 $ 3,542 $ 3,437
========== ======== ======== ======== ========
</TABLE>
- ---------------
(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.
(2) 8.60% preferred securities sold during the second quarter of 1998 by
Metropolitan Capital Trust I.
(3) The extraordinary item represents expenses associated with the early
retirement of 10% notes.
9
<PAGE> 13
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997 1996(1) 1995 1994
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA, RESTATED FOR STOCK
SPLITS:
Basic net income per share........ $ 0.88 $ 0.75 $ 0.22 $ 0.52 $ 0.50
Diluted net income per share...... 0.87 0.75 0.22 0.52 0.50
Book value per share.............. 5.50 4.73 3.90 3.70 2.94
Tangible book value per share..... 5.15 4.34 3.48 3.24 2.45
PERFORMANCE RATIOS:
Return on average assets.......... 0.64% 0.69% 0.23% 0.65% 0.82%
Return on average equity.......... 17.16 17.58 5.75 16.19 17.83
Interest rate spread.............. 2.90 3.20 3.07 2.98 3.71
Net interest margin............... 3.16 3.48 3.34 3.24 3.94
Average interest-earning assets to
average interest-bearing
liabilities..................... 104.96 105.30 105.39 105.13 105.53
Noninterest expense to average
assets.......................... 2.39 2.40 3.08 2.61 2.64
Efficiency ratio(2)............... 64.45 62.75 82.57 68.28 62.95
EARNINGS TO FIXED CHARGES
RATIOS:(3)
Including interest on deposits.... 1.21x 1.22x 1.08x 1.21x 1.34x
Excluding interest on deposits.... 1.96x 2.18x 1.50x 2.59x 5.32x
ASSET QUALITY RATIOS:(4)
Nonperforming loans to total
loans........................... 1.23% 0.44% 0.80% 0.69% 0.55%
Nonperforming assets to total
assets.......................... 1.34 0.56 0.70 0.60 0.51
Allowance for losses on loans to
total loans..................... 0.66 0.79 0.64 0.57 0.45
Allowance for losses on loans to
nonperforming total loans....... 54.44 178.60 80.38 83.61 80.70
Net charge-offs to average
loans........................... 0.16 0.13 0.04 0.02 0.03
CAPITAL RATIOS:
Shareholders' equity to total
assets.......................... 3.13% 3.96% 3.93% 4.32% 4.23%
Average shareholders' equity to
average assets.................. 3.70 3.94 3.96 4.02 4.60
Tier 1 capital to total
assets(5)....................... 6.27 5.47 5.58 5.77 5.34
Tier 1 capital to risk-weighted
assets(5)....................... 7.85 7.75 7.87 8.20 7.60
OTHER DATA:
Loans serviced for others
(000's)......................... $1,504,604 $1,190,185 $1,102,514 $1,182,216 $739,425
Number of full service offices.... 17 15 14 13 11
Number of loan production
offices......................... 5 4 5 5 4
</TABLE>
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(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. All per share data and performance ratios include the effect
of this assessment.
(2) Equals noninterest expense less amortization of intangible assets divided by
net interest income plus noninterest income (excluding gains or losses on
securities transactions).
(3) For purposes of computing the ratios of earnings to fixed charges, earnings
represent income from continuing operations before 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.
(4) Ratios are calculated on end of period balances except net charge-offs to
average loans.
(5) Ratios are for the Bank only.
10
<PAGE> 14
RISK FACTORS
An investment in the Common Stock or the Preferred Securities involves a
number of risks. We urge you to read all of the information contained in this
prospectus. In addition, we urge you to consider carefully the following factors
in evaluating Metropolitan, its business and the Trust before you purchase the
Common Stock or the Preferred Securities offered by this prospectus. In
particular, you should note that this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. When used in this
prospectus, the terms "anticipates," "plans," "expects," "believes," and similar
words as they relate to Metropolitan, its management or the Trust 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.
The considerations listed below represent some of the important factors
that we believe could cause such results to differ. These considerations do not
represent a complete list of the general or specific risks that may affect the
business of Metropolitan, the Common Stock and the Preferred Securities. You
should recognize that other risks, including those described above, may be
significant, now or in the future, and the risks set forth below may affect
Metropolitan and the Trust to a greater extent than indicated.
RISK FACTORS RELATING TO THE BUSINESS OF METROPOLITAN
RISK OF BANK BECOMING UNDERCAPITALIZED
The Bank faces a greater risk of becoming undercapitalized than other
banks. Most banks operate well above the minimum regulatory capital requirement.
The Bank operates close to the minimum regulatory capital requirement. The Bank
operates at this level to maximize long-term profitability through balance sheet
growth. If our operating performance is adversely affected, the Bank could
become undercapitalized. If the Bank becomes undercapitalized, it would be
subject to regulatory restrictions including increased restrictions on the
payments of dividends and other capital distributions to Metropolitan. See
"Regulation and Supervision -- The Bank."
WE ARE HIGHLY LEVERAGED AND PAYMENTS ON OUR DEBT ARE SUBSTANTIAL
The ability of Metropolitan, at the holding company level, to make payments
on its debt depends upon:
- the Bank's ability to generate profits and pay dividends to Metropolitan;
- Metropolitan's ability to renew or refinance borrowings; and
- Metropolitan's ability to raise additional equity capital.
If Metropolitan cannot accomplish the factors listed above on satisfactory
terms, Metropolitan may not be able to make payments on its debt. See
"Capitalization."
11
<PAGE> 15
Metropolitan invests virtually all of the proceeds from its debt in the
common shares of the Bank. As a result, at December 31, 1998, the Bank's
shareholder's equity of $88.2 million was greater than Metropolitan's
shareholders' equity of $42.6 million.
REGULATORY LIMITATIONS ON THE BANK'S ABILITY TO PAY DIVIDENDS MAY PREVENT US
FROM MAKING PAYMENTS ON OUR DEBTS
Our ability to make interest or principal payments on our debt is affected
by the Bank's ability to pay dividends to us. The Bank is subject to the capital
distribution regulations of the Office of Thrift Supervision. These regulations
limit the Bank's ability to pay dividends to us based on the Bank's capital
level and supervisory condition. At December 31, 1998, the Bank had $2.4 million
available for the payment of dividends to us. We cannot assure you that the
Bank's future net income will be sufficient to permit the Bank to pay dividends
to us. See "Regulation and Supervision -- The Bank" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
RISK OF DECLINE IN REAL ESTATE VALUES, PARTICULARLY IN OHIO
The value of the Bank's real estate collateral could be adversely affected
by negative changes in the real estate markets where it conducts its business. A
decline in real estate values, particularly in Ohio, would reduce the value of
the real estate collateral securing the Bank's loans and increase the risk that
the Bank would incur losses if borrowers defaulted on their loans. At December
31, 1998, real estate secured approximately 83.1% of the Bank's loans. At
December 31, 1998, properties located in Ohio secured approximately 50.0% of the
principal amount of the Bank's real estate loans.
EMPHASIS ON MULTIFAMILY AND COMMERCIAL REAL ESTATE LOANS INCREASES THE
POSSIBILITY OF LOAN LOSSES
We face the risk of incurring significant losses because a substantial
portion of the Bank's loans are secured by multifamily properties. At December
31, 1998, multifamily properties secured approximately 31.1% of the principal
amount of the Bank's loans. Multifamily properties are residential apartment
buildings with five or more units. We focus on this segment of the market more
than many other financial institutions. Loans secured by multifamily properties
are generally larger and are considered to have a higher risk of loss than loans
secured by one- to four-family residences. Significant losses are possible
because the cash flows from multifamily properties securing the loans may become
inadequate to service the loan payments. In addition, the value of the
collateral may be insufficient to repay the loan when due. See "Business -- Loan
Originations and Purchases."
We also face a higher level of risk with respect to the Bank's loans
secured by commercial real estate. At December 31, 1998, commercial real estate
secured approximately 21.1% of the principal amount of the Bank's loans.
Commercial real estate loans are generally larger and have a higher level of
risk than loans secured by one-to four-family residences. Significant losses are
possible because the repayment of loans secured by commercial real estate
typically depends upon the successful operation of the business activities being
conducted at the commercial real estate. See "Business -- Loan Originations and
Purchases."
12
<PAGE> 16
CONTROL BY ROBERT M. KAYE
Both before and after this offering, Mr. Robert M. Kaye of Rumson, New
Jersey, will have control of Metropolitan. He will have the ability to elect or
remove all of the directors of Metropolitan and determine the outcome of any
issue submitted to a vote of the shareholders. Mr. Kaye currently owns 77.5% of
Metropolitan's shares of Common Stock. After the completion of this offering,
Mr. Kaye will own 72.0%, or 71.2% if the underwriter exercises the
over-allotment option, of Metropolitan's shares of Common Stock. In addition to
being majority shareholder, Mr. Kaye serves as Chairman, Director and Chief
Executive Officer of Metropolitan and the Bank.
ADEQUACY OF ALLOWANCE FOR LOSSES ON LOANS
If loan losses exceed our allowance for loan losses, our results of
operations could be adversely affected. We maintain an allowance for losses on
loans at a level we consider adequate to cover currently anticipated losses. The
amount of future losses is vulnerable to changes in economic, operating, and
other conditions, including changes in interest rates. These changes may be
beyond our control. At December 31, 1998, we had total nonperforming loans of
$12.7 million. At the same date, our allowance for losses on loans was $6.9
million, or 0.66% of total loans, and 54.44% of total nonperforming loans. We
cannot assure you that this allowance will be adequate to cover actual losses.
See "Business -- Loan Delinquencies and Nonperforming Assets" and
" -- Allocation of Allowance for Losses on Loans."
OUR EARNINGS MAY SUFFER IF INTEREST RATES RISE
Rising interest rates could reduce our net income. This is because the Bank
has more short-term interest-bearing liabilities than it has short-term
interest-earning assets. Consequently, an increase in interest rates could
increase our interest expense without an offsetting increase in our interest
income. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Quantitative and Qualitative Disclosures about Market
Risk."
FAILURE OF THIRD PARTIES TO ADDRESS YEAR 2000 ISSUES
The year 2000 issue refers to computer programs being written using two
digits rather than four to define an applicable year. 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. Like other companies,
we face the challenge of ensuring that all of our computer related functions
will work properly into the year 2000 and beyond.
We believe that our most significant continuing risk with respect to year
2000 issues is the failure of third parties with whom we do business to address
their year 2000 problems. If our suppliers, particularly public utilities, are
not year 2000 ready, we may experience an interruption of service to our
customers. As a result, our business and operations may be materially and
adversely affected. We can make no assurances that the systems or products of
third parties on which we rely will be timely converted or that a failure by a
third party, or a conversion that is incompatible with our systems, would not
have a material adverse effect on us. For a more detailed discussion of this
risk and the status of our year 2000 program see
13
<PAGE> 17
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000."
POTENTIAL IMPOSITION OF CAPITAL REQUIREMENTS ON METROPOLITAN
We could become subject to capital requirements that the Federal Reserve
Board imposes on bank holding companies. Congress has considered legislation
that may result in thrift institutions like the Bank being forced to convert
into state or national banks. If Congress enacts this type of legislation, we
could become a bank holding company and be subject to the regulations of the
Federal Reserve Board. These regulations impose capital requirements.
Metropolitan, as a savings and loan holding company, is not currently subject to
capital requirements. See "Regulation and Supervision -- The Bank."
RISK FACTORS RELATING TO THE COMMON STOCK
EFFECT OF OUR DIVIDEND POLICY ON THE MARKET VALUE OF OUR COMMON STOCK
The market may value our Common Stock at a lower price than the common
stock of a similar company with a history of paying cash dividends. Dividend
yield is one of a number of factors that can affect the market price of a stock.
We have not paid any cash dividends since 1987. Currently, we have no plans to
pay cash dividends. In addition, we have entered into various agreements that
limit our ability to pay cash dividends. See "Price Range of Common Stock and
Dividends."
DILUTION AS A RESULT OF THIS COMMON STOCK OFFERING
As a result of this offering, you will incur immediate dilution in the net
tangible book value of your shares of Common Stock. If we issue additional
Common Stock in the future, you may experience further dilution in the net
tangible book value per share of the Common Stock.
TRADING VOLUME FOR THE COMMON STOCK MAY BE LIMITED
Because a majority of Metropolitan's Common Stock is owned by Mr. Robert
Kaye, the trading volume of the Common Stock has been less active than other
companies listed on the Nasdaq Stock Market's National Market. A public market
having the desired characteristics of depth, liquidity, and orderliness depends
upon the presence in the marketplace of willing buyers and sellers of the Common
Stock. In turn, the presence of buyers and sellers depends, among other things,
on the individual decisions of investors and upon general economic and market
conditions over which we have no control. See "Price Range of Common Stock and
Dividends."
YOUR INVESTMENT IS NOT INSURED
The shares of Common Stock offered under this prospectus do not constitute
a deposit with a depository institution. Therefore, neither the Federal Deposit
Insurance Corporation nor any other governmental agency insures the Common
Stock.
14
<PAGE> 18
ANTITAKEOVER PROVISIONS IN METROPOLITAN'S CORPORATE DOCUMENTS AND OHIO LAW
Some of the provisions of our articles of incorporation and code of
regulations and of Ohio law could have the following effects:
- discourage potential acquisition proposals;
- delay, deter, or prevent a change in control of Metropolitan; or
- limit the price that investors might be willing to pay in the future for
the Common Stock.
Among other things, our articles of incorporation and code of regulations
contain provisions that:
- require supermajority votes on some issues;
- establish advance notice procedures for nomination of candidates for
election as directors and for shareholder proposals to be considered at
shareholders' meetings;
- establish a classified Board of Directors;
- provide for the removal of directors only for cause upon the affirmative
vote of the holders of a majority of the shares entitled to vote; and
- eliminate cumulative voting.
In addition, under our articles of incorporation, the Board of Directors of
Metropolitan may issue up to 5,000,000 Class A preferred shares and 5,000,000
Class B preferred shares without shareholder approval. These preferred shares
could have dividend, liquidation, conversion, voting and other rights and
privileges that are superior or senior to the shares of Common Stock. Issuance
of preferred shares could:
- result in the dilution of the voting power of the shares of Common Stock;
- adversely affect holders of the Common Stock in the event of liquidation
of Metropolitan; or
- delay, defer, or prevent a change in control of Metropolitan.
Ohio law contains provisions which prohibit the acquisition of a company's
stock and prohibit transactions between a company and one of its shareholders
unless certain conditions are met. For a more detailed discussion of these
provisions and the antitakeover provisions in our articles of incorporation and
code of regulations see "Description of the Capital Stock -- Potential
Antitakeover Effects of Articles of Incorporation, Code of Regulations and Ohio
Law."
RISK FACTORS RELATING TO THE PREFERRED SECURITIES
YOUR RIGHTS IN LIQUIDATION RANK LOWEST OF ALL CREDITORS
Our obligations to you as a holder of Preferred Securities:
- will be subordinate and junior in right of payment to all of our
indebtedness ranking senior in right of payment to the obligations to
you; and
- will be unsecured.
15
<PAGE> 19
At December 31, 1998, Metropolitan, at the holding company level, had $22.0
million in outstanding indebtedness senior in right of payment to the Junior
Subordinated Debentures. The Junior Subordinated Debentures will rank equal in
right of payment to the $27.8 million aggregate principal amount of debentures
we sold during the second quarter of 1998 to Metropolitan Capital Trust I. There
is no limit on the amount of Subordinated Debt or indebtedness senior in right
of payment to the Junior Subordinated Debentures which we may issue.
If Metropolitan is not a creditor of a subsidiary, including the Bank, its
right to participate in the distribution of any subsidiary's assets upon
liquidation or reorganization is subject to the prior claims of that
subsidiary's creditors. In the case of the Bank, these creditors would include
depositors. As a result, your ability to benefit indirectly from those
distributions is also subject to these prior claims. If Metropolitan is a
subsidiary's creditor, its claims are subject to any prior security interest in
the assets of the subsidiary and any indebtedness of the subsidiary senior to
that of its claims. As a result, the Junior Subordinated Debentures and the
Guarantee will effectively be subordinated to all existing and future
liabilities of our subsidiaries, including the Bank. At December 31, 1998, the
Bank had liabilities of $1.3 billion.
Only our Common Stock is currently junior in right of payment to the Junior
Subordinated Debentures. Holders of the Junior Subordinated Debentures will only
be able to look to our assets for payments on the Junior Subordinated
Debentures. None of the agreements related to the Preferred Securities limits us
from issuing secured or unsecured debt in the future which would be senior in
right of payment to the Junior Subordinated Debentures. We may from time to time
incur such senior indebtedness. See "Description of the Guarantee -- Status of
the Guarantee" and "Description of the Junior Subordinated
Debentures -- Subordination."
RELIANCE ON BANK OPERATIONS TO FUND PAYMENTS TO HOLDERS OF PREFERRED SECURITIES
Metropolitan's ability to pay interest on the principal amount of the
Junior Subordinated Debentures will depend on the Bank's ability to pay
dividends to Metropolitan in amounts sufficient for Metropolitan to service its
obligations. As a holding company, we conduct our operations mainly through our
subsidiaries. The Bank's capital stock is our only significant asset. Other than
our investing and financing activities, our principal source of cash is
dividends from the Bank. As a result, the Trust's ability to pay distributions
on the Preferred Securities and our ability to perform our obligations under the
Guarantee will also depend on the Bank's ability to pay sufficient dividends. We
may become obligated to make other payments with respect to securities issued by
us in the future. These securities may be equal in priority with or have a
preference over the Junior Subordinated Debentures with respect to the payment
of principal, interest or dividends. There are no restrictions on our ability to
issue securities. There are also no limits on the amount of securities which we
may issue which are equal in priority with or have a preference over the Junior
Subordinated Debentures. In addition, there are no restrictions on the Bank's
ability to issue additional capital stock or incur additional indebtedness. See
" -- Risk Factors Relating to the Business of Metropolitan -- We Are Highly
Leveraged and Payments on Our Debt Are Substantial" and " -- Regulatory
Limitations on the Bank's Ability to Pay Dividends May Prevent Us From Making
Payments on Our Debts" and "Regulation and Supervision."
16
<PAGE> 20
OUR RIGHT TO DEFER INTEREST PAYMENTS MAY HAVE ADVERSE CONSEQUENCES TO YOU
You will not receive distributions on the Preferred Securities if we defer
interest payments on the Junior Subordinated Debentures. We may defer these
interest payments if we are not in default under the trust indenture. We may
defer interest payments for a period of up to 20 consecutive quarters with
respect to each interest deferral period. No interest deferral period may extend
beyond the stated maturity date of the Junior Subordinated Debentures. If we
defer interest payments, the Trust will defer distributions to you. The amount
of distributions to which you are entitled will accumulate additional
distributions at the rate of % per annum, compounded quarterly.
We do not currently intend to defer interest payments on the Junior
Subordinated Debentures. However, if we do defer interest payments in the
future, the market price of the Preferred Securities will likely be adversely
affected. Therefore, if you sell your Preferred Securities during an interest
deferral period, you may not receive the same return on your investment as
someone who continues to hold their Preferred Securities. In addition, due to
our 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 optional deferrals.
Before the end of an interest deferral period, we may further defer the
payment of interest. However, no interest deferral period may exceed twenty
consecutive quarters or extend beyond the stated maturity date of the Junior
Subordinated Debentures. At the end of an interest deferral period and upon the
payment of all accrued and unpaid interest on the Junior Subordinated
Debentures, we may begin a new interest deferral period subject to the above
requirements. There is no limitation on the number of times that we may begin an
interest deferral period if we are not in default under the trust indenture. See
"Description of the Preferred Securities -- Distributions" and "Description of
the Junior Subordinated Debentures -- Right to Defer Interest Payment
Obligation."
During an interest deferral period, you must continue to accrue income (in
the form of original issue discount) for United States federal income tax
purposes on your share of the interest accruing on the Junior Subordinated
Debentures. As a result, you will be required to include this income in your
gross income for United States federal income tax purposes before you receive
cash. You will not receive the cash related to the income from the Trust if you
sell your Preferred Securities before the record date for the payment of
distributions on the securities. See "Federal Income Tax
Consequences -- Interest Income and Original Issue Discount" and " -- Sales or
Redemption of the Preferred Securities."
If we defer any interest payment on the Junior Subordinated Debentures, the
Preferred Securities will likely trade at prices that do not fully reflect the
value of accrued but unpaid interest related to the underlying Junior
Subordinated Debentures. If you sell your Preferred Securities during an
interest deferral period, you will be required to treat any accrued but unpaid
interest on the Junior Subordinated Debentures as ordinary income. You will also
be required to add the amount of the accrued but unpaid interest to your
adjusted tax basis in the Preferred Securities. You will recognize a capital
loss if the selling price is less than your adjusted tax basis. Except in
limited circumstances pertaining to individuals, you cannot apply capital losses
to offset ordinary income for United States federal income tax purposes. See
"Federal Income Tax Consequences -- Sales or Redemption of the Preferred
Securities."
17
<PAGE> 21
EARLY REDEMPTION OF YOUR PREFERRED SECURITIES MAY AFFECT YOUR TOTAL RETURN
We have the ability to cause the Trust to redeem your Preferred Securities
after June 30, 2004. You will be paid the liquidation value of the Preferred
Securities and all accumulated and unpaid distributions at the time of
redemption. No further payments will be made to you by us or the Trust after the
redemption.
We may also redeem the Junior Subordinated Debentures all at once or in
part from time to time, on or after June 30, 2004. Additionally, if a Tax Event,
an Investment Company Event or a Capital Treatment Event occurs and continues,
we may redeem the Junior Subordinated Debentures, in whole but not in part,
within ninety days after the event. (The terms "Tax Event", "Investment Company
Event" and "Capital Treatment Event" are defined in "Description of the Junior
Subordinated Debentures -- Redemption or Exchange" on page 108.) In either case,
the redemption of the Junior Subordinated Debentures will cause a mandatory
redemption of the Preferred Securities. Our ability to redeem the Junior
Subordinated Debentures may be subject to prior receipt of regulatory approval,
if then required. See "Description of the Junior Subordinated
Debentures -- General."
Our inability to deduct the interest on the Junior Subordinated Debentures
could trigger a Tax Event and a redemption of the Preferred Securities.
Legislative proposals were made in 1996 and 1997 which, if enacted, could have
adversely affected our ability to deduct interest on the Junior Subordinated
Debentures. These proposals, however, were not enacted. Nevertheless, we cannot
assure you that other legislation enacted after the date of this prospectus will
not otherwise affect our ability to deduct the interest on the Junior
Subordinated Debentures.
Metropolitan is aware of at least one case, involving Enron Corporation,
now pending before the United States Tax Court where the Internal Revenue
Service initially sought to disallow the deduction for interest expense on
securities that are similar to, although different in a number of respects from,
the Junior Subordinated Debentures. In a recently filed stipulation, the
Internal Revenue Service conceded that Enron was entitled to deduct its interest
expense on the securities. Although the Internal Revenue Service has conceded
the interest deductibility issue in the Enron case, we cannot assure you that
the Internal Revenue Service will not challenge the interest deductions of other
taxpayers such as Metropolitan which issue similar types of preferred
securities.
MANDATORY EXCHANGE OF YOUR PREFERRED SECURITIES FOR JUNIOR SUBORDINATED
DEBENTURES MAY HAVE ADVERSE CONSEQUENCES TO YOU
We may dissolve the Trust at any time and distribute the Junior
Subordinated Debentures to you in exchange for your Preferred Securities. We
cannot make any assurances about the market prices for the Junior Subordinated
Debentures that may be distributed to you when the Trust is dissolved or
liquidated. The Junior Subordinated Debentures may trade at a discount to the
price that you paid to purchase the Preferred Securities in this offering.
In addition to making an investment decision in the Preferred Securities,
you are making an investment decision in the Junior Subordinated Debentures
because:
- you may receive Junior Subordinated Debentures if the Trust liquidates;
and
- payments on the Junior Subordinated Debentures will be the only source of
funds for distributions on, and redemptions of, the Preferred Securities.
18
<PAGE> 22
You should review carefully all of the information regarding the Junior
Subordinated Debentures contained in this prospectus.
Upon liquidation of the Trust, after the satisfaction of liabilities to the
Trust's creditors, Metropolitan may distribute Junior Subordinated Debentures to
the holders of the Preferred Securities and the Trust's common securities in
exchange for their securities. We may be required to obtain regulatory approval
before dissolving the Trust. We may, in certain circumstances, redeem the Junior
Subordinated Debentures in whole or in part, instead of causing the Trust to
distribute the Junior Subordinated Debentures. Under these circumstances, the
Trust will redeem the Preferred Securities to the same extent as the Junior
Subordinated Debentures are redeemed by us. We may be required to obtain
regulatory approval, if then required, for any distribution or redemption before
the stated maturity date of the Junior Subordinated Debentures. See "Description
of the Preferred Securities -- Liquidation of the Trust and Distribution of the
Junior Subordinated Debentures to Holders," and "Description of the Junior
Subordinated Debentures -- Redemption or Exchange."
Under United States federal income tax law, a distribution of Junior
Subordinated Debentures upon the dissolution of the Trust would not be a taxable
event to you. If, however, the Trust were characterized as an association
taxable as a corporation at the time of the dissolution of the Trust, the
distribution of the Junior Subordinated Debentures would constitute a taxable
event to you. In addition, any redemption of the Preferred Securities for cash
would be a taxable event to you. See "Federal Income Tax Consequences --
Distribution of the Junior Subordinated Debentures to Holders of the Preferred
Securities," and " -- Sales or Redemption of the Preferred Securities."
If the Junior Subordinated Debentures are distributed to the holders of
Preferred Securities if the Trust is liquidated, we will use our best efforts to
list the Junior Subordinated Debentures on the Nasdaq Stock Market's National
Market or SmallCap Market or the stock exchanges on which the Preferred
Securities are then listed.
YOUR INVESTMENT IS NOT INSURED
The Preferred Securities or the Junior Subordinated Debentures offered
under this prospectus do not constitute a deposit with a depository institution.
Therefore, neither the Federal Deposit Insurance Corporation nor any other
governmental agency insures the Trust Preferred Securities and the Junior
Subordinated Debentures.
YOU HAVE LIMITED RIGHTS UNDER THE GUARANTEE
Payments to you by the Trust are guaranteed only to the extent that the
Trust has funds available for distributions at the relevant time. The Guarantee
covers the following payments:
- any accumulated and unpaid distributions required to be paid on your
Preferred Securities;
- the redemption price for your Preferred Securities called for redemption;
and
- upon a voluntary or involuntary dissolution, winding-up or liquidation of
the Trust (unless Junior Subordinated Debentures are distributed to you),
the lesser of:
- the liquidation amount of your Preferred Securities and all
accumulated and unpaid distributions on your Preferred Securities to
the date of payment; or
19
<PAGE> 23
- the amount of Trust assets remaining available for distribution to you
after payment of the Trust's creditors as required by law.
The holders of at least a majority in aggregate liquidation amount of the
Preferred Securities may direct the time, method and place of any remedial
proceeding available to the Guarantee trustee or the exercise of any trust power
of the Guarantee trustee.
You may bring a claim directly against us to enforce your rights under the
Guarantee without first bringing a claim against the Trust, the Guarantee
trustee or any other person or entity. If we default on our obligation to pay
amounts due under the Junior Subordinated Debentures, the Trust will lack funds
for the payment of amounts due to you. As a result, you will not be able to rely
upon the Guarantee for those amounts. However, if we default under the trust
indenture by failing to pay interest on or principal of the Junior Subordinated
Debentures, you may bring a claim directly against us for enforcement of
payment. We will have a right of set-off under the trust indenture to the extent
we make any payment to you in connection with a claim. Except as described in
this prospectus, you will not be able to directly exercise any other remedy
available to the holders of the Junior Subordinated Debentures or to assert
directly any other rights in respect of the Junior Subordinated Debentures. The
trust agreement provides that each holder of Preferred Securities agrees to the
provisions of the Guarantee and the trust indenture by accepting the Preferred
Securities. See "Description of the Junior Subordinated Debentures -- Debenture
Events of Default," "Enforcement of Certain Rights by Holders of the Preferred
Securities," and "Description of the Guarantee."
NO SIGNIFICANT PROTECTIVE COVENANTS
The covenants in the trust indenture and the trust agreement are limited.
Neither the trust indenture nor the trust agreement:
- protects the holders of Junior Subordinated Debentures or Preferred
Securities if a material adverse change in Metropolitan's financial
condition or results of operations occurs;
- limits the ability of Metropolitan or any subsidiary to incur or assume
additional indebtedness or other obligations; or
- requires that Metropolitan meet any financial ratios or specified levels
of liquidity.
HOLDERS OF PREFERRED SECURITIES HAVE LIMITED VOTING RIGHTS
As a holder of Preferred Securities, you will have limited voting rights.
These voting rights will relate only to the modification of the Preferred
Securities and the exercise of the Trust's rights as holder of the Junior
Subordinated Debentures and the Guarantee. In general, only we, as holder of the
Trust's common securities, will be entitled to appoint, remove or replace the
trustees under the trust agreement. However, if we default under the trust
indenture and the default continues, the holders of a majority in liquidation
amount of the Preferred Securities may remove the trustee of the property under
the trust agreement. We and the trustees of the Trust may amend the trust
agreement without your consent to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust. We may take this
action even if it adversely affects your interests. See "Description of the
Preferred Securities -- Removal of the Trust Trustees" and "-- Voting Rights;
Amendment of the Trust Agreement."
20
<PAGE> 24
THERE IS NO CURRENT PUBLIC MARKET FOR THE PREFERRED SECURITIES
There is no current public market for the Preferred Securities. The Trust
has applied to list the Preferred Securities on the Nasdaq Stock Market's
National Market. However, three market makers are required for original listing,
and two are required for continued listing. The Underwriter has advised us that
it intends to make a market in the Preferred Securities. However, the
Underwriter is not obligated to do so and may discontinue this market making at
any time. Therefore, we cannot assure you that an active and liquid trading
market will develop for the Preferred Securities. If that market does develop,
we cannot assure you that it will be maintained or that the market price will
equal or exceed the public offering price on the cover page of this prospectus.
As a result, you may experience difficulty reselling the Preferred Securities or
you may be unable to sell them at all. Metropolitan and the Underwriter
determined the public offering price for the Preferred Securities through
negotiations. Many factors may influence market prices for the Preferred
Securities. These factors include prevailing interest rates, the liquidity of
the market for the Preferred Securities, investor perceptions of Metropolitan,
and general industry and economic conditions.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is listed for trading on the Nasdaq Stock Market's
National Market under the symbol "METF." The following table provides, for the
periods indicated, the high and low bid price for the Common Stock as reported
by the Nasdaq Stock Market's National Market.
<TABLE>
<CAPTION>
BID PRICE
----------------
HIGH LOW
------ ------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997
First Quarter............................................... $ 5.11 $ 4.89
Second Quarter.............................................. 7.39 4.89
Third Quarter............................................... 9.09 7.05
Fourth Quarter.............................................. 14.32 8.64
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................... $17.16 $13.64
Second Quarter.............................................. 15.46 13.18
Third Quarter............................................... 13.75 8.64
Fourth Quarter.............................................. 12.00 8.18
</TABLE>
The quotations set out above represent prices for the specific periods
indicated between dealers and do not include retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
The last reported bid price for the Common Stock on the Nasdaq Stock
Market's National Market on February , 1999 was $ . On March 1, 1999,
we had shareholders. The prices reflected above have been adjusted to
reflect Metropolitan's completion on December 10, 1997, of a two-for-one stock
split, and completion on December 29, 1998, of an eleven-for-ten stock split,
each in the form of a stock dividend to shareholders.
21
<PAGE> 25
We have not paid any cash dividends on our Common Stock since 1987. We
anticipate that we will retain future earnings to finance our operations and to
support the continued growth of the Bank. Accordingly, we do not currently
anticipate paying cash dividends on our Common Stock in the foreseeable future.
The payment of future dividends will be subject to the discretion of the Board
of Directors of Metropolitan and will depend on our results of operations,
financial position and capital requirements, general business conditions,
restrictions imposed by financing arrangements, and legal restrictions on the
payment of dividends.
We have entered into agreements that limit our ability to pay dividends.
Our commercial bank line of credit prohibits us from paying a dividend or other
distribution on our equity securities without the prior written consent of the
lender unless our ratio of tangible equity to total assets is in excess of 7.0%.
For these purposes, the line of credit agreement defines tangible equity as
consolidated net worth less goodwill.
MARKET FOR THE PREFERRED SECURITIES
The Trust plans to list the Preferred Securities on the Nasdaq Stock
Market's National Market under the symbol "METFO." Although the Underwriter
intends to make a market in the Preferred Securities, the Underwriter is not
obligated to do so and may discontinue such market making at any time.
Therefore, we cannot assure you that an active and liquid trading market will
develop or, if developed, that such a market will be sustained. Representatives
of Metropolitan and the Underwriter have determined the offering price and
distribution rate by negotiation. The offering price of the Preferred Securities
may not be indicative of the market price following the offering. See
"Underwriting."
USE OF PROCEEDS
We estimate the net proceeds from the sale of the Common Stock (at the
public offering price of $ per share) will be approximately $5.7 million
($6.5 million if the Underwriter's over-allotment options are exercised in
full), and the net proceeds from the sale of the Preferred Securities will be
approximately $28.6 million ($32.9 million if the Underwriter's over-allotment
options are exercised in full), in each case, after deducting the underwriting
discounts, commissions and estimated expenses. The Trust will invest all of the
proceeds from the sale of the Preferred Securities in Junior Subordinated
Debentures. Metropolitan intends to use the net proceeds from the sale of the
Common Stock and the Junior Subordinated Debentures for general corporate
purposes, including, but not limited to:
- capital contributions to the Bank to support growth and for working
capital;
- repayment of Metropolitan's $14.0 million 9.625% subordinated notes
maturing January 1, 2005;
- repayment of the current balance on Metropolitan's commercial bank line
of credit, which was $12.0 million on February 26, 1999; and
- acquisitions of financial services companies by either Metropolitan or
the Bank (although no agreements or understandings with respect to any
such acquisition presently exist).
22
<PAGE> 26
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of Metropolitan. As a result, the consolidated financial statements of
Metropolitan will include the Trust's financial statements. The consolidated
statements of financial condition of Metropolitan will include the Preferred
Securities under the caption "Guaranteed Preferred Beneficial Interests in
Metropolitan's Junior Subordinated Debentures," and the notes to the
consolidated financial statements will include appropriate disclosures about the
Preferred Securities. For financial reporting purposes, Metropolitan will record
distributions payable on the Preferred Securities as an interest expense in the
consolidated statements of operations.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth Metropolitan's consolidated ratios of
earnings to fixed charges for the periods indicated. 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>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1998 1997 1996(1) 1995 1994
----- ----- -------- ----- -----
<S> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Including interest on deposits..... 1.21x 1.22x 1.08x 1.21x 1.34x
Excluding interest on deposits..... 1.96x 2.18x 1.50x 2.59x 5.32x
</TABLE>
- ---------------
(1) Income from continuing operations before income taxes in 1996 includes a
$2.9 million one-time assessment to recapitalize the Savings Association
Insurance Fund.
23
<PAGE> 27
CAPITALIZATION
The following table sets forth our consolidated capitalization as of
December 31, 1998, as adjusted to give effect to the completion of the offering
of the Common Stock and the Preferred Securities, including the application of
the net proceeds as proposed. We urge you to read the following data, together
with the Consolidated Financial Statements and related notes, included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
AS
ACTUAL ADJUSTED
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Deposits.............................................. $1,051,357 $1,051,357
Borrowings:
Federal Home Loan Bank advances....................... 111,235 111,235
9.625% subordinate notes maturing January 1, 2005..... 14,000 --
Commercial bank line of credit........................ 8,000 --
Other borrowings...................................... 82,250 82,250
---------- ----------
Total borrowings................................. 215,485 193,485
---------- ----------
Total deposits and borrowings.................... $1,266,842 $1,244,842
========== ==========
Guaranteed preferred beneficial interests in
Metropolitan's junior subordinated debentures (1)... $ 27,750 $ 57,750
========== ==========
Shareholders' equity:
Shares of Common Stock, no par value, 10,000,000
shares authorized, 7,756,393 shares issued and
outstanding at December 31, 1998, 8,356,393 as
adjusted (2)........................................ $ -- $ --
Additional paid-in capital............................ 18,505 24,164
Retained earnings..................................... 23,660 23,660
Unrealized gain on securities available for sale...... 479 479
---------- ----------
Total shareholders' equity....................... $ 42,644 $ 48,303
========== ==========
</TABLE>
- ---------------
(1) The as adjusted Preferred Securities of the Trust include beneficial
interests in $30.0 million aggregate principal amount of the Junior
Subordinated Debentures issued by Metropolitan to the Trust. 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,
2029. Metropolitan owns all of the Trust's common securities.
(2) The as adjusted additional paid-in capital includes net proceeds of $5.7
million from the issuance of 600,000 shares of Common Stock.
24
<PAGE> 28
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
The following table represents summary consolidated statements of
operations which you should read together with our Consolidated Financial
Statements and related notes, and the Management's Discussion and Analysis of
Financial Condition and Results of Operations included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans.................. $74,059 $61,230 $50,268
Interest on mortgage-backed securities...... 8,895 6,947 2,890
Interest and dividends on other
investments............................... 2,774 1,169 1,294
------- ------- -------
Total interest income.................. 85,728 69,346 54,452
------- ------- -------
INTEREST EXPENSE
Interest on deposits........................ 42,537 34,120 28,132
Interest on borrowings...................... 9,614 7,583 4,984
Interest on Junior Subordinated
Debentures................................ 1,633 -- --
------- ------- -------
Total interest expense................. 53,784 41,703 33,116
------- ------- -------
NET INTEREST INCOME.............................. 31,944 27,643 21,336
Provision for loan losses........................ 2,650 2,340 1,636
------- ------- -------
Net interest income after provision for loan
losses......................................... 29,294 25,303 19,700
------- ------- -------
NONINTEREST INCOME
Net gain on sale of loans................... 3,453 488 202
Loan servicing income, net.................. 788 1,293 1,204
Service charges on deposit accounts......... 906 716 565
Net gain on sale of securities.............. 70 92 134
Loan option income.......................... 388 320 696
Loan credit discount income................. 137 -- --
Other operating income...................... 1,574 1,232 972
------- ------- -------
Total noninterest income............... 7,316 4,141 3,773
------- ------- -------
NONINTEREST EXPENSE
Salaries and related personnel costs........ 13,669 10,671 8,670
Occupancy and equipment expense............. 3,619 3,044 2,465
Federal deposit insurance premiums.......... 688 595 4,212
Marketing expense........................... 908 686 695
State franchise taxes....................... 623 543 461
Data processing expense..................... 491 441 599
Amortization of intangibles................. 262 263 256
Other operating expenses.................... 5,262 3,906 3,481
------- ------- -------
Total noninterest expense.............. 25,522 20,149 20,839
------- ------- -------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY
ITEM........................................... 11,088 9,295 2,634
Provision for income taxes....................... 4,049 3,492 1,095
------- ------- -------
INCOME BEFORE EXTRAORDINARY ITEM................. 7,039 5,803 1,539
Extraordinary item............................... (245) -- --
------- ------- -------
NET INCOME....................................... $ 6,794 $ 5,803 $ 1,539
======= ======= =======
</TABLE>
25
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of Metropolitan's
financial condition and results of operations in conjunction with the
Consolidated Financial Statements and related notes included elsewhere in this
prospectus.
The reported results of Metropolitan primarily reflect the operations of
the Bank. For purposes of this section, unless otherwise indicated, "we," "our"
or "us" means Metropolitan and its subsidiaries.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Net Income. Net income for 1998 increased 17.1% from net income for 1997.
Net income for 1998 was $6.8 million, or $0.88 per common share, and net income
for 1997 was $5.8 million, or $0.75 per common share. Earnings for 1998 included
an extraordinary expense of $245,000, net of tax, or $0.03 per common share.
This extraordinary expense represented the cost of retiring our 10.0%
subordinated debt with part of the proceeds from our issuance of 8.60%
cumulative trust preferred securities in April 1998. Net income before the
extraordinary item was $7.0 million for 1998, or $0.91 per common share, which
was a 21.3% increase over 1997 net income of $5.8 million. This increase in
income was due to growth in interest-earning assets and noninterest income.
Total assets grew 47.4% to $1.4 billion at December 31, 1998 from $925.0
million at December 31, 1997. Net income increased at a slower pace than assets
during 1998 because asset growth did not take place uniformly during the year.
Asset growth was concentrated in the second half of the year. Asset growth in
1998 was greater than usual because both capital and quality assets were
available. Although we do not expect asset growth to continue at that rate, we
do expect it to be approximately 20% annually.
Noninterest income grew 76.7% to $7.3 million in 1998 from $4.1 million in
1997. This growth was primarily due to a 607% increase in gain on sale of loans.
Our gain on sale of loans increased to $3.5 million in 1998 from $0.5 million in
1997. We restructured our residential lending operations late in 1997 in order
to increase our market share in the greater Cleveland area. As part of the
restructuring, Metropolitan hired additional commissioned loan officers. These
efforts, along with increased residential refinancing activity, resulted in
significant increases in loan originations, loan sales, and gain on sale of
loans.
Interest Income. Total interest income increased 23.6% to $85.7 million for
1998 from $69.3 million for 1997. This increase was due to a 27.4% increase in
the average balance of interest-earning assets. Average interest-earning assets
grew as a result of our strategy to increase assets if loans with acceptable
portfolio characteristics are available. The increase in interest income
attributable to the increase in the average balance of interest-earning assets
was partially offset by the decline in the weighted average yield on loans
receivable. This decline in weighted average yield to 8.48% during 1998 from
8.73% during 1997 was caused by the following factors:
- an overall decline in market interest rates;
- the narrowing of spreads on nonresidential loans caused by competition
from other lenders; and
26
<PAGE> 30
- a $500,000 decline in prepayment penalties.
Interest Expense. Total interest expense increased 29.0% to $53.8 million
for 1998 from $41.7 million for 1997. Interest expense increased primarily
because the average balance of interest-bearing liabilities increased 27.8% from
the prior year. We increased our average balance of interest-bearing liabilities
in order to fund our growth of interest-earning assets. Cost of funds increased
slightly to 5.58% in 1998 from 5.53% in 1997. We paid higher rates on new
borrowings and deposits to lengthen maturities. In addition, we paid higher
rates on retail deposits to increase our market share to fund asset growth.
Net Interest Margin. Net interest margin refers to net interest income
divided by total interest-earning assets. Our net interest margin declined 32
basis points to 3.16% for 1998 from 3.48% for 1997. The yield on
interest-earning assets decreased due to the declining interest rate environment
in 1998. We experienced increases in deposit and borrowing costs in 1998 despite
the declining interest rate environment. These increases resulted from our
efforts to lengthen maturities on deposits and borrowings and our issuance of
additional debt.
Average Balances and Yields. The following table presents the total dollar
amount of interest income from average interest-earning assets and the resulting
rates, 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 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 included in average loan balances. The average
balance of mortgage-backed securities and securities are presented at historical
cost.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
1998 1997 1996
------------------------------- ----------------------------- -----------------------------
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................ $ 848,931 $74,059 8.72% $673,809 $61,230 9.09% $574,502 $50,268 8.75%
Mortgage-backed securities...... 119,152 8,895 7.47 101,160 6,947 6.87 43,734 2,890 6.61
Other........................... 43,423 2,774 6.39 18,923 1,169 6.18 20,417 1,294 6.34
---------- ------- -------- ------- -------- -------
Total interest-earning
assets.................... 1,011,506 85,728 8.48 793,892 69,346 8.73 638,653 54,452 8.53
------- ------- -------
Nonearning assets............... 57,804 44,727 37,021
---------- -------- --------
Total assets................ $1,069,310 $838,619 $675,674
========== ======== ========
INTEREST-BEARING LIABILITIES:
Deposits........................ $ 790,897 42,537 5.38 $636,777 34,120 5.36 $532,100 28,132 5.29
Borrowings...................... 154,228 9,614 6.23 117,150 7,583 6.47 73,899 4,984 6.74
Junior Subordinated
Debentures.................... 18,577 1,633 8.79 -- -- -- -- -- --
---------- ------- -------- ------- -------- -------
Total interest-bearing
liabilities............... 963,702 53,784 5.58 753,927 41,703 5.53 605,999 33,116 5.46
------- ---- ------- ---- ------- ----
Noninterest-bearing
liabilities................... 66,009 51,674 42,924
Shareholders' equity............ 39,599 33,018 26,751
---------- -------- --------
Total liabilities and
shareholders' equity...... $1,069,310 $838,619 $675,674
========== ======== ========
Net interest income and interest
rate spread................... $31,944 2.90 $27,643 3.20 $21,336 3.07
======= ==== ======= ==== ======= ====
Net interest margin............. 3.16 3.48 3.34
Average interest-earning assets
to average interest bearing
liabilities................... 104.96% 105.30% 105.39%
</TABLE>
27
<PAGE> 31
Rate and Volume Variances. Changes in the level of interest-earning assets
and interest-bearing liabilities (known as changes due to volume) and changes in
yields earned on assets and rates paid on liabilities (known as changes due to
rate) affect net interest income. The following table provides a summary of the
changes in interest earned and interest paid resulting from changes in volume
and changes in 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,
---------------------------------------------------------
1998 VS. 1997 1997 VS. 1996
INCREASE (DECREASE) INCREASE (DECREASE)
--------------------------- ---------------------------
CHANGE CHANGE CHANGE
TOTAL DUE TO DUE TO TOTAL DUE TO TOTAL
CHANGE VOLUME RATE CHANGE VOLUME CHANGE
------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME ON:
Loans receivable............. $12,829 $15,162 $(2,333) $10,962 $ 8,962 $ 2,000
Mortgage-backed securities... 1,948 1,308 640 4,057 3,940 117
Other........................ 1,605 1,564 41 (125) (93) (32)
------- ------- ------- ------- ------- -------
Total interest income........ 16,382 $18,034 $(1,652) 14,894 $12,809 $ 2,085
------- ======= ======= ------- ======= =======
INTEREST EXPENSE ON:
Deposits..................... 8,417 $ 8,289 $ 128 5,988 $ 5,603 $ 385
Borrowings................... 2,031 2,300 (269) 2,599 2,792 (193)
Junior Subordinated
Debentures................. 1,633 1,633
------- ------- ------- ------- ------- -------
Total interest expense....... 12,081 $12,222 $ (141) 8,587 $ 8,395 $ 192
------- ======= ======= ------- ======= =======
Increase in net interest
income..................... $ 4,301 $ 6,307
======= =======
</TABLE>
Provision for Loan Losses. Our provision for loan losses increased 13.2% to
$3.0 million in 1998 from $2.3 million in 1997. This 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 46.0% to $1.0 billion at December 31, 1998 from $707.9 million at the
same date a year earlier. The allowance for losses on loans at December 31, 1998
was $6.9 million, or 0.66% of total loans, compared to $5.6 million, or 0.79% of
total loans, at the same date in 1997. Management bases its estimate of the
adequacy of the allowance for losses on loans on an analysis of various factors.
These factors include historical loan loss experience, the status of impaired
loans, economic conditions affecting real estate markets, and regulatory
considerations.
Noninterest Income. Total noninterest income increased 76.7% to $7.3
million in 1998 from $4.1 million in 1997. This increase occurred primarily
because of the increase in our gain on sale of loans.
In late 1997, we restructured our residential lending operation. We
expanded our product offerings and hired additional loan origination personnel.
We also restructured our compensation plans to increase incentives to produce
additional profitable volume. During 1998 long-term interest rates were
declining and were at lower levels than in 1997. This decline in rates
stimulated customer demand for fixed rate loans for purchases and refinances. In
addition, we generally sell fixed rate residential loans within 60 to 90 days of
origination
28
<PAGE> 32
in order to limit the risk of declining interest income from rising interest
rates. All of these factors combined to bring about the following increases for
all types of loans:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------- PERCENTAGE
1998 1997 INCREASE
--------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Loans originated for sale................. $211,677 $36,732 476%
Loans purchased for sale.................. 49,447 10,654 364%
Sale of loans............................. 258,064 51,402 402%
Gain on sale of loans..................... 3,453 488 607%
</TABLE>
Because these increases were due to the restructuring of our residential
lending operations and favorable interest rates, we expect that some, but not
all, of the increases will continue if market interest rates increase
significantly.
Net loan servicing income decreased 39.0% to $788,000 in 1998 from $1.3
million in 1997. This decrease in net loan servicing fees was a result of the
writedown of purchased and originated mortgage servicing rights. The writedown
occurred because a decline in long-term interest rates caused a high level of
prepayments during 1998. When loans prepay, the servicing rights associated with
those loans are written off. Management believes that based on the current level
of long-term interest rates, the high level of prepayments may continue. The
portfolio of loans serviced for others increased to $1.5 billion at December 31,
1998 from $1.2 billion at the same date a year earlier. This increase was a
result of the sale of $233.6 million of residential loan production, the
securitization of $101.0 million of commercial real estate loans during the
fourth quarter of 1998, and the continued acquisition of loan servicing
portfolios. These increases more than offset prepayments and amortization of
existing loans serviced for others. We remain committed to servicing loans for
others and will continue to acquire the rights to service portfolios where the
loan characteristics and pricing are consistent with our long-term profitability
and risk objectives.
Service charges on deposit accounts increased 26.5% to $906,000 in 1998
from $716,000 in 1997. The primary reason for the increase was the increase in
the level of passbook, statement savings and transaction accounts.
During 1998, we sold $43.2 million of mortgage-backed securities available
for sale for a net gain of $70,000. During 1997, we sold $16.6 million of
securities available for sale at a net gain of $92,000. We purchase or sell
securities and mortgage-backed securities for a variety of reasons. These
reasons include the management of liquidity, interest rate risk, capital levels,
collateral levels for borrowings, and to take advantage of favorable market
conditions. We do not currently hold any securities for trading purposes. Gains
or losses from the sale of securities are incidental to the sale of those
securities for the reasons listed above.
Loan option income was $388,000 in 1998 compared to $320,000 in 1997. In
loan option transactions, we purchase loans and sell nonrefundable options to a
third party to purchase these same loans at a later date. At the time the option
is exercised or the option period expires, we recognize fee income. The amount
of loan option income depends upon the amount of loans for which options are
written and the price negotiated. Both of these factors are affected by market
conditions. During 1998, we purchased $17.9 million of loans for option
transactions compared to $10.6 million in 1997.
29
<PAGE> 33
We recognized loan credit discount income of $137,000 in 1998. At times we
purchase loans at a discount based upon our assessment of credit risk and the
value of the underlying collateral. We do not recognize these collateral
discounts in income over the life of the loan. When the loans are repaid, any
discount related to management's initial assessment of the deficiency in
collateral values which is not utilized as part of the payoff is recognized as
noninterest income. The loan credit discount income we recognized in 1998 is the
result of realizing collateral discounts on two loans which were paid in full in
September 1998.
Other income increased 27.9% to $1.6 million in 1998 from $1.2 million in
1997. This increase was primarily due to increased fee income from credit cards
and ATMs and greater rental income at branch locations.
Noninterest Expense. Total noninterest expense increased 26.7% to $25.5
million in 1998 from $20.1 million in 1997. This increase in expenses resulted
primarily from growth in assets and increased staffing requirements due to
greater business volume.
Personnel related expenses increased 28.1% to $13.7 million in 1998 from
$10.7 million in 1997. This increase was caused by the following factors:
- increases in staffing due to the growth of the Bank;
- the payment of incentives for loan and deposit production;
- the addition of staff to increase loan production; and
- the effects of merit increases.
We expect increases in personnel costs to continue as we continue to grow.
Occupancy and equipment expense increased 18.9% to $3.6 million in 1998
from $3.0 million in 1997. Generally, these expenses increased because of the
following factors:
- the addition of two full service branch offices;
- maintenance costs; and
- the leasing of additional space at the executive office to support the
increased business volume.
Presently, we plan to open five new branch offices by the end of 2000. We are
also considering additional sites for future expansion. In addition, we have
executed an option to purchase land where we expect to build a new executive
office. We expect to occupy our new office in late 2000. Based on these facts we
expect occupancy costs will continue to increase.
Marketing expense increased $222,000 to $908,000 for 1998 from $686,000 in
1997. This increase was the result of marketing efforts to increase lending and
deposits.
Other operating expenses include miscellaneous general and administrative
costs such as loan servicing, loan processing costs, business development, check
processing and ATM expenses. Other operating expenses increased $1.4 million to
$5.3 million for 1998 from $3.9 million for 1997. Generally, this increase was
due to:
- greater expenses relating to increased loan origination/purchase volume;
- real estate owned expenses; and
- increased loan servicing costs associated with the higher level of
prepayments.
Provision for Income Taxes. The provision for income taxes increased to
$4.0 million in 1998 from $3.5 million in 1997 due to the increase in income
before taxes. The effective tax
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<PAGE> 34
rate was 36.5% for 1998 and 37.6% for 1997. The effective tax rate in 1998 was
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 1997 as a result of increased pre-tax income.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Net Income. Net income for 1997 was $5.8 million, or $0.75 per common
share, an increase of $4.3 million from 1996. Net income for 1996 was $1.5
million, or $0.22 per common share. This increase was primarily due to the
increase in net interest income and the $1.9 million after tax Savings
Association Insurance Fund assessment in 1996 which was not repeated in 1997.
Excluding the one-time Savings Association Insurance Fund assessment, net income
for 1996 was $3.5 million, or $0.49 per common share.
Interest Income. Total interest income grew 27.4% to $69.3 million for 1997
from $54.5 million for 1996. This growth was due to a 24.3% increase in average
interest-earning assets between 1997 and 1996 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 our strategy to increase assets if loans
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
from 8.53% during 1996. This 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. Increases in
consumer and business loans relative to real estate loans caused the weighted
average rate to increase.
Interest Expense. Total interest expense increased 25.9% to $41.7 million
for 1997 from $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. Our cost of funds
increased to 5.53% in 1997 from 5.46% in 1996. This increase occurred as we
increased our efforts to lengthen maturities on deposits and borrowings 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. Our net interest margin rose 14 basis points to 3.48%
for 1997 from 3.34% for 1996. While overall interest rates on loans and deposits
declined during 1997, we experienced increases in yields on interest-earning
assets due to prepayment penalties and changes in asset mix. In addition, we
experienced increased liability costs as a result of our 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 funds.
Provision for Loan Losses. The provision for loan losses increased 43.1% to
$2.3 million in 1997 compared to $1.6 million in 1996. This 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, compared to
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<PAGE> 35
$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 various factors. These factors include historical loan loss
experience, the status of impaired loans, economic conditions affecting real
estate markets, and regulatory considerations.
Noninterest Income. Total noninterest income increased 9.8% to $4.1 million
in 1997 from $3.8 million in 1996. Net loan servicing income increased 7.4% to
$1.3 million in 1997 from $1.2 million in 1996. The increase in net loan
servicing fees was a result of our strategy to increase fee income. The
portfolio of loans serviced for others increased to $1.2 billion at December 31,
1997 from $1.1 billion at the same date a year earlier. This increase was the
result of securitization of $93.0 million of multifamily loans with FannieMae
during the third quarter of 1997. Purchases of loan servicing rights and
origination of loan servicing during 1997 approximately offset payoffs and
amortization of existing loans serviced.
Service charges on deposit accounts increased 26.7% to $716,000 in 1997
from $565,000 in 1996. The primary reason for the increase was the overall
growth in deposit accounts and greater fee income derived from increased
business levels in various accounts.
Gain on sale of loans was $488,000 in 1997 compared to $203,000 in 1996.
This income depends upon the amount of loans sold, secondary market pricing, and
the value allocated to mortgage servicing rights. These variables were in turn
directly affected by prevailing interest rates. 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 compared to $55.5 million in 1996.
Gain on sale of securities was $92,000 in 1997 compared to $134,000 in
1996. During 1997, we sold securities with a principal balance outstanding of
$16.6 million. In 1996, we sold $3.6 million of mortgage-backed securities for a
gain of $134,000. We do not actively purchase mortgage-backed securities for
resale. However, we monitor the existing portfolio of mortgage-backed securities
for opportunities to improve the yield, manage interest rate risk, and increase
profits. As a result, certain mortgage-backed securities have been sold.
Loan option income was $320,000 in 1997 compared to $696,000 in 1996. Loan
option income depends upon the amount of loans for which options are written and
the price negotiated. Both of these factors are affected by market conditions.
During 1997, we purchased $10.6 million of loans and sold nonrefundable options
to purchase those same loans at a specified price within a specified time
period. In 1996, we sold options on $16.7 million of loans that we purchased.
Other income increased 26.7% to $1.2 million in 1997 from $972,000 in 1996.
This increase was primarily due to increased fee income earned on investment
services, rental income at branch office locations, and fee income from credit
cards.
Noninterest Expense. Total noninterest expense decreased 3.3% to $20.1
million in 1997 from $20.8 million in 1996. Noninterest expense in 1996 included
a $2.9 million one-time assessment to recapitalize the Savings Association
Insurance Fund. Increases in other expense categories in 1997 related primarily
to growth in assets, increases in branch offices, and personnel.
Personnel related expenses increased $2.0 million in 1997, or 23.1%, from
1996. This increase resulted from increased staffing due to the growth of the
Bank, the payment of
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<PAGE> 36
incentives for loan and deposit production, the addition to staff for loan
production, and the effects of merit increases.
Occupancy and equipment expense increased 23.5% to $3.0 million in 1997
from $2.5 million in 1996. These increases were generally the result of the
addition of full service branch offices, remodeling of certain other branch
offices, and expanded space at the executive office.
Federal deposit insurance expense decreased $3.6 million to $595,000 for
1997 from $4.2 million for 1996. This decrease was primarily a result of the
one-time assessment to recapitalize the Savings Association Insurance Fund in
1996. The one-time Savings Association Insurance Fund 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.
The Savings Association Insurance Fund recapitalization made this decline
possible.
Data processing expense decreased 26.3% to $441,000 in 1997 from $599,000
in 1996. The main reason for the decrease was the discount on processing fees
from the Bank's primary data services provider in mid-1997. This discount on
fees continued until mid-1998 when fees returned to their normal range prior to
the discount.
Other operating expenses increased $424,000 to $3.9 million for 1997 from
$3.5 million for 1996. This increase was primarily due to greater credit card
servicing costs. These servicing costs grew 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.
Provision for Income Taxes. The provision for income taxes increased to
$3.5 million in 1997 from $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. The relationship
was less significant as a result of the unfavorable effect the one-time
assessment to recapitalize the Savings Association Insurance Fund had on pre-tax
income in 1996. This more than offset the fact that we incurred significant
state income tax and were subject to a higher federal tax rate in 1997 for the
first time.
ASSET QUALITY
Nonperforming Assets. Our goal is to maintain high quality loans in the
loan portfolio through conservative lending policies and prudent underwriting.
We undertake detailed reviews of the loan portfolio regularly to identify
potential problem loans or trends early and to provide for adequate estimates of
potential losses. In performing these reviews, management considers, among other
things, current economic conditions, portfolio characteristics, delinquency
trends, and historical loss experiences. We normally consider 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, a loan is considered 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,
we assess the collectibility of the unpaid interest. Interest determined to be
uncollectible is reversed from interest income. Future interest
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<PAGE> 37
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.
The table below provides the amounts and categories of our nonperforming
assets as of the dates indicated. At December 31, 1998, all loans classified as
impaired were also classified as nonperforming.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1997 1996
------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Nonaccrual loans................................. $12,231 $2,763 $4,923
Loans past due greater than 90 days, still
accruing....................................... 460 384 271
------- ------ ------
Total nonperforming loans.............. 12,691 3,147 5,194
Real estate owned................................ 5,534 2,037 177
------- ------ ------
Total nonperforming assets............. $18,225 $5,184 $5,371
======= ====== ======
Nonperforming loans to total loans............... 1.23% 0.44% 0.80%
Nonperforming assets to total assets............. 1.34% 0.56% 0.70%
</TABLE>
Nonperforming assets increased $13.0 million to $18.2 million at December
31, 1998 from the prior year. Nonperforming loans increased in four areas:
commercial real estate, construction and land development, business loans, and
consumer loans. Real estate owned increased $3.5 million because we acquired two
properties in December.
Nonperforming commercial real estate loans increased $5.9 million due to
three loans including a $4.0 million loan financing a waterpark in Southern
California. This loan and one other are bridge loans, a program we are no longer
actively marketing. Based on appraisals and other current estimates of value, we
do not anticipate losses on these three loans.
Nonperforming construction and land development loans increased $1.8
million due to two borrowers. The largest loan is a $1.3 million land
development loan for residential lots that has experienced slower than
anticipated lot sales. The remaining loans are model home construction loans.
Based on appraised values and current market research, we do not anticipate
losses on these two loans.
Nonperforming business loans increased $1.5 million due to five loans. This
increase is consistent with the growth in this business line. We began making
business loans in 1995. From 1996 to 1997, business loans grew $34.0 million to
$57.5 million. In 1998, business loans grew another $24.8 million to $82.3
million. Total nonperforming business loans are $1.7 million or 2.1% of that
loan category. Unlike the real estate secured lending which comprises over 80%
of our loan portfolio, business loans often depend on the successful operation
of the business or depreciable collateral. Therefore, we expect nonperforming
loans and losses to be higher for business loans than for real estate loans.
Management currently estimates probable losses on these five loans at $900,000.
We have allocated a part of the allowance for loan losses to this estimate until
the actual loss is determined and charged-off. We are aggressively pursuing
collection of all nonperforming loans.
Nonperforming consumer loans have increased $500,000 to $2.5 million at
December 31, 1998. Nonperforming consumer loans represent 2.5% of the consumer
portfolio. The increase in these loans is primarily attributable to subprime
lending. We began subprime lending in 1997. These loans typically exhibit higher
delinquency rates than other consumer
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<PAGE> 38
loans but provide a greater yield to compensate for these costs of delinquency
and collection. These loans accounted for $240,000 or 29.7% of consumer loan
charge-offs in 1998. The aggregate balance of the subprime portfolio at December
31, 1998 was $10.2 million or less than one percent of total loans. All consumer
loans that are delinquent 120 days or more are 100% covered by loan insurance or
included in the allowance for loan losses in an amount equal to the estimated
loss for that loan.
In December 1998, we acquired a motel in Northeastern Ohio and a marina in
California. We transferred the loans related to these properties to real estate
owned. We adjusted the loans to their estimated fair value of $3.4 million and
$1.3 million, respectively, at the time of acquisition. We are actively pursuing
the sale of both properties. We do not anticipate further losses.
In addition to the nonperforming assets included in the table above, we
identify potential problem loans which are still performing but have a weakness
which causes us to classify those loans as substandard for regulatory purposes.
There was $3.1 million of potential problem loans in our portfolio at December
31, 1998. Seven loans secured by multifamily and commercial real estate are $1.8
million of this amount.
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. The following
table provides an analysis of the allowance for losses on loans at the dates
indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1998 1997 1996
------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period...................... $5,622 $4,175 $2,765
Charge-Offs:
One- to four-family................................. 5 32 22
Multifamily......................................... 39 494 119
Commercial real estate.............................. -- -- --
Construction and land............................... -- -- --
Consumer............................................ 809 363 95
Business............................................ 565 10 --
------ ------ ------
Total charge-offs......................... 1,418 899 236
------ ------ ------
Recoveries:
One- to four-family................................. 25 -- --
Multifamily......................................... 13 -- --
Commercial real estate.............................. -- -- --
Construction and land............................... -- -- --
Consumer............................................ 17 6 11
Business............................................ -- -- --
------ ------ ------
Total recoveries.......................... 55 6 11
------ ------ ------
</TABLE>
35
<PAGE> 39
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1998 1997 1996
------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net charge-offs..................................... 1,363 893 225
Provision for loan losses........................... 2,650 2,340 1,635
------ ------ ------
Balance at end of period............................ $6,909 $5,622 $4,175
====== ====== ======
Net charge-offs to average loans.................... 0.16% 0.13% 0.04%
Provision for loan losses to average loans.......... 0.31% 0.35% 0.28%
Allowance for losses on loans to total nonperforming
loans at end of period............................ 54.44% 178.68% 80.38%
Allowance for losses on loans to total loans at end
of period......................................... 0.66% 0.79% 0.64%
</TABLE>
In 1998, loans receivable increased 46.0% in 1998 to $1.0 billion while the
allowance for losses on loans increased only 22.9% to $6.9 million. We
considered the following factors in determining that this level of allowance for
losses on loans was adequate.
- Loan concentrations for each year are similar. In 1998 and 1997, real
estate secured approximately 83% of the loan portfolio. Commercial real
estate loans were approximately 21% of the portfolio in both years.
Multifamily loans have increased to 31% of the portfolio at December 1998
compared to 22% a year earlier.
- Average loan sizes remain relatively small for multifamily and commercial
real estate loans. As a result, the risk of loss is spread among many
borrowers and properties. The average loan size for a multifamily loan
was $534,000 at December 1998 compared to $543,000 a year earlier. The
average loan size for a commercial real estate loan was $618,000 at
December 1998 compared to $677,000 a year earlier.
- Historical charge-off experience on real estate loans has not been
significant.
- We separately evaluated individual nonperforming loans for the adequacy
of collateral values. Although we consider several of these loans to be
individually large because they exceed $1 million, we were able to
determine that our principal balance is well secured. We reached this
determination by reviewing current or updated appraisals, brokers' price
opinions, and other market surveys.
- Consumer loan charge-offs continued to increase. This increase was due
primarily to subprime lending. We are not currently expanding subprime
lending. The current balance in this portfolio is $10.2 million.
- Business loan charge-offs increased in 1998. We expect business loan
charge-offs to continue to grow as our emphasis in this area causes the
portfolio to grow.
After careful consideration of all of these factors, we concluded that it
was necessary to increase the allowance for loan losses but not at the same rate
that loans increased during 1998. Therefore, the provision for loan losses was
increased 13.2% to $3.0 million in 1998 which resulted in an increase in the
allowance for loan losses of $1.3 million.
COMPARISON OF DECEMBER 31, 1998 AND DECEMBER 31, 1997 FINANCIAL CONDITION
Total assets amounted to $1.4 billion at December 31, 1998 compared to
$925.0 million at December 31, 1997. Total assets increased $438.4 million, or
47.4%. The increase in
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<PAGE> 40
assets was funded primarily with deposit growth of $313.6 million, increased
borrowings of $79.6 million, and the issuance of $27.8 million in preferred
securities by a new, wholly owned subsidiary of Metropolitan named Metropolitan
Capital Trust I. Asset growth in 1998 was greater than usual because both
capital and quality assets were available. Although we do not expect asset
growth to continue at this rate, we expect it to be approximately 20% over the
next several years.
Securities available for sale increased by $17.8 million to $19.4 million
at December 31, 1998 from $1.7 million the prior year. This increase was
primarily due to our purchase of $7.5 million of FreddieMac preferred stock and
a $9.9 FannieMae medium term note. Securities available for sale are primarily
maintained to meet the liquidity maintenance requirement of our subordinated
notes maturing January 1, 2005 and to meet regulatory liquidity requirements.
Securities held to maturity increased $11.5 million to $16.2 million at
December 31, 1998 from $4.7 million at December 31, 1997. This increase was
primarily due to our purchase of $14.8 million of tax exempt municipal bonds and
$1.4 million of revenue bonds which were offset by the early redemption of $4.7
million of tax-exempt bonds.
Mortgage-backed securities increased $55.1 million to $198.3 million at
December 31, 1998 from $143.2 million a year earlier. Our securitization of
commercial real estate loans of $101.0 million and purchases of $45.7 million of
mortgage-backed securities were partially offset by repayments of $46.3 million
of mortgage-backed securities and sales of $43.2 million of mortgage-backed
securities. In December 1998, we completed the securitization of $101.0 million
of commercial real estate loans with a private issuer in a structure that used
an insurance policy to assume all credit risk. We expect to consider similar
transactions in the future because they improve our credit risk profile by
converting whole loans to mortgage-backed securities. In addition, these
transactions provide high quality collateral for wholesale borrowings.
Loans receivable, including loans held for sale, increased $325.4 million,
or 46.0%, to $1.0 billion. This increase was consistent with our overall
strategy of increasing assets while adhering to prudent underwriting standards
and preserving our "adequately capitalized" status.
We experienced the following increases by loan category:
- multifamily -- $143.0 million;
- commercial real estate loans -- $62.2 million;
- one- to four-family loans -- $37.7 million;
- consumer loans -- $33.1 million;
- business loans -- $24.8 million; and
- construction and land loans (net of loans in process) -- $21.0 million.
Premises and equipment increased $5.2 million, or 37.2%, to $19.1 million.
This increase was primarily the result of our opening two branch offices in
1998, the purchase of computer hardware and software, and the acquisition of
land for new branch offices. We have executed an option to purchase land for a
new executive office. We plan to begin construction during 1999 for occupancy
late in 2000. We continue to evaluate sites for future branch office expansion.
37
<PAGE> 41
Other assets include a $1.0 million investment in a limited partnership
which services real estate loans. The loans in the partnership's servicing
portfolio prepaid more quickly during 1998 than in 1997. If these prepayments
increase or remain at current levels for a long period of time, the full value
of this asset might not be realized.
Deposits totaled $1.1 billion at December 31, 1998, an increase of $313.6
million, or 42.5%, from December 31, 1997. This increase resulted from
management's marketing efforts, growth at newer branch offices, a $108.6 million
increase in out-of-state time deposits primarily from financial institutions,
and increased custodial checking balances.
Borrowings increased $79.6 million to $215.5 million at December 31, 1998,
from $135.9 million at December 31, 1997. This increase was the result of our
increased use of Federal Home Loan Bank advances and reverse repurchase
agreements to fund asset growth not funded by the increased balance of deposits.
During 1998, Metropolitan's wholly owned subsidiary, Metropolitan Capital
Trust I, issued $27.8 million of 8.60% cumulative trust preferred securities.
This subsidiary invested the proceeds of the offering in 8.60% junior
subordinated debentures of Metropolitan. The proceeds from these securities were
used to retire our 10.0% subordinated notes scheduled to mature December 31,
2001 and to fund capital contributions to the Bank during 1998 to support asset
growth.
Shareholders' equity increased $5.9 million, or 16.3%, to $42.6 million,
due largely to the retention of net income.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The term "liquidity" refers to our ability to generate adequate
amounts of cash for funding loan originations, loan purchases, deposit
withdrawals, maturities of borrowings and operating expenses. Our 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 and borrowings and public or
private offerings by Metropolitan.
In addition to debt or equity offerings, the primary source of funds for
Metropolitan, at the holding company level, is dividends from the Bank. The
payment of these dividends are subject to restrictions imposed by federal bank
regulatory agencies. At December 31, 1998, Metropolitan had liquid assets of
$2.1 million and had $4.0 million available to borrow on its commercial bank
line of credit. Currently, Metropolitan primarily uses funds for interest
payments on its existing debt. The covenants associated with its subordinated
notes maturing January 1, 2005 require Metropolitan to maintain liquid assets
sufficient to pay six months interest, or approximately $675,000. Metropolitan
could also use funds for additional capital contributions to the Bank, other
operating expenses, purchase of investment securities, or the acquisition of
other assets.
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 $60
million cash management line of credit with the Federal Home Loan Bank. This
line of credit is available to meet liquidity needs. As of December 31, 1998,
the balance on this line was $28.4 million. We regularly review cash flow needs
to fund
38
<PAGE> 42
operations. We believe that the resources described above are adequate to meet
our requirements for the foreseeable future.
When evaluating sources of funds, we consider the cost of various
alternatives such as local retail deposits, Federal Home Loan Bank advances, and
other wholesale borrowings. One option we have considered and used in the past
has been the acceptance of out-of-state time deposits from individuals and
entities, predominantly financial institutions. These deposits typically have
balances of $90,000 to $100,000 and have a term of one year or more. We do not
accept these deposits through brokers. At December 31, 1998, approximately
$166.3 million of certificates of deposits, or 15.8% of our total deposits, were
held by these individuals and entities. If we were unable to replace these
deposits upon maturity, our liquidity could be adversely affected. We monitor
these maturities to attempt to minimize any potential adverse effect on
liquidity.
At December 31, 1998, $129.4 million, or 18.0%, of our 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, our liquidity could be adversely affected. We monitor maturities
regularly 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 changed significantly.
These new regulations require the Bank to maintain liquid assets equal to at
least 4% of the Bank's 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"), FannieMae, or FreddieMac 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 1998 was 5.04%.
Capital. Our total shareholders' equity at December 31, 1998 was $42.6
million, an increase of $5.9 million, or 16.3%, from equity of $36.7 million at
December 31, 1997. This increase was due to net income of $6.8 million and a
decrease in unrealized gains on securities available for sale, net of tax, of
$811,000. No dividends were paid in 1998, 1997 or 1996. The terms of our
subordinated notes maturing January 1, 2005 and the commercial bank line of
credit prohibit the payment of dividends unless tangible equity divided by total
assets is greater than 7.0%. In 1998, Metropolitan's wholly owned subsidiary,
Metropolitan Capital Trust I, issued $27.8 million of 8.60% cumulative trust
preferred securities. Sources of future capital could include, but would not be
limited to, our earnings or additional offerings of debt or equity securities.
The Office of Thrift Supervision imposes capital requirements on savings
associations. Savings associations are required to meet three minimum capital
standards. These standards are a leverage requirement, a tangible capital
requirement, and a risk-based capital requirement.
These standards must be no less stringent than those applicable to national
banks. In addition, the Office of Thrift Supervision is authorized to impose
capital requirements in excess of these standards on individual associations on
a case-by-case basis.
The Office of Thrift Supervision leverage requirement expressly requires
that savings associations maintain core capital in an amount not less than 3% of
adjusted total assets. The Office of Thrift Supervision has taken the position,
however, that the prompt corrective action
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<PAGE> 43
regulations have 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, savings associations must maintain
tangible capital in an amount equal to at least 1.5% of adjusted total assets.
Tangible capital is defined as core capital less all intangible assets, except a
limited amount of qualifying purchased mortgage servicing rights. Adjusted total
assets, for the purpose of the tangible capital ratio, include total assets less
all intangible assets except qualifying purchased mortgage servicing rights.
The risk-based capital requirement is calculated based on the risk weight
assigned to on-balance sheet assets and off-balance sheet commitments. Risk
weights range from 0% to 100% of the book value of the asset and are based upon
the risk inherent in the asset. The risk weights assigned by the Office of
Thrift Supervision for principal categories of assets are:
- 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;
- 20% for securities, other than equity securities, issued by U.S.
Government sponsored agencies, and for mortgage-backed securities issued
by, or fully guaranteed as to principal and interest, by FannieMae or
FreddieMac except for those classes with residual characteristics or
stripped mortgage-related securities;
- 50% for the following loans:
- 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 than 80% at origination unless insured to that
ratio by an insurer approved by FannieMae or FreddieMac;
- certain qualifying multifamily first lien mortgage loans;
- residential construction loans; and
- 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 and supplementary capital.
Supplementary capital consists of certain permanent and maturing capital
instruments that do not qualify as core capital as well as 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.
40
<PAGE> 44
The Bank's regulatory capital ratios at December 31, 1998 were in excess of
the capital requirements specified by the Office of Thrift Supervision
regulations as shown by the following table:
<TABLE>
<CAPTION>
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL
--------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CAPITAL AMOUNT:
Actual................ $84,935 6.26% $85,113 6.27% $89,086 8.22%
Required.............. 20,361 1.50% 54,296 4.00% 86,731 8.00%
------- ---- ------- ---- ------- ----
Excess................ $64,574 4.76% $30,817 2.27% $ 2,355 0.22%
======= ==== ======= ==== ======= ====
</TABLE>
The Bank is also subject to the capital adequacy requirements under the
Federal Deposit Insurance Corporation Improvement Act of 1991. The additional
capital adequacy ratio imposed on the Bank in this evaluation is the Tier 1
risk-based capital ratio which at December 31, 1998 was 7.85% compared to the
required ratio of 4%.
The Bank's primary sources of capital are the earnings of the Bank and
additional capital investments from Metropolitan. Our strategy is to contribute
additional capital to the Bank as growth occurs to maintain risk-based capital
at "adequately capitalized" levels as defined by the Office of Thrift
Supervision regulations. We believe that under current regulations, the Bank
will continue to meet its minimum capital requirements in the foreseeable
future. However, events beyond our control, such as increases in interest rates
or a downturn in the economy, could adversely affect future earnings and,
consequently, the ability of the Bank to meet its future capital requirements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Metropolitan, like other financial institutions, is subject to market risk.
Market risk is the risk that a company can suffer economic loss due to changes
in the market values of various types of assets or liabilities. As a financial
institution, we make a profit by accepting and managing various types of risks.
The most significant of these risks are credit risk and interest rate risk. See
"-- Asset Quality" for a comprehensive discussion of credit risk. The principal
market risk for us is interest rate risk. Interest rate risk is the risk that
changes in market interest rates will cause significant changes in net interest
income because interest-bearing assets and interest-bearing liabilities mature
at different intervals and reprice at different times.
We manage interest rate risk in a number of ways. Some of the tools used to
monitor and quantify interest rate risk include:
- annual budgeting process;
- quarterly review of certificate of deposit maturities by day;
- monthly forecast of balance sheet activity;
- monthly review of listing of liability rates and maturities by month;
- monthly shock report of effect of sudden interest rate changes on net
interest income;
- monthly shock report of effect of sudden interest rate changes on net
value of portfolio equity; and
41
<PAGE> 45
- monthly analysis of rate and volume changes in historic net interest
income.
We have established an asset and liability committee to monitor interest
rate risk. This committee is made up of senior officers from finance, lending
and deposit operations. The committee meets at least quarterly, reviews our
current interest rate risk position, and determines strategies to pursue for the
next quarter. The activities of this committee are reported to the Board of
Directors of the Bank quarterly. Between meetings the members of this committee
are involved in setting rates on deposits, setting rates on loans and serving on
loan committees where they work on implementing the established strategies.
During 1997 and 1998, like many financial institutions, we had exposure to
potential declines in net interest income from rising interest rates. This is
because Metropolitan has had more short-term interest rate sensitive liabilities
than short-term interest rate sensitive assets. One of the ways we monitor
interest rate risk quantitatively is to measure the potential change in net
interest income based on various immediate changes in market interest rates. The
following table shows the change in net interest income for immediate sustained
parallel shifts of 1% and 2% in market interest rates as of the end of the last
two years.
<TABLE>
<CAPTION>
EXPECTED CHANGE IN NET INTEREST INCOME
--------------------------------------
CHANGE IN INTEREST RATE DECEMBER 31, 1998 DECEMBER 31, 1997
----------------------- ----------------- -----------------
<S> <C> <C>
+2%......................................... -19% -19%
+1%......................................... -10% -9%
- -1%......................................... +9% +8%
- -2%......................................... +18% +17%
</TABLE>
The change in net interest income from a change in market rates is a
short-term measure of interest rate risk. The results above indicate that we
have a significant short-term exposure to rising rates but that the exposure has
remained at a stable level over the past year.
Another quantitative measure of interest rate risk is the change in the
market value of all financial assets and liabilities based on various immediate
sustained shifts in market interest rates. This concept is also known as net
portfolio value and is the methodology used by the Office of Thrift Supervision
in measuring interest rate risk. The following table shows the change in net
portfolio value for immediate sustained parallel shifts of 1% and 2% in market
interest rates as of the end of the last two years.
<TABLE>
<CAPTION>
EXPECTED CHANGE IN NET PORTFOLIO VALUE
--------------------------------------
CHANGE IN INTEREST RATE DECEMBER 31, 1998 DECEMBER 31, 1997
----------------------- ----------------- -----------------
<S> <C> <C>
+2%......................................... -39% -17%
+1%......................................... -20% -8%
- -1%......................................... +25% +7%
- -2%......................................... +55% +18%
</TABLE>
The change in net portfolio value is a long-term measure of interest rate
risk. It assumes that no significant changes in assets or liabilities held would
take place if there were a sudden change in interest rates. Because we monitor
interest rate risk regularly and actively manage that risk, these projections
serve as a worst case scenario assuming no reaction to changing rates. The
results above indicate an increase in interest rate risk over the past year
because they are measuring long-term interest rate risk.
42
<PAGE> 46
Our strategies to limit interest rate risk from rising interest rates are
as follows:
- originate one- to four-family adjustable rate loans for the portfolio;
- originate one- to four-family fixed rate loans for sale;
- originate the majority of business loans to float with prime rates;
- increase core deposits which have low interest rate sensitivity;
- increase certificates of deposit with maturities over one year;
- borrow funds with maturities greater than a year; and
- increase the volume of loans serviced since they rise in value as rates
rise.
We also follow strategies that increase interest rate risk in limited ways
including:
- originating and purchasing fixed rate multifamily and commercial real
estate loans limited to ten year maturities; and
- originating and purchasing fixed rate consumer loans with terms from two
to fifteen years.
The result of these strategies taken together is that Metropolitan has
taken on long-term interest rate risk by adding some ten year fixed rate loans
and financing those loans with certificates of deposit and borrowings with terms
from one to five years. We made a conscious decision to add this long-term
interest rate risk during 1998 because these loans met our credit quality, rate,
and geographic diversity requirements.
The Bank's level of interest rate risk as of December 31, 1998, was above
limits previously established by the Bank's Board of Directors for rising
interest rate scenarios. However, we feel that the current level of interest
rate risk is acceptable for several reasons. The risk is weighted toward the
long-term where changes in assets and liabilities can be made if rates do rise.
We have a history of growth of 20% to 30% in assets over the past five years. As
long as growth can be maintained at 20% per year interest rate risk can be
rapidly diluted by growth in short term and adjustable rate assets funded by
long term liabilities. We feel that the likelihood of large increases in market
rates is low at this time. An analysis of the average quarterly change in the
Treasury yield curve from 1988 to 1997 indicates that a parallel curve shift of
1.5% or more is an event that has less than a 0.1% chance of occurrence. In
addition, the asset and liability committee has developed strategies designed to
reduce our exposure to rising interest rates. The Bank's Board of Directors
approved new interest rate risk limits which are more reflective of the Bank's
current interest rate risk strategy. The Bank is in compliance with the revised
interest rate risk limits. Management anticipates that the current level of
interest rate risk will be maintained or will decline modestly in 1999.
We are also aware that any method of measuring interest rate risk including
the two used above has certain shortcomings. For example, certain assets and
liabilities may have similar maturities or repricing dates but their repricing
rates may not follow the general trend 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 rates on other
assets and liabilities may lag market rates. In addition, any projection of a
change in market rates requires that prepayment rates on loans and early
withdrawal of certificates of deposits be projected and those projections may be
inaccurate. We focus on the change in net interest income and the change in net
portfolio value as a result of immediate and sustained parallel shifts in
interest rates as a balanced approach to monitoring interest rate risk when used
with budgeting and the other tools noted above.
43
<PAGE> 47
At the present time we do not hold any trading positions, foreign currency
positions, or commodity positions. Equity investments are approximately 1% of
assets and half of that amount is held in Federal Home Loan Bank stock which can
be sold to the Federal Home Loan Bank of Cincinnati at par. Therefore, we do not
consider any of these areas to be a source of significant market risk.
YEAR 2000
The year 2000 issue refers to computer programs being written using two
digits rather than four to define an applicable year. 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, we face the challenge of ensuring that all of our computer related
functions will work properly from the year 2000 and beyond.
We completed the assessment and planning phases, and substantially
completed the remediation and testing phases, of our year 2000 program by
December 31, 1998. By June 30, 1999, we will complete the testing and
remediation of our internal equipment and software. However, we expect to retest
our equipment and software during the remainder of 1999. As part of our year
2000 program, we have fully upgraded and tested our computer systems which
service the majority of our customers accounts. As a result of these upgrades,
we believe that these systems are year 2000 ready. During the first quarter of
1999, we will test our supporting systems. We believe that all of these internal
components will be adequate to provide quality service to our customers without
interruption by January 1, 2000. In addition, we are continuing our efforts to
test our interface systems with third parties. We expect to complete this
testing by September 1999.
In addition to internal resources, we are utilizing external resources to
implement our year 2000 program. We have contracted with outside consultants to
verify our assessment of our year 2000 problems and to assist us with our
remediation efforts.
We may experience an increase in problem loans and credit losses if
borrowers fail to respond to year 2000 issues. In addition, higher funding costs
may result if consumers react to publicity about the issue by withdrawing
deposits. In response to these concerns, we formed a task force. The task force
has conducted a survey of significant credit customers to determine their year
2000 readiness and to evaluate the level of potential credit risk to us. These
customers have assured us that they are or will be year 2000 compliant. We have
also implemented a customer awareness program to provide deposit customers with
an understanding of our year 2000 readiness.
On an ongoing basis, we are contacting our key suppliers and third parties
with whom we conduct business to determine their year 2000 readiness. We have
put in place a program to monitor third party progress on year 2000 issues
during 1999. Despite our efforts, we can make no assurances that the critical
third parties with which we do business will adequately address their year 2000
issues. If our suppliers and customers are not year 2000 compliant by January 1,
2000, their noncompliance could materially affect our business, results of
operations and financial condition.
We believe that our worst case scenario involves the inability of electric
utility companies to service our various offices due to year 2000 problems. If
the electric utility
44
<PAGE> 48
companies cannot provide power to a significant number of our offices, our
business and operations could be materially disrupted.
We are in the process of developing contingency plans that focus on
reducing any disruption that might be created by third parties with whom we do
business being year 2000 noncompliant. We have also created a task force to
document and test a business resumption plan. This plan is anticipated to be in
place and tested by September 30, 1999.
In management's opinion, any incremental costs or potential loss of
revenues would not have a material impact on our financial condition,
operations, or cash flows. To date, we have spent $34,000 for incremental
services directly related to ensuring year 2000 readiness. In addition, we have
spent $110,000 to upgrade computer hardware and software in 1998, which was
necessary to ensure year 2000 readiness. We expect to spend an additional
$200,000 in the first half of 1999 to finalize upgrades to computer hardware and
software to be year 2000 ready.
RECENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133 "Accounting for Derivative Instruments and
Hedging Activities." Statement of Financial Accounting Standard No. 133
addresses the accounting for derivative instruments and certain derivative
instruments embedded in other contracts, and hedging activities. The statement
standardizes the accounting for derivative instruments by requiring that an
entity recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value. This statement is effective
for all fiscal years beginning after June 15, 1999.
In October 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 134 "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise." Statement of Financial Accounting Standard No.
134 will, in 1999, allow mortgage loans held for sale that are securitized to be
classified as trading, available for sale, or in certain circumstances held to
maturity. Currently, these must be classified as trading. We do not expect these
statements to have a material effect on the Company's consolidated financial
position or results of operation.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and notes included in this prospectus
have been prepared in accordance with generally accepted accounting principles.
These principles require the measurement of financial position and operating
results in terms of historical dollars without consideration of changes in
relative purchasing power of money over time due to inflation. The impact of
inflation is reflected in the increased cost of our 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 and in monetary and fiscal policies. Our ability to
match the interest rate sensitivity of our financial assets to the interest
sensitivity of our financial liabilities in our asset/liability management may
tend to minimize the effect of changes in interest rates on our financial
performance.
45
<PAGE> 49
BUSINESS
GENERAL
Metropolitan is a savings and loan holding company that was incorporated in
1972. We are engaged in the principal business of originating and purchasing
mortgage and other loans through our wholly-owned subsidiary, the Bank. The Bank
is an Ohio chartered stock savings association established in 1958. We obtain
funds for lending and other investment activities primarily from savings
deposits, wholesale borrowings, principal repayments on loans, and the sale of
loans. The activities of Metropolitan at the holding company level are limited
and impact the results of operations primarily through interest expense on a
consolidated basis. Unless otherwise noted, all of the activities discussed
below are of the Bank. Our executive office is located at 6001 Landerhaven
Drive, Mayfield Heights, Ohio 44124.
Robert M. Kaye of Rumson, New Jersey, is Metropolitan's current majority
shareholder. Mr. Kaye acquired Metropolitan in 1987 and remained sole
shareholder until the initial public offering of Metropolitan's Common Stock in
October 1996. Since the initial public offering, Mr. Kaye has owned 77.5% of
Metropolitan's outstanding Common Stock. After the offering described in this
prospectus, Mr. Kaye will own 72.0% (71.2% if the overallotment option is
exercised) of Metropolitan's outstanding Common Stock. Mr. Kaye has the ability
to decide the outcome of 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.
At December 31, 1998, we operated 17 full service retail offices in
Northeastern Ohio. As of December 31, 1998, we also maintained five residential
and multifamily/commercial real estate loan production offices. As a secondary
line of business, we service mortgage loans for various investors.
At December 31, 1998, we had total assets of $1.4 billion, total deposits
of $1.1 billion and shareholders' equity of $42.6 million. The Federal Deposit
Insurance Corporation insures the deposits of the Bank up to applicable limits.
We directly or indirectly own the following active and inactive
subsidiaries:
<TABLE>
<CAPTION>
ACTIVE SUBSIDIARIES INACTIVE SUBSIDIARIES
------------------- ---------------------
<S> <C>
- - Metropolitan Bank and Trust Company - MetroCapital Corporation
- - Metropolitan Capital Trust I - Metropolitan Savings Service
Corporation
- - Kimberly Construction Company - Metropolitan Securities Corporation
</TABLE>
The Bank changed its name from Metropolitan Savings Bank of Cleveland to
Metropolitan Bank & Trust Company in April 1998. We formed Metropolitan Capital
Trust I during 1998 to facilitate the issuance of cumulative trust preferred
securities. Kimberly Construction Company'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. Our primary lending activity is the origination and purchase of
mortgage loans secured by multifamily and commercial real estate. We also
originate one-to four-family residential and construction loans, and to a lesser
extent, consumer and business loans.
46
<PAGE> 50
Loan Portfolio Composition. The following information presents the
composition of our 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.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------------
1998 1997 1996
----------------------- --------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
REAL ESTATE LOANS:
One- to four-family....................... $ 189,182 17.4% $146,685 19.2% $114,758 16.8%
Multifamily............................... 337,412 31.1 194,450 25.4 276,544 40.3
Commercial................................ 228,825 21.1 166,593 21.8 135,635 19.8
Construction and land..................... 137,023 12.6 116,829 15.3 71,697 10.5
Held for sale............................. 9,416 0.9 14,230 1.8 8,973 1.3
---------- ----- -------- ----- -------- -----
Total real estate loans................. 901,858 83.1 638,787 83.5 607,607 88.7
CONSUMER LOANS.............................. 96,115 8.8 68,590 9.0 54,180 7.9
CONSUMER HELD FOR SALE...................... 5,601 0.5 -- -- -- --
BUSINESS AND OTHER LOANS.................... 82,317 7.6 57,496 7.5 23,508 3.4
---------- ----- -------- ----- -------- -----
Total loans............................. 1,085,891 100.0% 764,873 100.0% 685,295 100.0%
===== ===== =====
LESS:
Loans in process............................ 46,001 46,833 31,758
Deferred fees, net.......................... 5,013 4,108 2,336
Discount (premium) on loans, net............ (5,320) 425 560
Allowance for losses on loans............... 6,909 5,622 4,175
---------- -------- --------
TOTAL LOANS RECEIVABLE, NET............. $1,033,288 $707,885 $646,466
========== ======== ========
<CAPTION>
DECEMBER 31,
------------------------------------------------
1995 1994
--------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
REAL ESTATE LOANS:
One- to four-family....................... $ 76,259 15.0% $112,840 25.2%
Multifamily............................... 231,459 45.8 187,928 41.9
Commercial................................ 109,403 21.5 83,354 18.6
Construction and land..................... 48,210 9.5 38,270 8.5
Held for sale............................. 1,504 0.2 84 0.0
-------- ----- -------- -----
Total real estate loans................. 466,835 92.0 422,476 94.2
CONSUMER LOANS.............................. 32,214 6.3 25,946 5.8
CONSUMER HELD FOR SALE...................... -- -- -- --
BUSINESS AND OTHER LOANS.................... 8,703 1.7 171 0.0
-------- ----- -------- -----
Total loans............................. 507,752 100.0% 448,593 100.0%
===== =====
LESS:
Loans in process............................ 23,373 19,338
Deferred fees, net.......................... 1,220 1,480
Discount (premium) on loans, net............ 544 837
Allowance for losses on loans............... 2,765 1,911
-------- --------
TOTAL LOANS RECEIVABLE, NET............. $479,850 $425,027
======== ========
</TABLE>
We had commitments to originate or purchase fixed and adjustable rate loans
of $69.8 million and $73.2 million, respectively, at December 31, 1998. In
addition, we had firm commitments to sell fixed rate loans of $24.0 million and
optional commitments to sell fixed rate loans of $6.6 million at December 31,
1998.
47
<PAGE> 51
The following table shows the composition of our 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.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------------
1998 1997 1996
----------------------- --------------------- ---------------------
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....................... $ 76,566 7.1% $ 59,058 7.7% $ 41,436 6.1%
Multifamily............................... 194,521 17.9 60,136 7.9 88,529 12.9
Commercial................................ 147,860 13.6 52,390 6.9 34,726 5.1
Construction and land..................... 27,849 2.6 20,854 2.7 392 0.0
Held for sale............................. 8,920 0.8 6,294 0.8 2,531 0.4
---------- ---- -------- ---- -------- ----
Total fixed rate real estate loans...... 455,716 42.0 198,732 26.0 167,614 24.5
Consumer.................................... 93,689 8.6 61,307 8.0 46,725 6.8
Consumer held for sale...................... 5,601 0.5 -- -- -- --
Business and other.......................... 25,526 2.4 19,575 2.6 5,650 0.8
---------- ---- -------- ---- -------- ----
Total fixed rate loans.................. 580,532 53.5% 279,614 36.6% 219,989 32.1%
---------- ==== -------- ==== -------- ====
ADJUSTABLE RATE LOANS:
Real estate:
One- to four-family......................... 112,616 10.4% 87,627 11.5% 73,322 10.7%
Multifamily................................. 142,891 13.2 134,314 17.6 188,015 27.5
Commercial.................................. 80,965 7.5 114,203 14.9 100,909 14.7
Construction and land....................... 109,174 10.0 95,975 12.5 71,305 10.4
Held for sale............................... 496 0.0 7,936 1.0 6,442 0.9
---------- ---- -------- ---- -------- ----
Total adjustable rate real estate
loans................................. 446,142 41.1 440,055 57.5 439,993 64.2
Consumer.................................... 2,426 0.2 7,283 0.9 7,455 1.1
Business and other.......................... 56,791 5.2 37,921 5.0 17,858 2.6
---------- ---- -------- ---- -------- ----
Total adjustable rate loans............. 505,359 46.5% 485,259 63.4% 465,306 67.9%
---------- ==== -------- ==== -------- ====
LESS:
Loans in process............................ 46,001 46,833 31,758
Deferred fees, net.......................... 5,013 4,108 2,336
Discount (premium) on loans, net............ (5,320) 425 560
Allowance for losses on loans............... 6,909 5,622 4,175
---------- -------- --------
TOTAL LOANS RECEIVABLE, NET............. $1,033,288 $707,885 $646,466
========== ======== ========
<CAPTION>
DECEMBER 31,
------------------------------------------------
1995 1994
--------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FIXED RATE LOANS:
Real estate:
One- to four-family....................... $ 35,042 6.9% $ 46,418 10.4%
Multifamily............................... 71,909 14.2 19,852 4.4
Commercial................................ 17,615 3.5 7,948 1.8
Construction and land..................... 39 0.0 -- --
Held for sale............................. 1,504 0.3 84 0.0
-------- ---- -------- ----
Total fixed rate real estate loans...... 126,109 24.9 74,302 16.6
Consumer.................................... 32,214 6.3 25,946 5.8
Consumer held for sale...................... -- -- -- --
Business and other.......................... 2,744 0.5 20 0.0
-------- ---- -------- ----
Total fixed rate loans.................. 161,067 31.7% 100,268 22.4%
-------- ==== -------- ====
ADJUSTABLE RATE LOANS:
Real estate:
One- to four-family......................... 41,217 8.1% 66,422 14.8%
Multifamily................................. 159,550 31.4 168,076 37.5
Commercial.................................. 91,788 18.1 75,406 16.8
Construction and land....................... 48,171 9.5 38,270 8.5
Held for sale............................... -- -- -- --
-------- ---- -------- ----
Total adjustable rate real estate
loans................................. 340,726 67.1 348,174 77.6
Consumer.................................... -- -- -- --
Business and other.......................... 5,959 1.2 151 0.0
-------- ---- -------- ----
Total adjustable rate loans............. 346,685 68.3% 348,325 77.6%
-------- ==== -------- ====
LESS:
Loans in process............................ 23,373 19,338
Deferred fees, net.......................... 1,220 1,480
Discount (premium) on loans, net............ 544 837
Allowance for losses on loans............... 2,765 1,911
-------- --------
TOTAL LOANS RECEIVABLE, NET............. $479,850 $425,027
======== ========
</TABLE>
48
<PAGE> 52
The following table illustrates the contractual maturity of our loan
portfolio, including loans held for sale at December 31, 1998. The table shows
loans that have adjustable or renegotiable interest rates as maturing in the
period during which the contract is due. The table does not reflect the effects
of possible prepayments, enforcement of due-on-sale clauses, or amortization of
premium, discounts, or deferred loan fees. The table includes demand loans,
loans having no stated maturity and overdraft loans in the due in one year or
less category.
<TABLE>
<CAPTION>
DUE AFTER ONE YEAR
DUE IN ONE YEAR OR LESS THROUGH FIVE YEARS DUE AFTER FIVE YEARS TOTAL
----------------------- ------------------ --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
------ ---------- ------- -------- --------- --------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REAL ESTATE:
One- to four-family............. $ 1,921 9.16% $ 1,659 8.62% $195,018 7.17% $ 198,598 7.20%
Multifamily..................... 50 8.00 2,923 8.11 334,439 8.15 337,412 8.15
Commercial...................... 747 9.64 9,218 9.39 218,860 8.47 228,825 8.51
Construction and land........... 92,185 8.65 31,587 8.77 13,251 8.35 137,023 8.65
CONSUMER.......................... 8,551 13.69 16,273 9.81 76,892 10.86 101,716 10.93
BUSINESS.......................... 35,984 8.52 16,604 9.01 29,729 9.00 82,317 8.79
-------- ------- -------- ----------
Total.................... $139,438 8.94% $78,264 9.08% $868,189 8.29% $1,085,891 8.43%
======== ======= ======== ==========
</TABLE>
The total amount of loans due after December 31, 1999 which have
predetermined interest rates is $548.5 million. The total amount of loans due
after that date which have floating or adjustable rates is $398.0 million.
49
<PAGE> 53
LOAN ORIGINATIONS AND PURCHASES
Our strategy in recent years has been to increase interest-earning assets
primarily by increasing the total loan portfolio if quality loans with the
necessary portfolio characteristics were available. We accomplished this by
increasing origination capacity and emphasizing purchases. The following table
presents our loan origination, purchase, sale and repayment activities for the
periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
ORIGINATIONS BY TYPE:
ADJUSTABLE RATE:
Real Estate:
One- to four-family.................................... $ 77,297 $ 28,017 $ 56,519
Multifamily............................................ 29,215 12,600 20,669
Commercial............................................. 9,350 29,304 14,667
Construction and land.................................. 73,125 77,062 60,566
Consumer............................................... 18,888 12,719 10,062
Business............................................... 8,606 27,058 18,536
--------- --------- ---------
Total adjustable rate................................ 216,481 186,760 181,019
--------- --------- ---------
FIXED RATE:
Real Estate:
One- to four-family.................................... 223,846 53,712 44,795
Multifamily............................................ 75,626 9,490 15,759
Commercial............................................. 84,511 1,300 --
Construction and land.................................. 16,229 25,333 328
Consumer............................................... 66,941 17,598 17,242
Business............................................... 20,137 15,003 4,249
--------- --------- ---------
Total fixed rate..................................... 487,290 122,436 82,373
--------- --------- ---------
Total loans originated............................. 703,771 309,196 263,392
--------- --------- ---------
PURCHASES BY TYPE:
ADJUSTABLE RATE:
Real Estate:
One- to four-family.................................... -- 90 1,835
Multifamily............................................ 21,611 19,433 45,184
Commercial............................................. 36,458 22,541 16,905
Construction and land.................................. 1,365 347 --
Consumer............................................... -- -- 5,432
--------- --------- ---------
Total adjustable rate................................ 59,434 42,411 69,356
--------- --------- ---------
FIXED RATE:
Real Estate:
One- to four-family.................................... 1,077 -- 1,125
Multifamily............................................ 118,434 23,195 22,971
Commercial............................................. 70,753 46,729 21,296
Construction and land.................................. 4,072 1,975 --
Consumer............................................... 23,622 16,900 12,224
--------- --------- ---------
Total fixed rate..................................... 217,958 88,799 57,616
--------- --------- ---------
Total loans purchased.............................. 277,392 131,210 126,972
--------- --------- ---------
SALES:
Real Estate:
One- to four-family.................................... (233,620) (34,887) (36,392)
Multifamily............................................ (6,117) (9,678) (11,539)
Commercial............................................. (30,055) (20,782) (7,808)
Construction and land.................................. (3,496) (600) --
Business............................................... (559) -- --
--------- --------- ---------
Total loan sales..................................... (273,847) (65,947) (55,739)
--------- --------- ---------
Loans securitized........................................ (100,995) (98,325) (14,458)
Principal repayments..................................... (285,303) (196,556) (142,624)
--------- --------- ---------
Total reductions..................................... (660,145) (360,828) (212,821)
--------- --------- ---------
Increase (decrease) in other items, net.................. 4,385 (18,159) (10,927)
--------- --------- ---------
NET INCREASE............................................. $ 325,403 $ 61,419 $ 166,616
========= ========= =========
</TABLE>
50
<PAGE> 54
Multifamily Lending. We emphasize multifamily real estate loans. We
originate these loans from referrals by present customers of the Bank and
mortgage and real estate brokers. Through our existing referral network and
advertising efforts, we have become known for originating multifamily loans in
our primary multifamily lending markets of Ohio, Kentucky, Michigan,
Pennsylvania, and New Jersey. Although we operate full service retail sales
offices solely in Northeast Ohio, we have loan origination offices in Southern
Ohio, Western Pennsylvania, and Southeastern Michigan.
At December 31, 1998, our multifamily loans totaled $337.4 million, with an
average loan size of approximately $534,000. Of this amount, we originated
$123.7 million, or 36.6%. Currently, we emphasize the origination of multifamily
loans with principal amounts of $2.0 to $6.0 million and balloon maturities of
10 years. Adjustable loans are adjustable on a one-, three- or five-year
schedule with amortization periods of 25 or 30 years. We base rate adjustments
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, we have allocated more funds for fixed
rate programs. Typically, the loans have balloon maturities of 10 years. The
maximum loan to value ratio of multifamily residential loans is 75%.
We recognize that multifamily loans generally involve a higher degree of
risk than one-to four-family residential real estate loans. Multifamily loans
involve more risk because they typically involve larger loan balances to single
borrowers or groups of related borrowers. The payment experience on these loans
typically depends upon the successful operation of the related real estate
project and is subject to risks such as excessive vacancy rates or inadequate
rental income levels. In order to manage and reduce these risks, we use strict
underwriting standards in our multifamily residential lending process.
Apartment buildings, generally with less than 75 residential units,
typically secure loans originated in this area. Our underwriting process
includes a site evaluation, which considers factors such as location, access by
roadways, condition of the apartments, and amenities. One of our employees
visits each location before a loan approval is made. The underwriting process
involves an evaluation of the borrower, whether the borrower is an individual or
a group of individuals acting as a separate entity. We review the financial
statements of each of the individual borrowers and generally obtain personal
guarantees in an amount equal to the original principal amount of the loan.
Staff independent of the lending department reviews the financial statements of
individual guarantors. In addition, we complete an analysis of debt service
coverage of the property. Debt service coverage requirements are determined
based upon the individual characteristics of each loan. Typically, these
requirements range from a ratio of 1.15:1 to 1.30:1. For the multifamily loans,
the debt service coverage is calculated based on the maximum interest rate of
the loan.
At December 31, 1998, $213.8 million or 63.4% of our multifamily loan
portfolio was purchased. Prior to purchasing these loans, we use a similar
underwriting process with substantially the same standards as for our originated
loans. In some cases, when we consider the purchase of a portfolio with a
considerable number of moderate balance loans, we use an independent contract
inspector for property inspections. Real estate located in Ohio secures 37.5% of
our multifamily loan portfolio. Underlying real estate for the remaining loans
is primarily located in California, Michigan, Pennsylvania and New Jersey.
51
<PAGE> 55
Commercial Real Estate Lending. At December 31, 1998, loans secured by
commercial real estate totaled $228.8 million or 21.1% of our total portfolio.
The average size of these loans was $618,000. Of this amount, we originated
$75.2 million or 32.9% and $153.6 million or 67.1% represented loans purchased
from a variety of sources, predominantly other financial institutions.
We purchase loans secured by commercial real estate generally when these
loans are secured by retail strip shopping centers or office buildings and the
loan yields and other terms meet our requirements. In 1997, we began to
introduce more geographic diversity into the portfolio based on our desire to
acquire high credit quality loans. We believe a certain amount of geographic
diversity is important to reduce the risk of loss due to regional economic
downturns.
We recognize that commercial real estate loans generally involve a higher
degree of risk than the financing of one- to four-family residential real
estate. 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, we focus our lending on existing properties with a record of satisfactory
performance and target retail strip centers and office buildings with multiple
tenants.
We purchase commercial real estate loans secured by strip shopping centers
and small office buildings to a much greater extent than we originate commercial
real estate loans. Through customer referrals and real estate brokers, we lend
on commercial real estate in many states, but predominantly in Ohio,
Pennsylvania, Northern Kentucky, Michigan and California. These loans are
typically ten year balloon loans with an amortization period of 25 years at a
margin over the appropriate term U.S. Treasury securities. The maximum loan to
value ratio is generally 75%.
The following table presents information as to the locations and types of
properties securing the multifamily and commercial real estate portfolio as of
December 31, 1998. We have loans in 41 states. Properties securing loans in 38
states are aggregated in the table because none of those states exceed 5.0% of
the outstanding principal balance of the total multifamily and commercial real
estate portfolio.
<TABLE>
<CAPTION>
NUMBER
OF LOANS PERCENT PRINCIPAL PERCENT
-------- ------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Ohio:
Apartments........................... 160 16.0% $126,649 22.4%
Office buildings..................... 31 3.1 14,836 2.6
Retail centers....................... 16 1.6 8,698 1.5
Other................................ 22 2.2 5,532 1.0
----- ----- -------- -----
Total............................. 229 22.9 155,715 27.5
----- ----- -------- -----
</TABLE>
52
<PAGE> 56
<TABLE>
<CAPTION>
NUMBER
OF LOANS PERCENT PRINCIPAL PERCENT
-------- ------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
California:
Apartments........................... 226 22.5 100,783 17.8
Office buildings..................... 43 4.3 15,760 2.8
Retail centers....................... 66 6.6 30,712 5.5
Other................................ 36 3.6 17,790 3.1
----- ----- -------- -----
Total............................. 371 37.0 165,045 29.2
----- ----- -------- -----
Pennsylvania:
Apartments........................... 47 4.7 25,995 4.6
Office buildings..................... 7 0.7 19,363 3.4
Retail centers....................... 5 0.5 13,170 2.3
Other................................ 4 0.4 1,036 0.2
----- ----- -------- -----
Total............................. 63 6.3 59,564 10.5
----- ----- -------- -----
Other states:
Apartments........................... 199 19.8 83,985 14.8
Office Buildings..................... 49 4.9 41,328 7.3
Retail centers....................... 38 3.8 28,958 5.1
Other................................ 53 5.3 31,642 5.6
----- ----- -------- -----
Total............................. 339 33.8 185,913 32.8
----- ----- -------- -----
1,002 100.0% $566,237 100.0%
===== ===== ======== =====
</TABLE>
The following table presents aggregate information as to the type of
security as of December 31, 1998:
<TABLE>
<CAPTION>
AVERAGE
NUMBER BALANCE
OF LOANS PER LOAN PRINCIPAL PERCENT
-------- -------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Apartments............................ 632 $534 $337,412 59.6%
Office buildings...................... 130 702 91,287 16.1
Retail centers........................ 125 652 81,538 14.4
Other................................. 115 487 56,000 9.9
----- -------- -----
Total............................ 1,002 $565 $566,237 100.0%
===== ======== =====
</TABLE>
One- to Four-family Residential Lending. In 1998, we originated
approximately 20.1% of our one- to four-family residential loans through our
full service retail sales offices. We originated the remainder with commissioned
loan officers, correspondent lenders, or our telemarketing department
established in 1998. We maintain one- to four-family residential loan
origination offices in North Olmsted, Ohio and Bloomfield, Michigan. We have
focused our 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, 1998, the one-to four-family residential mortgages totaled
$189.2 million or 17.4% of our loan portfolio.
We emphasize the origination of conventional ARM loans for retention in our
loan portfolio and fixed rate loans suitable for sale in the secondary market.
In addition, we offer fixed rate end loan financing to borrowers building homes
with our approved construction loan builders. We retain only a limited dollar
amount of this fixed rate end loan financing in our portfolio. We closely
monitor the amount being originated and subsequently retained.
53
<PAGE> 57
Property located in our Northeastern Ohio secures substantially all of the one-
to four-family residential mortgage loan originated for retention is our
portfolio. At December 31, 1998, our fixed rate residential mortgage loan
portfolio totaled $76.6 million, or 7.1%, of our total loan portfolio.
We are presently originating three types of ARM products for our portfolio.
The first product is a one-year adjustable ARM. The interest rate is 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. In addition,
the adjustments are generally limited to a 2% maximum annual interest rate
adjustment and 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. In addition, the adjustments are
generally limited to a 2% maximum interest rate adjustment per change and a
maximum lifetime adjustment of 6%.
Our originated ARMs do not permit negative amortization of principal and
most of them are convertible into fixed rate mortgages. We typically sell these
loans in the secondary market if the option to convert to a fixed rate is
exercised. We originate ARMs with terms to maturity of up to 30 years. Borrowers
are qualified based upon secondary market requirements.
At December 31, 1998, $23.8 million, or 12.6% of our one- to four-family
residential loan portfolio was purchased. We use an underwriting process with
substantially the same standards as for our originated loans when purchasing
these loans.
Construction Lending and Land Development. We originate construction loans
on single family homes to local builders in our primary lending market and to
individual borrowers on owner-occupied properties. We also make 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. Our primary market
area for construction lending is in Northeastern Ohio, in the counties of
Cuyahoga, Lake, Geauga, Summit, Medina, Portage, and Lorain. We currently have
one commissioned construction loan originator in the high volume Columbus, Ohio
construction market to originate single family construction loans and improved
lot loans.
54
<PAGE> 58
The following table presents the number, amount, and type of properties
securing construction and land development loans at December 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF PRINCIPAL
LOANS BALANCE
--------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
RESIDENTIAL CONSTRUCTION LOANS:
Owner-occupied................................. 74 $ 20,611
Builder presold................................ 42 9,733
Builder model homes............................ 129 26,810
Builder lines of credit........................ 26 24,430
Lot loans...................................... 55 8,188
Development loans.............................. 28 18,650
--- --------
Total residential construction loans........ 354 108,422
NONRESIDENTIAL CONSTRUCTION LOANS:
Multifamily.................................... 3 3,956
Commercial..................................... 5 15,173
--- --------
Total nonresidential construction loans..... 8 19,129
LAND LOANS....................................... 5 8,152
--- --------
Total....................................... 367 $135,703
=== ========
</TABLE>
The risk of loss on a construction loan largely depends 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. We also review the borrower's
financial position and require a personal guarantee on all builder loans. We
base all loans upon the appraised value of the underlying collateral, as
completed. Qualified independent fee appraisers who have been approved by the
Board of Directors complete the appraisals.
We establish a maximum loan to value ratio for each type of loan based upon
the contract price, cost estimate or appraised value, whichever is less. The
maximum loan to value ratio by 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
- builder lines of credit -- 75% (development of land for cluster or
condominium projects which will be part of builder line of credit).
All construction loans that we make to builders are for relatively short
terms (6 to 24 months) and are at 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, the loan portfolio.
We offer builders lines of credit to build single family homes. Builders
cannot use these lines for any other purpose. We secure all lines of credit by
the homes that are built with the
55
<PAGE> 59
draws under such credit agreements. Most of the homes built with the line of
credit funds are presold homes. The number of homes built without contracts for
sale or as model homes is limited by the financial strength of the builder. We
permit the use of lines of credit only where a builder owns a specific number of
lots in a development. We base draws upon the percentage of completion. At all
times, we retain enough funds to complete the home. We make disbursements only
after receipt of a property inspection and a mechanic's lien update from the
title company.
We also originate construction loans on multifamily and commercial real
estate projects where we intend to provide the financing once construction is
complete. We underwrite these loans in a manner similar to our originated and
purchased multifamily residential and commercial real estate loans described
above.
Consumer Lending. The underwriting standards we employ 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, 1998, secured
loans comprised $91.0 million or 89.5% of the $101.7 million consumer loan
portfolio. 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 depends upon the borrower's
continuing financial stability. Thus, personal circumstances are more likely to
have an adverse affect on collection. Furthermore, the application of various
federal and state laws, including bankruptcy and insolvency laws, may limit the
amount recovered on such loans in the event of default.
In order to supplement the growth in the consumer loan portfolio, we have
been purchasing loans through correspondent lenders and bulk portfolios offered
for sale. At December 31, 1998, purchased consumer loans represented $59.5
million, or 58.5% of the outstanding balance of consumer loans. Second mortgages
on one- to four-family homes, automobiles, or manufactured housing are the
primary collateral types for these loans. In 1997, we acquired two packages of
subprime loans totaling $6.3 million. Subprime loans are 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. In 1998, we acquired an additional loan package of $5.0
million of subprime loans also secured by manufactured housing. Total subprime
loans were $10.2 million, or 9.6% of total consumer loans at December 31, 1998.
At December 31, 1998, our credit card portfolio had an outstanding balance
of $7.3 million with $26.8 million in unused credit lines. Of the outstanding
balance, $2.6 million related to cards we originated and $4.7 million related to
credit card relationships we purchased.
Business Lending. We began offering business loans in 1994. At December 31,
1998, we had $82.3 million of business loans outstanding against available lines
totaling $101.0 million. Our business lending activities encompass loans with a
variety of purposes
56
<PAGE> 60
and security, including loans to finance accounts receivable, inventory and
equipment. Generally, our business lending has been limited to borrowers
headquartered, or doing business in, our retail market area. These loans are
generally adjustable interest rates at some margin over the prime interest rate
and some are guaranteed by the Small Business Administration.
The following table sets forth information regarding the number and amount
of our business loans as of December 31, 1998:
<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......................... 205 $ 38,060 $30,876
Second lien on real estate........... 67 23,835 17,865
First lien on real estate............ 35 28,292 27,979
Specific equipment and machinery..... 33 1,622 1,622
Titled vehicles...................... 30 990 990
Stocks and bonds..................... 5 1,492 1,367
Certificates of deposit.............. 9 617 281
UNSECURED LOANS........................ 18 2,602 1,337
--- -------- -------
Total................................ 402 $ 97,510 $82,317
=== ======== =======
</TABLE>
Business loans differ from residential mortgage loans. Residential mortgage
loans generally are made on the basis of the borrower's ability to make
repayment from his or her employment and other income and are secured by real
property whose value is 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 substantially
depend 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. We work to reduce
this risk by carefully underwriting business loans.
SECONDARY MARKET ACTIVITIES
In addition to originating loans for our own portfolio, we participate in
secondary mortgage market activities by selling whole loans, as well as creating
mortgage-backed securities, with FannieMae and the FreddieMac. Secondary market
sales allow us 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 we choose not to hold in our own portfolio. Our
primary focus in mortgage banking operations is to sell 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, we tailor some of our real estate loan programs to meet the
specifications of FreddieMac and FannieMae, two of the largest institutional
investors. We generally 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
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<PAGE> 61
Servicing Activities." The sale of substantially all loans to FreddieMac and
FannieMae is without recourse to us.
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 our relationship with the
institutional investor. In the case of one- to four-family residential loans, we
periodically obtain formal commitments primarily with FreddieMac and FannieMae.
Pursuant to these commitments, FreddieMac or FannieMae is obligated to purchase
a specific dollar amount of whole loans over a specified period. The terms of
the commitments range from ten to sixty days. The pricing varies depending upon
the length of each commitment. We classify loans as held for sale while we are
negotiating the sale of specific loans which meet selected criteria to a
specific investor or after a sale is negotiated but before it is settled.
During the third quarter of 1997, we completed the securitization of $93.0
million of multifamily loans with FannieMae under a newly developed program.
This program uses insurance to provide the credit enhancement necessary to
achieve a triple A rating. We are servicing the loans as mortgage-backed
securities for FannieMae. To date, we have retained ownership of the securities
in that portfolio. During the fourth quarter of 1998, we completed the
securitization of $101.0 million of commercial real estate loans with a private
issuer in a non-rated structure. Similar to the 1997 FannieMae transaction, we
used an insurance policy to assume all credit risk. In addition to decreasing
loans receivable and increasing mortgage-backed securities, the securitizations
have had several other benefits, including the following:
- improvement in the credit risk profile of the Bank's balance sheet by
converting whole loans into mortgage-backed securities guaranteed by
others;
- reduction of the required level of risk-based capital; and
- addition of high quality collateral which can be pledged for borrowings
in the secondary market to fund future loan growth.
We also sell whole loans or participations in multifamily and commercial
real estate loans to private investors and retain the right to service the
loans. We make the majority of our sales of multifamily and commercial real
estate loans under individually negotiated whole loan or participation sales
agreements. These sales are for individual loans or for a package of loans.
During 1998, we sold $12.9 million of multifamily and commercial real estate
participations. The Bank may seek a participant when a loan would otherwise
exceed the loan-to-one borrower limit. We have sold other loans to manage
geographic concentration or interest rate risk. In addition, we sell multifamily
and commercial real estate loans that are purchased under a loan option program.
See " -- Loan Option Income."
58
<PAGE> 62
LOAN SERVICING ACTIVITIES
At December 31, 1998, the overall servicing portfolio was $2.1 billion. Of
that amount, loans serviced for others totaled $1.5 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........ -- -- $186,481 $ 186,481
FreddieMac.................... $319,082 $469,645 -- 788,727
FannieMae..................... 57,998 428,159 -- 486,157
Private investors............. 3,469 7,837 -- 11,306
-------- -------- -------- ----------
Total One- to
Four-family.............. 380,549 905,641 186,481 1,472,671
-------- -------- -------- ----------
Multifamily and Commercial:
Metropolitan portfolio........ -- -- 430,978 430,978
FreddieMac.................... 3,323 1,608 -- 4,931
FannieMae..................... 78,454 22,865 -- 101,319
Private investors............. 77,473 25,806 -- 103,279
-------- -------- -------- ----------
Total Multifamily and
Commercial............... 159,250 50,279 430,978 640,507
-------- -------- -------- ----------
Total................. $539,799 $955,920 $617,459 $2,113,178
======== ======== ======== ==========
</TABLE>
Generally, we service the loans we originate. When we sell loans to an
investor, such as FreddieMac or FannieMae, we generally retain the servicing
rights for the loans. We receive fee income for servicing these sold loans at
various percentages based upon the unpaid principal balances of the loans
serviced. We collect and retain service fees out of monthly mortgage payments.
To further increase our servicing fee income, the Bank has aggressively pursued
purchases of servicing portfolios from other originating institutions. These
purchased servicing portfolios are primarily FreddieMac and FannieMae single
family loans that are geographically located within the eastern half of the
nation. At December 31, 1998, the unpaid principal balance of our purchased
servicing portfolio was $964.2 million. The related balance of purchased
mortgage servicing rights was $9.9 million.
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.
LOAN OPTION INCOME
During 1995, we developed a program to purchase loans and sell loan options
in order to take advantage of our underwriting capabilities, increase net
interest income and increase non-interest income. In these transactions, we
purchase loans and sell nonrefundable options to a third party to purchase these
same loans at a specified price within a specified period. Prior to purchasing
the loans that will be subject to the options, the Bank uses an underwriting
process with substantially the same standards as in its origination process. In
the
59
<PAGE> 63
event the option is not exercised, we would sell the underlying loans or
transfer them to the Bank's portfolio at its fair value at the date of the
transfer. We negotiate a nonrefundable option fee 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, we have entered into these option
transactions with one loan broker. At December 31, 1998, there were $5.6 million
in loans held for sale in connection with outstanding options. We have
recognized $388,000 in income in connection with loan options during 1998.
BRIDGE LOAN ACTIVITY
During 1997, we developed a program to underwrite and originate bridge
loans to take advantage of our underwriting capabilities and to increase
interest income. A bridge loan is a short term financing arrangement provided to
a borrower until they secure more permanent financing or sell the property. For
these loans we assess the debt service capacity and underlying collateral value
as we would for other multifamily or commercial real estate loans. We collect 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. This adds a potential element of
risk. In all cases, these loans are adequately secured by real property. During
1998, we originated three of these loans totaling $5.4 million and recognized
origination fees of $449,000 in net interest income. During the two years, we
funded ten loans totaling $21.2 million. We are no longer actively marketing
this program.
LOAN DELINQUENCIES AND NONPERFORMING ASSETS
When a borrower fails to make a required payment on a loan, we begin work
to cure the delinquency by contacting the borrower. In the case of real estate
loans, we send a late notice 15 days after the due date. If the delinquency is
not cured within 30 days of the due date, we contact the borrower by telephone.
We make additional written and verbal contacts with the borrower between 30 and
90 days after the due date. If the delinquency continues for a period of 90
days, we usually bring an action to foreclose on the property. If we foreclose
on the property, we sell the property at public auction where we may be the
acquirer. Delinquent consumer loans are handled in a similar manner, except that
we make our initial contact when the payment is 10 days past due. We bring an
action to collect any loan payment that is delinquent for more than 30 days. Our
procedures for collection efforts, repossession, and sale of consumer collateral
must comply with various requirements under state and federal consumer
protection laws. In the case of business loans, we monitor payment activity on a
weekly basis. We make telephone contact with any borrower who has not made their
payment by its due date. If a delay in payment continues, we meet with the
borrower. The borrowers' cash flow situation is evaluated and a repayment plan
instituted. In some situations, we exercise our rights to collateral or
assignment of receivables in order to liquidate the debt.
60
<PAGE> 64
The following table sets forth information concerning delinquent loans at
December 31, 1998, in dollar amounts and as a percentage of each category of the
loan portfolio. The amounts presented represent the total remaining principal
balances of the related loans, rather than the actual payment amounts that are
overdue.
<TABLE>
<CAPTION>
LOANS DELINQUENT FOR:
60-89 DAYS 90 DAYS AND OVER TOTAL DELINQUENT LOANS
-------------------------- --------------------------- ---------------------------
PERCENT PERCENT PERCENT
OF LOAN OF LOAN OF LOAN
NUMBER AMOUNT CATEGORY NUMBER AMOUNT CATEGORY NUMBER AMOUNT CATEGORY
------ ------ -------- ------ ------- -------- ------ ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REAL ESTATE
One- to four-family..... 1 $ 104 0.05% 7 $ 512 0.26% 8 $ 616 0.31%
Multifamily............. -- -- -- -- -- -- -- -- --
Commercial.............. 1 142 0.06 6 6,123 2.68 7 6,265 2.74
Construction and land... -- -- -- 4 1,824 1.33 4 1,824 1.33
CONSUMER.................. 58 669 0.66 365 2,498 2.46 423 3,167 3.11
BUSINESS.................. 4 863 1.05 14 1,734 2.11 18 2,597 3.15
-- ------ --- ------- --- -------
Total............ 64 $1,778 0.16% 396 $12,691 1.17% 460 $14,469 1.33%
== ====== === ======= === =======
</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. In addition, interest is not accrued on loans as to which payment of
principal and interest in full is not expected unless in our judgment the loan
is well secured, and we expect no loss in principal or interest.
When a loan reaches nonaccrual status, we discontinue interest accruals and
reverse prior accruals. The classification of a loan on nonaccrual status does
not necessarily indicate that the principal is uncollectible in whole or in
part. We consider both the adequacy of the collateral and the other resources of
the borrower in determining the steps to take to collect nonaccrual loans. The
final determination as to these steps is made on a case-by-case basis.
Alternatives we consider are commencing foreclosure, collecting on guarantees,
restructuring the loan, or instituting collection lawsuits.
61
<PAGE> 65
The following table summarizes non-performing assets by category as of the
dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------
1998 1997 1996 1995 1994
------- ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccruing loans
One- to four-family......... $ 512 $ 792 $ 950 $ 293 $ 337
Multifamily................. -- -- 871 2,138 1,585
Commercial real estate...... 6,123 198 2,032 391 150
Construction and land
development.............. 1,824 -- -- 15 15
Consumer.................... 2,038 1,562 802 266 153
Business.................... 1,734 211 268 -- --
------- ------ ------ ------ ------
Total nonaccruing loans..... 12,231 2,763 4,923 3,103 2,240
Loans past due greater than 90
Days still accruing......... 460 384 271 204 128
------- ------ ------ ------ ------
Total nonperforming loans... 12,691 3,147 5,194 3,307 2,368
Real estate owned............. 5,534 2,037 177 258 53
------- ------ ------ ------ ------
Total nonperforming
assets........... $18,225 $5,184 $5,371 $3,565 $2,421
======= ====== ====== ====== ======
Nonperforming loans to total
loans....................... 1.23% 0.44% 0.80% 0.69% 0.55%
Nonperforming assets to total
assets...................... 1.34% 0.56% 0.70% 0.60% 0.51%
</TABLE>
For the years ended December 31, 1998 and 1997, gross interest income which
would have been recorded had the nonaccruing loans been current in accordance
with their original terms amounted to $788,000 and $151,000, respectively. The
amounts that were included in interest income on these loans were $291,000 and
$132,000 for the years ended 1998 and 1997, respectively.
Nonperforming assets were $18.2 million at December 31, 1998, an increase
of $13.0 million from $5.2 million at December 31, 1997. During the same period,
total net loans receivable increased $325.4 million to $1.0 billion at December
31, 1998. The nonaccrual loan component of nonperforming assets increased $9.5
million to $12.2 million while real estate owned increased $3.5 million to $5.5
million. Nonperforming loans showed significant increases in four areas:
commercial real estate; construction and land development; business loans; and
consumer loans. Real estate owned increased due to two properties acquired in
December.
The $5.9 million increase in nonperforming commercial real estate is
attributable to three loans including a $4.0 million loan financing a waterpark
in Southern California. This loan and one other are bridge loans, a program we
are no longer actively marketing. Based on appraisals and other current
estimates of value, we do not anticipate losses on these three loans. The $1.8
million increase in nonperforming construction and land development loans is
related to two borrowers. The largest is a $1.3 million land development loan
for residential lots that has experienced slower than anticipated lot
absorption. The remaining loans are
62
<PAGE> 66
model home construction loans. Based on appraised values and current market
research, we do not anticipate losses on these two relationships.
The $1.5 million increase in nonperforming business loans is consistent
with the growth in business loans. We introduced this product in 1995. From 1996
to 1997, this loan category grew $34.0 million to $57.5 million. In 1998, this
loan category grew another $24.8 million to $82.3 million. Total nonperforming
business loans are $1.7 million, or 2.1% of that loan category. Unlike the real
estate lending which comprises 80% of our loan portfolio, business loans often
depend on the successful operation of a business and depreciable collateral.
Therefore, we expect nonperforming loans and losses to be higher for business
loans than for real estate loans. Management currently estimates probable losses
on these five loans at $900,000. We have allocated a portion of the allowance
for loan losses to this estimate until the actual loss is determined and
charged-off. We are aggressively pursuing collection of all nonperforming loans
including those described above.
Nonperforming consumer loans have increased to $2.5 million at December 31,
1998 and represent 2.5% of the consumer portfolio. This increase is primarily
attributable to subprime lending. We began suprime lending in 1997. These loans
typically carry higher delinquency rates than other consumer loans and provide a
greater yield to compensate for the related increase in costs. These loans
account for $240,000, or 29.7% of consumer loan charge-offs in 1998. The
aggregate balance of the subprime portfolio at December 31, 1998 was $10.2
million or less than one percent of total loans. All consumer loans that are
delinquent 120 days or more are 100% covered by loan insurance or a portion of
the allowance for loan losses equal to the estimated loss has been allocated to
that loan.
In December 1998, we acquired title to a motel in Northeast Ohio and a
marina in California through foreclosure. We adjusted the carrying value of
these properties to their estimated fair value of $3.4 million and $1.3 million,
respectively, at the time of acquisition. We are actively pursuing the sale of
both properties. We anticipate no further losses.
At December 31, 1998, we had potential problem loans totaling $3.1 million
which were classified by management as substandard and were not included in the
table above. Seven loans secured by multifamily and commercial real estate are
$1.8 million of this amount. Although these loans were current or not seriously
delinquent, there is some unfavorable development involving each loan. If not
corrected, the unfavorable development could result in the loan changing to
nonaccrual status or a loss being incurred. We are in contact with these
borrowers, and we monitor their status closely.
ALLOCATION OF ALLOWANCE FOR LOSSES ON LOANS
We maintain an allowance for losses on loans because some loans may not be
repaid in full. We maintain the allowance at a level we consider 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 we may
periodically allocate portions of the allowance for specific problem loans, the
whole allowance is available for any loan charge-offs that occur. We charge a
loan against the allowance as a loss when, in our opinion, it is uncollectible.
Despite the charge-off, we continue collection efforts. As a result, future
recoveries may occur.
The following table sets forth an allocation of the allowance for losses on
loans among categories as of December 31 of the years indicated based on our
estimate of probable losses
63
<PAGE> 67
that were currently anticipated based largely on past loss experience. Since the
factors influencing such estimates are subject to change over time, we believe
that any allocation of the allowance for losses on loans into specific
categories lends an appearance of precision which does not exist. In practice,
we use the allowance as a single unallocated 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 our 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>
DECEMBER 31,
------------------------------------------------------------------------------------
1998 1997 1996
----------------------- ----------------------- -----------------------
PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN
EACH EACH EACH
CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
------ ----------- ------ ----------- ------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
One- to four-family............... $ 304 18.3% $ 237 19.8% $ 228 17.1%
Multifamily....................... 648 31.1 482 25.4 1,020 40.8
Commercial real estate............ 1,019 21.1 1,400 23.0 937 20.3
Construction and land............. 237 12.6 353 15.3 193 10.5
Consumer.......................... 2,335 9.3 2,132 9.0 1,182 7.9
Business.......................... 1,675 7.6 456 7.5 197 3.4
Unallocated....................... 691 -- 562 -- 418 --
------ ----- ------ ----- ------ -----
Total.................... $6,909 100.0% $5,622 100.0% $4,175 100.0%
====== ===== ====== ===== ====== =====
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1995 1994
----------------------- -----------------------
PERCENT OF PERCENT OF
LOANS IN LOANS IN
EACH EACH
CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
------ ----------- ------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
One- to four-family............... $ 172 15.2% $ 189 25.2%
Multifamily....................... 887 45.8 733 41.9
Commercial real estate............ 676 21.5 358 18.6
Construction and land............. 167 9.5 99 8.5
Consumer.......................... 512 6.3 340 5.8
Business.......................... 74 1.7 1 --
Unallocated....................... 277 -- 191 --
------ ----- ------ -----
Total.................... $2,765 100.0% $1,911 100.0%
====== ===== ====== =====
</TABLE>
With the uncertainties that could adversely affect the overall quality of
the loan portfolio, we consider an adequate allowance for losses on loans
essential. We consider the unallocated allowance 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. In
our opinion the risks associated with off-balance sheet commitments are
insignificant. Therefore, we have not provided an allowance for these
commitments.
64
<PAGE> 68
The following table provides an analysis of the allowance for losses on
loans for the periods indicated. In each period, we base the provision for loan
losses 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,
----------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD............ $5,622 $4,175 $2,765 $1,911 $1,239
Charge-offs:
One- to four-family..................... 5 32 22 23 23
Multifamily............................. 39 494 119 -- 64
Commercial real estate.................. -- -- -- 27 --
Construction and land................... -- -- -- -- --
Consumer................................ 809 363 95 56 14
Business................................ 565 10 -- -- --
------ ------ ------ ------ ------
Total charge-offs.................... 1,418 899 236 106 101
------ ------ ------ ------ ------
Recoveries:
One- to four-family..................... 25 -- -- 1 1
Multifamily............................. 13 -- -- -- 6
Commercial real estate.................. -- -- -- -- --
Construction and land................... -- -- -- -- --
Consumer................................ 17 6 11 -- --
Business................................ -- -- -- -- --
------ ------ ------ ------ ------
Total recoveries..................... 55 6 11 1 7
------ ------ ------ ------ ------
Net charge-offs........................... 1,363 893 225 105 94
Provision for loan losses................. 2,650 2,340 1,635 959 766
------ ------ ------ ------ ------
BALANCE AT END OF PERIOD.................. $6,909 $5,622 $4,175 $2,765 $1,911
====== ====== ====== ====== ======
Net charge-offs to average loans.......... 0.16% 0.13% 0.04% 0.02% 0.03%
Provision for loan losses to average
loans................................... 0.31% 0.35% 0.28% 0.21% 0.21%
Allowance for losses on loans to total
nonperforming loans at end of period.... 54.44% 178.60% 80.38% 83.61% 80.70%
Allowance for losses on loans to total
loans at end of period.................. 0.66% 0.79% 0.64% 0.57% 0.45%
</TABLE>
INVESTMENT PORTFOLIO
We maintain our 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 we can hold. As a member
of the Federal Home Loan Bank System, the Bank is required to hold a minimum
amount of Federal Home Loan Bank stock based upon asset size and mix. As the
Bank grows, management anticipates this investment will increase.
65
<PAGE> 69
The following table summarizes the amounts and the distribution of
securities held as of the dates indicated:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------
1998 1997 1996
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
SECURITIES:
Mutual funds................................... $ 2,059 $ 1,706 $ 2,009
Tax-exempt bond................................ 14,817 4,740 --
Revenue bond................................... 1,400 -- --
FannieMae medium term note..................... 9,884 -- 6,065
FreddieMac preferred stock..................... 7,500 -- --
FannieMae preferred stock...................... -- -- 5,100
Federal Home Loan Bank stock................... 6,054 5,350 3,989
------- ------- -------
Total....................................... $41,714 $11,796 $17,163
======= ======= =======
OTHER INTEREST-EARNING ASSETS:
Interest-bearing deposits with banks........... $ 9,275 $ 1,961 $ 2,745
Term repurchase agreements..................... -- 6,397 6,000
------- ------- -------
Total....................................... $ 9,275 $ 8,358 $ 8,745
======= ======= =======
</TABLE>
The following table sets forth the contractual maturities and approximate
weighted average yields of debt securities at December 31, 1998.
<TABLE>
<CAPTION>
DUE IN
------------------------------------------
ONE YEAR FIVE TO MORE THAN
OR LESS TEN YEARS TEN YEARS TOTAL
-------- --------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Mutual funds.......................... $2,059 $ -- $ -- $ 2,059
Tax-exempt bond....................... -- -- 14,817 14,817
Revenue bond.......................... -- -- 1,400 1,400
FannieMae medium term note............ -- 9,884 -- 9,884
------ ------ ------- -------
Total............................ $2,059 $9,884 $16,217 $28,160
====== ====== ======= =======
Weighted average yield................ 5.06% 5.89% 7.07% 6.51%
</TABLE>
66
<PAGE> 70
MORTGAGE-BACKED SECURITIES PORTFOLIO
The following table sets forth the mortgage-backed securities portfolio at
the dates indicated. We classify all mortgage-backed securities as available for
sale.
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------
1998 1997 1996
-------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
FannieMae pass-through certificates............ $ 61,705 $ 97,146 $19,775
GNMA pass-through certificates................. 5,870 8,037 9,700
FreddieMac participation certificates.......... 13,149 37,714 26,713
BPA Commercial Capital L.L.C.
mortgage-backed security..................... 100,995 -- --
FreddieMac Collateralized Mortgage
Obligation................................... 8,494 -- --
FannieMae Collateralized Mortgage Obligation... 7,868 -- --
Other.......................................... 214 270 484
-------- -------- -------
Total..................................... $198,295 $143,167 $56,672
======== ======== =======
</TABLE>
The following table sets forth the contractual maturities and approximate
weighted average yields of mortgage-backed securities at December 31, 1998.
<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>
FannieMae pass-through
certificates................... $6,743 $53,757 $ 1,205 $ 61,705
GNMA pass-through certificates... 81 -- 5,789 5,870
FreddieMac participation
certificates................... -- -- 13,149 13,149
BPA Commercial Capital L.L.C.
Mortgage-backed security....... -- -- 100,995 100,995
FreddieMac Collateralized
Mortgage Obligation............ -- -- 8,494 8,494
FannieMae Collateralized Mortgage
Obligation..................... -- -- 7,868 7,868
Other............................ -- -- 214 214
------ ------- -------- --------
Total mortgage-backed
securities................ $6,824 $53,757 $137,714 $198,295
====== ======= ======== ========
Weighted average yield........... 7.41% 7.27% 7.26% 7.27%
</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 funds for lending and
investment purposes. The following paragraphs provide a brief description of the
types of accounts offered:
Passbook and Statement Savings Accounts. Consumers may invest savings in
and withdraw savings from regular passbook, tiered passbook and statement
savings accounts without restriction. We compound interest on tiered passbook
accounts monthly and credit the account monthly. We compound interest on regular
passbook and statement savings accounts quarterly and credit the account
quarterly.
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<PAGE> 71
Checking Accounts. We offer 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 depends upon the balance in the account. We can
waive monthly service charges on personal interest-bearing checking accounts if
the consumer maintains either a $1,000 minimum balance or a greater than $5,000
minimum balance in another deposit account or establish 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. We review the interest rate paid on the interest-bearing
checking accounts regularly and adjust the rate based on cash flow projections
and market interest rates.
In connection with loan servicing activities, we maintain 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 given the level of loans serviced for
others.
We also offer a commercial checking account. This account is noninterest
bearing and is assessed monthly service charges based upon transaction activity
levels.
Certificates of Deposit. We offer fixed rate, fixed term certificates of
deposit. Terms are from seven days to five years. 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. We review interest rates offered on certificates of
deposit regularly and adjust them based on cash flow projections and market
interest rates.
From time to time, we have accepted certificates of deposit from
out-of-state individuals and entities, predominantly financial institutions.
These deposits typically have balances of $90,000 to $100,000 and have a term of
one year or more. We do not accept these deposits through brokers. At December
31, 1998, these individuals and entities held approximately $166.3 million of
certificates of deposits, or 15.8% of total deposits.
68
<PAGE> 72
Individual Retirement Accounts ("IRA"). We also offer IRAs. Customers may
invest funds in a passbook account or any certificate of deposit we currently
offer.
The following table provides information regarding trends in average
deposits for the periods indicated. The noninterest bearing demand deposit
category includes principal and interest custodial accounts and taxes and
insurance custodial accounts for loans serviced for FreddieMac, FannieMae and
private investors.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------------------
1998 1997 1996
------------------------- ---------------------------- -------------------------
PERCENT PERCENT PERCENT
AVERAGE OF RATE AVERAGE OF RATE AVERAGE OF RATE
AMOUNT TOTAL PAID AMOUNT TOTAL PAID AMOUNT TOTAL PAID
-------- ------- ---- -------- ---------- ---- -------- ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand
deposits.................. $ 51,385 6.1% $ 38,837 5.8% $ 31,248 5.5%
Interest bearing deposits:
Demand deposits........... 45,980 5.5 2.75% 39,965 5.9 2.66% 36,273 6.4 2.64%
Savings deposits.......... 184,907 21.9 4.54 170,362 25.2 4.56 169,866 30.2 4.79
Time deposits............. 560,010 66.5 5.87 426,450 63.1 5.93 325,960 57.9 5.83
-------- ----- -------- ----- -------- -----
Total interest-bearing
deposits............. 790,897 93.9 5.38 636,777 94.2 5.36 532,099 94.5 4.97
-------- ----- -------- ----- -------- -----
Total average
deposits............. $842,282 100.0% $675,614 100.0% $563,347 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
Deposits increased 42.5% to $1.1 billion at December 31, 1998 from a year
earlier. This increase was consistent with the overall growth of the Bank. The
increase was primarily due to a 50.8% increase in time deposits to $720.8
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 certificates of
deposit as of December 31, 1998.
<TABLE>
<CAPTION>
PERCENT OF
2.00-4.99% 5.00-5.99% 6.00-6.99% 7.00-8.99% TOTAL TOTAL
---------- ---------- ---------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CERTIFICATE ACCOUNTS MATURING IN
QUARTER ENDING:
March 31, 1999.................. $35,159 $ 99,440 $ 68,790 $ 355 $203,744 28.3%
June 30, 1999................... 13,833 106,047 33,787 78 153,745 21.3
September 30, 1999.............. 834 53,522 8,521 -- 62,877 8.7
December 31, 1999............... 4,573 80,689 25,509 1,472 112,243 15.6
March 31, 2000.................. 656 39,042 21,761 5,262 66,721 9.3
June 30, 2000................... 341 13,370 8,504 29 22,244 3.1
September 30, 2000.............. 5 16,583 2,351 8,436 27,375 3.8
December 31, 2000............... -- 26,786 2,167 1,222 30,175 4.2
March 31, 2001.................. -- 13,914 2,351 134 16,399 2.3
June 30, 2001................... -- 6,753 637 -- 7,390 1.0
September 30, 2001.............. -- 2,768 220 -- 2,988 0.4
December 31, 2001............... -- 2,378 28 -- 2,406 0.3
Thereafter...................... -- 8,102 3,966 396 12,464 1.7
------- -------- -------- ------- -------- -----
Total...................... $55,401 $469,394 $178,592 $17,384 $720,771 100.0%
======= ======== ======== ======= ======== =====
Percent of total................ 7.7% 65.1% 24.8% 2.4%
</TABLE>
69
<PAGE> 73
The following table shows the remaining maturity for time deposits of
$100,000 or more as of December 31, 1998.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Three months or less..................................... $ 34,994
Over three through six months............................ 24,130
Over six through twelve months........................... 32,889
Over twelve months....................................... 37,417
--------
Total............................................... $129,430
========
</TABLE>
In addition to deposits, we rely on borrowed funds. The discussion below
describes our current borrowings.
Subordinated Note Offering. In December 1995, we issued subordinated notes
with an aggregate principal balance of $14.0 million through a public offering.
The interest rate on the notes is 9.625%. We pay interest monthly. We will repay
these subordinated notes at a premium with a portion of the proceeds of this
offering. These subordinated notes are unsecured.
Line of Credit. We have a commercial line of credit agreement with a
commercial bank. The maximum borrowing under the line is $12.0 million. We
modified the agreement during 1998 to increase the borrowing limit from $4.0
million. The line matures May 30, 1999, but we can renew the line annually as
agreed by both parties. The interest rate on the line of credit is tied to LIBOR
or prime at our option. As collateral for the loan, our largest shareholder,
Robert Kaye, has agreed to pledge a portion of his shares of Common Stock of
Metropolitan in an amount at least equal in value to 200% of any outstanding
balance. At December 31, 1998, the outstanding balance under this agreement was
$8.0 million.
Federal Home Loan Bank Advances. The Federal Home Loan Bank makes funds
available for housing finance to eligible financial institutions like the Bank.
The Federal Home Loan Bank generally limits advances to 50% of assets from all
borrowing sources. We collateralize advances 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 residential mortgage loans at 125% of
the advance amount and various types of investment and mortgage-backed
securities at rates ranging from 101% to 110% of the advance amount. We pledge
Federal Home Loan Bank stock owned by the Bank as additional collateral, but
this stock is not available as primary collateral. The aggregate balance of
assets pledged as collateral for Federal Home Loan Bank advances at December 31,
1998 was $184.0 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
Federal Home Loan Bank borrowings and at times, more favorable rates. The
aggregate balance of mortgage-backed securities pledged as collateral for
reverse repurchase agreements at December 31, 1998 was $87.7 million.
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The following table shows the maximum month-end balance, the average
balance, and the ending balance of borrowings during the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
MAXIMUM MONTH-END BALANCE:
FHLB advances................................... $119,000 $73,700 $75,150
1993 subordinated notes......................... 4,874 4,874 4,874
1995 subordinated notes......................... 14,000 14,000 14,000
Line of credit.................................. 8,000 4,000 --
Reverse repurchase agreements................... 97,983 74,496 23,500
AVERAGE BALANCE:
FHLB advances................................... $ 65,714 $59,325 $50,546
1993 subordinated notes......................... 1,999 4,874 4,874
1995 subordinated notes......................... 14,000 14,000 14,000
Line of credit.................................. 2,147 114 --
Reverse repurchase agreements................... 70,368 38,843 4,480
ENDING BALANCE:
FHLB advances................................... $111,236 $41,000 $59,500
1993 subordinated notes......................... 4,874 4,874
1995 subordinated notes......................... 14,000 14,000 14,000
Line of credit.................................. 8,000 1,500 --
Reverse repurchase agreements................... 82,250 74,496 23,500
</TABLE>
The following table provides the interest rates of borrowings during the
periods indicated.
<TABLE>
<S> <C> <C> <C>
WEIGHTED AVERAGE INTEREST RATE:
FHLB advances.......................................... 5.68% 5.65% 5.43%
1993 subordinated notes................................ 10.47 10.47 10.47
1995 subordinated notes................................ 10.48 10.48 10.48
Line of credit......................................... 8.49 8.98 --
Reverse repurchase agreements.......................... 5.66 5.73 5.61
</TABLE>
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN METROPOLITAN'S JUNIOR SUBORDINATED
DEBENTURES
During 1998, Metropolitan's wholly owned subsidiary, Metropolitan Capital
Trust I, issued 2,775,000 shares ($10 liquidation amount per security) of 8.60%
cumulative trust preferred securities. Metropolitan Capital Trust I invested the
total proceeds from the sale of the 8.60% cumulative trust preferred securities
in the 8.60% guaranteed preferred beneficial interests in junior subordinated
debentures of Metropolitan. These debentures mature on June 30, 2028. We are
amortizing total issuance costs of $1.4 million on a straight-line basis over
the life of the junior subordinated debentures. The 8.60% cumulative trust
preferred securities are listed on the Nasdaq Stock Market's National Market
under the symbol "METFP." At December 31, 1998, the outstanding balance of the
junior subordinated debentures was $27.8 million. The average balance
outstanding during 1998 was $18.6 million. The weighted average rate was 8.79%.
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COMPETITION
The Bank 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,
convenient branch locations, and high quality service.
EMPLOYEES
At December 31, 1998, we had a total of 354 employees, including part-time
and seasonal employees. Our employees are not represented by any collective
bargaining group. Management considers its employee relations to be excellent.
REGULATION AND SUPERVISION
INTRODUCTION
Metropolitan is a savings and loan holding company within the meaning of
the Home Owners' Loan Act. As a savings and loan holding company, we are subject
to the regulations, examination, supervision, and reporting requirements of the
Office of Thrift Supervision. The Bank, an Ohio-chartered savings and loan
association, is a member of the Federal Home Loan Bank System. Its deposits are
insured by the Federal Deposit Insurance Corporation through the Savings
Association Insurance Fund. The Bank is subject to examination and regulation by
the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and
the Ohio Division of Financial Institutions. The Bank must comply with
regulations regarding matters such as capital standards, mergers, establishment
of branch offices, subsidiary investments and activities, and general investment
authority. The purpose of this examination and regulation is primarily to
protect depositors.
The descriptions of the statutes and regulations which are applicable to
Metropolitan and the Bank and the effects of the statutes and regulations are
summarized below and elsewhere in this prospectus. This summary does not purport
to be a complete description of the statutes and regulations and their effects
on Metropolitan or the Bank. In addition, this summary does not identify every
statute and regulation that may apply to Metropolitan or the Bank.
METROPOLITAN
As a savings and loan holding company, we are subject to restrictions
relating to our activities and investments. Among other things, we are generally
prohibited, either directly or indirectly, from acquiring control of any other
savings association or savings and loan
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<PAGE> 76
holding company, without prior approval of the Office of Thrift Supervision, 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.
Similarly, a person must obtain Office of Thrift Supervision approval prior
to that 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 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."
This presumption is rebuttable.
THE BANK
General. The Office of Thrift Supervision 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. This authority includes the power
to assess civil money penalties, issue cease and desist or removal and
prohibition orders against an institution, its directors, officers or employees
and other persons, or initiate 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. These statutes and regulations include statutes and
regulations relating to the environmental condition of the property.
Insurance of Accounts and Regulation by the Federal Deposit Insurance
Corporation. The Bank is a member of the Savings Association Insurance Fund,
which is administered by the Federal Deposit Insurance Corporation. The Federal
Deposit Insurance Corporation insures deposits up to applicable limits and the
full faith and credit of the United States Government back such insurance. As
insurer, the Federal Deposit Insurance Corporation imposes deposit insurance
premiums and conducts examinations of and requires reporting by Federal Deposit
Insurance Corporation-insured institutions. It also may prohibit any Federal
Deposit Insurance Corporation-insured institution from engaging in any activity
the Federal Deposit Insurance Corporation determines by regulation or order to
pose a serious risk to the Federal Deposit Insurance Corporation. The Federal
Deposit Insurance Corporation also has the authority to initiate enforcement
actions against savings associations, after giving the Office of Thrift
Supervision an opportunity to take such action. It 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 Federal Deposit Insurance Corporation 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
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<PAGE> 77
would pay the lowest premium. Institutions classified as undercapitalized and
requiring substantial supervision would pay the highest premium. The Federal
Deposit Insurance Corporation makes a risk classification of all insured
institutions for each semi-annual assessment period. Effective January 1, 1997,
the Savings Association Insurance Fund assessment rates are identical to those
for Bank Insurance Fund insured institutions.
In addition to its authority to assess risk-based premiums for deposit
insurance, the Federal Deposit Insurance Corporation has assessment authority to
collect funds from Federal Deposit Insurance Corporation-insured institutions
sufficient to pay interest on Financing Corporation bonds. The Deposit Insurance
Funds Act of 1996 authorized the Financing Corporation to assess both Bank
Insurance Fund- and Savings Association Insurance Fund-insured deposits. It also
required the Bank Insurance Fund rate to equal one-fifth the Savings Association
Insurance Fund rate through 1999, or until the insurance funds were merged,
whichever occurs first. After that time, Bank Insurance Fund- and Savings
Association Insurance Fund-insured deposits will be assessed the same rate.
Thus, Savings Association Insurance Fund institutions, such as the Bank, will
continue to be subject to a greater burden than Bank Insurance Fund institutions
through 1999.
In addition, the Deposit Insurance Funds Act of 1996 required the merger of
the Bank Insurance Fund and Savings Association Insurance Fund into a single
insurance by January 1, 1999 assuming certain pre-conditions. Those
pre-conditions were not met and a timetable for merger of the Bank Insurance
Fund and Savings Association Insurance Fund has not been established. In
connection with the merger of the Bank Insurance Fund and the Savings
Association Insurance Fund, Savings Association Insurance Fund-insured
institutions could be forced to convert to state bank charters or national bank
charters. If that proposal became law, Metropolitan would become a bank holding
company. As a result, Metropolitan would be subject to regulation by the Federal
Reserve Board. That regulation imposes capital requirements on bank holding
companies.
Regulatory Capital Requirements. The capital regulations of the Office of
Thrift Supervision establish a "leverage limit," a "tangible capital
requirement," and a "risk-based capital requirement." In addition, the Office of
Thrift Supervision 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 Office of Thrift
Supervision has not established an 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
Office of Thrift Supervision. A capital directive could include 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 Office of
Thrift Supervision.
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<PAGE> 78
In addition, a conservator or receiver may be appointed under these
circumstances.
The leverage limit currently requires a savings association to maintain
"core capital" of not less than 3% of adjusted total assets. The Office of
Thrift Supervision has taken the position, however, that the prompt corrective
action regulation has effectively raised the leverage ratio requirement for all
but the most highly-rated institutions. The leverage ratio has in effect
increased to 4% since an institution is "undercapitalized" if, among other
things, its leverage ratio is less than 4%.
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.
Each bank regulatory agency and the Office of Thrift Supervision review
each of their capital standards every two years. The purpose of this review is
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 Office of Thrift Supervision 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, 1998, 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, 1998.
<TABLE>
<CAPTION>
PERCENT OF ASSETS
AS DEFINED FOR
AMOUNT EACH CAPITAL TEST
------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Tangible capital.................................... $84,935 6.26%
Tangible capital requirement........................ 20,361 1.50
------- ----
Excess.............................................. $64,574 4.76%
======= ====
Core capital........................................ $85,113 6.27%
Core capital requirement............................ 54,296 4.00
------- ----
Excess.............................................. $30,817 2.27%
======= ====
Risk-based capital.................................. $89,086 8.22%
Risk-based capital requirement...................... 86,731 8.00
------- ----
Excess.............................................. $ 2,355 0.22%
======= ====
</TABLE>
The Bank is also subject to the capital adequacy requirements under the
Federal Deposit Insurance Corporation Investment Act of 1991. The additional
capital adequacy ratio imposed under Federal Deposit Insurance Corporation
Investment Act is the Tier 1 capital to risk adjusted assets ratio. This ratio
must be at least 6.0% for a "well capitalized" institution. At December 31,
1998, the Tier 1 risk-based capital ratio of the Bank was 7.85%.
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<PAGE> 79
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." Generally, the regulations
require 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 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 CAMELS
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 CAMELS 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. In addition, the agency
may treat an adequately capitalized or undercapitalized institution as if it
were in the next lower capital category, if the agency determines, after notice
and an opportunity for a hearing, that the institution is in an unsafe or
unsound condition or that the institution has 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
reclassification or determination, the appropriate federal banking agency may
require an adequately capitalized or under-capitalized institution to comply
with mandatory and discretionary supervisory actions. A significantly
undercapitalized savings association may not be reclassified, however, as
critically undercapitalized.
Restrictions on Dividends and Other Capital Distributions. Savings
association subsidiaries of holding companies generally are required to provide
their Office of Thrift Supervision 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. In some circumstances, an association may be
required to provide their Office of Thrift Supervision regional director with an
application for a proposed declaration of a dividend on the association's stock.
The Office of Thrift Supervision regulations impose limitations upon
certain "capital distributions" by savings associations. These distributions
include cash dividends, payments
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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.
An application is required if:
- the proposed capital distribution for a calendar year exceeds an
association's net income for that year to date plus its retained net
income for the preceding two years;
- the association would not be at least adequately capitalized following
the distribution; or
- the proposed capital distribution would violate a prohibition contained
in any statute or regulation, or an agreement between the association and
the Office of Thrift Supervision.
A notice is required if the association is not required to file an
application as described above, but:
- the association would not be well capitalized following the distribution;
- the proposed capital distribution will reduce or retire any part of
common or preferred stock or any part of debt instruments included in
capital; or
- the association is a subsidiary of a savings and loan holding company.
The Office of Thrift Supervision retains the authority to prohibit any
capital distribution otherwise authorized under the regulation if the Office of
Thrift Supervision 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, a Federal Deposit
Insurance Corporation-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.
Liquidity. Federal regulations currently require savings associations to
maintain, for each calendar month, an average daily balance of liquid assets
equal to at least 4% of the ending or average daily balance of deposit accounts
with maturities less than a year and short-term borrowings with maturities less
than a year. Liquid assets include cash, certain time deposits, bankers'
acceptances, and specified United States Government, state or federal agency
obligations. From time to time, the Office of Thrift Supervision may change this
liquidity requirement 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. The Office of Thrift Supervision may impose monetary
penalties for failure to meet liquidity ratio requirements. At December 31,
1998, the liquidity ratio of the Bank was 5.04%. This ratio exceeded the
applicable requirement.
Qualified Thrift Lender Test. Pursuant to the Qualified Thrift Lender 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.
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<PAGE> 81
A savings association's failure to remain a Qualified Thrift Lender may
result in: a) limitations on new investments and activities; b) imposition of
branching restrictions; c) loss of Federal Home Loan Bank borrowing privileges;
and d) limitations on the payment of dividends. If a savings institution that is
a subsidiary of a savings and loan holding company fails to regain Qualified
Thrift Lending status within one year of its loss of such status, the holding
company must register as, and will be deemed to be, a bank holding company. As a
result, it will be subject to, among other things, the business activity
restrictions and capital regulations of the Bank Holding Company Act.
The qualified thrift investments of the Bank were in excess of 67.2% of its
portfolio assets as of December 31, 1998.
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. Regulation by the Ohio Division of Financial
Institutions affects the internal organization of the Bank as well as its
savings, mortgage lending, and other investment activities. Periodic
examinations by the Ohio Division of Financial Institutions are usually
conducted on a joint basis with the Office of Thrift Supervision. Ohio law
requires the Bank to 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 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:
- 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;
- invest up to 10% of assets in corporate equity securities, bonds,
debentures, notes, or other evidence of indebtedness;
- 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
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<PAGE> 82
- 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 real property as its board of directors
deems necessary or convenient for the conduct of the business of the
association. However, the amount 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
limitations on its permitted activities and investments under federal law. These
limitations 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. For purposes of Ohio law, control exists 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 that
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 Division of Financial
Institution 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 only a summary and does not
purport to be a comprehensive description of the tax rules applicable to
Metropolitan 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 the nature of their supervision and
business operations were permitted to establish a reserve for bad debts and to
make annual additions to it, which additions may, within specified formula
limits, be deducted in arriving at taxable income. The Bank's bad debt deduction
for qualifying real property loans, which are generally loans secured by
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
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<PAGE> 83
and reduced by the amount of any permitted additions to the reserve for
nonqualifying loans. The Bank's bad debt deduction for nonqualifying loans was
computed under the experience method, which essentially allows a deduction based
on the actual loss experience of the Bank 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 may no longer calculate their deduction
for bad debts using the percentage of taxable income method. Instead, savings
associations like the Bank with more than $500 million in assets must compute
their deduction for bad debts based on specific charge-offs during the taxable
year. 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. The recapture may be suspended for up to two years if,
during those years, the savings association satisfies a residential loan
requirement.
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 difference (positive or negative) between
adjusted current earnings ("ACE") and AMTI. Any ACE reductions to AMTI are
limited to prior aggregate ACE increases to AMTI. ACE equals pre-adjustment
AMTI: (a) 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 (b) 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).
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. The Internal Revenue Service has audited
Metropolitan, the Bank and other includable subsidiaries 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 1.4% and will drop to 1.3% for tax years 2000 and
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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.
Metropolitan, at the holding company level, 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 8.5%
of the remainder, with an additional add-on tax not to exceed $5,000) or a
specified percentage of net worth (currently approximately 0.4%, with a cap on
the net worth tax of $150,000, plus an add-on tax not to exceed $5,000). In
calculating net income for this purpose, dividends from wholly-owned
subsidiaries, such as the Bank, would be excluded. Beginning with the 1999 tax
year, Metropolitan may be exempt from the net worth portion of the franchise tax
if it satisfies the requirements, including appropriate election, to be treated
as a qualified holding company.
PROPERTIES
Our executive office is leased under an agreement that extends through
December 31, 2000. It is located at 6001 Landerhaven Drive, Mayfield Heights,
Ohio 44124. We have executed an option to purchase land in Highland Hills, Ohio.
We have preliminary plans to build an executive office at the location. We
anticipate that design of the office will take place during 1999 and
construction will be completed during 2000. We operate seventeen branch
locations. We lease seven of these locations under long-term lease agreements
with various parties. We own the other ten branches, located in Cleveland,
Euclid, Willoughby Hills, Mayfield Heights, Macedonia, Cleveland Heights,
Hudson, Aurora, Stow, and Twinsburg, Ohio. In addition, we own land in Auburn
and Medina, and land and a building in Willoughby. We plan on using these sites,
along with leased space in Beachwood, Ohio, for future full service retail
offices. The Bank currently leases office space for its loan production offices
in North Olmsted and Cincinnati, Ohio, Grosse Point and West Bloomfield,
Michigan, and Pittsburgh, Pennsylvania. We are planning future loan production
offices for Columbus, North Canton and Fairlawn, Ohio, in 1999.
LEGAL PROCEEDINGS
The Bank is involved in various legal proceedings incidental to the conduct
of its business. We do not expect that any of these proceedings will have a
material adverse effect on our financial position or results of operations.
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<PAGE> 85
MANAGEMENT
The following table provides 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 1999 Annual Meeting and the
directors.
<TABLE>
<CAPTION>
DIRECTOR FOR TERM POSITIONS CURRENTLY HELD WITH
NOMINEES FOR DIRECTOR AGE SINCE TO EXPIRE METROPOLITAN AND THE BANK
--------------------- --- -------- --------- -------------------------------------
<S> <C> <C> <C> <C>
Malvin E. Bank.................... 68 1991 2002 Secretary, Assistant Treasurer and
Director of Metropolitan and
Secretary and Director of the Bank
Robert M. Kaye.................... 61 1987 2002 Chairman of Metropolitan and Chairman
of the Bank
David G. Lodge.................... 59 1991 2002 President, Assistant Secretary,
Assistant Treasurer and Director of
Metropolitan and President and
Director of the Bank
David P. Miller................... 66 1992 2002 Treasurer, Assistant Secretary and
Director of Metropolitan and Director
of the Bank
</TABLE>
<TABLE>
<CAPTION>
DIRECTOR TERM POSITIONS CURRENTLY HELD WITH
CONTINUING DIRECTORS AGE SINCE EXPIRING METROPOLITAN AND THE BANK
-------------------- --- -------- -------- ----------------------------------
<S> <C> <C> <C> <C>
Robert R. Broadbent.................. 77 1992 2001 Director of Metropolitan and the
Bank
Marjorie M. Carlson.................. 58 1994 2001 Director of Metropolitan and the
Bank
James A. Karman...................... 61 1992 2001 Director of Metropolitan and the
Bank
Ralph D. Ketchum..................... 72 1991 2001 Director of Metropolitan and the
Bank
Lois K. Goodman...................... 65 1994 2000 Director of Metropolitan and the
Bank
Marguerite B. Humphrey............... 57 1994 2000 Director of Metropolitan and the
Bank
Alfonse M. Mattia.................... 57 1996 2000 Director of Metropolitan and the
Bank
</TABLE>
During the past five years, the business experience of each of the director
nominees, directors and executive officers has been as follows:
NOMINEES
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 serves as a Director of Oglebay Norton Company. Mr. Bank
also serves as a Trustee of Case Western Reserve University, The Holden
Arboretum, Chagrin River Land Conservancy, Cleveland
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<PAGE> 86
Center for Research in Child Development, Hanna Perkins School, and numerous
other civic and charitable organizations and foundations.
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. 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.
CONTINUING DIRECTORS
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 Holdings, 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 is the retired 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 and Playhouse Square Foundation.
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> 87
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., A. Schulman, Inc. and Shiloh Industries, Inc. Mr. Karman also
serves as a member of the Board of Trustees of the Boys & Girls Club of
Cleveland, Boys Hope, The Western Reserve Historical Society and is a member of
the Corporate Council, Cleveland Museum of Art.
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 to that time, 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, Inc. and Lithium Technologies, Inc.
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. Mr. Mattia also serves as a director of United Heritage Bank.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Judith L. Zawacki Adam, 43, has been Senior Vice President -- Finance and
Accounting and Chief Financial Officer of the Bank since September 1997. Prior
to that, Ms. Adam held the position of Vice President -- Finance with the Bank
from 1992 to September 1997.
Lloyd W. W. Bell, Jr., 57, has been Senior Vice President -- Chief Lending
Officer of the Bank since July 1998. Prior to that, Mr. Bell, Jr. held the
position of Senior Vice President -- Commercial Real Estate with the Bank from
1997 to July 1998. Prior to joining Metropolitan, Mr. Bell, Jr. was a partner in
O'Brien & Bell, an executive search and consulting firm specializing in
financial institutions.
Patrick W. Bevack, 52, 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.
Carl R. Stauffeneger, 50, has been Senior Vice President -- Consumer
Banking of the Bank since 1995. Prior to joining Metropolitan, Mr. Stauffeneger
was responsible for client services at Money Access Service, Midwest Division, a
provider of automated teller machine services.
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, plus 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.
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<PAGE> 88
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Organization Committee of Metropolitan's Board of
Directors consists of Messrs. Ketchum (Chair), Bank, Karman and Kaye.
The law firm of Thompson Hine & Flory LLP, of which Malvin E. Bank is a
partner, provided legal services to Metropolitan in 1998 and during the current
year at costs negotiated in arms-length transactions.
Mr. Kaye, the Chairman of the Board, is the sole stockholder of Planned
Residential Communities, Inc. Planned Residential Communities, Inc. receives a
$96,000 annual fee for providing employee benefit related services and
multifamily property consulting services to Metropolitan.
Several of the directors and executive officers of Metropolitan purchased
10% subordinated notes due December 31, 2001, from Metropolitan during its 1993
private offering. These purchases were made on the same terms and at the same
prices offered to nonaffiliated investors. All of these subordinated notes were
repurchased by Metropolitan on May 22, 1998 with the proceeds of the 8.60%
preferred securities sold during the second quarter of 1998 by Metropolitan
Capital Trust I, including $515,000 and $200,000, in principal amounts, held
respectively by Messrs. Kaye and Ketchum.
CERTAIN TRANSACTIONS
The accounting firm of Amper, Politziner & Mattia, of which Alfonse M.
Mattia is a partner, provided tax services to Metropolitan in 1998 and during
the current year at costs negotiated in arms-length transactions.
As noted above, several of the directors and executive officers of
Metropolitan purchased subordinated notes due December 31, 2001, from
Metropolitan during its 1993 private offering. These purchases were made on the
same terms and at the same prices offered to nonaffiliated investors. All
subordinated notes were repurchased by Metropolitan on May 22, 1998, with the
proceeds of the 8.60% preferred securities sold during the second quarter of
1998 by Metropolitan Capital Trust I, including the following principal amounts:
- $200,000 held by David P. Miller;
- $400,000 jointly held by the Bank's 401(k) Plan and the Planned
Residential Communities Management Co. Inc. and Affiliates 401(k)
Plan; and
- $200,000 held by the Amper, Politziner & Mattia Profit Sharing
Trust, of which Alfonse M. Mattia is a trustee.
The Bank has had banking transactions, including loans, with Metropolitan's
and the Bank's directors, officers, stockholders and associates, and expects
these transactions to continue in the future. Those transactions are in the
ordinary course of the Bank's business and are on substantially the same terms,
including interest rates and collateral on loans, prevailing at the time for
comparable transactions with other persons. Those transactions do not involve
more than the normal risk of collectability or present other terms unfavorable
to the Bank.
SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth, as of February 26, 1999, information
concerning shares of Common Stock beneficially owned by current directors of and
nominees for director of
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<PAGE> 89
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 shares of Common Stock
indicated. The number of shares of Common Stock owned reflects Metropolitan's
completion, on December 29, 1998, of an eleven-for-ten stock split by way of 10%
stock dividend to shareholders of record as of December 15, 1998.
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL AMOUNT AND NATURE OF PERCENT OF
OR PERSONS IN GROUP BENEFICIAL OWNERSHIP CLASS
------------------- -------------------- ----------
<S> <C> <C>
Robert M. Kaye........................... 6,013,997(1) 77.5%
David G. Lodge........................... 31,127(2) *
Malvin E. Bank........................... 16,500 *
David P. Miller.......................... 40,706 *
Ralph D. Ketchum......................... 25,300(3) *
James A. Karman.......................... 7,700 *
Robert R. Broadbent...................... 43,430(4) *
Marjorie M. Carlson...................... 22,000 *
Lois K. Goodman.......................... 18,700(5) *
Marguerite B. Humphrey................... 11,000 *
Alfonse M. Mattia........................ 83,820(6) 1.1%
Judith Z. Adam........................... 2,200 *
Lloyd W. W. Bell, Jr..................... 2,200 *
Patrick W. Bevack........................ 9,350 *
All directors and executive officers as a
group (15 persons)..................... 6,324,750 78.6%
</TABLE>
- ---------------
(1) Total includes 6,600 shares of Common Stock held by Mr. Kaye as trustee with
sole investment and voting power.
(2) Total includes 2,747 shares of Common Stock held by Mr. Lodge as custodian
for his children and 3,520 shares of Common Stock held by Mr. Lodge's
spouse, as to which Mr. Lodge disclaims beneficial ownership.
(3) Total includes 7,700 shares of Common Stock held by Mr. Ketchum's spouse, as
to which Mr. Ketchum disclaims beneficial ownership.
(4) Total includes 6,050 shares of Common Stock held by the Broadbent Family
Foundation, of which Mr. Broadbent is Chair.
(5) Total includes 11,000 shares of Common Stock held by Ms. Goodman's spouse,
as to which Ms. Goodman disclaims beneficial ownership.
(6) Total includes 42,460 shares of Common Stock held by Mr. Mattia as trustee,
5,610 shares of Common Stock held by a partnership in which Mr. Mattia is a
partner and 1,100 shares of Common Stock held by Mr. Mattia's spouse, as to
which Mr. Mattia disclaims beneficial ownership.
* Represents less than 1% of Metropolitan's outstanding shares of Common Stock.
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<PAGE> 90
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Except as set forth below, no person is known to Metropolitan at February
26, 1999 to own beneficially within the meaning of the regulations of the
Securities and Exchange Commission, more than 5% of Metropolitan's outstanding
Common Stock. The shares of Common Stock indicated reflect Metropolitan's
completion, on December 29, 1998, of an eleven-for-ten stock split by way of a
10% stock dividend to shareholders of record as of December 15, 1998.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------- -------------------- ----------
<S> <C> <C>
Robert M. Kaye
6001 Landerhaven Drive
Mayfield Heights, Ohio 44124 6,013,997 77.5%
</TABLE>
CHANGE IN CONTROL
The commercial bank line of credit is a revolving line of credit that
matures on May 30, 1999, but can be renewed annually upon the agreement of both
parties. The maximum permitted borrowing amount is $12 million. As collateral
for the commercial bank line of credit, Mr. Kaye pledged a portion of his Common
Stock in an amount equal in value to 200% of any outstanding balance. At
February 26, 1999, the outstanding balance under the commercial bank line of
credit was $12 million.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION TABLE
The following table provides information with respect to compensation
provided by Metropolitan and its subsidiaries during the years ended December
31, 1998, 1997 and 1996, to its chief executive officer and Metropolitan's other
executive officers whose annual salary and bonus exceed $100,000.
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<PAGE> 91
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------
FISCAL YEAR ALL OTHER
NAME AND ENDED COMPEN-
PRINCIPAL POSITION DECEMBER 31 SALARY BONUS SATION(1)
------------------ ----------- -------- -------- ---------
<S> <C> <C> <C> <C>
Robert M. Kaye, 1998 $394,465 $ 75,000(2) $5,000
Chairman of the Board and 1997 351,000 75,000(2) 4,750
Chief Executive Officer of
Metropolitan 1996 295,000 65,000(2) 4,750
David G. Lodge, 1998 269,696 75,000(2) 5,000
President, Assistant Treasurer and 1997 242,654 75,000(2) 4,750
Assistant Secretary of Metropolitan 1996 205,000 65,000 4,750
Patrick W. Bevack, 1998 142,525 277,185 5,000
Executive Vice President 1997 146,042 39,553(3) 4,750
of the Bank 1996 135,000 7,500 4,750
Lloyd W.W. Bell, Jr., 1998 125,654 130,871 --
Senior Vice President and 1997 23,077 -- --
Chief Lending Officer of the
Bank(4) -- -- -- --
Judith Z. Adam, 1998 105,482 7,000 4,499
Senior Vice President and 1997 99,137 6,000 4,205
Chief Financial Officer of the Bank 1996 89,144 4,000 3,726
</TABLE>
- ---------------
(1) Represents the Bank's contribution to the Metropolitan Bank and Trust
Company 401(k) Plan.
(2) Paid in January in the following year.
(3) Mr. Bevack's 1997 bonus was not paid until after Metropolitan's 1998 Proxy
Statement was filed.
(4) Mr. Bell did not join the Bank until October 20, 1997.
OPTION GRANTS
The following table provides information regarding grants of options made
during the year ended December 31, 1998, to each of the executive officers named
in the Summary Compensation Table. All option, share and base price figures
reflect Metropolitan's completion, on December 29, 1998, of an eleven-for-ten
stock split by way of 10% stock dividend to shareholders of record as of
December 15, 1998. 50% of the options granted vest on the third anniversary of
the date of their grant. 25% vest on the date of the fourth anniversary and the
remaining 25% vest on the date of the fifth anniversary of the date of their
grant.
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<PAGE> 92
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR TEN YEAR OPTION TERM
OPTIONS IN FISCAL BASE PRICE EXPIRATION --------------------------
NAME GRANTED YEAR ($/SHARE) DATE 5% 10%
---- ---------- ---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Kaye 55,000 47.17% $14.43 05/20/2008 $ 499,122 $ 1,264,874
6,600(1) 5.66 15.87 05/20/2008 50,391 142,281
David G. Lodge 22,000 18.87 14.43 05/19/2008 199,649 505,949
6,600(1) 5.66 14.43 05/19/2008 59,895 151,785
Patrick W. Bevack 3,300(1) 2.83 14.43 05/19/2008 29,947 75,892
Lloyd W.W. Bell, Jr. 5,500(1) 4.72 14.43 05/19/2008 49,912 126,487
Judith Z. Adam 5,500(1) 4.72 14.43 05/19/2008 49,912 126,487
Increase in value to all common shareholders (2) $70,350,485 $178,397,039
</TABLE>
- ---------------
(1) Represents grants of incentive stock options.
(2) Calculated for the total number of shares of Common Stock outstanding on
December 31, 1998 (7,756,393), at a per share price of $23.50 for 5% annual
10-year price appreciation, and at a per share price of $37.43 for 10%
annual 10-year price appreciation.
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<PAGE> 93
DESCRIPTION OF THE CAPITAL STOCK
GENERAL
Metropolitan has authorized 10,000,000 shares of Common Stock, no par
value, and 10,000,000 shares of preferred stock, no par value. As of February
26, 1999, Metropolitan had 7,756,393 shares of Common Stock issued and
outstanding, and no shares of preferred stock issued and outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held by
them on all matters being voted upon the shareholders. Subject to the
preferences of outstanding preferred stock, holders of Common Stock are entitled
to receive dividends ratably if, as, and when, declared by the Board out of
funds available for the payment of dividends. If Metropolitan is liquidated,
dissolved, or wound up, holders of Common Stock are entitled to share ratably in
all assets remaining after payment of liabilities and liquidation preferences of
any outstanding preferred stock. Holders of Common Stock have no preemptive
rights and no right to convert their shares of Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
shares of Common Stock. All outstanding shares of Common Stock are, and all
shares of Common Stock to be outstanding upon completion of the offering will
be, fully paid and nonassessable.
PREFERRED STOCK
Without action by the shareholders, the Board may issue up to 5,000,000
shares of Class A preferred stock, without par value, and 5,000,000 shares of
Class B preferred stock, without par value. The Board may issue Class A
preferred stock and Class B preferred stock in one or more series. The Board may
fix the rights, designations, preferences, privileges, qualifications and
restrictions of the shares of Class A preferred stock and Class B preferred
stock. These rights include dividend rights, conversion rights, rights and terms
of redemption, liquidation preferences, and sinking fund terms. Any or all of
these rights may be greater than the rights of the Common Stock. Without
shareholder approval, the Board can issue Class A preferred stock and Class B
preferred stock with voting, conversion, and other rights. These rights could
adversely affect the voting power and other rights of the holders of Common
Stock, such as their rights to receive dividend payments or payments upon
liquidation. Holders of Class A preferred stock would be entitled to one vote
per share for each share of Class A preferred stock held by them. Holders of
Class B preferred stock would not be entitled to vote upon matters presented to
the shareholders except in limited circumstances. The Board could issue Class A
preferred stock and Class B preferred stock quickly with terms calculated to
delay, deter, or prevent a change in control of Metropolitan or to make removal
of management more difficult, without any further action by the shareholders.
This type of issuance could decrease the market price of the Common Stock.
Metropolitan has no present plans to issue any Class A preferred stock or Class
B preferred stock.
POTENTIAL ANTITAKEOVER EFFECTS OF ARTICLES OF INCORPORATION, CODE OF REGULATIONS
AND OHIO LAW
As an Ohio corporation, Metropolitan is subject to Ohio laws which may
discourage or make more difficult an unsolicited takeover of Metropolitan. One
of these laws generally
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<PAGE> 94
prohibits any person who owns 10% or more of a corporation's stock from engaging
in a merger, consolidation, majority share acquisition, asset sale, loan or
other similar transaction with the corporation for a period of three years after
such person becomes a 10% or more shareholder. These transactions are permitted
only if the corporation's board of directors first approves the transaction
which results in the person owning 10% or more of the corporation's stock. If
the acquiring person does not obtain this approval, that person must wait until
the three-year waiting period expires. After the three-year waiting period, the
10% shareholder can complete the transaction only if, among other things:
- approval is received from two-thirds of all voting shares of the
corporation and from a majority of shares of the corporation excluding
shares held by the 10% shareholder or certain affiliated persons; or
- the transaction meets certain criteria designed to ensure fairness to all
remaining shareholders.
In addition, under Ohio law, a person can acquire shares entitling that
person to exercise (a) one-fifth or more, (b) one-third or more, or (c) a
majority of voting power of a corporation only with prior authorization. The
acquirer must obtain this authorization from:
- the holders of at least a majority of the total voting power of the
corporation; and
- the holders of at least a majority of the total voting power of the
corporation excluding the acquirer, officers of the corporation elected
or appointed by the directors, directors of the corporation who are also
employees, and certain shares that are transferred after the announcement
of the proposed acquisition and prior to the vote with respect to the
proposed acquisition.
Upon completion of the offering, Mr. Kaye will own approximately 72.0% of
Metropolitan's outstanding Common Stock (71.2% if the Underwriter's
over-allotment option is exercised in full). As a result, an acquisition by a
third party requiring prior authorization will not be possible unless Mr. Kaye
votes in favor of such acquisition.
Certain provisions of Metropolitan's Code of Regulations may deter hostile
takeovers or delay or prevent changes in control or management of Metropolitan.
Specifically, Metropolitan's Regulations require a shareholder to give
Metropolitan advance notice if that shareholder desires to present a proposal or
director nomination at any annual meeting of shareholders. The Regulations also
provide that a majority of the directors in office, although less than a quorum,
may fill vacancies created by an increase in the size of the Board of Directors.
However, holders of a majority of Metropolitan's voting stock may fill vacancies
resulting from an increase in the size of the Board due to action by the
shareholders. In addition, Metropolitan's Regulations require the holders of at
least 75% of the voting stock to approve any amendment to certain provisions of
the Regulations. These provisions relate to the number and classification of
directors, filling of Board vacancies, the removal of directors, advance notice
of shareholder proposals, and nominations.
Similarly, the provisions in the Articles of Incorporation classifying the
Board of Directors and giving the Board of Directors the ability to issue
preferred stock may deter hostile takeovers or delay or prevent changes in
control or management of Metropolitan. See "Risk Factors -- Risk Factors
Relating to the Common Stock -- Antitakeover Provisions in Metropolitan's
Corporate Documents and Ohio Law."
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<PAGE> 95
DESCRIPTION OF THE PREFERRED SECURITIES
GENERAL
The following is a summary of the key terms and provisions of the Preferred
Securities. This summary is not complete and is subject to, and qualified in its
entirety by reference to, the trust agreement (the "Trust Agreement") among
Metropolitan, as depositor, Wilmington Trust Company, as property trustee (the
"Property Trustee") and the administrative trustees of the Trust (the
"Administrative Trustees"), and the Trust Indenture Act. Metropolitan has filed
the form of the trust agreement as an exhibit to the registration statement of
which this prospectus is a part. Unless we indicate otherwise, all references to
Metropolitan appearing under this caption "Description of the Preferred
Securities" and under the caption "Description of the Junior Subordinated
Debentures" mean Metropolitan Financial Corp. excluding its consolidated
subsidiaries.
DISTRIBUTIONS
The Preferred Securities represent preferred undivided beneficial interests
in the assets of the Trust. The Trust will pay preferential cumulative cash
distributions ("Distributions") on the Preferred Securities at the annual rate
of % of the stated liquidation amount of $10. The Trust will pay the
dividends quarterly in arrears on March 31, June 30, September 30 and December
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 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, 1999. The Trust will compute the amount of Distributions payable for any
period on the basis of a 360-day year of twelve thirty-day months. If
Distributions on the Preferred Securities are payable on a date that is not a
business day, the Trust will pay such Distributions on the next day that is a
business day. The Trust will not pay any additional Distributions or other
payment as a result of the delay. If, however, that business day is in the next
calendar year, the Trust will make such payment on the immediately preceding
business day. That payment will have the same force and effect as if it were
made on the date the payment was originally payable (each date on which
Distributions are payable in accordance with the foregoing, a "Distribution
Date"). A "business day" means 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 trustee under
the Indenture (the "Indenture") between Metropolitan and Wilmington Trust
Company, as trustee, is closed for business.
If Metropolitan is not in default, it may, under the Indenture, 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 deferral period (each, an "Extension Period"). No Extension Period may
extend beyond the stated maturity date of the Junior Subordinated Debentures. As
a result of any deferral of interest, the Trust will defer quarterly
Distributions on the Preferred Securities during the Extension Period.
Distributions to which holders of the Preferred Securities are entitled will
accumulate additional Distributions at the rate per annum of %, compounded
quarterly from the relevant payment date for such Distributions. The term
"Distributions" as used in this prospectus includes any such additional
Distributions.
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<PAGE> 96
The terms of the Indenture limit Metropolitan's ability to make certain
payments during any Extension Period. Metropolitan may not make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem, any
debt securities of Metropolitan that rank equal in priority with or junior in
right of payment to the Junior Subordinated Debentures. Metropolitan may not
make any guarantee payments under any guarantee by Metropolitan of the debt
securities of any of its subsidiaries if such guarantee ranks equal in priority
with or junior in right of payment to the Junior Subordinated Debentures other
than payments pursuant to the Preferred Securities Guarantee Agreement.
Metropolitan may not declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment relating to, any of
Metropolitan's capital stock other than:
- the reclassification of any class of Metropolitan's capital stock into
another class of capital stock;
- dividends or distributions payable in shares of common stock of
Metropolitan;
- 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;
- payments under the Guarantee; and
- purchases of shares of common stock related to the issuance of shares of
common stock or rights under any of Metropolitan's benefit plans for its
directors, officers or employees.
Additionally, during any Extension Period, Metropolitan may not redeem,
purchase or acquire less than all the outstanding Junior Subordinated Debentures
or any of the Preferred Securities.
During any Extension Period, interest would continue to accrue and holders
of the Preferred Securities would be required to accrue interest income for
United States federal income tax purposes, even though such holders would not
receive current cash distributions with which to pay tax, if any, arising with
respect to such accrued interest income. See "Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
Before the termination of any Extension Period, Metropolitan may further
defer the payment of interest on the Junior Subordinated Debentures if no
Extension Period exceeds twenty consecutive quarters or extends beyond the
stated maturity date of the Junior Subordinated Debentures. Upon the termination
of any such Extension Period and the payment of all accrued and unpaid interest
(together with interest thereon at the rate of %, compounded quarterly, to
the extent permitted by law), Metropolitan may begin a new Extension Period.
There is no limitation on the number of times that Metropolitan may begin an
Extension Period. See "Description of the Junior Subordinated
Debentures -- Right to Defer Interest Payment Obligation" and "Federal Income
Tax Consequences -- Interest Income and Original Issue Discount."
The Trust will invest the proceeds from the issuance and sale of its common
securities and the Preferred Securities in the Junior Subordinated Debentures.
The revenue available for distribution to holders of the Trust's Preferred
Securities will be limited to payments under the Junior Subordinated Debentures.
See "Description of the Junior Subordinated Debentures." If Metropolitan does
not make interest payments on the Junior Subordinated Debentures, the Property
Trustee (as defined herein) will not have funds available to pay
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Distributions on the Preferred Securities. Metropolitan will guarantee the
payment of Distributions on a limited basis as described in this prospectus
under "Description of the Guarantee."
Metropolitan has no current intention of deferring payments of interest on
the Junior Subordinated Debentures.
SUBORDINATION OF THE TRUST'S COMMON SECURITIES
The Trust will pay Distributions on, and the Redemption Price (as defined
herein) of, its common securities and the Preferred Securities, as applicable,
pro rata based on their liquidation amount. However, in general, if Metropolitan
is in default under the Indenture on any Distribution Date or Redemption Date,
the Trust will not make any Distribution on, or pay the Redemption Price of, any
of its common securities, or make any other payment on account of the
redemption, liquidation or other acquisition of its common securities. In the
event of such a default, the Trust may make such payments only under limited
circumstances. In the case of payment of Distributions, the Trust must make
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 to the relevant date. In the case of payment of the Redemption Price,
the Trust must pay the full amount of the Redemption Price on all of the
outstanding Preferred Securities then called for redemption. In addition, the
Property Trustee must first apply all available funds to the payment in full in
cash of all Distributions on, or Redemption Price of, the Preferred Securities
then due and payable.
If an event of default occurs under the Trust Agreement as a result of an
event of default under the Indenture, Metropolitan, as holder of the Trust's
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 defaults with respect to the Preferred Securities are cured, waived or
otherwise eliminated. Until all such events of default under the Trust Agreement
are cured, waived or otherwise eliminated, the Property Trustee will act solely
on behalf of the holders of the Preferred Securities and not on behalf of
Metropolitan as holder of the Trust's common securities, and only the holders of
the Preferred Securities will be able 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 date or earlier redemption as provided in the Indenture. The Property
Trustee will apply the proceeds from the repayment or redemption to redeem
Preferred Securities with a liquidation value equal to the principal amount of
the Junior Subordinated Debentures so redeemed. The Property Trustee will give
not less than thirty nor more than sixty days' notice before the date fixed for
repayment or redemption. The Property Trustee will redeem the Preferred
Securities at a redemption price equal to the aggregate liquidation amount of
the 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."
Metropolitan may redeem the Junior Subordinated Debentures before maturity
on or after June 30, 2004, in whole at any time, or in part from time to time.
As a result,
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Metropolitan can cause a mandatory redemption of an equivalent liquidation value
of the Preferred Securities. Any time that a Tax Event, an Investment Company
Event or a Capital Treatment Event (each as defined herein) occurs and
continues, Metropolitan may redeem the Junior Subordinated Debentures in whole
but not in part. As a result, Metropolitan can cause a mandatory redemption of
the Preferred Securities in whole but not in part. Any redemption before the
stated maturity date of the Junior Subordinated Debentures will be subject to
prior regulatory approval, if then required, under applicable capital guidelines
or regulatory policies. See "Description of the Junior Subordinated
Debentures -- Redemption or Exchange."
REDEMPTION PROCEDURES
The Trust will redeem Preferred Securities at the Redemption Price by using
proceeds from the contemporaneous redemption of a liquidation value equal to the
principal amount of the Junior Subordinated Debentures. The Trust will redeem
the Preferred Securities and pay the Redemption Price on each Redemption Date
only to the extent that the Trust has funds on hand available for the payment of
the Redemption Price.
If the Trust gives a notice of redemption relating to the Preferred
Securities, then, by 10:00 a.m., New York City time, on the Redemption Date, the
Property Trustee will deposit irrevocably with Depository Trust Company ("DTC")
funds sufficient to pay the applicable Redemption Price. The Property Trustee
will also give DTC irrevocable instructions and authority to pay the Redemption
Price to holders when the holders surrender their certificates evidencing the
Preferred Securities. Despite any redemption, the Trust will make Distributions
payable on or before the Redemption Date for the Preferred Securities being
redeemed to recordholders of the Preferred Securities on the relevant record
dates. If the Trust has given a notice of redemption and deposited funds, then,
upon the date of such deposit, all rights of the holders of Preferred Securities
being redeemed will terminate, except for their right to receive the Redemption
Price without interest. In addition, upon the date of such deposit, such
Preferred Securities will cease to be outstanding.
If any date fixed for redemption of the Preferred Securities is not a
business day, the Trust will pay the Redemption Price on the next day which is a
business day. The Trust will not pay any interest or other payment as a result
of such delay. If that business day falls in the next calendar year, the Trust
will make the payment on the immediately preceding business day. If either the
Trust or Metropolitan improperly withholds or refuses to pay the Redemption
Price on the Preferred Securities being redeemed, under the Guarantee, the
Distributions on the Preferred Securities will continue to accrue. These
Distributions will accrue at the then applicable rate, from the Redemption Date
originally established by the Trust for such Preferred Securities to the date
such Redemption Price is actually paid. See "Description of the Guarantee."
Under such circumstances, the actual payment date will be the date fixed for
redemption for purposes of calculating the Redemption Price.
Subject to applicable law, Metropolitan 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 will be made to the recordholders as they appear on the register for
the Preferred Securities on the relevant record date. The relevant record date
will be one business day before the relevant Redemption Date. However, in the
event the Preferred Securities do not remain in book entry form, the relevant
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record date will be the date at least 15 days before the Redemption Date or
liquidation date, as applicable.
If the Trust redeems less than all of its common securities and the
Preferred Securities on a Redemption Date, then the aggregate liquidation amount
of the Trust's common securities and Preferred Securities to be redeemed will be
allocated pro rata to its common securities and the Preferred Securities based
upon the relative liquidation amounts of such classes. The Property Trustee will
select the particular Preferred Securities to be redeemed within 60 days of the
Redemption Date, 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 will 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 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
will 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.
The Trustee will mail notice of any redemption at least thirty but not more
than sixty days before the Redemption Date to each holder of the Preferred
Securities to be redeemed at its registered address. Unless Metropolitan
defaults in payment of the Redemption Price on the Junior Subordinated
Debentures, interest will cease to accrue, on and after the Redemption Date, on
the Junior Subordinated Debentures or portions those debentures called for
redemption.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES
TO HOLDERS
Metropolitan may at any time dissolve the Trust. After satisfaction of the
liabilities of creditors of the Trust as provided by law, Metropolitan may cause
Junior Subordinated Debentures to be distributed to the holders of the Preferred
Securities and the Trust's common securities in exchange for those securities
upon liquidation of the Trust.
After the liquidation date for any distribution of the Junior Subordinated
Debentures for Preferred Securities, those Preferred Securities will no longer
be deemed to be outstanding. 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 the distribution with respect to Preferred Securities held by DTC or its
nominee. 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 the 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 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. However, if there is a change in law, a
change in legal interpretation, a Tax Event or other circumstances, the
distribution could be a taxable event to holders of the Preferred Securities.
See "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 will automatically dissolve at
the end of its term. The Trust will also dissolve if any of the following events
occurs:
- the entry of an order for the dissolution of the Trust by a court of
competent jurisdiction;
- certain events of bankruptcy, dissolution or liquidation of Metropolitan,
subject in certain instances to any such event remaining in effect for a
period of ninety consecutive days;
- the distribution of a liquidation value equal to the principal amount of
the Junior Subordinated Debentures to the holders of its Preferred
Securities, if Metropolitan, as depositor, has given written direction to
the Property Trustee to dissolve the Trust (which direction is optional
and wholly within the discretion of Metropolitan, as depositor); and
- redemption of all of the Preferred Securities as described under
"-- Redemption."
If an early dissolution occurs as described in one of the first three
clauses listed above, the Trust trustees will liquidate the Trust as quickly as
possible by first satisfying the liabilities to creditors of the Trust, if any,
as provided by law, and then by distributing to the holders of the Preferred
Securities an equivalent liquidation value of the Junior Subordinated
Debentures. If the Administrative Trustees determine this distribution is not
practical, after satisfaction of liabilities to creditors of the Trust, if any,
as provided by law, holders of the Preferred Securities will receive out of the
assets of the Trust available for distribution to holders, an amount equal to
the liquidation amount plus accrued and unpaid Distributions to the date of
payment (such amount being the "Liquidation Distribution"). If the Liquidation
Distribution can be paid only in part because the Trust has insufficient assets
available to pay the Liquidation Distribution in full, then the Trust will pay
the amounts due on a pro rata basis. Metropolitan, as the holder of the Trust's
common securities, will receive distributions upon any such liquidation pro rata
with the holders of the Preferred Securities. However, if Metropolitan is in
default under the Indenture, the Preferred Securities will have a priority over
the Trust's 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 Preferred Securities
and the Trust's common securities issued under the Trust Agreement. Each event
constitutes an Event of Default regardless of the reason for the Event of
Default and whether it is voluntary or involuntary or 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:
- the occurrence of an event of default under the Indenture (see
"Description of the Junior Subordinated Debentures -- Debenture Events of
Default"); or
- default in the payment of any Distribution when it becomes due and
payable, and the continuation of the default for a period of 30 days; or
- default in the payment of any Redemption Price when it becomes due and
payable; or
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- default in the performance, or breach, in any material respect, of any
covenant or warranty of any trustee under 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 the clauses listed 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" under the Trust
Agreement; or
- the occurrence of certain events of bankruptcy or insolvency with respect
to the Property Trustee and the failure by Metropolitan to appoint a
successor Property Trustee within 60 days of such event of bankruptcy or
insolvency.
Within 90 days after the occurrence of any Event of Default actually known
to the Property Trustee, the Property Trustee will send notice of the Event of
Default to the holders of the Preferred Securities, the Administrative Trustees
and Metropolitan, as depositor, unless the Event of Default has been cured or
waived. Metropolitan, as depositor, and the Administrative Trustees are required
to file annually with the Property Trustee a certificate stating 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 will have a preference over the Trust's common
securities as described above. See "-- Subordination of the Trust's Common
Securities." The holders of the Preferred Securities cannot accelerate the
payment of the Preferred Securities due to an event of default.
REMOVAL OF THE TRUST TRUSTEES
Unless an event of default under the Indenture has occurred and is
continuing, the holder of the Trust's common securities may remove any trustee
under the Trust Agreement at any time. If an event of default under the
Indenture has occurred and is continuing, the holders of a majority in
liquidation amount of the outstanding Preferred Securities may remove the
Property Trustee at such time. The holders of the Preferred Securities will not
have the right to vote to appoint, remove or replace the Administrative
Trustees. The voting rights of the Administrative Trustees are vested
exclusively in Metropolitan as the holder of the Trust's common securities. No
resignation or removal of any trustee under the Trust Agreement and no
appointment of a successor trustee will be effective until the successor trustee
accepts its appointment in accordance with the provisions of the Trust
Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default has occurred and is continuing, for the purpose
of meeting the legal requirements of the Trust Indenture Act, if applicable, or
of any jurisdiction where part of the property and assets of the Trust are
located, Metropolitan, as the holder of the Trust's common securities, may
appoint one or more persons either to act as a co-trustee, jointly with the
Property Trustee, of all or any part of that Trust Property, or to act as
separate trustee of any of that property. The co-trustee or separate trustee
will have the powers described in the instrument of appointment. Metropolitan
may vest in the person or persons in such capacity any property, title, right or
power deemed necessary or desirable,
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subject to the provisions of the Trust Agreement. If an event of default under
the Indenture has occurred and is continuing, the Property Trustee alone may
make the appointment.
MERGER OR CONSOLIDATION OF THE PROPERTY TRUSTEE
Provided such entity shall be otherwise qualified and eligible, the
successor of the Property Trustee under the Trust Agreement will be:
- Any entity into which the trustee that is not a natural person may be
merged or converted,
- Any entity with which the trustee may be consolidated,
- Any entity resulting from any merger, conversion or consolidation to
which the trustee will be a party, or
- Any entity succeeding to all or substantially all the corporate trust
business of the trustee.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust 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 may, at the request of
Metropolitan, 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 if certain conditions are met.
These conditions are:
- the 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 in priority with respect to Distributions and payments upon
liquidation, redemption and otherwise,
- Metropolitan expressly appoints a trustee of the successor entity
possessing the same powers and duties as the Property Trustee as the
holder of the Junior Subordinated Debentures,
- 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,
- 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,
- the 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,
- the successor entity has a purpose substantially identical to that of the
Trust,
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- before the transaction, Metropolitan receives an opinion from independent
counsel experienced in such matters to the effect that (a) the
transaction 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 the
transaction, neither the Trust 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
- Metropolitan or any permitted successor or assignee owns all of the
common securities or its equivalent of the successor entity and
guarantees the obligations of the successor entity under the Successor
Securities at least to the extent provided by the Guarantee.
Even if these conditions are met, if the 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, the Trust will not enter into such
transaction without the consent of holders of 100% in liquidation amount of the
Preferred Securities.
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 Metropolitan, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities:
- with respect to acceptance of appointment of a successor trustee,
- 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 will not be inconsistent with the other
provisions of the Trust Agreement, or
- to modify, eliminate or add to any provisions of the Trust Agreement to
the extent necessary to ensure that the Trust 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
will not be required to register as an "investment company" under the
Investment Company Act.
If Metropolitan, the Property Trustee and the Administrative Trustees amend
the Trust Agreement to cure an ambiguity, the action may not adversely affect in
any material respect the interests of any holder of the Preferred Securities.
Any amendments of the Trust Agreement described above will become effective when
notice of the amendment is given to the holders of the Preferred Securities.
The Trust Agreement may be amended by the Trust trustees and Metropolitan
with:
- the consent of holders representing not less than a majority (based upon
liquidation amounts) of the outstanding Preferred Securities, and
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- receipt by the Trust trustees of an opinion of counsel to the effect that
such amendment or the exercise of any power granted to the Trust trustees
in accordance with such amendment will not affect the Trust's status as a
grantor trust for United States federal income tax purposes or the
Trust's exemption from status as an "investment company" under the
Investment Company Act.
Some of the provisions in the Trust Agreement may not be amended without
the consent of each affected holder of the Preferred Securities. Consent is
required to amend the Trust Agreement to:
- 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, and
- 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.
If the Junior Subordinated Debentures are held by the Property Trustee, the
Trust trustees will not take any of the following actions without obtaining the
prior approval of the holders of a majority in aggregate liquidation amount of
all outstanding Preferred Securities:
- direct the time, method and place of conducting any proceeding for any
remedy available to the trustee under the Indenture or executing any
trust or power conferred on the Property Trustee with respect to the
Junior Subordinated Debentures,
- waive any past default that is waivable under the Indenture,
- exercise any right to rescind or annul a declaration that the principal
of all the Junior Subordinated Debentures will be due and payable, or
- consent to any amendment, modification or termination of the Indenture or
the Junior Subordinated Debentures, where such consent is required.
If a consent under the Indenture would require the consent of each holder
of the Junior Subordinated Debentures affected by the actions described above,
the Property Trustee will not give that consent without the prior consent of
each holder of the Preferred Securities. The Trust trustees will 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 will notify each holder of the Preferred
Securities of any notice of default with respect to the Junior Subordinated
Debentures. In addition to obtaining the approval of the holders of the
Preferred Securities, before taking any of the foregoing actions, the Trust
trustees will obtain an opinion of counsel experienced in such matters to the
effect that the Trust 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 called for such purpose or
by written consent. The Property Trustee will cause a notice of any meeting at
which holders of the Preferred Securities are entitled to vote 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 to redeem and cancel the Preferred Securities in
accordance with the Trust Agreement.
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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 Metropolitan, the Trust trustees or any
affiliate of Metropolitan or the Trust trustees will, 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 is $10 per Preferred Security plus accumulated and
unpaid Distributions. This amount may be paid in the form of a distribution in
Junior Subordinated Debentures, subject to certain exceptions. See
"-- Liquidation Distribution Upon Dissolution."
EXPENSES AND TAXES
In the Indenture, Metropolitan, 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 including costs and expenses relating to the
organization of the Trust, the fees and expenses of the trustees under the Trust
Agreement and the costs and expenses relating to the operation of the Trust.
Metropolitan has also agreed to pay any and all taxes and all costs and expenses
with respect thereto (other than United States withholding taxes) to which the
Trust might become subject. These obligations of Metropolitan under the
Indenture are for the benefit of, and will be enforceable by, any person to whom
any such debts, obligations, costs, expenses and taxes are owed (a "Creditor")
whether or not that Creditor has received notice thereof. Any Creditor may
enforce the obligations of Metropolitan directly against Metropolitan.
Metropolitan has irrevocably waived any right or remedy to require that a
Creditor take any action against the Trust or any other person before proceeding
against Metropolitan. Metropolitan has also agreed in the Indenture to execute
any additional agreements necessary or desirable to give full effect to the
foregoing.
BOOK ENTRY, DELIVERY AND FORM
The Trust will issue the Preferred Securities in the form of one or more
fully registered global securities. The global securities will be deposited
with, or on behalf of, DTC and registered in the name of DTC's nominee. Unless
and until a global security is exchangeable in whole or in part for the
Preferred Securities in definitive form, the global security may not be
transferred except as a whole by:
- DTC to a nominee of DTC;
- a nominee of DTC to DTC or another nominee of DTC; or
- 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. Metropolitan expects that, when a
global security is issued, 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 the global security.
Ownership of beneficial interests in the 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
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interests of persons held through Participants). Beneficial owners will not
receive written confirmation from DTC of their purchase. However, Metropolitan
expects the beneficial owner 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 the 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 of the Preferred Securities under the
Indenture. Accordingly, to exercise any rights of a holder of Preferred
Securities under the Indenture, 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. Metropolitan understands that, under DTC's existing
practices, if Metropolitan 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. In
turn, those Participants would authorize beneficial owners owning through the
Participants to take the 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,
Metropolitan understands that it is DTC's existing practice to determine by lot
the amount of the interest of each Participant to be redeemed.
The Trust will make Distributions on the Preferred Securities registered in
the name of DTC or its nominee to DTC or its nominee, as the case may be, as the
registered owner of the global security representing such Preferred Securities.
None of Metropolitan, the Trust trustees, any Paying Agent (as defined herein)
or any other agent of Metropolitan or the Trust 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. DTC will
be responsible for the Disbursements of Distributions to Participants. 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 believes that
it will not receive payment on the payable date. Standing instructions and
customary practices will govern payments by Participants to beneficial owners,
as is the case with securities held for the accounts of customers in bearer form
or registered in "street name." The Participants will be responsible for such
payments, not DTC, Metropolitan, the Trust trustees, the Paying Agent or any
other agent of Metropolitan, 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
Metropolitan or the Trust trustees. If DTC notifies Metropolitan or the Trust
trustees that it is unwilling to continue as depository, or if it is unable to
continue or ceases to be a clearing agency registered under the Securities
Exchange Act of 1934 and a successor depository is not appointed by Metropolitan
within ninety days after receiving such notice or becoming aware that DTC is no
longer so registered, Metropolitan will issue the Preferred Securities in
definitive form
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upon registration of transfer of, or in exchange for, a global security. In
addition, the Trust may, at any time and in its sole discretion, determine not
to have the Preferred Securities represented by one or more global securities.
Under these and certain other circumstances, Metropolitan will issue Preferred
Securities in definitive form in exchange for all of the global securities
representing such Preferred Securities.
DTC has advised Metropolitan and the Trust of the following information.
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 Securities and
Exchange Act of 1934. 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. The use of electronic book entry changes eliminates the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include other
organizations. Some of the 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 Metropolitan and the Trust believe to be
reliable. However, neither Metropolitan nor the Trust take responsibility for
the accuracy of this information.
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. Secondary
market trading activity in the Preferred Securities will therefore be required
by DTC to settle in immediately available funds. Metropolitan can make no
assurance as to the effect, if any, of settlement in immediately available funds
on trading activity in the Preferred Securities.
PAYMENT AND PAYING AGENCY
DTC will credit payments in respect of the Preferred Securities to the
relevant accounts at DTC on the applicable Distribution Dates. If the Preferred
Securities are not held by DTC, the Paying Agent will make such payments by
check mailed to the address of the holder entitled to such payments at the
address appearing on the securities register for the Preferred Securities and
the Trust's common securities. The initial paying agent (the "Paying Agent")
will be the Property Trustee and any co-Paying Agent chosen by the Property
Trustee and acceptable to the Administrative Trustees. The Paying Agent may
resign as Paying Agent upon thirty days' written notice to the Trust trustees.
If the Property Trustee is no longer the Paying Agent, the Property Trustee will
appoint a successor to act as Paying Agent. The successor must be a bank or
trust company reasonably acceptable to the Administrative Trustees.
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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, except for the payment
of any tax or other governmental charges that may be imposed in connection with
any transfer or exchange. Upon any redemption, the Trust will not be required to
issue, register the transfer of, or exchange any Preferred Securities during a
period beginning at the opening of business fifteen 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. The
Trust will also not be required to register the transfer of or exchange any
Preferred Securities 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
Other than upon the occurrence and during the continuance of an Event of
Default, the Property Trustee undertakes to perform only such duties as are
specifically set forth in the Trust Agreement. After an Event of Default, the
Property Trustee 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 action as it deems advisable and in the best interests of
the holders of the Preferred Securities. The Property Trustee will have no
liability for such action except for its own negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are to conduct the affairs of and to operate
the Trust in such a way that the Trust 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 Metropolitan for United States federal income tax
purposes. Metropolitan and the Administrative Trustees are authorized to take
any action, not inconsistent with applicable law, the certificate of trust of
the Trust or the Trust Agreement, that Metropolitan 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.
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DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Metropolitan is to issue the Junior Subordinated Debentures under the
Indenture. The Indenture will be qualified as an indenture under the Trust
Indenture Act. This summary of key terms and provisions of the Junior
Subordinated Debentures and the Indenture is not complete and is subject to, and
is qualified in its entirety by reference to, the Indenture, and to the Trust
Indenture Act. Metropolitan has filed the form of the Indenture as an exhibit to
the Registration Statement of which this Prospectus forms a part.
GENERAL
At the same time the Trust issues the Preferred Securities, the Trust will
invest the proceeds from their sale, along with the consideration paid by
Metropolitan for the Trust's common securities, in the Junior Subordinated
Debentures. The Junior Subordinated Debentures will bear interest at the annual
rate of %, payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year (each, an "Interest Payment Date"), commencing June
30, 1999. Metropolitan will pay interest 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 immediately prior to the Interest Payment
Date. It is anticipated that, until the liquidation, if any, of the Trust, the
Property Trustee will hold the Junior Subordinated Debentures in trust for the
benefit of the holders of the Preferred Securities. Metropolitan will compute
the amount of interest payable for any period on the basis of a 360-day year of
twelve thirty-day months. If interest on the Junior Subordinated Debentures is
payable on a date that is not a business day, Metropolitan will pay that
interest on next day that is a business day. Metropolitan will not pay any
additional interest or other payment as a result of the delay. If that business
day is in the next calendar year, Metropolitan will make that payment on the
immediately preceding business day. This payment will have the same force and
effect as if it were made on the date the payment was originally payable.
Accrued interest that is not paid on the applicable Interest Payment Date will
bear additional interest at the rate per annum of % thereof, compounded
quarterly from the relevant Interest Payment Date. The term "interest" as used
in this section includes quarterly interest payments, interest on quarterly
interest payments not paid on the applicable Interest Payment Date and
Additional Interest (as defined herein), as applicable.
The Junior Subordinated Debentures have a stated maturity date of June 30,
2029.
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all indebtedness of Metropolitan
senior in right of payment to them. The Junior Subordinated Debentures will rank
equal in right of payment to the $27.8 million aggregate principal amount of
debentures Metropolitan sold during the second quarter of 1998 to Metropolitan
Capital Trust I. 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, is subject to the prior claims of creditors of that subsidiary,
except to the extent that Metropolitan 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
Metropolitan's subsidiaries, and holders of the Junior Subordinated Debentures
should look only to the assets of Metropolitan for payments on the Junior
Subordinated Debentures. The Indenture does not limit Metropolitan's ability to
incur or issue other secured or unsecured debt, including indebtedness senior in
right of payment to the Junior
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Subordinated Debentures, whether under the Indenture or any existing or other
indenture that Metropolitan may enter into in the future or otherwise.
RIGHT TO DEFER INTEREST PAYMENT OBLIGATION
If Metropolitan is not in default under the Indenture, Metropolitan may,
under the Indenture at any time or from time to time during the term of the
Junior Subordinated Debentures, defer the payment of interest on the Junior
Subordinated Debentures for a period not exceeding twenty consecutive quarters
with respect to each Extension Period. No Extension Period may extend beyond the
stated maturity date of the Junior Subordinated Debentures. At the end of each
Extension Period, Metropolitan 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
even though such holders would not receive current cash distributions with which
to pay tax, if any, arising with respect to such accrued interest income. See
"Federal Income Tax Consequences -- Interest Income and Original Issue
Discount."
During any Extension Period, Metropolitan may not taken certain actions.
Metropolitan may not make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of Metropolitan that rank
equal in priority with or junior in right of payment to the Junior Subordinated
Debentures. Metropolitan may not make any guarantee payments with respect to any
guarantee by Metropolitan of the debt securities of any subsidiary of
Metropolitan if such guarantee ranks equal in priority with or junior in right
of payment to the Junior Subordinated Debentures other than payments pursuant to
the Guarantee. Metropolitan may not 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:
- the reclassification of any class of Metropolitan's capital stock into
another class of capital stock,
- dividends or distributions in shares of common stock of Metropolitan,
- 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,
- payments under the Guarantee, and
- 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.
Additionally, during any Extension Period, Metropolitan will not redeem,
purchase or acquire less than all the outstanding Junior Subordinated Debentures
or any of the Preferred Securities.
Before the termination of any Extension Period, Metropolitan may further
defer the payment of interest on the Junior Subordinated Debentures if no
Extension Period exceeds twenty consecutive quarters or extends beyond the
stated maturity date of the Junior
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Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all Compounded Interest, Metropolitan may begin a new Extension
Period subject to the above requirements. No interest will be due and payable
during an Extension Period, except at the end of such Extension Period.
Metropolitan must give the Property Trustee, the Administrative Trustees and the
trustee under the Indenture notice of its election to begin an Extension Period
at least one Business Day before the earlier of:
- the date interest on the Junior Subordinated Debentures would have been
payable except for the election to begin such Extension Period or
- 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 before such record date.
The trustee under the Indenture will give notice of Metropolitan'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 Metropolitan may begin an
Extension Period.
ADDITIONAL INTEREST
If the Trust or the Property Trustee is required to pay any additional
taxes, duties or other governmental charges as a result of a Tax Event,
Metropolitan will pay such additional amounts on the Junior Subordinated
Debentures as required. The Trust will not reduce the Distributions payable by
it as a result of any such additional taxes, duties or other governmental
charges.
REDEMPTION OR EXCHANGE
The Junior Subordinated Debentures will not be subject to any sinking fund.
Metropolitan may redeem the Junior Subordinated Debentures before maturity
on or after June 30, 2004, in whole at any time or in part from time to time, or
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. In each case, the redemption price shall equal the
accrued and unpaid interest on the redeemed Junior Subordinated Debentures to
the date fixed for redemption, plus 100% of the principal amount of such Junior
Subordinated Debentures. Any redemption before the stated maturity date of the
Junior Subordinated Debentures will be subject to prior regulatory approval, if
then required under applicable capital guidelines or regulatory policies. The
restrictions in the indenture under which Metropolitan's 9.625% subordinated
notes maturing January 1, 2005 were issued will be inapplicable upon repayment
of the notes from the net proceeds of this offering.
Metropolitan will mail notice of any redemption at least thirty but not
more than sixty days before the redemption date to each holder of the Junior
Subordinated Debentures to be redeemed. Metropolitan will mail notice to such
holder's registered address. Unless Metropolitan defaults in payment of the
redemption price, on and after the redemption date interest ceases to accrue on
the Junior Subordinated Debentures or portions thereof called for redemption.
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"Additional Interest" means the additional amounts necessary so that the
amount of Distributions then due and payable by the Trust on its 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
has become subject as a result of a Tax Event.
"Investment Company Event" means the receipt by the Trust of an Opinion of
Counsel to the effect that, as a result 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 is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act and that the change becomes effective on or after the
date of original issuance of the Preferred Securities.
"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,
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 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 Metropolitan. There are
currently no capital adequacy guidelines applicable to savings and loan holding
companies such as Metropolitan.
"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:
- the Trust is, or will be within ninety 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,
- interest payable by Metropolitan on the Junior Subordinated Debentures is
not, or within ninety 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
- the Trust is, or will be within ninety 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 matters being opined upon, that is delivered to the Trust
trustees.
AUTHENTICATION
A Junior Subordinated Debenture will not be valid until authenticated
manually by an authorized signatory of the trustee under the Indenture, or by an
authenticating agent. That
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signature will be conclusive evidence that the Junior Subordinated Debenture has
been duly authenticated and delivered under the Indenture and that the holder is
entitled to the benefits of the Indenture. Each Junior Subordinated Debenture
will be dated the date of its authentication by the trustee under the Indenture.
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. If the Junior
Subordinated Debentures are distributed to holders of Preferred Securities,
Metropolitan anticipates that the depository arrangements for the Junior
Subordinated Debentures will be substantially identical to those in effect for
the Preferred Securities. See "Description of the Preferred Securities -- Book
Entry, Delivery and Form."
Although DTC has agreed to the procedures described above, DTC is under no
obligation to perform or continue to perform such procedures. DTC may
discontinue such procedures at any time. If DTC is at any time unwilling or
unable to continue as depository and a successor depository is not appointed by
Metropolitan within ninety days of receipt of notice from DTC, and in other
circumstances, including at Metropolitan's option, Metropolitan will cause the
Junior Subordinated Debentures to be issued in certificated form.
Metropolitan will make payments on Junior Subordinated Debentures
represented by a global security to Cede & Co., the nominee for DTC, as the
registered holder of the Junior Subordinated Debentures, as described under
"Description of the 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 Wilmington Trust
Company, the trustee under the Indenture, in Wilmington, Delaware or at the
offices of any Paying Agent or transfer agent appointed by Metropolitan.
However, at the option of Metropolitan, payment of any interest may be made:
- by check mailed to the address of the person entitled to such payment
that appears in the securities register for the Junior Subordinated
Debentures; or
- by wire transfer of immediately available funds upon written request to
the trustee under the Indenture no later than fifteen calendar days
before the date on which the interest is payable by a holder of $1
million or more in aggregate principal amount of the Junior Subordinated
Debentures.
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.
A holder of Junior Subordinated Debentures may present for exchange as
provided above, and may present for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), that holder's Junior Subordinated Debentures. The holder of
Junior Subordinated Debentures takes such action at the office of the securities
registrar appointed under the Indenture or at the office of any transfer agent
designated by Metropolitan without service charge and upon payment of any taxes
and other governmental charges as described in the Indenture. Metropolitan will
appoint
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the trustee under the Indenture as securities registrar under the Indenture.
Metropolitan may at any time designate additional transfer agents with respect
to the Junior Subordinated Debentures.
In the event of any redemption, neither Metropolitan nor the trustee under
the Indenture will be required to issue, register the transfer of, or exchange
Junior Subordinated Debentures during a period beginning at the opening of
business fifteen days before the day of mailing of notice for redemption of the
Junior Subordinated Debentures to be redeemed (if less than all are to be
redeemed) and ending at the close of business on the day of mailing of the
relevant notice of redemption. In addition, neither Metropolitan nor the trustee
under the Indenture will be required to transfer or exchange any Junior
Subordinated Debentures 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 trustee under the Indenture or any Paying
Agent, and any monies held by Metropolitan in trust, for the payment of the
principal of (and premium, if any) or interest on any Junior Subordinated
Debenture that remains unclaimed for two years after such principal (and
premium, if any) or interest has become due and payable will, at the request of
Metropolitan, be repaid to Metropolitan. After that repayment, the holder of the
Junior Subordinated Debenture will look, as a general unsecured creditor, only
to Metropolitan for payment of principal or interest.
RESTRICTIONS ON CERTAIN PAYMENTS
Metropolitan will also covenant, as to the Junior Subordinated Debentures,
that, during any Extension Period, it will not take certain actions.
Metropolitan will not make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of Metropolitan that
rank equal in priority with or junior in right of payment to the Junior
Subordinated Debentures. Metropolitan will not make any guarantee payments with
respect to any guarantee by Metropolitan of the debt securities of any
subsidiary of Metropolitan if such guarantee ranks equal in priority with or
junior in right of payment to the Junior Subordinated Debentures other than
payments pursuant to the Guarantee. Metropolitan will not 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:
- the reclassification of any class of Metropolitan's capital stock into
another class of capital stock;
- dividends or distributions payable in shares of common stock of
Metropolitan;
- 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;
- payments under the Guarantee; and
- 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.
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Additionally, Metropolitan will not redeem, purchase or acquire less than
all the outstanding Junior Subordinated Debentures or any of the Preferred
Securities if at such time:
- there shall have occurred an event of default under the Indenture,
- Metropolitan shall be in default with respect to its obligations under
the Guarantee relating to such Preferred Securities, or
- Metropolitan 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.
MODIFICATION OF INDENTURE
From time to time Metropolitan and the trustee under the Indenture may,
without the consent of the holders of the Junior Subordinated Debentures, amend,
waive or supplement the Indenture for specified purposes. These purposes
include, among other things, curing ambiguities, defects or inconsistencies,
changes that do not materially adversely affect the interest of the holders of
the Junior Subordinated Debentures and changes to qualify, or maintain the
qualification of, the Indenture under the Trust Indenture Act. The Indenture
contains provisions permitting Metropolitan and the trustee under the Indenture,
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. However, no such modification may, without the consent of the holder
of each outstanding Junior Subordinated Debenture so affected,
- extend the stated maturity date of the Junior Subordinated Debentures,
reduce the principal amount thereof or reduce the rate or extend the time
of payment of interest thereon, or
- 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 events with
respect to the Junior Subordinated Debentures that has occurred and is
continuing constitutes a "Debenture Event of Default":
- failure for thirty 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
- failure to pay any principal on the Junior Subordinated Debentures when
due, whether at stated maturity, upon declaration of acceleration of
maturity or otherwise; or
- failure to observe or perform certain other covenants contained in the
Indenture for ninety days after written notice to Metropolitan from the
trustee under the Indenture or the holders of at least 25% in aggregate
outstanding principal amount of the outstanding Junior Subordinated
Debentures; or
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- certain events in bankruptcy, insolvency or reorganization of
Metropolitan, subject in certain instances to any such event remaining in
effect for a period of sixty consecutive days.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures may direct the time, method and place of
conducting any proceeding for any remedy available to the trustee under the
Indenture. The trustee under the Indenture 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)
and all other Debenture Events of Default have been cured and Metropolitan has
deposited with the trustee under the Indenture a sum sufficient to pay all
matured installments of interest and principal due otherwise than by
acceleration.
Metropolitan is required to file annually with the trustee under the
Indenture a certificate as to whether or not Metropolitan 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 due to the
failure of Metropolitan to pay interest or principal on the Junior Subordinated
Debentures when payable, a holder of the Preferred Securities may institute a
legal proceeding directly against Metropolitan. That holder may institute such a
proceeding to enforce payment to the 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.
Metropolitan may not amend the Indenture to remove the right to bring such a
legal proceeding without the prior written consent of the holders of all of the
Preferred Securities. If the right to bring such a legal proceeding is removed,
the Trust may become subject to the reporting obligations under the Securities
and Exchange Act of 1934. Metropolitan may under the Indenture set-off any
payment made to such holder of the Preferred Securities by Metropolitan in
connection with such a legal proceeding.
The holders of the Preferred Securities will not be able to exercise
directly any remedies other than those described in the above 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 Metropolitan will 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 will consolidate with
or merge into Metropolitan or convey, transfer or lease its properties and
assets substantially as an entirety to Metropolitan unless certain conditions
prescribed in the Indenture are met. In the event Metropolitan consolidates with
or merges into another entity or conveys or transfers its properties and assets
substantially as an entirety to any entity, these conditions include that the
successor entity is organized under the laws of the United States or any state
or the District of Columbia, and that the successor
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entity expressly assumes Metropolitan's obligations on the Junior Subordinated
Debentures issued under the Indenture. In addition, immediately after giving
effect to the transaction, 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.
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 Metropolitan that may adversely affect
holders of the Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to
Metropolitan'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 Metropolitan will be deemed to have satisfied and discharged the
Indenture when certain events occur. These events include when all of the Junior
Subordinated Debentures not previously delivered to the trustee under the
Indenture for cancellation
- have become due and payable, or
- will become due and payable at their stated maturity date or will be
called for redemption within one year,
and Metropolitan deposits or causes to be deposited with the trustee under the
Indenture funds, in trust. The deposited funds are 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 trustee under the
Indenture for cancellation, for the principal and interest to the date of the
deposit or to the stated maturity date or redemption, as the case may be.
SUBORDINATION
In the Indenture, Metropolitan has covenanted and agreed that the Junior
Subordinated Debentures issued under the Indenture will be subordinate and
junior in right of payment to all indebtedness of Metropolitan senior in right
of payment to them 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
Metropolitan, the holders of indebtedness of Metropolitan senior in right of
payment to the Junior Subordinated Debentures will first receive payment in full
of principal of (and premium, if any) and interest, if any, on such senior
indebtedness. The holders of indebtedness senior in right of payment to the
Junior Subordinated Debentures will receive such payment before the holders of
the Junior Subordinated Debentures, or the Property Trustee on behalf of the
holders, 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 indebtedness senior in right of
payment to them outstanding at the time of such acceleration will receive
payment in full of all amounts due (including any amounts due upon acceleration)
before the holders of the Junior Subordinated Debentures
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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 indebtedness senior in right
of payment to the Junior Subordinated Debentures, or an event of default with
respect to any such senior indebtedness resulting in the acceleration of the
maturity of the senior indebtedness, and any payments so received may be
required to be paid over to the holders of the senior indebtedness.
The Indenture places no limitation on the amount of indebtedness senior in
right of payment to the Junior Subordinated Debentures that may be incurred by
Metropolitan. Metropolitan may from time to time incur indebtedness constituting
such senior indebtedness.
"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:
- every obligation of such person for money borrowed;
- 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;
- every reimbursement obligation of such person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account
of such person;
- 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);
- every capital lease obligation of such person;
- all indebtedness of such person whether incurred on or before 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
- every obligation of the type referred to in the clauses above 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 Metropolitan whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or before 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 equal in priority with, or subordinated to, the Junior Subordinated
Debentures. However, Senior Debt does not include:
- any Debt of Metropolitan 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 Metropolitan;
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- any Debt of Metropolitan to any of its subsidiaries; and
- any Debt to any employee of Metropolitan.
"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 Metropolitan whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or before the date of the Indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other Debt of Metropolitan (other than the Junior Subordinated Debentures),
except that Subordinated Debt shall not include the Junior Subordinated
Debentures or the $27.75 million aggregate principal amount of debentures
Metropolitan sold during the second quarter of 1998 to Metropolitan Capital
Trust I.
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 TRUSTEE UNDER THE INDENTURE
The trustee under the Indenture will 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 trustee under the Indenture
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 trustee under the Indenture
is not required to expend or risk its own funds or otherwise incur personal
financial liability in the performance of its duties if it reasonably believes
that repayment or adequate indemnity is not reasonably assured to it.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES
Under certain circumstances involving the termination of the Trust, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, Junior Subordinated Debentures may be distributed to the holders of the
Preferred Securities in exchange for their Preferred Securities upon liquidation
of the Trust. See "Description of the Preferred Securities -- Liquidation of the
Trust and Distribution of the Junior Subordinated Debentures to Holders." Any
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, Metropolitan 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. Metropolitan can make 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 Wilmington Trust Company, trustee
under the Indenture in the city of Wilmington, Delaware or at the offices of
such Paying Agent or Paying Agents as
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Metropolitan may designate from time to time. However, at the option of
Metropolitan, payment of any interest may be made
- by check mailed to the address of the person entitled to such payment
that appears in the securities register for the Junior Subordinated
Debentures, or
- by wire transfer of immediately available funds upon written request to
the trustee under the Indenture no later than fifteen calendar days
before the date on which the interest is payable by a holder of $1
million or more in aggregate principal amount of the Junior Subordinated
Debentures.
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 interest due and payable, but not timely paid. Metropolitan may at any
time designate additional Paying Agents or rescind the designation of any Paying
Agent.
Any monies deposited with the trustee under the Indenture or any Paying
Agent, or any monies held by Metropolitan 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 will be repaid to Metropolitan upon written request of Metropolitan on
May 31 of each year or (if then held in trust by Metropolitan) will be
discharged from such trust. After that repayment, the holders of the Junior
Subordinated Debentures will look, as general unsecured creditors, only to
Metropolitan for payment of such principal and interest.
REGISTRAR AND TRANSFER AGENT
The trustee under the Indenture 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. Metropolitan 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 if Metropolitan maintains a transfer agent in the place
of payment. Metropolitan may at any time designate additional transfer agents
with respect to the Junior Subordinated Debentures. In the event of any
redemption, neither Metropolitan nor the trustee under the Indenture will be
required to issue, register the transfer of or exchange Junior Subordinated
Debentures during a period beginning at the opening of business fifteen days
before the day of mailing of notice of redemption of Junior Subordinated
Debentures (if less than all are to be redeemed) and ending at the close of
business on the day of mailing of the relevant notice of redemption. In
addition, neither Metropolitan nor the trustee under the Indenture will be
required to transfer or exchange any Junior Subordinated Debentures 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
Metropolitan will execute and deliver the Guarantee at the same time the
Trust issues the Preferred Securities. Wilmington Trust Company will hold the
Guarantee as the trustee under the Guarantee for the benefit of the holders of
the Preferred Securities. The Guarantee will be qualified under the Trust
Indenture Act. This summary of certain provisions of the
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Guarantee is not 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. Metropolitan has filed the form of the Guarantee as an exhibit to the
Registration Statement of which this Prospectus forms a part.
GENERAL
To the extent described below, Metropolitan will irrevocably agree to pay
in full, on a subordinated basis, the Guarantee Payments (as defined herein) to
the holders of the Preferred Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. If not paid by or on behalf of the Trust, the
following payments that relate to the Preferred Securities (the "Guarantee
Payments") will be subject to the Guarantee:
- any accrued and unpaid Distributions required to be paid on the Preferred
Securities, to the extent that the Trust has funds on hand available for
such Distributions at such time;
- the Redemption Price, including unpaid Distributions to the date of
redemption, with respect to any Preferred Securities called for
redemption, to the extent that the Trust has funds on hand available to
pay such Redemption Price at such time; or
- upon a voluntary or involuntary dissolution, winding-up or termination of
the Trust (unless the Junior Subordinated Debentures are distributed to
holders of the Preferred Securities or all Preferred Securities are
redeemed), the lesser of:
- the liquidation amount and all accrued and unpaid Distributions on the
Preferred Securities, to the extent that the Trust has funds available
for such a payment at such time; and
- the amount of assets of the Trust remaining available for distribution
to holders of the Preferred Securities after satisfaction of
liabilities to creditors of the Trust as required by applicable law.
Metropolitan may satisfy its obligation to make a Guarantee Payment by
directly paying the required amounts to the holders of the Preferred Securities
or by causing the Trust to pay such amounts to such holders.
If Metropolitan does not make interest payments on the Junior Subordinated
Debentures held by the Trust, the Trust will not be able to pay Distributions on
the Preferred Securities and will not have funds available for such
Distributions. The Guarantee will rank subordinate and junior in right of
payment to all indebtedness of Metropolitan senior in right of payment to the
Junior Subordinated Debentures. See "Description of the Guarantee -- Status of
the Guarantee." Because Metropolitan is a holding company, the right of
Metropolitan to participate in any distribution of assets of any subsidiary upon
that subsidiary's liquidation or reorganization or otherwise is subject to the
prior claims of creditors of that subsidiary, except to the extent Metropolitan
may itself be recognized as a creditor of that subsidiary. Accordingly,
Metropolitan's obligations under the Guarantee will be effectively subordinated
to all existing and future liabilities of Metropolitan's subsidiaries, and
claimants should look only to the assets of Metropolitan for payments under the
Guarantee. The Guarantee does not limit Metropolitan's ability to incur or issue
other secured or unsecured debt, including indebtedness senior in right of
repayment to the Junior Subordinated Debentures, whether under the Indenture,
any other indenture that Metropolitan may enter into in the future, or
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otherwise. Metropolitan may from time to time incur indebtedness constituting
such senior indebtedness.
Metropolitan and the Trust believe that, taken together, the obligations of
Metropolitan under the Guarantee, the Trust Agreement, the Junior Subordinated
Debentures, the Indenture and the Expense Agreement (as defined herein),
constitute, in the aggregate, a full, irrevocable and unconditional guarantee,
on a subordinated basis, of all of the Trust'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'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 Metropolitan and
will rank subordinate and junior in right of payment to all indebtedness of
Metropolitan senior in right of repayment to the Junior Subordinated Debentures.
The Guarantee ranks equal to the guarantee agreement executed by Metropolitan in
respect of the 8.60% preferred securities sold during the second quarter of 1998
by Metropolitan Capital Trust I.
The Guarantee will constitute a guarantee of payment and not of collection.
As a result, the guaranteed party may institute a legal proceeding directly
against Metropolitan to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity. The trustee
under the Guarantee will hold the Guarantee for the benefit of the holders of
the Preferred Securities.
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 will bind the successors, assigns, receivers, trustees and
representatives of Metropolitan and will 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
Metropolitan 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 trustee under the
Guarantee in respect of such Guarantee or to direct the exercise of any trust or
power conferred upon the trustee under the Guarantee.
Metropolitan, as guarantor, is required to file annually with the trustee
under the Guarantee a certificate as to whether or not Metropolitan is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
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INFORMATION CONCERNING THE TRUSTEE UNDER THE GUARANTEE
The trustee under the Guarantee, other than during an event of default by
Metropolitan in the performance of the Guarantee, undertakes to perform only
such duties as are specifically set forth in the Guarantee. After an event of
default under the Guarantee, the trustee 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 trustee under the Guarantee 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 trustee under the Guarantee is not required
to expend or risk its own funds or otherwise incur personal financial liability
in the performance of its duties if the it 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:
- full payment of the Redemption Price of the Preferred Securities;
- full payment of the amounts payable upon liquidation of the Trust; or
- distribution of the Junior Subordinated Debentures to the holders of the
Preferred Securities in exchange for their Preferred Securities.
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.
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 Metropolitan under the
Trust Agreement (the "Expense Agreement"), Metropolitan will irrevocably and
unconditionally guarantee to each person or entity to whom the Trust becomes
indebted or liable, the full payment of any costs, expenses or liabilities of
the Trust, other than obligations of the Trust 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 may proceed directly
against Metropolitan under the Expense Agreement, regardless of whether such
creditors had notice of the Expense Agreement.
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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 has funds available for the payment of such
Distributions) are irrevocably guaranteed by Metropolitan as and to the extent
set forth under "Description of the Guarantee." Metropolitan and the Trust
believe that, taken together, the obligations of Metropolitan 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'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's obligations under the Preferred Securities. If and to the extent
that Metropolitan does not make payments on the Junior Subordinated Debentures,
the Trust will not pay Distributions or other amounts due on its Preferred
Securities. The Guarantee does not cover payment of Distributions when the Trust
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 legal
proceeding against Metropolitan for enforcement of payment of such Distributions
to such holder. The obligations of Metropolitan under the Guarantee are
subordinate and junior in right of payment to all indebtedness senior in right
of payment to the Junior Subordinated Debentures.
SUFFICIENCY OF PAYMENTS
If 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. Such payments are sufficient
primarily because:
- 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 the Trust's common securities;
- 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;
- Metropolitan will pay for all and any costs, expenses and liabilities of
the Trust except the Trust's obligations to holders of its Preferred
Securities; and
- the Trust Agreement further provides that the Trust will not engage in
any activity that is not consistent with the limited purposes of the
Trust.
Notwithstanding anything to the contrary contained in the Indenture,
Metropolitan has the right to set-off any payment it is otherwise required to
make under the Indenture if, and to the extent, Metropolitan has made, or is
concurrently making, a payment under the Guarantee.
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ENFORCEMENT RIGHTS OF HOLDERS OF THE PREFERRED SECURITIES
A holder of a Preferred Security may institute a legal proceeding directly
against Metropolitan to enforce its rights under the Guarantee without first
instituting a legal proceeding against the trustee under the Guarantee the Trust
or any other person or entity.
A default or event of default under any indebtedness of Metropolitan senior
to the Junior Subordinated Debentures would not constitute a default or event of
default under the Indenture. However, in the event of payment defaults under, or
acceleration of, any such senior indebtedness, 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.
LIMITED PURPOSE OF THE TRUST
The Preferred Securities evidence preferred undivided beneficial interests
in the Trust. The Trust exists for the sole purpose of issuing its Preferred
Securities and common securities and investing the proceeds of such issuance 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
Metropolitan 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 (or from Metropolitan under the Guarantee)
if, and to the extent, the Trust 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 involving the liquidation of the Junior Subordinated Debentures, after
satisfaction of liabilities to creditors of the Trust, if any, as provided by
applicable law, the holders of the Preferred Securities will receive, out of
assets held by the Trust, the Liquidation Distribution in cash. See "Description
of the Preferred Securities -- Liquidation Distribution Upon Dissolution." Upon
any voluntary or involuntary liquidation or bankruptcy of Metropolitan, the
Property Trustee, as holder of the Junior Subordinated Debentures, would be a
subordinated creditor of Metropolitan. As a result, the Property Trustee would
be subordinated in right of payment to all indebtedness of Metropolitan senior
in right of payment to the Junior Subordinated Debentures as set forth in the
Indenture, but entitled to receive payment in full of principal and interest
before any shareholders of Metropolitan receive payments or distributions. Since
Metropolitan is the guarantor under the Guarantee and has agreed to pay for all
costs, expenses and liabilities of the Trust (other than the Trust'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 Metropolitan in the event of
liquidation or bankruptcy of Metropolitan are expected to be substantially the
same.
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
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summary addresses only the tax consequences to a person that acquires Preferred
Securities on their original issue at the stated offering price. It 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 "synthetic security," "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. This summary also does not
address tax consequences to shareholders, partners or beneficiaries of a holder
of the Preferred Securities. Further, it does not include any description of any
alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the Preferred
Securities. Accordingly, each prospective investor should consult and should
rely exclusively on, such investor's own tax advisors in analyzing the federal,
state, local and foreign tax consequences of the purchase, ownership or
disposition of the Preferred Securities.
The statements of law or legal conclusions set forth in this summary
constitute the opinion of Thompson Hine & Flory LLP special tax counsel to
Metropolitan and the Trust. 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 AND THE JUNIOR SUBORDINATED DEBENTURES
In the opinion of Thompson Hine, for United States federal income tax
purposes under current law, the Trust will not be classified as an association
taxable as a corporation, and 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
Metropolitan, 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.
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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"). Metropolitan believes that the
likelihood of its exercising its option to defer payments of interest on the
Junior Subordinated Debentures is remote, because exercising that option would
prevent it from declaring dividends on any class of its shares. Based on the
foregoing, Metropolitan intends to take the position that the Junior
Subordinated Debentures were not issued with OID. 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"). In the
opinion of Thompson Hine, based upon Metropolitan's representations, it is not
unreasonable for Metropolitan to take the position that the likelihood of
deferral is remote. 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 Metropolitan 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. In addition, all stated interest (and de minimis OID, if
any) on the Junior Subordinated Debentures would thereafter be treated as OID if
the Junior Subordinated Debentures remained outstanding. In such event, all of a
Securityholder's interest income with respect to the 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 Metropolitan would not make and the Securityholder would not receive
any actual cash payments during an Extension Period.
A Securityholder that disposed of Preferred Securities before 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. 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 is not treated as an association taxable as a corporation, a distribution
by the Trust of the Junior Subordinated Debentures as described under the
caption "Description of the Preferred Securities -- Liquidation of the Trust and
Distribution of the Junior Subordinated Debentures to Holders" will be
nontaxable to the Securityholders. Such distribution will also result in a
Securityholder receiving its pro rata share of the Junior Subordinated
Debentures previously
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held indirectly through the Trust, 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 in the manner described above under " -- 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. Preferred Securities constituting a capital
asset which are acquired by an individual and held for more than one year 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.
If Metropolitan 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
for the period before 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. In addition, such
Securityholder would be required to add such amount to its adjusted tax basis in
its disposed of Preferred Securities. 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 a
certain limited exception, in the case of individual taxpayers 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, payments by the Trust
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 the following three conditions are met. First, the Securityholder
does not actually or constructively own 10% or more of the total combined voting
power of all classes of shares of Metropolitan entitled to vote. Second, the
Securityholder is not a controlled foreign corporation that is related to
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Metropolitan through share ownership. Third, either the Securityholder certifies
to the Trust or its agent, under penalties of perjury, that it is not a United
States holder and provides its name and address or 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 or its agent, 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 or its agent with a copy thereof. Under current United States federal
income tax law, 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") effective for payments of interest after December 31, 1999, were
issued that provide alternative methods for satisfying the certification
requirements described in the third condition above. The Withholding Tax
Regulations also require, in the case of Preferred Securities held by a foreign
partnership, that the certification described in the third condition above be
provided by the partners rather than by the foreign partnership. A look-through
rule would apply in the case of tiered partnerships. Prospective investors are
urged to consult their tax advisors with respect to the effect of the
Withholding Tax Regulations. The Trust will issue a Form 1042 or 1042-S, where
appropriate.
PROPOSED TAX LAW CHANGES
Legislation has been introduced in the United States Congress in the past
that, if enacted, would have denied an interest deduction to issuers of
instruments such as the Junior Subordinated Debentures that were issued after
the date such legislation was proposed. No such legislation is currently
pending. We cannot assure you, however, that similar legislation will not
ultimately be enacted into law, possibly with retroactive effect, or that there
will not be other developments that would adversely affect the tax treatment of
the Junior Subordinated Debentures and could result in the occurrence of Tax
Event, possibly leading to the redemption of the Junior Subordinated Debentures.
See "Description of the Junior Subordinated Debentures -- Redemption or
Exchange."
Metropolitan is aware of at lease one case, involving Enron Corporation,
now pending before the United States Tax Court where the IRS initially sought to
disallow the deduction for interest expense on securities that are similar to,
although different in a number of respects from, the Junior Subordinated
Debentures. Such securities were issued in 1993 and 1994 to partnerships that,
in turn, issued "monthly income preferred securities." In a recently filed
stipulation in the United States Tax Court, the IRS conceded that Enron was
entitled to deduct its interest expense on the securities. Although the IRS has
apparently conceded the interest deductibility issue in the Enron case, there
can be no assurance that the IRS will not challenge the interest deductions of
other taxpayers (such as Metropolitan) which issue similar types of preferred
securities.
INFORMATION REPORTING TO SECURITYHOLDERS
Generally, income on the Preferred Securities will be reported to
Securityholders on Forms 1099-INT (Forms 1099-OID if interest is accounted for
under the OID rules), which will be mailed to securityholders by January 31
following each calendar year.
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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
Metropolitan and certain affiliates of Metropolitan 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 an employee benefit 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 Metropolitan, or any
affiliate of Metropolitan, 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
SALE OF THE COMMON STOCK
Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement"), dated , 1999, among Metropolitan, the Trust
and the Underwriter, Metropolitan has agreed to sell to the Underwriter, and the
Underwriter has agreed to purchase from Metropolitan, 600,000 shares of Common
Stock. The Underwriting Agreement provides that the obligations of the
Underwriter are subject to certain conditions precedent. The Underwriter has
agreed to purchase and pay for all shares of Common Stock (other than those
shares subject to the over-allotment described below) if any are purchased.
Metropolitan has been advised by the Underwriter that the Underwriter
proposes to offer the shares of Common Stock to the public at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per share. The
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain other dealers. After the initial offering to the
public, the offering price and other selling terms may be changed by the
Underwriter.
Metropolitan has granted to the Underwriter an option, exercisable not
later than thirty days after the date of this Prospectus, to purchase up an
additional 90,000 shares of Common Stock at the public offering price per share.
To the extent that the Underwriter exercises such option, Metropolitan will be
obligated, pursuant to the option, to sell such shares of Common Stock to the
Underwriter. The Underwriter may exercise such option only to cover over-
allotments made in connection with the sale of the shares of Common Stock.
Metropolitan, its directors and officers have agreed not to offer, sell or
otherwise dispose of any shares of the Common Stock or any securities
convertible into or exchangeable for
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shares of Common Stock of Metropolitan for 180 days after the date of this
prospectus without the prior written consent of the Underwriter except for:
- the issuance by Metropolitan of Common Stock pursuant to the exercise of
stock options under Metropolitan's option plans as disclosed in this
prospectus;
- the granting by Metropolitan of stock options after the date of this
prospectus under the option plans;
- as a bona fide gift to a third party or as a distribution to the partners
or stockholders of a Metropolitan shareholder, provided the recipient(s)
thereof agree to be bound by the terms of the lock-up arrangement to
which such shareholder is bound.
SALE OF THE PREFERRED SECURITIES
Subject to the terms and conditions of the Underwriting Agreement, the
Trust has agreed to sell to the Underwriter, and the Underwriter has agreed to
purchase from the Trust, $30 million 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.
Metropolitan 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.
Metropolitan has granted to the Underwriter an option, exercisable not
later than thirty days after the date of this prospectus, to purchase up to an
additional $4.5 million aggregate liquidation amount of the Preferred Securities
at the public offering price plus accrued Distributions, if any, from
, 1999. To the extent that the Underwriter exercises such option,
Metropolitan 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 $30
million aggregate liquidation amount of the Preferred Securities are being
offered.
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
Metropolitan, the Underwriting Agreement provides that Metropolitan will pay as
compensation for the Underwriter's arranging the investment therein of such
proceeds an amount of $0.375 per Preferred Security (or $1,125,000 ($1,293,750
if the over-allotment option is exercised in full) in the aggregate).
Metropolitan has also agreed to reimburse the Underwriter for its reasonable
out-of-pocket expenses, including legal fees (not to exceed $75,000 (excluding
"blue sky" work) without the prior written consent of Metropolitan) and expenses
relating to the offering of the Preferred Securities.
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Because the National Association of Securities Dealers, Inc. (the "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. Metropolitan and the Trust 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.
GENERAL
Although the Common Stock is listed on the Nasdaq Stock Market's National
Market and the Trust intends to list the Preferred Securities on the Nasdaq
Stock Market's National Market, Metropolitan can make no assurances as to the
liquidity of the Common Stock and the Preferred Securities. See "Risk
Factors -- Risk Factors Relating to the Common Stock -- Trading Volume for the
Common Stock May be Limited" and " -- Risk Factors Relating to the Preferred
Securities -- There is No Current Public Market for the Preferred Securities."
The offering price of the Common Stock and the offering price and distribution
rate of the Preferred Securities have been determined by negotiations among
representatives of Metropolitan, the Trust and the Underwriter. Such offering
prices may not be indicative of the market price of the Common Stock or the
Preferred Securities following the offering.
In connection with the offering, 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 Common Stock and 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 Common Stock or Preferred Securities than it
is committed to purchase. In such a case, to cover all or part of the short
position, the Underwriter may exercise either or both of the over-allotment
option described above to purchase additional Common Stock or Preferred
Securities or may purchase Common Stock or Preferred Securities in the open
market following completion of the initial offering. The Underwriter also may
engage in stabilizing transactions in which it bids for, and purchases, Common
Stock or 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 Common Stock or 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 Common Stock or the Preferred Securities at a level above that
which might otherwise prevail in the open market. Neither Metropolitan 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 Common Stock or the Preferred Securities. The Underwriter is not
required to
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engage in any of the foregoing transactions and, if commenced, such transactions
may be discontinued at any time without notice.
Metropolitan and the Trust have agreed to indemnify the Underwriter against
certain liabilities, including liabilities under the Securities Act of 1933.
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 will be passed upon by Richards, Layton & Finger, P.A., special Delaware
counsel to Metropolitan and the Trust. The validity of the Guarantee and the
Junior Subordinated Debentures will be passed upon for Metropolitan 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 Metropolitan by Thompson Hine.
Malvin E. Bank, a partner of Thompson Hine, is Secretary, Assistant
Treasurer and a Director of Metropolitan and a Director of the Bank. Mr. Bank
owns 16,500 shares of Common Stock of Metropolitan. Other partners of Thompson
Hine own a total of 660 shares of Common Stock of Metropolitan and 600 of
Metropolitan's 8.60% preferred securities.
EXPERTS
The consolidated financial statements of Metropolitan as of December 31,
1998 and 1997, and for each of the three years in the period ended December 31,
1998, included in this Prospectus and Registration Statement have been included
in reliance upon the report of Crowe, Chizek and Company LLP, as set forth in
its report thereon, appearing elsewhere in this Prospectus. 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.
WHERE YOU CAN FIND MORE INFORMATION
Metropolitan files annual, quarterly, and current reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"). You can read and copy such reports, proxy statements and other
information at the following locations of the Commission:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661
</TABLE>
You may also obtain copies of this information by mail at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can obtain further information on the operation of
the Commission's Public Reference Room in Washington, D.C. by calling the
Commission at 1-800-SEC-0330.
The Commission also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers like Metropolitan
who file electronically with the Commission. The address of that site is
http://www.sec.gov.
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Metropolitan and the Trust have filed with the Commission a Registration
Statement on Form S-1 (together with all amendments, the "Registration
Statement") that relates to the Common Stock, the Preferred Securities, the
Junior Subordinated Debentures and the Guarantee. This prospectus is only part
of the Registration Statement. It does not contain all of the information in the
Registration Statement. The rules and regulations of the Commission permit us to
omit certain portions of the Registration Statement from the prospectus. For
more information regarding Metropolitan, the Trust, the Preferred Securities,
the Junior Subordinated Debentures and the Guarantee, you should refer to the
Registration Statement, including the attached exhibits.
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. The descriptions of such documents are brief and are
not necessarily complete. As a result, we urge you to refer to the copy of each
material contract, report and exhibit attached to the Registration Statement for
a more complete description of such document. Each such statement in this
prospectus is qualified in its entirety by reference to the complete document.
You may read the Registration Statement without charge at the principal office
of the Commission in Washington, D.C., and you may obtain copies of all or part
of it from the Commission by paying the prescribed fees.
Metropolitan will provide to the holders of the Common Stock and 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 Common Stock and the
Preferred Securities who so request in writing addressed to the Secretary of
Metropolitan.
No separate financial statements of the Trust have been included herein.
Metropolitan 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 will be owned by Metropolitan, a reporting company under the
Securities and Exchange Act of 1934, (ii) the Trust has no independent
operations but exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of the Trust and investing the
proceeds thereof in Junior Subordinated Debentures issued by Metropolitan, and
(iii) Metropolitan and the Trust believe that, taken together, the obligations
of Metropolitan 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's obligations under the Preferred
Securities. See "Description of the Junior Subordinated Debentures" and
"Description of the Guarantee."
The Trust is not currently subject to the information reporting
requirements of the Securities and Exchange Act of 1934 and Metropolitan does
not expect that the Trust will file reports, proxy statements and other
information under this Act with the Commission.
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METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
MAYFIELD HEIGHTS, OHIO
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
CONTENTS
<TABLE>
<S> <C>
REPORT OF INDEPENDENT AUDITORS.............................. F-2
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION............ F-3
CONSOLIDATED STATEMENTS OF OPERATIONS..................... F-4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY................................................. F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS..................... F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................ F-7
</TABLE>
F-1
<PAGE> 136
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, 1998 and 1997, and
the related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
Crowe, Chizek and Company LLP
Cleveland, Ohio
February 12, 1999
F-2
<PAGE> 137
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
-------------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks............................ $ 19,810,617 $ 14,152,785
Interest-bearing deposits in other banks........... 9,275,257 1,961,183
Securities purchased under resale agreements....... 6,396,720
-------------- ------------
Cash and cash equivalents........................ 29,085,874 22,510,688
Securities available for sale...................... 19,443,264 1,705,879
Securities held to maturity........................ 16,217,406 4,740,000
Mortgage-backed securities available for sale...... 198,295,290 143,166,654
Loans held for sale................................ 15,016,632 14,230,130
Loans receivable, net.............................. 1,018,270,921 693,654,608
Federal Home Loan Bank stock, at cost.............. 6,053,900 5,349,700
Accrued interest receivable........................ 8,678,479 5,752,161
Premises and equipment, net........................ 19,113,869 13,927,911
Real estate owned, net............................. 5,534,229 2,037,465
Intangible assets.................................. 2,723,880 2,986,539
Loan servicing rights.............................. 13,412,167 9,223,974
Prepaid expenses and other assets.................. 11,587,703 5,698,912
-------------- ------------
Total assets.................................. $1,363,433,614 $924,984,621
============== ============
LIABILITIES
Noninterest-bearing deposits....................... $ 63,716,544 $ 46,234,027
Interest-bearing deposits.......................... 987,640,170 691,547,834
Borrowings......................................... 215,485,780 135,869,673
Accrued interest payable........................... 5,511,306 3,272,815
Other liabilities.................................. 20,685,291 11,399,016
-------------- ------------
Total liabilities............................. 1,293,039,091 888,323,365
-------------- ------------
Guaranteed Preferred Beneficial Interests in the
Corporation's Junior Subordinated Debentures..... 27,750,000
SHAREHOLDERS' EQUITY
Preferred stock, 10,000,000 shares authorized
Common stock, no par value, 10,000,000 shares
authorized, 7,756,393 shares issued and
outstanding
Additional paid-in capital......................... 18,505,174 11,101,383
Retained earnings.................................. 23,660,349 24,269,873
Accumulated other comprehensive income............. 479,000 1,290,000
-------------- ------------
Total shareholders' equity.................... 42,644,523 36,661,256
-------------- ------------
Total liabilities and shareholders'
equity................................... $1,363,433,614 $924,984,621
============== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 138
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans.................................. $74,059,415 $61,230,083 $50,267,618
Interest on mortgage-backed securities...................... 8,894,573 6,946,824 2,890,437
Interest and dividends on other investments................. 2,774,186 1,169,208 1,293,828
----------- ----------- -----------
Total interest income................................... 85,728,174 69,346,115 54,451,883
----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits........................................ 42,536,460 34,120,452 28,131,837
Interest on borrowings...................................... 9,614,062 7,582,855 4,984,212
Interest on Junior Subordinated Debentures.................. 1,633,454
----------- ----------- -----------
Total interest expense.................................. 53,783,976 41,703,307 33,116,049
----------- ----------- -----------
NET INTEREST INCOME......................................... 31,944,198 27,642,808 21,335,834
Provision for loan losses................................... 2,650,000 2,340,000 1,635,541
----------- ----------- -----------
Net interest income after provision for loan losses......... 29,294,198 25,302,808 19,700,293
----------- ----------- -----------
NONINTEREST INCOME
Net gain on sale of loans................................... 3,452,612 488,104 202,621
Loan servicing income, net.................................. 788,305 1,292,719 1,203,779
Service charges on deposit accounts......................... 905,659 715,657 564,654
Net gain on sale of securities.............................. 70,033 92,338 133,706
Loan option income.......................................... 388,006 320,464 695,798
Loan credit discount income................................. 137,104
Other operating income...................................... 1,574,844 1,231,524 972,057
----------- ----------- -----------
Total noninterest income................................ 7,316,563 4,140,806 3,772,615
----------- ----------- -----------
NONINTEREST EXPENSE
Salaries and related personnel costs........................ 13,668,661 10,671,192 8,669,705
Occupancy and equipment expense............................. 3,618,751 3,044,220 2,464,926
Federal deposit insurance premiums.......................... 688,037 595,268 4,211,869
Marketing expense........................................... 907,831 685,954 694,898
State franchise taxes....................................... 622,762 542,577 461,127
Data processing expense..................................... 491,604 441,335 599,150
Amortization of intangibles................................. 262,659 262,659 255,720
Other operating expenses.................................... 5,261,961 3,905,522 3,481,610
----------- ----------- -----------
Total noninterest expense............................... 25,522,266 20,148,727 20,839,005
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM........... 11,088,495 9,294,887 2,633,903
Provision for income taxes.................................. 4,049,000 3,492,000 1,095,000
----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM............................ 7,039,495 5,802,887 1,538,903
----------- ----------- -----------
Extraordinary item.......................................... (245,228)
NET INCOME.................................................. $ 6,794,267 $ 5,802,887 $ 1,538,903
=========== =========== ===========
Basic earnings per share:
Before extraordinary item................................. $ 0.91 $ 0.75 $ 0.22
Extraordinary item........................................ 0.03
----------- ----------- -----------
Basic earnings per share.................................... $ 0.88 $ 0.75 $ 0.22
=========== =========== ===========
Diluted earnings per share:
Before extraordinary item................................. $ 0.90 $ 0.75 $ 0.22
Extraordinary item........................................ 0.03
----------- ----------- -----------
Diluted earnings per share................................ $ 0.87 $ 0.75 $ 0.22
=========== =========== ===========
Weighted average shares for basic earnings per share........ 7,756,393 7,756,393 7,023,064
Effect of dilutive stock options............................ 82,412 12,899
----------- ----------- -----------
Weighted average shares for diluted earnings per share...... 7,838,805 7,769,292 7,023,064
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 139
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN RETAINED COMPREHENSIVE SHAREHOLDERS'
STOCK CAPITAL EARNINGS INCOME EQUITY
------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1996......... $ 100 $ 7,801,283 $16,928,083 $ 736,949 $25,466,415
Comprehensive income:
Net income.................... 1,538,903 1,538,903
Change in unrealized gain on
securities, net of tax and
net of reclassification of
gain of $88,000 from net
income...................... (60,949) (60,949)
-----------
Total comprehensive
income.................... 1,477,954
Issuance of 400,000 shares of
Common stock................ 3,300,000 3,300,000
Change in stated value of
common stock................ (100) 100 --
----- ----------- ----------- ---------- -----------
BALANCE DECEMBER 31, 1996....... 11,101,383 18,466,986 676,000 30,244,369
Comprehensive income:
Net income.................... 5,802,887 5,802,887
Change in unrealized gain on
securities, net of tax and
net of reclassification of
gain of $60,000 from net
income...................... 614,000 614,000
-----------
Total comprehensive
income.................... 6,416,887
----- ----------- ----------- ---------- -----------
BALANCE DECEMBER 31, 1997....... 11,101,383 24,269,873 1,290,000 36,661,256
Comprehensive income:
Net income.................... 6,794,267 6,794,267
Change in unrealized gain on
securities, net of tax and
net of reclassification of
gain of $46,000 from net
income...................... (811,000) (811,000)
-----------
Total comprehensive
income.................... 5,983,267
10% stock dividend............ 7,403,791 (7,403,791) --
----- ----------- ----------- ---------- -----------
BALANCE DECEMBER 31, 1998....... $18,505,174 $23,660,349 $ 479,000 $42,644,523
===== =========== =========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 140
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................. $ 6,794,267 $ 5,802,887 $ 1,538,903
Adjustments to reconcile net income to net cash provided by
operating activities:
Net amortization and depreciation........................ 4,338,086 4,533,303 3,022,358
Gain on sale of securities............................... (70,033) (92,338) (133,706)
Provision for loan and REO losses........................ 2,850,000 2,340,000 1,677,541
Deferred tax provision................................... (709,604) (1,131,325) (183,303)
Loans originated for sale................................ (211,676,778) (36,731,553) (35,235,545)
Loans purchased for sale................................. (49,446,855) (10,654,255) (16,675,331)
Proceeds from sale of loans.............................. 258,063,886 51,402,212 43,410,896
Repayments on loans held for sale........................ 39,180 809,737
Loss on sale of premises, equipment and real estate
owned.................................................. 122,839 104,608 113,428
FHLB stock dividend...................................... (400,100) (348,800) (264,100)
Changes in other assets.................................. (5,179,187) (865,930) (2,980,967)
Changes in other liabilities............................. 6,888,774 (561,078) 1,051,576
-------------- -------------- --------------
Net cash provided by (used in) operating activities.... 11,575,295 13,836,911 (3,848,513)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Disbursement of loan proceeds.............................. (450,712,197) (288,659,170) (218,376,200)
Purchases of:
Loans.................................................... (280,336,145) (103,062,046) (110,565,748)
Mortgage-backed securities............................... (45,663,268) (6,364,379) (13,570,050)
Securities available for sale............................ (38,556,800) (5,101,096) (13,336,840)
Securities held to maturity.............................. (16,212,500) (4,740,000)
Mortgage Loan servicing rights........................... (4,282,274) (2,055,908) (732,262)
FHLB stock............................................... (304,100) (1,012,300) (155,800)
Premises and equipment................................... (6,616,504) (3,713,528) (4,506,250)
Proceeds from maturities and repayments of:
Loans.................................................... 287,095,932 208,024,684 140,245,124
Mortgage-backed securities............................... 46,348,016 18,111,121 7,189,624
Securities available for sale............................ 8,000,000 6,051,195
Securities held to maturity.............................. 4,740,000
Proceeds from sale of:
Loans.................................................... 13,470,986 14,088,337 12,106,490
Mortgage-backed securities............................... 43,187,001 3,636,772
Securities available for sale............................ 12,800,000 16,582,643 16,690,055
Premises, equipment and real estate owned................ 1,225,767 551,043 1,250,813
Additional investment in real estate owned................. (52,278) (88,481)
Premium paid for credit card relationships................. (10,359) (306,146)
-------------- -------------- --------------
Net cash used for investing activities................. (425,868,364) (157,449,439) (174,379,223)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposit accounts............................. 313,502,148 115,604,639 118,279,840
Proceeds from borrowings................................... 217,007,000 115,219,000 210,000,000
Repayment of borrowings.................................... (172,290,893) (76,223,000) (155,000,000)
Proceeds from issuance of Guaranteed preferred Beneficial
Interests in the corporation's Junior Subordinated
Debentures............................................... 27,750,000
Net activity on lines of credit............................ 34,900,000 (5,000,000)
Proceeds from issuance of stock............................ 3,300,000
-------------- -------------- --------------
Net cash provided by financing activities.............. 420,868,255 149,600,639 176,579,840
-------------- -------------- --------------
Net change in cash and cash equivalents.................... 6,575,186 5,988,111 (1,647,896)
Cash and cash equivalents at beginning of year............. 22,510,688 16,522,577 18,170,473
-------------- -------------- --------------
Cash and cash equivalents at end of year................... $ 29,085,874 $ 22,510,688 $ 16,522,577
============== ============== ==============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................... $ 51,545,485 $ 42,550,655 $ 33,546,947
Income taxes........................................... 4,217,500 4,871,000 1,587,000
Transfer from loans receivable to other real estate...... 4,844,182 2,282,807 1,325,948
Transfer from loans receivable to loans held for sale.... 9,678,044
Loans securitized........................................ 100,710,462 98,324,696 14,458,129
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 141
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997, AND 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Metropolitan Financial Corp. ("Metropolitan" or the "Corporation") is a
savings and loan holding company and an Ohio corporation. Metropolitan is
engaged in the business of originating multifamily and commercial real estate
loans primarily in Ohio, Pennsylvania, Michigan, and Kentucky and purchases
multifamily and commercial real estate loans throughout the United States.
Metropolitan offers full service banking services to communities in Northeast
Ohio where its additional lending activities include originating one-to
four-family residential real estate, construction, business and consumer loans.
The accounting policies of the Corporation conform to generally accepted
accounting principles and prevailing practices within the financial services
industry. A summary of significant accounting policies follows:
CONSOLIDATION POLICY: The Corporation and its wholly owned subsidiaries,
MetroCapital Corporation, Metropolitan Capital Trust I and Metropolitan Bank and
Trust Company (the "Bank"), formerly known as Metropolitan Savings Bank of
Cleveland and its wholly-owned subsidiaries, are included in the accompanying
consolidated financial statements. All significant intercompany balances have
been eliminated.
USE OF ESTIMATES: 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
loan losses, 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 17. 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 activity on line of credit borrowings.
F-7
<PAGE> 142
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
and recognized as part of comprehensive income. 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 deferred costs and accretion of
discounts and deferred fees using the interest method. At December 31, 1998 and
1997, 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: The allowance for losses on loans is
established by a provision for loan losses charged against income. 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 probable 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 often 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
F-8
<PAGE> 143
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
losses. Management excludes all consumer loans and residential single family
loans with balances less than $200,000 from its review for impairment. However,
these loans are considered in determining the appropriate level of the allowance
for loss on loans. 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 the lower of fair value, less estimated selling
costs or cost at the date of foreclosure. Any reduction from the carrying value
of the related loan to fair value at the time of acquisition is accounted for as
a charge-off. 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
shareholder's equity in calculating tangible capital for regulatory purposes.
Identifiable intangible assets are amortized over the estimated periods of
benefit.
LOAN SERVICING RIGHTS: Purchased mortgage servicing rights are initially
valued at cost. When originated 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 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.
F-9
<PAGE> 144
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. When a loan
is placed on nonaccrual status, accrued and unpaid interest is charged against
income. Payments received on nonaccrual loans are applied against principal
until the recovery of the remaining balance is reasonably assured. The net
amount deferred is reported in the consolidated statements of financial
condition as a reduction of loans.
LOAN OPTION INCOME: Periodically 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, excluding Metropolitan
Capital Trust I, 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 one period and recognized for income tax
purposes in a different period. A valuation allowance, if needed, reduces
deferred tax assets to the amount expected to be realized.
STOCK OPTIONS: Expense for employee compensation under stock option plans
is based on Accounting Principles Board ("APB") Opinion No. 25 with expense
reported only if options are granted below market price at grant date. Pro forma
disclosures of net income and earnings per share are provided as if the fair
value method of SFAS No. 123 were used for stock based compensation. For the
periods presented, no expense has been recognized as the option price of the
common shares equals or exceeds the market 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: 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. The Corporation declared a 100% stock
split in the form of a dividend in 1997. During 1998, the Corporation declared a
10% stock dividend which was recorded by a transfer, equal to the fair value of
the shares issued, from retained earnings to additional paid in capital. All per
share information has been retroactively adjusted to reflect the effect of the
stock dividend and stock split.
COMPREHENSIVE INCOME: Comprehensive income consists of net income and
other comprehensive income. Other comprehensive income includes unrealized gains
and losses on securities available for sale which are also recognized as
separate components of equity. The
F-10
<PAGE> 145
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accounting standard that requires reporting comprehensive income first applies
for 1998, with prior information restated to be comparable.
NEW ACCOUNTING PRONOUNCEMENTS: Beginning January 1, 2000, a new accounting
standard will require all derivatives to be recorded at fair value. Unless
designated as hedges, changes in these fair values will be recorded in the
income statement. Fair value changes involving hedges will generally be recorded
by offsetting gains and losses on the hedge and on the hedged item, even if the
fair value of the hedged item is not recorded. This is not expected to have a
material effect but the effect will depend on derivative holdings when this
standard applies.
Mortgage loans originated in mortgage banking are converted into securities
on occasion. A new accounting standard for 1999 will allow classifying these
securities as available for sale, trading, or held to maturity, instead of the
current requirement to classify as trading. This is not expected to have a
material effect but the effect will vary depending on the level and designation
of securitizations as well as as on market price movements.
LOSS CONTINGENCIES: Loss contingencies, including claims and legal actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will have
a material effect on the financial statements.
INDUSTRY SEGMENT: Internal financial information is primarily reported and
aggregated in two lines of business, retail and commercial banking and mortgage
banking.
FINANCIAL STATEMENT PRESENTATION: Certain previously reported consolidated
financial statement amounts have been reclassified to conform to the 1998
presentation.
NOTE 2. SECURITIES
The amortized cost, gross unrealized gains and losses, and fair values of
investment securities at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998
-----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
Mutual funds................. $ 2,058,890 $ 2,058,890
FreddieMac preferred stock... 7,500,000 7,500,000
FannieMae medium term note... 9,921,501 $ (37,127) 9,884,374
Mortgage-backed securities... 197,520,786 $953,892 (179,388) 198,295,290
------------ -------- --------- ------------
217,001,177 953,892 (216,515) 217,738,554
HELD TO MATURITY
Tax-exempt municipal bond.... 14,817,406 14,817,406
Revenue bond................. 1,400,000 1,400,000
------------ -------- --------- ------------
16,217,406 16,217,406
------------ -------- --------- ------------
Totals..................... $233,218,583 $953,892 $(216,515) $233,955,960
============ ======== ========= ============
</TABLE>
F-11
<PAGE> 146
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<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
------------ ---------- -------- ------------
Total investment
securities............. 142,854,698 2,077,015 (59,180) 144,872,533
HELD TO MATURITY
Tax-exempt municipal bond... 4,740,000 4,740,000
------------ ---------- -------- ------------
Totals.................... $147,594,698 $2,077,015 $(59,180) $149,612,533
============ ========== ======== ============
</TABLE>
The amortized cost and fair value of debt securities at December 31, 1998,
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 available for sale:
Due after five years through ten years........... $ 9,921,501 $ 9,884,374
Mortgage-backed securities available for sale.... 197,520,786 198,295,290
------------ ------------
207,442,287 208,179,664
Securities held to maturity:
Due after ten years.............................. 16,217,406 16,217,406
------------ ------------
Total debt securities............................ $223,659,693 $224,397,070
============ ============
</TABLE>
Proceeds from the sale of mortgage-backed securities available for sale
were $43,187,001 in 1998. Proceeds from the sale of mortgage-backed securities
available for sale were $3,636,772 in 1996. Proceeds from the sale of securities
available for sale were $12,800,000 in 1998, $16,582,643 in 1997, and
$16,690,055 in 1996. Gross gains realized on those sales were $108,307 in 1998,
$102,955 in 1997 and $133,706 in 1996. Gross losses of $38,274 and $10,617 were
realized in 1998 and 1997, respectively.
Certain securities with a carrying value of $87,718,000 and a market value
of $88,440,000 at December 31, 1998, were pledged to secure reverse repurchase
agreements. Other securities with a carrying value of $2,017,000 and a market
value of $2,035,000 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.
F-12
<PAGE> 147
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. LOANS RECEIVABLE
The composition of the loan portfolio at December 31, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
1998
--------------------------------------------
ORIGINATED PURCHASED TOTAL
------------ ------------ --------------
<S> <C> <C> <C>
Real estate loans
Construction loans
Residential single family........ $ 81,584,178 $ 81,584,178
Commercial....................... 19,129,204 19,129,204
Land............................. 34,989,879 34,989,879
Loans in process................. (46,001,413) (46,001,413)
------------ --------------
Construction loans, net........ 89,701,848 89,701,848
Permanent loans
Residential single family........ 165,419,246 $ 23,763,074 189,182,320
Multifamily...................... 123,655,857 213,756,121 337,411,978
Commercial....................... 75,186,943 153,637,299 228,824,242
Other............................ 1,319,980 1,319,980
------------ ------------ --------------
Total real estate loans........ 455,283,874 391,156,494 846,440,368
Consumer loans........................ 42,186,074 53,929,342 96,115,416
Business loans and other loans........ 82,317,575 82,317,575
------------ ------------ --------------
Total loans................. $579,787,523 $445,085,836 1,024,873,359
============ ============
Premium on loans, net................. 5,320,149
Deferred loan fees, net............... (5,013,470)
Allowance for losses on loans......... (6,909,117)
--------------
$1,018,270,921
==============
</TABLE>
F-13
<PAGE> 148
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<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
Multi family.......................... 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
============
</TABLE>
Loans with adjustable rates, included above, totaled $505,359,000 and
$485,259,000 at December 31, 1998 and 1997, respectively.
Metropolitan's real estate loans are secured by property in the following
states:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Ohio........................................................ 50% 60%
California.................................................. 19 11
Michigan.................................................... 2 5
Pennsylvania................................................ 8 5
Other....................................................... 21 19
--- ---
100% 100%
=== ===
</TABLE>
Activity in the allowance for losses on loans is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------------
1998 1997 1996
----------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year................. $ 5,621,879 $4,175,015 $2,764,664
Provision for loan losses.................... 2,650,000 2,340,000 1,635,541
Net charge-offs.............................. (1,362,762) (893,136) (225,190)
----------- ---------- ----------
$ 6,909,117 $5,621,879 $4,175,015
=========== ========== ==========
</TABLE>
F-14
<PAGE> 149
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
1998 1997
----------- -----------
<S> <C> <C>
Balance of impaired loans............................. $10,141,909 $ 516,498
Less portion for which no allowance for losses on
loans is allocated.................................. 9,002,146 516,498
----------- -----------
Portion of impaired loan balance for which an
allowance for losses on loans is allocated.......... $ 1,139,763 $ --
=========== ===========
Portion of allowance for losses on loans allocated to
the impaired loan balance........................... $ 1,012,388 $ --
=========== ===========
</TABLE>
Information regarding impaired loans is as follows for the year ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
----------- -------- ----------
<S> <C> <C> <C>
Average investment in impaired loans during
the year.................................... $11,509,597 $944,283 $4,220,286
Interest income recognized during
impairment.................................. 191,036 16,691 48,146
Interest income recognized on cash basis
during the year............................. 191,036 16,691 48,146
</TABLE>
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Land.................................................. $ 4,284,502 $ 2,752,946
Office buildings...................................... 6,186,293 5,334,323
Leasehold improvements................................ 2,939,786 2,783,785
Furniture, fixtures and equipment..................... 8,804,768 6,389,966
Construction in progress.............................. 1,235,612 458,515
----------- -----------
Total............................................... 23,450,961 17,719,535
Accumulated depreciation.............................. 4,337,092 3,791,624
----------- -----------
$19,113,869 $13,927,911
=========== ===========
</TABLE>
Depreciation expense was $1,281,694, $978,193, and $683,718 for the years
ended December 31, 1998, 1997 and 1996, 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, 1998, 1997 and 1996 was $989,617,
$923,395, and $874,164, respectively.
F-15
<PAGE> 150
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The future minimum annual rental commitments as of December 31, 1998 for
all noncancelable leases are as follows:
<TABLE>
<S> <C>
1999........................................................ $1,088,659
2000........................................................ 1,056,308
2001........................................................ 315,852
2002........................................................ 239,269
2003........................................................ 225,567
Thereafter.................................................. 634,546
----------
$3,560,201
==========
</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,
------------------------------
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Balance at beginning of year.................... $ -- $57,000 $15,000
Provision for loss.............................. 200,000 -- 42,000
Charge-offs..................................... -- (57,000) --
-------- ------- -------
Balance at end of year.......................... $200,000 $ -- $57,000
======== ======= =======
</TABLE>
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,
--------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Mortgage loan portfolios serviced for:
FreddieMac................................... $ 794,285,277 $ 656,816,894
FannieMae.................................... 587,476,160 507,345,160
Other........................................ 114,585,090 26,023,287
-------------- --------------
$1,496,346,527 $1,190,185,341
============== ==============
</TABLE>
Custodial balances maintained in noninterest-bearing deposit accounts with
the Bank in connection with the foregoing loan servicing were approximately
$28,066,000 and $18,894,000 at December 31, 1998 and 1997, respectively.
F-16
<PAGE> 151
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Following is an analysis of the changes in loan servicing rights acquired
for the year ended December 31:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Balance at beginning of year........................... $ 7,659,518 $ 7,286,403
Additions.............................................. 4,282,274 2,055,908
Amortization........................................... (2,047,748) (1,682,793)
----------- -----------
Balance at end of year................................. $ 9,894,044 $ 7,659,518
=========== ===========
</TABLE>
Following is an analysis of the changes in loan servicing rights originated
for the year ended December 31:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Balance at beginning of year............................ $1,564,456 $ 764,434
Additions............................................... 2,699,653 1,157,451
Amortization............................................ (745,986) (357,429)
---------- ----------
Balance at end of year.................................. $3,518,123 $1,564,456
========== ==========
</TABLE>
The Corporation did not have a valuation allowance associated with loan
servicing rights at any time during the years ended December 31, 1998, 1997, and
1996.
NOTE 7. DEPOSITS
Deposits consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1998 1997
------------------------ ----------------------
AMOUNT PERCENT AMOUNT PERCENT
-------------- ------- ------------ -------
<S> <C> <C> <C> <C>
Noninterest-bearing deposits........ $ 63,716,544 6% $ 46,234,027 6%
-------------- ------------
Interest-bearing checking accounts--
2.08% to 3.20%.................... 54,158,621 5 43,080,404 6
Passbook savings and statement
savings -- 2.72% to 5.46%......... 212,710,522 20 170,442,615 23
Certificates of deposit............. 720,771,027 69 478,024,815 65
-------------- --- ------------ ---
Total interest-bearing
deposits............... 987,640,170 94 691,547,834 94
-------------- ------------
$1,051,356,714 100% $737,781,861 100%
============== === ============ ===
</TABLE>
F-17
<PAGE> 152
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1998, scheduled maturities of certificates of deposit are
as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
YEAR INTEREST
ENDED AMOUNT RATE
- ----- ------------ --------
<S> <C> <C>
1999.................................................... $532,609,151 5.63%
2000.................................................... 146,515,772 5.90%
2001.................................................... 29,182,054 5.83%
2002.................................................... 3,068,602 5.87%
2003.................................................... 7,146,869 6.04%
Thereafter.............................................. 2,248,579 5.78%
------------
$720,771,027 5.70%
============
</TABLE>
The aggregate amount of certificates of deposit with balances of $100,000
or more was approximately $129,430,000 and $86,884,000 at December 31, 1998 and
1997, respectively. The Bank also accepts out-of-state time deposits from
individuals and entities, predominantly credit unions. At December 31, 1998,
approximately $166,300,000 of time deposits, or 15.8% of Metropolitan's total
deposits, were held by these entities. At December 31, 1997, approximately
$57,700,000 million of time deposits, or 7.8% of Metropolitan's total deposits,
were held by these entities.
NOTE 8. BORROWINGS
Borrowings consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Federal Home Loan Bank advances (5.4% and 5.7% at
December 31, 1998 and 1997, respectively)......... $111,235,780 $ 41,000,000
Reverse repurchase agreements (5.6% and 5.7%
December 31, 1998 and 1997, respectively)......... 82,250,000 74,496,000
Commercial bank line of credit (7.71% and 8.5% at
December 31, 1998 and 1997, respectively)......... 8,000,000 1,500,000
Subordinated debt maturing December 31, 2001 (10%
fixed rate)....................................... 4,873,673
Subordinated debt maturing January 1, 2005 (9.625%
fixed rate)....................................... 14,000,000 14,000,000
------------ ------------
$215,485,780 $135,869,673
============ ============
</TABLE>
F-18
<PAGE> 153
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1998, scheduled payments on borrowings are as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
YEAR INTEREST
ENDED AMOUNT RATE
- ----- ------------ --------
<S> <C> <C>
1999.................................................... $ 66,400,000 5.51%
2000.................................................... 5,000,000 5.12%
2001.................................................... 3,000,000 6.15%
2002.................................................... 62,250,000 5.62%
2003.................................................... 50,000,000 5.81%
Thereafter.............................................. 28,835,780 7.84%
------------
$215,485,780 5.92%
============
</TABLE>
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 $184,000,000 and $147,000,000 at December 31, 1998 and 1997,
respectively. In addition, Metropolitan also has a $60,000,000 cash management
line with the Federal Home Loan Bank. At December 31, 1998 the balance of this
line was $28,400,000.
The Corporation has a commercial line of credit agreement with a commercial
bank. The maximum borrowing under the line is $12,000,000. The agreement was
modified during 1998 increasing the maximum borrowing to the current limit from
$4,000,000. At the same time, the term was also modified so that the line
matures May 30, 1999, but can be renewed annually as agreed by both parties. As
collateral for the loan, the Corporation's 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, 1998, the outstanding balance
under this agreement was $8,000,000.
In 1993 and early 1994, the Corporation issued subordinated notes ("1993
Subordinated Notes") totaling $4,873,673. These subordinated notes were retired
in 1998 with the proceeds of a new offering (see note 9). The early retirement
of the 1993 Subordinated Notes required the payment of a 6% premium and the
write-off of the unamortized issuance costs totalling $376,228. This amount, net
of tax, is included in the extraordinary item on the face of the income
statement.
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 be redeemed
through November 30, 1999 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.
F-19
<PAGE> 154
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following tables set forth certain information about borrowings during
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------
1998 1997
------------ -----------
<S> <C> <C>
MAXIMUM MONTH-END BALANCES:
FHLB advances........................................ $119,000,000 $73,700,000
1993 subordinated notes.............................. 4,873,673 4,873,673
1995 subordinated notes.............................. 14,000,000 14,000,000
Commercial bank line of credit....................... 8,000,000 4,000,000
Reverse repurchase agreements........................ 97,983,000 74,496,000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
AVERAGE BALANCE:
FHLB advances......................................... $65,713,668 $59,324,587
1993 subordinated notes............................... 1,998,716 4,873,673
1995 subordinated notes............................... 14,000,000 14,000,000
Commercial bank line of credit........................ 2,147,312 113,699
Reverse repurchase agreements......................... 70,368,462 38,843,324
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------
1998 1997
----- -----
<S> <C> <C>
WEIGHTED AVERAGE INTEREST RATE:
FHLB advances............................................... 5.68% 5.65%
1993 subordinated notes..................................... 10.47 10.47
1995 subordinated notes..................................... 10.48 10.48
Commercial bank line of credit.............................. 8.49 8.98
Reverse repurchase agreements............................... 5.66 5.73
</TABLE>
NOTE 9. GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE CORPORATION'S JUNIOR
SUBORDINATED DEBENTURES
During 1998, the Corporation issued 2,775,000 shares ($10 liquidation
amount per security) of 8.60% cumulative trust preferred securities (the "Trust
Preferred") through a new, wholly-owned subsidiary Metropolitan Capital Trust I
(the "Trust Issuer"). The Trust Issuer invested the total proceeds from the sale
of the Trust Preferred in the 8.60% Guaranteed Preferred Beneficial Interests in
the Corporation's Junior Subordinated Debentures (the "Junior Subordinated
Debentures"), which mature on June 30, 2028. The obligations of Metropolitan
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
Metropolitan of all of the Trust's obligations under the Preferred Securities.
Total issuance costs of $1,432,987 are being amortized on a straight-line basis
over the life of the Junior
F-20
<PAGE> 155
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Subordinated Debentures. The Trust Preferred are listed on the NASDAQ Stock
Market's National Market under the symbol "METFP." At December 31, 1998, the
outstanding balance of the Junior Subordinated Debentures was $27,750,000.
NOTE 10. EXTRAORDINARY ITEM
In the second quarter, 1998, earnings were affected by an extraordinary
expense of $376,228, $245,228 net of tax, or $0.03 per common share, pertaining
to the Corporation's early retirement of $4,873,673 of 10% Subordinated Notes
which were scheduled to mature December 31, 2001. This amount represents the
write-off of the unamortized issuance costs and the prepayment premium resulting
from the early retirement. The retirement of the 10% Subordinated Notes was
funded through the issuance of the 8.60% Guaranteed Preferred Beneficial
Interests in the Junior Subordinated Debentures.
NOTE 11. INCOME TAXES
The provision for income taxes consists of the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996
---------- ----------- ----------
<S> <C> <C> <C>
Current tax provision:
Federal expense............................ $4,680,604 $ 4,478,325 $1,278,303
State expense.............................. 78,000 145,000 --
---------- ----------- ----------
Total current expense................... 4,758,604 4,623,325 1,278,303
Deferred federal benefit................... (709,604) (1,131,325) (183,303)
---------- ----------- ----------
$4,049,000 $ 3,492,000 $1,095,000
========== =========== ==========
</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,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Deferred tax assets
Deferred loan fees.................................... $ 104,684 $ 124,872
Bad debt deduction.................................... 1,998,557 1,051,179
Loan servicing rights................................. 296,870 426,811
Other................................................. 126,375 19,859
---------- ----------
2,526,486 1,622,721
---------- ----------
Deferred tax liabilities
Equity in partnership................................. (100,163)
Employment contract................................... (93,933) (100,891)
Depreciation expense.................................. (52,978) (95,103)
Stock dividends on FHLB stock......................... (430,318) (290,287)
Other................................................. (4,212) (1,162)
---------- ----------
(681,604) (487,443)
---------- ----------
Net deferred tax asset............................. $1,844,882 $1,135,278
========== ==========
</TABLE>
F-21
<PAGE> 156
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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,
------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Statutory rate............................... 35% 35% 34%
Income taxes at statutory rate............... $3,880,974 $3,253,210 $ 895,527
Officer's life premium....................... 13,078 9,610 30,441
Amortization of purchased intangibles........ 90,745 92,051 97,962
Stock dividend exclusion..................... (70,692)
Tax exempt income............................ (65,660) (64,286)
Current state expense........................ 50,700 94,250
Utilization of capital loss carryforward..... (35,000)
Business expense limitation.................. 73,467 62,684 67,368
Other........................................ 76,388 79,481 3,702
---------- ---------- ----------
Provision for income taxes................. $4,049,000 $3,492,000 $1,095,000
========== ========== ==========
</TABLE>
Taxes attributable to security's gains and (losses) totaled $24,511, ($2,682)
and $45,460 for the years ended December 31, 1998, 1997 and 1996, 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.
NOTE 12. 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 $205,857, $166,895 and $126,599 for
the years ended December 31, 1998, 1997 and 1996, respectively. No discretionary
contributions have been made by the Corporation for the periods presented.
NOTE 13. STOCK OPTION PLAN
On October 28, 1997, the Board of Directors of Metropolitan adopted the
Metropolitan Financial Corp. 1997 Stock Option Plan for key employees and
officers of the Corporation.
F-22
<PAGE> 157
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 715,000, which reflects
adjustments for the 2-for-1 stock split completed in December, 1997 and the 10%
stock dividend completed in December, 1998. The Plan provides for the grant of
options, which may qualify as either incentive stock options or nonqualified
options. Grants of options are 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 88,000
incentive stock options and 352,000 nonqualified options. On May 19, 1998, the
Board of Directors approved grants of an additional 39,600 incentive stock
options and 77,000 nonqualified options.
An option may be exercised in one or more installments at the time or times
provided in the option instrument. One-half of the options granted to employees
will become exercisable on the third anniversary, and one-fourth of the Common
Shares covered by the option on the fourth and fifth anniversary 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>
INCENTIVE STOCK OPTIONS NONQUALIFIED OPTIONS
------------------------ ---------------------------
SHARES OPTION PRICE SHARES OPTION PRICE
------- -------------- ------- -----------------
<S> <C> <C> <C> <C>
Outstanding at January 1, 1997.............. -- --
Granted..................................... 88,000 $9.21 352,000 $9.21 - $10.13
Exercised................................... -- --
Forfeited................................... -- --
------- -------
Outstanding at December 31, 1997............ 88,000 $9.21 352,000 $9.21 - $10.13
------- -------
Granted..................................... 39,600 $14.44 77,000 $14.44 - $15.88
Exercised................................... -- --
Forfeited................................... (2,200) $9.21 --
------- -------
Outstanding at December 31, 1998............ 125,400 $9.21 - $14.44 429,000 $9.21 - $15.88
======= =======
Closing stock price on date of
grant -- 1997............................. $9.21 $9.21
Closing stock price on date of
grant -- 1998............................. $14.44 $14.44
Assumptions used:
Expected option life...................... 10 years 5 years
Risk-free interest rate -- 1997........... 5.97% 5.75%
Risk-free interest rate -- 1998........... 4.69% 4.87%
Expected stock price volatility -- 1997... 33.00% 33.00%
Expected stock price volatility -- 1998... 32.22% 32.22%
Expected dividends........................ -- --
</TABLE>
F-23
<PAGE> 158
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Estimated fair value of options granted:
<TABLE>
<CAPTION>
INCENTIVE STOCK OPTIONS NONQUALIFIED OPTIONS
------------------------ --------------------
<S> <C> <C> <C> <C>
1997:
Granted at $9.21................... $4.14 $2.30
Granted at $10.13.................. $1.61
1998:
Granted at $14.44.................. $5.57 $3.02
Granted at $15.88.................. $1.90
</TABLE>
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 effected as summarized in the schedule below:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Net income -- as reported............................... $6,794,267 $5,802,887
Net income -- pro forma................................. 6,528,665 5,613,767
Earnings per share -- as reported....................... $ 0.88 $ 0.75
Earnings per share -- pro forma......................... 0.84 0.72
</TABLE>
NOTE 14. 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, 1998, the Bank had fixed and variable rate commitments
to originate and/or purchase loans (at market rates) of approximately
$69,845,000 and $73,196,000, respectively. In addition, the Bank had firm
commitments to sell fixed rate loans totaling $24,046,000 at December 31, 1998.
Metropolitan's commitments to originate and purchase loans are for loans at
rates ranging from 6.0% to 16.0% and commitment periods up to one year.
During 1998 and 1997, the Corporation purchased approximately $44,385,000
and $12,816,000 of loans and sold non-refundable options to a third party to
purchase these same loans at a later date. The Corporation recognized a fee of
$388,006, $320,464, and $695,798 on the sale of options during the years ended
December 31, 1998, 1997, and 1996, respectively. During 1998, certain options
were sold with an agreement to share in the gain on sale of the loans in lieu of
an option fee. The Corporation recognized a gain of $251,000
F-24
<PAGE> 159
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
on the sale of these loans during the year ended December 31, 1998. At December
31, 1998, loans with a carrying value of $5,601,000 were held for sale in
connection with outstanding purchase options.
RESERVE REQUIREMENTS. The Bank was required to maintain $4,400,000 of cash
on hand or on deposit with the Federal Reserve to meet regulatory reserve
requirements at December 31, 1998. 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 15. CAPITAL AND EXTERNAL 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. 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. In addition, the Board of
Directors approved a 10% stock dividend in December, 1998, further increasing
the outstanding number of shares to 7,756,393.
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, 1998 and 1997, 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.
F-25
<PAGE> 160
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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:
<TABLE>
<CAPTION>
CAPITAL TO RISK-
WEIGHTED ASSETS
----------------- TIER 1 CAPITAL
TOTAL TIER 1 TO ADJUSTED 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>
1998
Total capital (to risk
weighted assets)....... $89,086 8.22% $86,731 8.0% $108,414 10.0%
Tier 1 (core) capital (to
risk weighted
assets)................ 85,113 7.85 43,366 4.0 65,048 6.0
Tier 1 (core) capital (to
adjusted total
assets)................ 85,113 6.27 54,296 4.0 67,870 5.0
Tangible capital (to
adjusted total
assets)................ 84,935 6.26 20,361 1.5 N/A
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
</TABLE>
The Bank at year-end 1998 was categorized as adequately capitalized. At
December 31, 1998, the most restrictive regulatory consideration of 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,
1998 that would change the capital category.
F-26
<PAGE> 161
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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 1995 subordinated notes and related indenture agreement
prohibit the Corporation from paying cash dividends unless the Corporation's
ratio of tangible equity to total assets exceeds 7.0%. The commercial bank line
of credit also prohibits Metropolitan from paying cash dividends unless the
Corporation's ratio of tangible equity to tangible assets exceeds 7%. As a
result, the Corporation is currently prohibited from paying dividends to its
shareholders.
NOTE 16. RELATED PARTY TRANSACTIONS
In the years ended December 31, 1998, 1997 and 1996 the Corporation
expensed $96,000 per year for management fees relating to services provided by a
company with the same majority shareholder as the corporation.
Certain directors and executive officers of the Corporation and its
subsidiaries held 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. In addition, the Corporation's 401(k) salary deferral plan
held a $400,000 interest in the subordinated debt at December 31, 1997. As
previously discussed, these subordinated notes were retired in the second
quarter, 1998.
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 $461,000 and $1,296,000 at December 31,
1998 and 1997, respectively.
F-27
<PAGE> 162
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Related party deposits totaled $2,155,000 and $1,116,000 at December 31,
1998 and 1997, respectively.
NOTE 17. FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments,
whether or not recognized on the balance sheet, for which it is practicable to
estimate that value. SFAS No. 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value estimates presented do not reflect the underlying fair
value of the Corporation. While these estimates are based on management's
judgment of the most appropriate factors, there is no assurance that the
estimated fair values would necessarily have been achieved at that date, since
market values may differ depending on various circumstances. As such, the
estimated fair values of these financial instruments subsequent to the
respective reporting dates may be different than the amounts reported at year
end. The following table shows those financial instruments and the related
carrying values. Financial instruments are excluded from this table in the case
of carrying amount and fair value being equal.
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------- -----------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Financial assets:
Securities........... $ 35,660,670 $ 35,660,670 $ 6,445,879 $ 6,445,879
Mortgage-backed
securities........ 198,295,290 198,295,290 143,166,654 143,166,654
Loans, net........... 1,033,287,553 1,072,890,556 707,884,738 732,123,284
Loan servicing
rights............ 13,412,167 14,846,130 9,223,974 11,707,000
Financial liabilities:
Time deposits........ (720,771,027) (725,384,444) (478,024,815) (478,415,186)
Borrowings........... (215,485,780) (216,579,045) (135,869,673) (135,692,553)
</TABLE>
The following methods and assumptions were used to estimate the fair value
of financial instruments:
CASH AND EQUIVALENTS -- The carrying amount of these items is a
reasonable estimate of the fair value.
SECURITIES AND MORTGAGE-BACKED SECURITIES -- The estimated fair value
is based on quoted market prices or dealer estimates.
LOANS, NET -- For loans held for sale, the fair value was estimated
based on quoted market prices. The fair value of other loans is estimated
by discounting the future cash flows and estimated prepayments using the
current rates at which similar loans would be made to borrowers with
similar credit ratings for the same remaining term. Some loan types were
valued at carrying value because of their floating rate or expected
maturity characteristics.
F-28
<PAGE> 163
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FEDERAL HOME LOAN BANK STOCK -- The fair value is based upon the
redemption value of the stock which equates to its carrying value.
ACCRUED INTEREST RECEIVABLE -- The carrying amount and fair value are
equal.
LOAN SERVICING RIGHTS -- The fair value is based upon the discounted
cash flow analysis.
DEMAND AND SAVINGS DEPOSITS -- The fair value is the amount payable on
demand at the reporting date.
TIME DEPOSITS -- the fair value of fixed maturity certificates of
deposit is estimated by discounting the estimated future cash flows using
the rates offered at year end for similar remaining maturities.
BORROWINGS -- The fair value of borrowings is estimated by discounting
the estimated future cash flows using the rates offered at year end for
similar remaining maturities.
ACCRUED INTEREST PAYABLE -- The carrying amount and fair value are
equal.
COMMITMENTS -- The estimated fair value is not materially different
from the nominal value.
NOTE 18. SEGMENT REPORTING
Metropolitan's operations include two major operating segments. A
description of those segments follows:
RETAIL AND COMMERCIAL BANKING -- Retail and commercial banking is the
segment of the business that brings in deposits and lends those funds out
to businesses and consumers. The local market for deposits is the consumers
and businesses in the neighborhoods surrounding our 17 retail sales offices
in Northeastern Ohio. The market for lending is Ohio and the surrounding
states for originations and throughout the United States for purchases. The
majority of loans are secured by multifamily and commercial real estate.
Loans are also made to businesses secured by business assets and consumers
secured by real or personal property. Business and consumer loans are
concentrated in Northeastern Ohio.
MORTGAGE BANKING -- Mortgage banking is the segment of our business
that originates, sells and services permanent or construction loans secured
by one- to four-family residential properties. These loans are primarily
originated through commissioned loan officers located in Northeastern Ohio
and Southeastern Michigan. In general, fixed rate loans are originated for
sale and adjustable rate loans are originated to be retained in the
portfolio. Loans being serviced include loans originated and still owned by
Metropolitan, loans originated by Metropolitan but sold to others with
servicing rights retained by Metropolitan, and servicing rights to loans
originated by others but purchased by Metropolitan. The servicing rights
Metropolitan purchases may be located in a variety of states and are
typically being serviced for FannieMae or FreddieMac.
F-29
<PAGE> 164
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The category below labeled Parent and Other consists of the remaining
segments of Metropolitan's business. It includes corporate treasury, interest
rate risk, and financing operations which do not generate revenue from outside
customers.
Operating results and other financial data for the current and preceding
year are as follows:
As of or for the year ended December 31, 1998
<TABLE>
<CAPTION>
RETAIL AND
COMMERCIAL MORTGAGE PARENT
BANKING BANKING AND OTHER TOTAL
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
OPERATING RESULTS:
Net interest income......... $ 21,187,193 $ 7,354,813 $ 3,402,192 $ 31,944,198
Provision for losses on
loans..................... 2,419,416 230,584 2,650,000
------------ ------------ ------------ --------------
Net interest income after
provision for loan
losses.................... 18,767,777 7,124,229 3,402,192 29,294,198
Noninterest income.......... 3,824,572 3,553,583 (61,592) 7,316,563
Direct noninterest
expense................... 13,142,155 4,993,235 343,943 18,479,333
Allocation of overhead...... 5,108,955 1,933,978 7,042,933
------------ ------------ ------------ --------------
Net income before income
taxes..................... $ 4,341,239 $ 3,750,599 $ 2,996,657 $ 11,088,495
============ ============ ============ ==============
FINANCIAL DATA:
Segment assets.............. $882,224,907 $304,120,202 $177,088,505 $1,363,433,614
Depreciation and
amortization.............. 1,602,173 2,851,403 352,465 4,806,041
Expenditures for additions
to premises and
equipment................. 5,458,568 1,157,936 6,616,504
</TABLE>
As of or for the year ended December 31, 1997
<TABLE>
<CAPTION>
RETAIL AND
COMMERCIAL MORTGAGE PARENT
BANKING BANKING AND OTHER TOTAL
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
OPERATING RESULTS:
Net interest income........... $ 19,657,647 $ 3,494,091 $ 4,491,070 $ 27,642,808
Provision for losses on
loans....................... 2,104,800 235,200 2,340,000
------------ ------------ ----------- ------------
Net interest income after
provision for loan losses... 17,552,847 3,258,891 4,491,070 25,302,808
Noninterest income............ 2,220,181 1,674,223 246,402 4,140,806
Direct noninterest expense.... 10,646,984 3,568,112 339,408 14,554,504
Allocation of overhead........ 4,195,099 1,398,438 686 5,594,223
------------ ------------ ----------- ------------
Net income before income
taxes....................... $ 4,930,945 $ (33,436) $ 4,397,378 $ 9,294,887
============ ============ =========== ============
FINANCIAL DATA:
Segment assets................ $605,867,224 $226,884,625 $92,232,772 $924,984,621
Depreciation and
amortization................ 947,432 2,016,810 350,391 3,314,633
Expenditures for additions to
premises and equipment...... 3,148,021 565,507 3,713,528
</TABLE>
F-30
<PAGE> 165
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The financial information provided for each major operating segment has
been derived from the internal profitability system used to monitor and manage
financial performance and allocate resources. The internal profitability system
has been in place for only the two latest years; therefore only two years
segment information is presented. Prior to the adoption of the internal
profitability system the Company operated as one segment.
The measurement of performance for the operating segments is based on the
organizational structure of Metropolitan and is not necessarily comparable with
similar information for any other financial institution. The information
presented is also not indicative of the segments' financial condition and
results of operations if they were independent entities.
Metropolitan evaluates segment performance based on contribution to income
before income taxes. Certain indirect expenses have been allocated based on
various criteria considered by management to best reflect benefits derived. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Indirect expense allocations and
accounting policies have been consistently applied for the periods presented.
There are no differences between segment profits and assets and the consolidated
profits and assets of Metropolitan. The net interest income that results from
investing in assets and liabilities with different terms to maturity or
repricing has been eliminated from the two major operating segments and is
included in the category labeled Parent and Other.
F-31
<PAGE> 166
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19. 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.
PARENT COMPANY ONLY
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks............................... $ 155,306 $ 349,563
Securities available for sale......................... 2,058,890 1,705,879
Loans receivable...................................... 50,000 50,000
Investment in Metropolitan Bank & Trust Company....... 88,176,617 54,234,523
Intangible assets..................................... 47,111 50,601
Prepaid expenses and other assets..................... 3,665,678 1,198,148
----------- -----------
Total assets........................................ $94,153,602 $57,588,714
=========== ===========
LIABILITIES
Borrowings............................................ $22,000,000 $20,373,673
Other liabilities..................................... 1,759,079 553,785
----------- -----------
Total liabilities................................... 23,759,079 20,927,458
----------- -----------
Guaranteed Preferred Beneficial Interests In the
Corporation's Junior Subordinated Debentures........ 27,750,000
SHAREHOLDERS' EQUITY
Common stock
Additional paid-in capital............................ 11,101,383 11,101,383
Retained earnings..................................... 31,064,140 24,269,873
Unrealized gain on securities available for sale, net
of tax.............................................. 479,000 1,290,000
----------- -----------
Total shareholders' equity.......................... 42,644,523 36,661,256
----------- -----------
Total liabilities and shareholders' equity.......... $94,153,602 $57,588,714
=========== ===========
</TABLE>
F-32
<PAGE> 167
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PARENT COMPANY ONLY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Interest on loans and securities........... $ 471,460 $ 107,505 $ 97,909
Interest on borrowings..................... 1,917,307 1,997,341 1,982,259
Interest on Junior Subordinated
Debentures............................... 1,633,454
----------- ----------- -----------
Net interest expense....................... (3,079,301) (1,889,836) (1,884,350)
Noninterest income
Dividends from Metropolitan Bank & Trust
Company............................... 500,000 1,500,000 1,400,000
Other operating income................... 4,411 3,647 1,541
----------- ----------- -----------
504,411 1,503,647 1,401,541
----------- ----------- -----------
Noninterest expense
Amortization of intangibles.............. 3,490 3,490 3,490
State franchise taxes.................... 22,956 21,111 24,672
Other operating expenses................. 283,363 246,244 249,507
----------- ----------- -----------
309,809 270,845 277,669
----------- ----------- -----------
Income before income taxes................. (2,884,699) (657,034) (760,478)
Federal income tax benefit............ (1,171,000) (723,000) (702,000)
----------- ----------- -----------
Income before equity in undistributed net
income of Metropolitan Bank & Trust
Company............................... (1,713,699) 65,966 (58,478)
Equity in undistributed net income of
Metropolitan Bank & Trust Company........ 8,753,194 5,736,921 1,597,381
----------- ----------- -----------
Income before extraordinary item........... 7,039,495 5,802,887 1,538,903
Extraordinary item......................... (245,228)
----------- ----------- -----------
Net income............................ $ 6,794,267 $ 5,802,887 $ 1,538,903
=========== =========== ===========
</TABLE>
F-33
<PAGE> 168
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PARENT COMPANY ONLY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------------------------
1998 1997 1996
------------ ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................. $ 6,794,267 $5,802,887 $1,538,903
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in undistributed net income of
Metropolitan Bank & Trust Company......... (8,753,194) (5,736,921) (1,597,381)
Amortization................................ 3,490 3,490 3,490
Change in other assets and liabilities...... (1,968,158) (203,209) 351,706
------------ ---------- ----------
Net cash from operating activities..... (3,923,595) (133,753) 296,718
------------ ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities........... 13,153,011 400,000 7,428,600
Purchase of securities available for sale... (12,800,000) (96,796) (8,335,440)
Capital contributions to Metropolitan Bank &
Trust Company............................. (26,000,000) (1,500,000) (7,300,000)
------------ ---------- ----------
Net cash from investing activities..... (25,646,989) (1,196,796) (8,206,840)
------------ ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of Guaranteed
Preferred Beneficial Interests in the
Corporation's Junior Subordinated
Debentures............................. 27,750,000
Repayment of borrowings..................... (4,873,673)
Net activity on lines of credit............. 6,500,000 1,500,000
Proceeds from issuance of stock............. 3,300,000
------------ ---------- ----------
Net cash from financing activities.......... 29,376,327 1,500,000 3,300,000
------------ ---------- ----------
Net change in cash and cash
equivalents.......................... (194,257) 169,451 (4,610,122)
Cash and cash equivalents at beginning of
year...................................... 349,563 180,112 4,790,234
------------ ---------- ----------
Cash and cash equivalents at end of year.... $ 155,306 $ 349,563 $ 180,112
============ ========== ==========
</TABLE>
NOTE 20. 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 ("BIF") 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-34
<PAGE> 169
METROPOLITAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 21. 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>
1998
- -------------------------------------
Interest income...................... $19,213 $20,301 $21,366 $24,848
Net interest income.................. 7,556 7,631 7,875 8,882
Provision for loan losses............ 450 910 690 600
Income before extraordinary item..... 1,987 1,551 1,621 1,880
Extraordinary item................... 245
Net income........................... 1,987 1,306 1,621 1,880
Basic earnings per share............. $ 0.26 $ 0.17 $ 0.21 $ 0.24
Diluted earnings per share........... $ 0.26 $ 0.17 $ 0.21 $ 0.24
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............. $ 0.16 $ 0.17 $ 0.19 $ 0.23
Diluted earnings per share........... $ 0.16 $ 0.17 $ 0.19 $ 0.23
</TABLE>
F-35
<PAGE> 170
- ------------------------------------------------------
- ------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR OTHER
INFORMATION TO WHICH THIS PROSPECTUS REFERS. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE UNDER THIS PROSPECTUS SHOULD CAUSE YOU TO IMPLY,
UNDER ANY CIRCUMSTANCES, THAT THE AFFAIRS OF METROPOLITAN OR THE TRUST HAVE NOT
CHANGED SINCE THE DATE OF THIS PROSPECTUS OR THAT THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROSPECTUS.
THIS PROSPECTUS IS NOT AN OFFER TO SELL AND IT IS NOT SOLICITING AN OFFER TO BUY
ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS NOT PERMITTED.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................ 1
Selected Consolidated Financial and
Other Data........................... 9
Risk Factors........................... 11
Price Range of Common Stock and
Dividends............................ 21
Market for the Preferred Securities.... 22
Use of Proceeds........................ 22
Accounting Treatment................... 23
Ratio of Earnings to Fixed Charges..... 23
Capitalization......................... 24
Summary Consolidated Statements of
Operations........................... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 26
Business............................... 46
Regulation and Supervision............. 72
Management............................. 82
Description of the Capital Stock....... 90
Description of the Preferred
Securities........................... 92
Description of the Junior Subordinated
Debentures........................... 106
Description of the Guarantee........... 117
Relationship Among the Preferred
Securities, the Junior Subordinated
Debentures, the Expense Agreement and
the Guarantee........................ 121
Federal Income Tax Consequences........ 122
ERISA Considerations................... 127
Underwriting........................... 127
Validity of Securities................. 130
Experts................................ 130
Where You Can Find More Information.... 130
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[Metropolitan Logo]
METROPOLITAN
FINANCIAL CORP.
600,000 SHARES OF COMMON STOCK
$ PER SHARE
------------------------
METROPOLITAN
CAPITAL TRUST II
$30,000,000
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT
$10 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED
BY METROPOLITAN FINANCIAL CORP.
-------------------
PROSPECTUS
-------------------
[RYAN, BECK LOGO]
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 171
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........................................ $ 11,582
Nasdaq filing fee........................................... 27,125
NASD filing fee............................................. 5,166
Trustees' fees and expenses................................. 7,500
Legal fees and expenses..................................... 265,000
Accounting fees and expenses................................ 25,000
Printing expenses........................................... 100,000
Underwriter expenses........................................ 10,000
Miscellaneous expenses...................................... 2,000
--------
Total............................................. $453,373
========
</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
II-1
<PAGE> 172
such person) made or threatened to be made a party to any 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
trustees of the Trust or any predecessor trustee for the Trust, 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 United
States Securities Act of 1933, as amended (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
- ----------- -----------
<C> <S>
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
4.1 Form of 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 II
4.4 Form of Amended and Restated Trust Agreement of Metropolitan
Capital Trust II
4.5 Form of Trust Preferred Security Certificate for
Metropolitan Capital Trust II (included as Exhibit E to
Exhibit 4.4)
4.6 Form of Guarantee of the Corporation relating to the Trust
Preferred Securities
4.7 Form of 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 II*
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)**
</TABLE>
II-2
<PAGE> 173
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.3 Indenture, dated as of April 30, 1998, between the
Corporation and Wilmington Trust Company, as trustee,
relating to the Corporation's 8.60% Junior Subordinated
Deferrable Interest Debentures due June 30, 2028 (filed as
Exhibit 4.1 to the Corporation's Form 10-Q, filed May 15,
1998 and incorporated herein by reference)
10.4 Amended and Restated Trust Agreement, dated as of April 30,
1998, among the Corporation, as depositor, Wilmington Trust
Company, as property trustee, the administrative trustees
named therein and the several holders of the 8.60%
Cumulative Trust Preferred Securities of Metropolitan
Capital Trust I (filed as Exhibit 4.2 to the Corporation's
Form 10-Q, filed May 15, 1998 and incorporated herein by
reference)
10.5 Preferred Securities Guarantee Agreement, dated as of April
30, 1998, between the Corporation and Wilmington Trust
Company, as trustee, for the benefit of the holders of the
8.60% Cumulative Trust Preferred Securities of Metropolitan
Capital Trust I (filed as Exhibit 4.3 to the Corporation's
Form 10-Q, filed May 15, 1998 and incorporated herein by
reference)
10.6 Agreement as to Expenses and Liabilities, dated as of April
30, 1998, between the Corporation and Metropolitan Capital
Trust I (filed as Exhibit 4.4 to the Corporation's Form
10-Q, filed May 15, 1998 and incorporated herein by
reference)
12 Computation of ratio of earnings to fixed charges
21 List of subsidiaries of the Corporation
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
27 Financial Data Schedule
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 The Restated Loan Agreement by and between The Huntington
National Bank and the Corporation dated as of March 31, 1998
(filed as Exhibit 99.1 to the Corporation's Form 10-Q, filed
May 14, 1998 and incorporated herein by reference)
99.4 Second Amendment to Restated Loan Agreement by and between
The Huntington National Bank and the Corporation dated as of
December 18, 1998
</TABLE>
- ---------------
* To be filed by amendment.
** Indicates that the exhibit is a management contract or compensatory plan or
arrangement.
(b) Financial Statement Schedules
Parent Company Financial Statements
II-3
<PAGE> 174
Incorporated by reference from Note 19 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
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 SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by 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 Securities Act and will be governed by
the final adjudication of such issue.
For purposes of determining any liability under the Securities Act, 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, 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> 175
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 26th day of February, 1999.
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 Chairman of the Board, Chief Executive February 26, 1999
- --------------------------------------------- Officer and Director (Principal Executive
Robert M. Kaye Officer)
By: /s/ DAVID G. LODGE President, Assistant Secretary, Assistant February 26, 1999
- --------------------------------------------- Treasurer and Director (Principal
David G. Lodge Financial and Accounting Officer)
By: /s/ MALVIN E. BANK Director February 26, 1999
- ---------------------------------------------
Malvin E. Bank
By: /s/ ROBERT R. BROADBENT Director February 26, 1999
- ---------------------------------------------
Robert R. Broadbent
By: /s/ MARJORIE M. CARLSON Director February 26, 1999
- ---------------------------------------------
Marjorie M. Carlson
By: /s/ LOIS K. GOODMAN Director February 26, 1999
- ---------------------------------------------
Lois K. Goodman
By: /s/ MARGUERITE B. HUMPHREY Director February 26, 1999
- ---------------------------------------------
Marguerite B. Humphrey
By: /s/ JAMES A. KARMAN Director February 26, 1999
- ---------------------------------------------
James A. Karman
By: /s/ RALPH D. KETCHUM Director February 26, 1999
- ---------------------------------------------
Ralph D. Ketchum
By: /s/ ALFONSE M. MATTIA Director February 26, 1999
- ---------------------------------------------
Alfonse M. Mattia
</TABLE>
II-5
<PAGE> 176
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
By: /s/ DAVID P. MILLER Director February 26, 1999
- ---------------------------------------------
David P. Miller
By: /s/ JUDITH Z. ADAM Attorney-in-Fact for the Officers and February 26, 1999
- --------------------------------------------- Directors signing in the capacities
Judith Z. Adam indicated
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, Metropolitan
Capital Trust II 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 26th day of February, 1999.
METROPOLITAN CAPITAL TRUST II
By: METROPOLITAN FINANCIAL CORP.,
AS DEPOSITOR
By: /s/ DAVID G. LODGE
--------------------------------
David G. Lodge
President, Assistant
Secretary and
Assistant Treasurer
II-6
<PAGE> 177
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <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
4.1 Form of 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 II
4.4 Form of Amended and Restated Trust Agreement of Metropolitan
Capital Trust II
4.5 Form of Trust Preferred Security Certificate for
Metropolitan Capital Trust II (included as Exhibit E to
Exhibit 4.4)
4.6 Form of Guarantee of the Corporation relating to the Trust
Preferred Securities
4.7 Form of 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 II*
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)
10.3 Indenture, dated as of April 30, 1998, between the
Corporation and Wilmington Trust Company, as trustee,
relating to the Corporation's 8.60% Junior Subordinated
Deferrable Interest Debentures due June 30, 2028 (filed as
Exhibit 4.1 to the Corporation's Form 10-Q, filed May 15,
1998 and incorporated herein by reference)
10.4 Amended and Restated Trust Agreement, dated as of April 30,
1998, among the Corporation, as depositor, Wilmington Trust
Company, as property trustee, the administrative trustees
named therein and the several holders of the 8.60%
Cumulative Trust Preferred Securities of Metropolitan
Capital Trust I (filed as Exhibit 4.2 to the Corporation's
Form 10-Q, filed May 15, 1998 and incorporated herein by
reference)
10.5 Preferred Securities Guarantee Agreement, dated as of April
30, 1998, between the Corporation and Wilmington Trust
Company, as trustee, for the benefit of the holders of the
8.60% Cumulative Trust Preferred Securities of Metropolitan
Capital Trust I (filed as Exhibit 4.3 to the Corporation's
Form 10-Q, filed May 15, 1998 and incorporated herein by
reference)
10.6 Agreement as to Expenses and Liabilities, dated as of April
30, 1998, between the Corporation and Metropolitan Capital
Trust I (filed as Exhibit 4.4 to the Corporation's Form
10-Q, filed May 15, 1998 and incorporated herein by
reference)
12 Computation of ratio of earnings to fixed charges
21 List of subsidiaries of the Corporation
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 Richard, Layton & Finger, P.A. (included in
Exhibit 5.2)*
24 Power of Attorney
</TABLE>
II-7
<PAGE> 178
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S> <C>
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
27 Financial Data Schedule
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 The Restated Loan Agreement by and between The Huntington
National Bank and the Corporation dated as of March 31, 1998
(filed as Exhibit 99.1 to the Corporation's Form 10-Q, filed
May 14, 1998 and incorporated herein by reference)
99.4 Second Amendment to Restated Loan Agreement by and between
The Huntington National Bank and the Corporation dated as of
December 18, 1998
</TABLE>
- ---------------
* To be filed by amendment.
II-8
<PAGE> 1
Exhibit 3.2
AMENDED AND RESTATED
CODE OF REGULATIONS
OF
METROPOLITAN FINANCIAL CORP.
(JANUARY 19, 1999)
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. Place of Meeting. All meetings of the shareholders of the
Corporation shall be held at the office of the Corporation or at such other
places, within or without the State of Ohio, as may from time to time be
determined by the Board of Directors, the Chairman of the Board, or the
President and specified in the notice of such meeting.
SECTION 2. ANNUAL MEETING. The annual meeting of the shareholders of
the Corporation for the election of directors, the consideration of reports to
be laid before such meeting, and the transaction of such other business as may
properly come before the meeting shall be held on the date from time to time
determined by the Board of Directors of the Corporation that is not a legal
holiday under the laws of the place where the meeting is to be held, and, if a
legal holiday, then on the next succeeding day not a legal holiday under the
laws of such place, or such other date, and at such hour as may from time to
time be determined by the Chairman of the Board, or the President and specified
in the notice of such meeting. If no determination is made as to the date of the
annual meeting of shareholders by the Board of Directors, the Chairman of the
Board of the President, then the annual meeting of the Corporation's
shareholders shall be held on the fourth Tuesday of May, unless such date is a
legal holiday under the laws of the place where the meeting is to be held, in
which case, the meeting shall be held on the next succeeding day that is not a
legal holiday.
SECTION 3. Special Meetings. Except as otherwise required by law and
subject to the rights of the holders of any class or series of preferred stock
of the Corporation, special meetings of the shareholders for any purpose or
purposes may be called only by (i) the Chairman of the Board, (ii) the
President, or, in the case of the President's absence, death, or disability, the
vice-president authorized to exercise the authority of the President, (iii) the
Board of Directors by action at a meeting, or a majority of the entire
authorized Board of Directors acting without a meeting, or (iv) the persons who
hold 50% of all shares outstanding and entitled to vote at the special meeting.
Upon request in writing delivered either in person or by registered
mail to the President or the Secretary, by any persons entitled to call a
meeting of shareholders, such officer shall forthwith cause to be given to the
shareholders entitled thereto notice of a meeting to be held on a date not less
than seven nor more than 60 days after the receipt of such request, as such
officer may fix. If such notice is not given within 30 days after the delivery
or mailing of such request, the persons calling the meeting may fix the time of
the meeting and give notice thereof in the manner provided by law or as provided
in these Regulations, or cause such notice to be given by any designated
representative.
SECTION 4. Notice of Meetings. Except as otherwise provided by law,
written notice of each meeting of the shareholders, whether annual or special,
shall be
<PAGE> 2
given, either by personal delivery or by mail, not less than seven nor more than
60 days before the date of the meeting to each shareholder of record entitled to
notice of the meeting, by or at the direction of the Chairman of the Board,
President or Secretary or any other person or persons required or permitted by
these Regulations to give such notice. If mailed, such notice shall be deemed
given when deposited in the United States mail, postage prepaid, directed to the
shareholder at such shareholder's address as it appears on the records of the
Corporation. Each such notice shall state the place, date, and hour of the
meeting, and the purpose or purposes for which the meeting is called. Notice of
adjournment of a meeting of shareholders need not be given if the time and place
to which it is adjourned are fixed and announced at such meeting.
SECTION 5. Quorum. Except as otherwise provided by law or by the
Articles of Incorporation of the Corporation, the holders of shares entitled to
exercise a majority of the voting power of the Corporation at the meeting shall
constitute a quorum for the transaction of business at any meeting of the
shareholders; provided, however, that no action required by law, by the Articles
of Incorporation of the Corporation, or by these Regulations to be authorized or
taken by the holders of a designated proportion of the shares of any particular
class or of each class of the Corporation may be authorized or taken by a lesser
proportion.
SECTION 6. Adjournments. The holders of a majority of the voting
shares represented at a meeting, whether or not a quorum is present, may adjourn
such meeting from time to time.
SECTION 7. Advance Notice of Shareholder Proposals. No proposal made by
a shareholder of the Corporation shall be eligible to be submitted to the
shareholders for their approval or adoption at any annual or special meeting of
shareholders unless all of the following requirements are met:
(1) the shareholder submitting the proposal (the "proponent")
submits the proposal to the Corporation in writing at the Corporation's
principal executive offices;
(2) at the time the proponent submits such proposal the
proponent is a shareholder of record of the Corporation and continues
to be a shareholder of record of the Corporation as of the close of
business on the record date for determining shareholders entitled to
notice of and to vote at such annual or special meeting of
shareholders, in both instances as reflected in the shareholder records
of the Corporation;
(3) at the time the proponent submits such proposal the
proponent provides the Corporation in writing with the proponent's
name, address, the number of and class of all shares of each class of
stock of the Corporation beneficially owned (within the meaning of Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as
amended), by such shareholder, the date upon which the proponent
acquired such securities, any material interest of the proponent in the
proposal (other than as a shareholder), a brief written statement of
the reasons why the proponent favors the proposal, and a list of all
other proposals submitted by the proponent to the Corporation during
the preceding five years; and
(4) the proposal is received at the Corporation's principal
executive offices (A) in the case of a proposal to be acted upon at an
annual meeting of shareholders, not less than 120 calendar days in
advance of the date of the Corporation's proxy statement released to
shareholders in connection with the previous year's annual meeting of
shareholders, or, if no annual meeting was held in the previous year, a
reasonable time (as determined by the Corporation in its sole
discretion) before the current year's annual meeting; and (B) in the
case of a proposal to be acted upon at a special meeting of
shareholders, a reasonable time (as determined by the Corporation in
its sole discretion) before the special meeting.
Notwithstanding the foregoing provisions of this Section 7, in the case
of any proposal that the Corporation is required to include in its proxy
statement and form
-2-
<PAGE> 3
of proxy under the provisions of Rule 14a-8 (as from time to time amended)
promulgated under the Securities Exchange Act of 1934, as amended (or any
similar or successor rule or regulation under that or any successor act),
compliance by the proponent with all of the requirements of such rule shall be
deemed to constitute compliance with the provisions of this Section 7.
The person presiding at the meeting, in addition to making any other
determinations that may be appropriate to the conduct of the meeting, shall
determine whether such notice under this Section 7 or under Section 2(b) of
Article II, as applicable, has been duly given and shall direct that proposals
and nominees not be considered if such notice (together with all required
information to be submitted by such shareholder under this Section 7 or under
Section 2(b) of Article II, as applicable) has not been given.
ARTICLE II
DIRECTORS
SECTION 1. Number, Classification, and Term of Office. The Board of
Directors shall be divided into three classes. The respective terms of the three
classes of directors are staggered so that at any time the term of one class
will expire at the next annual meeting of shareholders thereafter occurring, the
term of a second class will expire at the second annual meeting of shareholders
thereafter occurring, and the term of a third class will expire at the third
annual meeting of shareholders thereafter occurring. At each annual meeting of
shareholders of the Corporation, the successors to the directors of the class
whose term will expire in that year shall be elected to hold office for a term
expiring at the annual meeting of shareholders occurring in the third year after
the date of their election. In each instance directors shall hold office until
their successors are chosen and qualified, or until the earlier death,
retirement, resignation, or removal of any such director as provided in Sections
11 and 12 of this Article II.
At the Effective Time (as defined below), the number of directors of
the Corporation shall be 11, divided into three classes as follows: one class of
three directors whose term will expire at the next annual meeting of
shareholders occurring after the Effective Time, one class of four directors
whose term will expire at the second annual meeting of shareholders occurring
after the Effective Time, and one class of four directors whose term will expire
at the third annual meeting of shareholders occurring after the Effective Time.
"Effective Time" shall mean the date of the closing of the initial public
offering of shares of Common Stock of the Corporation.
The Board of Directors or the shareholders may from time to time fix or
change the size of the Board of Directors to a total number of not fewer than 8
directors and no more than 14 directors. The Board of Directors may fix or
change the number of directors by the affirmative vote of a majority of the
entire authorized Board. The shareholders may, subject to the limitations
contained in the first sentence of this paragraph regarding the number of
directors, fix or change the number of directors at a meeting of the
shareholders called for the purpose of electing directors (i) by the affirmative
vote of the holders of shares entitling them to exercise three-quarters of the
voting power of the Corporation represented at the meeting and entitled to elect
directors or (ii) if the proposed change in the number of directors is
recommended by a majority of the entire authorized Board of Directors, by the
affirmative vote of the holders of shares entitling them to exercise a majority
of the voting power of the Corporation represented at the meeting and entitled
to elect directors. If the Board of Directors or the shareholders change the
number of directors, the three classes of the Board of Directors shall be
divided into as equal a number of directors as possible, with the Board of
Directors or the shareholders, as the case may be, fixing or determining the
adjustment to be made in each class. No reduction in the number of directors
shall of itself have the effect of shortening the term of an incumbent director.
In the event that the Board of Directors increases the number of directors, it
may fill the vacancy or vacancies created by the increase in the number of
directors for the respective unexpired terms in accordance with the provisions
of Section 13 of this Article II. In the event the shareholders increase the
number of directors and fail to fill the vacancy or vacancies created thereby,
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the Board of Directors may fill such vacancy or vacancies for the respective
unexpired terms in accordance with the provisions of Section 13 of this Article
II.
The foregoing provisions of this Section 1 are subject to the automatic
increase by two in the authorized number of directors and the right of the
holders of any class or series of preferred stock of the Corporation to elect
two directors of the Corporation during any time when dividends payable on such
shares are in arrears, all as set forth in the Articles of Incorporation of the
Corporation and/or the express terms of the preferred stock of the Corporation.
SECTION 2. Nominations. Only persons who are nominated in accordance
with the following procedures shall be eligible for election as directors.
Subject to the rights of the holders of any class or series of preferred stock
of the Corporation, nominations for the election of directors may be made only:
(a) by the affirmative vote of a majority of the entire
authorized Board of Directors, or
(b) by any shareholder of the Corporation entitled to vote for
the election of directors at a meeting, but only if written notice of
such shareholder's intent to make such nomination is given to the
Secretary of the Corporation, delivered to or mailed and received at
the Corporation's principal executive offices, not less than 60 nor
more than 90 days prior to the meeting; provided, however, that in the
event that less than 75 days' notice to the shareholders or prior
public disclosure of the date of the meeting is given or made, the
written notice of such shareholder's intent to make such nomination
must be given to the Secretary not later than the close of business on
the fifteenth day following the earlier of the day on which such notice
of the date of the meeting was mailed or such public disclosure was
made. Each such notice of a shareholder's intent to make a nomination
shall set forth: (A) as to each person who is not an incumbent director
when the shareholder proposes to nominate such person for election as a
director: (1) the name, age, business address, and residence address of
such person, (2) the principal occupation or employment of such person
for the last five years, (3) the class and number of shares of capital
stock of the Corporation which are beneficially owned by such person,
(4) all positions of such person as a director, officer, partner,
employee, or controlling shareholder of any corporation or other
business entity, (5) any prior position as a director, officer, or
employee of a depository institution or any company controlling a
depository institution, (6) any other information regarding such person
that would be required pursuant to paragraphs (a), (d), (e) and (f) of
Item 401 of Regulation S-K adopted by the Securities and Exchange
Commission (or the corresponding provisions of any regulations
subsequently adopted by the Securities and Exchange Commission
applicable to the Corporation) to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange
Commission had such person been nominated, or intended to be nominated,
by the Board of Directors, and (7) the written consent of each nominee
to serve as a director of the Corporation if so elected, and (B) as to
the shareholder giving the notice: (1) the name and record address of
such shareholder, (2) a representation that the shareholder is a holder
of record of shares of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice, (3) a description of all
arrangements or understandings between the shareholder and each nominee
and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder, and (4) the class and number of shares of capital stock of
the Corporation which are beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended) by such shareholder.
No person shall be eligible for election as a director unless nominated
in compliance with the forgoing procedure.
SECTION 3. Place of Meeting. The Board of Directors may hold its
meetings at such place or places within or without the State of Ohio as the
Board may from time
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to time determine or as shall be specified or fixed in the respective notices or
waivers of notice thereof.
SECTION 4. Regular Meetings of the Board. Regular meetings of the Board
of Directors shall be held at such times and places as the Board shall from time
to time determine. If any day fixed for a regular meeting shall be a legal
holiday under the laws of the place where the meeting is to be held, the meeting
which would otherwise be held on that day shall be held at the same hour on the
next succeeding business day or at such other time and place as the Board shall
determine.
SECTION 5. Special Meetings of the Board. Special meetings of the Board
of Directors shall be held whenever called by the Chairman of the Board or the
President or by a majority of the directors then in office.
SECTION 6. Notice of Meetings. Notice of regular meetings of the Board
of Directors or any adjourned meeting thereof need not be given. Notice of each
special meeting of the Board shall be mailed to each director, addressed to such
director at such director's residence or usual place of business, at least two
days before the day on which the meeting is to be held or shall be sent to such
director at such place by telegraph, telex or telecopier (or similar facsimile
transmission), or be given personally or by telephone, not later than the day
before the meeting is to be held, but notice need not be given to any director
who shall, either before or after the meeting, submit a signed waiver of such
notice or who shall attend such meeting without protesting prior to or at its
commencement, the lack of notice to such director. Every such notice shall state
the time and place but need not state the purpose of the meeting.
SECTION 7. Action Without Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors or any committee thereof may
be authorized or taken without a meeting with the affirmative vote or approval
of, and in a writing or writings signed by, all the directors or all the
committee members, which writing or writings are filed with or entered upon the
records of the Corporation.
SECTION 8. Quorum, Adjournments, and Manner of Acting. Except as
otherwise provided by law, the Articles of Incorporation of the Corporation, or
these Regulations, a majority of the entire authorized Board of Directors shall
constitute a quorum for the transaction of business at any meeting of the Board.
Except as otherwise provided by law, the Articles of Incorporation of the
Corporation, or these Regulations, the affirmative vote of a majority of the
directors present at any meeting at which a quorum is present shall be the act
of the Board. In the absence of a quorum, a majority of the directors present at
a meeting duly held may adjourn the meeting to another time and place. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the originally called meeting.
Notwithstanding the foregoing provisions of this Section 8, the
affirmative vote of at least two-thirds of the entire authorized Board of
Directors shall be required for the approval of any of the following
transactions: (a) any merger or consolidation of the Corporation (i) with any
interested shareholder, as such term is defined in Chapter 1704 of the Ohio
Revised Code, or (ii) with any other corporation if the merger or consolidation
is caused by any interested shareholder, (b) any recommendation or approval of
any transaction as a result of which any person will become an interested
shareholder, (c) any merger or consolidation involving the Corporation and any
other corporation with assets having an aggregate book value equal to 50% or
more of the aggregate book value of all the assets of the Corporation determined
on a consolidated basis, (d) any liquidation or dissolution of the Corporation,
(e) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition
(in one transaction or a series of transactions) to or with an interested
shareholder of assets of the Corporation which assets have an aggregate book
value equal to 10% or more of the aggregate book value of all the assets of the
Corporation determined on a consolidated basis, (f) any sale, lease, exchange,
mortgage, pledge, transfer, or other disposition (in one transaction or a series
of transactions) to or with any person of assets of the Corporation which assets
have an aggregate book value equal to 25% or more of the aggregate book value of
all the assets of the Corporation determined on a consolidated basis, (g) any
transaction which results in
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the issuance or transfer by the Corporation of more than 15% of the voting
stock of the Corporation to any person, (h) any transaction involving the
Corporation which has the effect, directly or indirectly, of increasing the
proportionate share of the stock or securities of any class or series of the
Corporation which is owned by an interested shareholder, (i) any transaction
requiring the amendment of any provision of the Articles of Incorporation of the
Corporation if to amend such provision otherwise would require an affirmative
vote of at least two-thirds of the entire authorized Board of Directors or any
transaction requiring the amendment of any provision of these Regulations if to
amend such provision otherwise would require an affirmative vote of at least
two-thirds of the entire authorized Board of Directors of the Corporation
(provided, however, if the amendment of any provision of these Regulations
requires an affirmative vote of more than two-thirds of the entire authorized
Board of Directors, any transactions having the same effect may only be
authorized by the vote required to amend such provision of these Regulations),
and (j) any receipt by an interested shareholder, other than proportionately as
a shareholder of the Corporation, of the benefit, directly or indirectly, of any
loans, advances, guarantees, pledges, or other financial benefits provided
through the Corporation.
SECTION 9. Committees. The Board of Directors may at any time appoint
from its members an Executive, Audit, or other committee or committees,
consisting of such number of members, not less than three, as the Board of
Directors may deem advisable, together with such alternates as the Board of
Directors may deem advisable, to take the place of any absent member or members
at any meeting of the committee. Each member and each alternate shall hold
office at the direction of the Board of Directors. Any committee shall act only
in the intervals between meetings of the Board of Directors and shall have such
authority of the Board of Directors as may, from time to time, be delegated by
the Board of Directors, except the authority to fill vacancies in the Board of
Directors or in any committee of the Board of Directors. Subject to these
exceptions, any person dealing with the Corporation shall be entitled to rely
upon any act or authorization of any act by any committee to the same extent as
an act or authorization of the Board of Directors. Each committee shall keep
full and complete records of all meetings and actions, which shall be open to
inspection by the directors. Unless otherwise ordered by the Board of Directors,
any committee may prescribe its own rules for calling and holding meetings,
including telephone meetings, and for its own method of procedure, and may act
at a meeting, including a telephone meeting, by a majority of its members or
without a meeting by a writing or writings signed by all of its members.
SECTION 10. Participation in Meeting by Means of Communications
Equipment. Any one or more members of the Board of Directors or any committee
thereof may participate in any meeting of the Board or of any committee by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such meeting.
SECTION 11. Resignations. Any director of the Corporation may resign at
any time by oral statement to that effect made at a meeting of the Board of
Directors or any committee thereof or by giving written notice to the Board of
Directors, the Chairman of the Board, the President, or the Secretary of the
Corporation. Such resignation shall take effect at the date of receipt of such
notice or at any later date specified therein, and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 12. Removal of Directors. The Board of Directors may remove any
director and thereby create a vacancy on the Board: (a) if by order of court the
director has been found to be of unsound mind or has been adjudicated a bankrupt
or (b) if within 60 days from the date of the director's election he or she does
not qualify by accepting in writing the election to such office or by acting at
a meeting of directors.
All the directors, or all of the directors of a particular class, or
any individual director, may be removed from office, without assigning any
cause, by the affirmative vote of the holders of shares entitling them to
exercise three-quarters of the voting power of the Corporation entitled to elect
directors in place of those
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to be removed. In case of any such removal, a new director nominated in
accordance with Section 2 of this Article II may be elected at the same meeting
for the unexpired term of each director removed. Failure to elect a director to
fill the unexpired term of any director removed shall be deemed to create a
vacancy on the Board.
SECTION 13. Vacancies. Any vacancies on the Board of Directors
resulting from death, resignation, removal, or other cause shall only be filled
by the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors, or by a sole remaining
director. Newly created directorships resulting from any increase in the number
of directors by action of the Board of Directors shall be filled by the
affirmative vote of a majority of the directors then in office, or if not so
filled, by the shareholders at the next annual meeting thereof or at a special
meeting called for that purpose in accordance with Section 4 of Article I of
these Regulations. In the event the shareholders increase the authorized number
of directors in accordance with these Regulations but fail at the meeting at
which such increase is authorized, or an adjournment of that meeting, to elect
the additional directors provided for, or if the shareholders fail at any
meeting to elect the whole authorized number of directors, such vacancies may be
filled by the affirmative vote of a majority of the directors then in office.
Any director elected in accordance with the three preceding sentences of this
Section 13 shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified. The
provisions of this Section 13 shall not restrict the rights of the holders of
any class or series of preferred stock of the Corporation to fill vacancies in
directors elected by such holders as provided by the express terms of the
preferred stock.
ARTICLE III
OFFICERS
SECTION 1. Designations. The Board of Directors shall elect a Chairman
of the Board, a President, such number of Executive Vice-Presidents, Senior
Vice-Presidents and Vice-Presidents as the Board may from time to time
determine, a Secretary and a Treasurer. The Board of Directors may from time to
time create such offices and appoint such other officers, subordinate officers
and assistant officers as it may determine. The Chairman of the Board of
Directors shall be, but the other officers need not be, chosen from among the
members of the Board of Directors.
SECTION 2. Term and Removal. The officers of the Corporation shall hold
office until their successors are chosen and have qualified, or until any such
officer has resigned or is removed. Any officer elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
SECTION 3. Chairman of the Board. The Chairman of the Board shall serve
as chairman of all executive committees of the Corporation and preside at all
meetings of the Board of Directors, and shall have such other powers and duties
as may be prescribed by the Board of Directors.
SECTION 4. President. The President shall have general and active
management of the business of the Corporation. The President shall preside at
all meetings of the shareholders of the Corporation, and shall see that all
orders and resolutions of the Board of Directors are carried into effect. If the
Corporation has no Chairman of the Board, the President shall have all of the
duties and responsibilities previously enumerated for the Chairman of the Board.
In the absence or disability of the President, the Board of Directors shall
designate the appropriate officer to perform the duties and responsibilities of
the President.
SECTION 5. Secretary. The Secretary shall attend all meetings of the
Board, of the shareholders, and of the Executive Committee when required, and
record all the votes of the Corporation and the minutes of all its transactions
in a book to be kept for that purpose. The Secretary shall give, or cause to be
given, notice of all
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meetings of the shareholders and of special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision the Secretary shall act. The
Secretary shall keep in safe custody the corporate seal of the Corporation, if
any, and, when authorized by the Board, affix the same to any instrument
requiring it, and when so affixed it shall be attested by his or her signature
or by the signature of the Treasurer or an Assistant Secretary. The Secretary
shall perform such other duties as shall from time to time be imposed upon him
or her by the Board of Directors, Chairman of the Board, or President.
SECTION 6. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation, and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as shall be designated by the Board. The
Treasurer shall disburse the funds of the Corporation as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall render to the
President and directors, at the regular meetings of the Board, or whenever they
may require it, an account of all his or her transactions as Treasurer and of
the financial condition of the Corporation. The Treasurer shall perform such
other duties as shall from time to time be imposed upon him or her by the Board
of Directors, Chairman of the Board, or President.
SECTION 7. Assistant Secretaries and Assistant Treasurers. In the
absence or disability of the Secretary or Treasurer, the Assistant Secretaries
or Assistant Treasurers, as the case may be, in the order designated by the
Board, shall perform the duties of the Secretary or Treasurer, as the case may
be, and shall have the full powers thereof.
ARTICLE IV
INDEMNIFICATION
The Corporation shall indemnify, to the full extent permitted by the
Ohio General Corporation Law as it may be amended, any person made or threatened
to be made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, by reason
of the fact that he or she 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, trustee, employee, member, manager, or agent of another
corporation, bank, limited liability company, partnership, joint venture, trust
or other enterprise. The indemnification provided by this Article IV shall not
be deemed exclusive of any other rights to which any person seeking
indemnification may be entitled by statute, the Articles of Incorporation of the
Corporation, these Regulations, or any agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
ARTICLE V
CAPITAL STOCK
SECTION 1. Certificates for Shares. Certificates representing shares of
stock of each class of the Corporation, whenever authorized by the Board of
Directors, shall be in such form as shall be approved by the Board or by the
Chairman of the Board or President and the Secretary or an Assistant Secretary
or the Treasurer or an Assistant Treasurer. Every share certificate shall be
signed by, or in the name of, the Corporation by the Chairman of the Board or
the President and by the Secretary or an Assistant Secretary or the Treasurer or
an Assistant Treasurer of the Corporation. Any or all signatures may be
facsimiles, engraved, stamped, or printed if countersigned by an incorporated
transfer agent or registrar. Although an officer, transfer agent or registrar
whose manual or facsimile signature is affixed to such a certificate ceases to
be such officer, transfer agent, or registrar before such
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certificate has been delivered, such certificate nevertheless shall be effective
in all respects when delivered.
SECTION 2. Transfers of Shares. Transfers of shares of stock of each
class of the Corporation shall be made only on the books of the Corporation by
the holder thereof, or by such holder's attorney thereunto authorized by power
of attorney duly executed and filed with the Secretary of the Corporation or a
transfer agent for such stock, if any, and on surrender of the certificate or
certificates for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. The person in whose
name shares stand on the books of the Corporation shall be deemed the owner
thereof for all purposes as regards the Corporation. No transfer of shares shall
be valid as against the Corporation and its shareholders and creditors for any
purpose until it shall have been entered in the stock records of the Corporation
by an entry showing from and to whom transferred.
SECTION 3. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation and
alleged to have been lost, stolen or destroyed, upon receiving an affidavit of
that fact made by the person claiming that the share certificate has been lost,
stolen or destroyed. When authorizing such issuance of a new certificate or
certificates, the Board may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his or her legal representative, to provide the
Corporation a bond in such sum and with such surety or sureties as it may direct
to indemnify the Corporation and such transfer agents and registrars against any
claim that may be made on account of the alleged loss, theft, or destruction of
any such certificate or certificates or the issuance of such new certificate or
certificates.
ARTICLE VI
RECORD DATES
For any lawful purpose, including the determination of the shareholders
who are entitled to receive notice of or to vote at a meeting of the
shareholders, the Board of Directors may fix a record date in accordance with
the provisions of the Ohio General Corporation Law. The record date for the
purpose of the determination of the shareholders who are entitled to receive
notice of or to vote at a meeting of the shareholders shall continue to be the
record date for all adjournments of the meeting unless the Board of Directors or
the persons who shall have fixed the original record date shall, subject to the
limitations set forth in the Ohio General Corporation Law, fix another date and
shall cause notice thereof and of the date to which the meeting shall have been
adjourned to be given to shareholders of record as of the newly fixed date in
accordance with the same requirements as those applying to a meeting newly
called. The Board of Directors may close the share transfer books against
transfers of shares during the whole or any part of the period provided for in
this Article VI, including the date of the meeting of the shareholders and the
period ending with the date, if any, to which adjourned. If no record date is
fixed therefor, the record date for determining the shareholders who are
entitled to receive notice of a meeting of the shareholders shall be the date
next preceding the day on which notice is given, and the record date for
determining the shareholders who are entitled to vote at a meeting of the
shareholders shall be the date next preceding the day on which the meeting is
held.
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ARTICLE VII
CORPORATE SEAL
The Board of Directors may provide a suitable seal, containing the name
of the Corporation, to be kept by the Secretary. If deemed advisable by the
Board of Directors, duplicate seals may be kept and used by other officers of
the Corporation, or by any transfer agent or registrar of its shares.
ARTICLE VIII
AMENDMENTS
These Regulations may be amended, or new regulations may be adopted, by
the shareholders at a meeting held for that purpose, by the affirmative vote of
the holders of shares entitling them to exercise a majority of the voting power
on that proposal. Notwithstanding anything to the contrary contained in these
Regulations or in this Article VIII, to amend or repeal Article I - Section 7,
Article II - Sections 1, 2, 12 and 13 and this Article VIII shall require the
affirmative vote at a meeting of holders of shares entitled to exercise
three-fourths of the voting power on such proposal, unless such action is
recommended by two-thirds of the members of the Board of Directors.
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Exhibit 4.1
================================================================================
METROPOLITAN FINANCIAL CORP.
AND
WILMINGTON TRUST COMPANY,
AS TRUSTEE
INDENTURE
_____% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
DUE JUNE 30, 2029
DATED AS OF ______, 1999
================================================================================
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ARTICLE I DEFINITIONS 2
Section 1.1 Definitions of Terms 2
ARTICLE II ISSUE, DESCRIPTION, TERMS, CONDITIONS REGISTRATION AND EXCHANGE 10
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 18
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
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Section 3.5 Payment Upon Redemption 21
Section 3.6 No Sinking Fund 21
ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD 21
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 CORPORATION 23
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 REPORTS BY THE CORPORATION AND THE 26
TRUSTEES
Section 6.1 Corporation to Furnish Trustee Names And Addresses of 26
Debenturesholders
Section 6.2 Preservation of Information Communications With Debenture 27
Holders
Section 6.3 Reports by The Corporation 27
Section 6.4 Reports by The Trustee 28
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Section 6.5 Statements As to Default 28
ARTICLE VII REMEDIES OF THE TRUSTEE AND DEBENTURE HOLDERS ON EVENT OF DEFAULT 29
Section 7.1 Events of Default 29
Section 7.2 Collection of Indebtedness And Suits For Enforcement by Trustee 30
Section 7.3 Application of Moneys Collected 32
Section 7.4 Limitation on Suits 32
Section 7.5 Rights And Remedies Cumulative; Delay or Omission Not Waiver 33
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 ISSUE 35
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
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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 Successor 40
Section 9.12 Acceptance of Appointment by Successor 41
Section 9.13 Merger, Conversion, Consolidation or Succession to Business 42
Section 9.14 Preferential Collection of Claims Against The Corporation 42
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 Disregarded 44
Section 10.5 Actions Binding on Future Debenture Holders 44
ARTICLE XI SUPPLEMENTAL INDENTURES 45
Section 11.1 Supplemental Indentures Without The Consent of Debenture Holders 45
Section 11.2 Supplemental Indentures With Consent of Debenture Holders 46
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
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<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE XII SUCCESSOR CORPORATION 47
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, STOCKHOLDERS, OFFICERS AND DIRECTORS 51
Section 14.1 No Recourse 51
ARTICLE XV MISCELLANEOUS PROVISIONS 52
Section 15.1 Effect on Successors And Assigns 52
Section 15.2 Actions by Successor 52
Section 15.3 Surrender of Corporation Powers 52
Section 15.4 Notices 52
Section 15.5 Governing Law 52
Section 15.6 Treatment of Debentures as Debt 53
Section 15.7 Compliance Certificates And Opinions 53
Section 15.8 Payments on Business Days 53
Section 15.9 Conflict With Trust Indenture Act 53
Section 15.10 Counterparts 54
</TABLE>
v
<PAGE> 7
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 15.11 Separability 54
Section 15.12 Assignment 54
Section 15.13 Acknowledgment of Rights 54
Section 15.14 Additional Provisions for the Payment of Expenses 54
ARTICLE XVI SUBORDINATION OF DEBENTURES 55
Section 16.1 Agreement to Subordinate 55
Section 16.2 Default on Senior Debt or Subordinated Debt 55
Section 16.3 Liquidation; Dissolution; Bankruptcy 56
Section 16.4 Subrogation 57
Section 16.5 Trustee to Effectuate Subordination 58
Section 16.6 Notice by The Corporation 58
Section 16.7 Rights of The Trustee; Holders of Senior Indebtedness 59
Section 16.8 Subordination May Not Be Impaired 59
</TABLE>
vi
<PAGE> 8
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Section of Trust Indenture Act of 1939, as amended Section of Indenture
<S> <C>
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>
<CAPTION>
Section of Trust Indenture Act of 1939, as amended Section of Indenture
<S> <C>
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 _______, 1999, 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, 2029 (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 II, a Delaware statutory business
trust (the "Trust"), has offered to the public up to $_______ 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 up to $_______ aggregate
liquidation amount of its Common Securities (as defined herein), in up to
$_______ 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.
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<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 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.
"Other Debentures" means all junior subordinated debentures (other than
the Debentures) issued by the Corporation from time to time and sold to trusts
established or to be established by the Corporation, in each case similar to the
Trust.
"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 _________, 1999, 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, 2029.
"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
8
<PAGE> 18
Corporation (other than the Debentures), except that Subordinated Debt shall not
include Debentures or Other Debentures, including debentures sold by the
Corporation to Metropolitan Capital Trust I or to the holders of Metropolitan
Capital Trust I Preferred Securities, which Other Debentures, including the
aforementioned debentures shall be pari passu with the Debentures for purposes
of this Indenture and the indenture pursuant to which such debentures were
issued.
"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 II, a Delaware statutory
business trust created by the Trust Agreement.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
______, 1999, 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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<PAGE> 19
"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 are hereby authorized Debentures designated the "_____% Junior
Subordinated Deferrable Interest Debentures due June 30, 2029," limited in
aggregate principal amount to not more than $_________ 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
10
<PAGE> 20
(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 March
31, June 30, September 30 and December 31 of each year (each, an "Interest
Payment Date," commencing on June 30, 1999), 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.
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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 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
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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 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
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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 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
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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 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
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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.
(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,
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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.
(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
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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. 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.
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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 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
the 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 June 30, 2004,
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
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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.
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
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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
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
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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
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
or 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.
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(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.
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 (including Other Debentures) 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
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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 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
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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.
(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 9.11, a
Trustee that meets the requirements of Section 9.10, 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
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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 (including other debentures) which rank pari passu
with or junior to the Debentures; provided, however, that 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.
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 June 30, 2004, 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 April 30 and October 31 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
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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.
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
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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.
(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 April 30
following the date of this Indenture deliver to Debentureholders a brief report,
dated as of such April 30, 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 311(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.
(a) 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.
(b) 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
Trustee or of any predecessor or successor corporation, either directly or
through the Trustee 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 the
Indenture obligations of the Trustee are solely corporate obligations of the
Trustee, 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 Trustee 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 by the Trustee.
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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.
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.
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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 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.
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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.
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.
SECTION 15.14 ADDITIONAL PROVISIONS FOR THE PAYMENT OF EXPENSES.
In connection with the offering, sale and issuance of the Debentures to
the Trust and in connection with the sale of the Trust Securities by the Trust,
the Corporation, in its capacity as
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borrower with respect to the Debentures, and not in limitation of the provisions
contained in the "Expense Agreement" (as such term is defined in the Trust
Agreement) or the other provisions contained herein, agrees to pay the
following:
(a) All debts and other obligations (other than with respect to
the Preferred Securities) of the Trust and all costs and
expenses of the Trust (including costs and expenses relating
to the organization of the Trust, the fees and expenses of the
Property Trustee and the other costs and expenses relating to
the operation of the Trust); and
(b) Any and all taxes and all costs and expenses with respect
thereto (other than United States withholding taxes) to which
the Trust might become subject.
The foregoing obligations of the Corporation are for the benefit of, and shall
be enforceable by, any person to whom such debts, obligations, costs, expenses
and liabilities are owed (a "Creditor") whether or not such Creditor has
received notice thereof. Not in limitation of the provisions of the Expense
Agreement, any such Creditor may enforce such obligations of the Corporation
directly against the Corporation, and the Corporation irrevocably waives any
right or remedy to require that any such Creditor take any action against the
Trust or any other person before proceeding against the Corporation. The
Corporation also agrees to execute such additional agreements as may be
necessary or desirable to give full effect to the foregoing.
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
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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 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
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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
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
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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 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
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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 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
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covenants of this Indenture, regardless of any knowledge thereof that any such
holder may have or otherwise be charged with.
(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. $__________
CUSIP NO. ___________
METROPOLITAN FINANCIAL CORP.
____% SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE JUNE 30, 2029
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
METROPOLITAN FINANCIAL CORP., an Ohio corporation (the "Corporation,"
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to WILMINGTON TRUST
COMPANY, as Property Trustee for Metropolitan Capital Trust II, or registered
assigns, the principal sum of Dollars ($_____________) on June 30, 2029 (the
"Stated Maturity"), and to pay interest on said principal sum from ______, ____,
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 March 31, June 30,
September 30 and December 31 of each year commencing June 30, 1999, 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
<PAGE> 71
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 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.
2
<PAGE> 72
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 Trustee or Authentication Agent
By: __________________________ By: ___________________
Authorized Signatory
<PAGE> 73
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> 74
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
________, 1999 (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 June 30,
2004 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,
<PAGE> 75
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 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
2
<PAGE> 76
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 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 II
THIS Certificate of Trust of Metropolitan Capital Trust II (the
"Trust"), dated February 23, 1999, is being duly executed and filed by the
undersigned, as trustee, to form a business trust under the Delaware Business
Trust Act (12 Del. C. ss.3801 et seq.) (the "Act").
1. Name. The name of the business trust formed hereby is Metropolitan
Capital Trust II.
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 duly executed this Certificate of Trust in accordance with Section
3811(a)(1) of the Act.
WILMINGTON TRUST COMPANY, not
in its individual capacity but solely as
trustee
By: /s/ Donald G. MacKelcan
-----------------------
Name: DONALD G. MACKELCAN
Title: ASSISTANT VICE PRESIDENT
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 08:30 AM 02/23/1999
991070526 - 3008541
<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 ________, 1999
METROPOLITAN CAPITAL TRUST II
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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>
PAGE
----
<S> <C> <C>
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>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<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>
<CAPTION>
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
----
<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 ...................................................56
Section 1005. Payments Due on Non-business Day ................................56
Section 1006. Successors ......................................................56
Section 1007. Headings ........................................................56
Section 1008. Reports, Notices And Demands ....................................56
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
</TABLE>
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
-v-
<PAGE> 7
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Section of Section of Amended
Trust Indenture Act and Restated
of 1939, as amended Trust Agreement
------------------- ---------------
<S> <C>
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)
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
Section of Section of Amended
Trust Indenture Act and Restated
of 1939, as amended Trust Agreement
------------------- ---------------
<S> <C>
316(c) 607
317(a)(1) Not Applicable
317(a)(2) Not Applicable
317(b) 509
318(a) 1010
</TABLE>
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 ________, 1999, 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 II,
pursuant to the Delaware Business Trust Act by the entering into of that certain
Trust Agreement, dated as of _______, 1999 (the "Original Trust Agreement"), and
by the execution and filing by the Property Trustee with the Secretary of State
of the State of Delaware of the Certificate of Trust, filed on _______, 1999,
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, not in its individual capacity but solely as trustee under the
Indenture.
"Debentures" means the aggregate principal amount of the Depositor's
____% Junior Subordinated Deferrable Interest Debentures due 2029, 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 ________, 1999 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:
-8-
<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 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 (i) 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 (ii)
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 Property Trustee.
"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 Securityholders and established pursuant to
Section 301 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 II, 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
________, 1999, 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 II," 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 _________ Preferred Securities having an aggregate
Liquidation Amount of $__________ against receipt of the aggregate purchase
price of such Preferred Securities of $__________, 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 _______ Preferred Securities having an aggregate
Liquidation Amount of up to $_________ against receipt of the aggregate purchase
price of such Preferred Securities of $_________, 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 and filing 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 the dates of
issuance, and, except during any Extended Interest Payment Period with respect
to the Debentures, shall be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 each year, commencing on June 30, 1999. 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 April 30 and October 31 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 ________, 1999, 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. 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.
(a) 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) except as provided in this Article VIII, in accepting the trusts
hereby created the Property Trustee acts solely as such hereunder and not in its
individual capacity;
(k) 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
(l) 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
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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.
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 811 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, 2029 (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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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 II." 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
-57-
<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
-58-
<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 _________, 1999,
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 II
TRUST COMMON SECURITIES
(LIQUIDATION AMOUNT $10 PER COMMON SECURITY)
Metropolitan Capital Trust II, 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 ________, 1999, 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 _______, 1999.
METROPOLITAN CAPITAL TRUST II
By:
--------------------------
Name:
------------------------
Title: Administrative Trustee
<PAGE> 68
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT, dated as of ______, 1999, 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 II, 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 ________, 1999,
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
<PAGE> 69
otherwise) and (b) the date on which there are no Beneficiaries remaining;
provided, however, that 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 or 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 II
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: David G. Lodge
Title: President
METROPOLITAN CAPITAL TRUST II
By: ________________________
Name: Judith Z. Adam
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 II
____% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
Metropolitan Capital Trust II, 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 II ____% 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 _______, 1999, 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 _________, 1999 (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 __________, 1999.
METROPOLITAN CAPITAL TRUST II
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
________, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION 1
Section 1.1 Definitions and Interpretation 1
ARTICLE II TRUST INDENTURE ACT 5
Section 2.1 Trust Indenture Act; Application 5
Section 2.2 Lists of Holders of Securities 6
Section 2.3 Reports by the Preferred Guarantee Trustee 6
Section 2.4 Periodic Reports to Preferred Guarantee Trustee 6
Section 2.5 Evidence of Compliance with Conditions Precedent 7
Section 2.6 Events of Default; Waiver 7
Section 2.7 Event of Default; Notice 7
Section 2.8 Conflicting Interests 7
ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE 8
Section 3.1 Powers And Duties of The Preferred Guarantee Trustee 8
Section 3.2 Certain Rights of Preferred Guarantee Trustee 9
Section 3.3 Not Responsible For Recitals or Issuance of Guarantee 11
ARTICLE IV PREFERRED GUARANTEE TRUSTEE 12
Section 4.1 Preferred Guarantee Trustee; Eligibility 12
Section 4.2 Appointment, Removal and Resignation of Preferred Guarantee Trustees 12
ARTICLE V GUARANTEE 13
Section 5.1 Guarantee 13
Section 5.2 Waiver of Notice and Demand 13
Section 5.3 Obligations Not Affected 14
Section 5.4 Rights of Holders 15
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Section 5.5 Guarantee of Payment 15
Section 5.6 Subrogation 15
Section 5.7 Independent Obligations 15
ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION 16
Section 6.1 Limitation of Transactions 16
Section 6.2 Ranking 16
ARTICLE VII TERMINATION 16
Section 7.1 Termination 16
ARTICLE VIII INDEMNIFICATION 17
Section 8.1 Exculpation 17
Section 8.2 Indemnification 17
ARTICLE IX MISCELLANEOUS 18
Section 9.1 Successors and Assigns 18
Section 9.2 Amendments 18
Section 9.3 Notices 18
Section 9.4 Benefit 19
Section 9.5 Governing Law 19
</TABLE>
-ii-
<PAGE> 4
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
SECTION OF TRUST INDENTURE SECTION OF GUARANTEE AGREEMENT
ACT OF 1939, AS AMENDED
<S> <C>
310(a) 4.1(a)
310(b) 4.1(c), 2.8
310(c) Not Applicable
311(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
</TABLE>
<PAGE> 5
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
SECTION OF TRUST INDENTURE SECTION OF GUARANTEE AGREEMENT
ACT OF 1939, AS AMENDED
<S> <C>
317(b) Not Applicable
318(a) 2.1
318(b) 2.1
318(c) 2.1
</TABLE>
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 _______, 1999, 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 II, a Delaware statutory business trust (the
"Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of ________, 1999, 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
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 2029 (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;
<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 2029,
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
-2-
<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.
-3-
<PAGE> 9
"Indenture" means the Indenture dated as of ________, 1999, 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.
"Other Debentures" means all junior subordinated debentures (other than
the Debentures) issued by the Corporation from time to time and sold to trusts
established or to be established by the Corporation, in each case similar to the
Trust.
"Other Guarantees" means all guarantees (other than the Preferred
Securities Guarantee), issued or to be issued by the Corporation from time to
time with respect to preferred securities or preference stock issued to trusts
(other than the Trust) established or to be established by the Corporation, in
each case similar to the Trust.
"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 April 30 and October 31 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.
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SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
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.
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ARTICLE III
POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.
(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
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(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 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
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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;
(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
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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
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.
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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:
(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
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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 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
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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:
(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.
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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 Holders; (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 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.
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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, 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
(including other Debentures) 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, including but not limited to the Preferred Securities Guarantee
Agreement heretofore entered into by Guarantor in respect of the Metropolitan
Capital Trust I Preferred Securities and any other Guarantees, 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.
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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
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 Preferred Securities Guarantee.
-17-
<PAGE> 23
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.
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):
-18-
<PAGE> 24
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.
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: David G. Lodge
Title: President
WILMINGTON TRUST COMPANY, AS
PREFERRED GUARANTEE TRUSTEE
By: _______________________________
Name: _______________________________
Title: _______________________________
-19-
<PAGE> 1
Exhibit 12
METROPOLITAN FINANCIAL CORP.
Computation of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Computation of Earnings 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net income 7,039,495 5,802,887 1,538,903 3,542,419 3,436,789
Income taxes 4,049,000 3,492,000 1,095,000 2,154,700 1,987,143
---------- ---------- ---------- ---------- ----------
Income before taxes 11,088,495 9,294,887 2,633,903 5,697,119 5,423,932
Fixed charges less interest 11,577,389 7,890,654 5,275,600 3,574,470 1,254,223
---------- ---------- ---------- ---------- ----------
Earnings excluding deposit interest 22,665,884 17,185,541 7,909,503 9,271,589 6,678,155
Interest on Deposits 42,436,460 34,120,452 28,131,837 23,521,751 14,917,447
---------- ---------- ---------- ---------- ----------
Earnings including Deposit Interest 65,102,344 51,305,993 36,041,340 32,793,340 21,595,602
========== ========== ========== ========== ==========
Interest expense 11,247,517 7,582,855 4,984,212 3,294,520 1,074,344
Gross rental expense 989,617 923,395 874,164 839,849 539,636
Less: noninterest 659,745 615,597 582,776 559,899 359,757
---------- ---------- ---------- ---------- ----------
329,872 307,798 291,388 279,950 179,879
---------- ---------- ---------- ---------- ----------
Fixed charges excluding deposit interest 11,577,389 7,890,653 5,275,600 3,574,470 1,254,223
Interest on deposits 42,436,460 34,120,452 28,131,837 23,521,751 14,917,447
---------- ---------- ---------- ---------- ----------
Fixed charges including interest 54,013,849 42,011,105 33,407,437 27,096,221 16,171,670
========== ========== ========== ========== ==========
Earnings to Fixed Charges excluding Deposit Interest 1.96 2.18 1.50 2.59 5.32
Earnings to Fixed Charges including Deposit Interest 1.21 1.22 1.08 1.21 1.34
</TABLE>
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF METROPOLITAN FINANCIAL CORP.
<TABLE>
<CAPTION>
State of Incorporation/
-----------------------
Active Organization
- ------ ------------
<S> <C>
Kimberly Construction Company Ohio
Metropolitan Bank and Trust Company Ohio
Metropolitan Capital Trust I Delaware
Inactive
- --------
MetroCapital Corporation Ohio
Metropolitan Savings Service Corporation Ohio
Metropolitan Securities Corporation Ohio
</TABLE>
<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 12, 1999 on the
consolidated financial statements of Metropolitan Financial Corp. as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998. We also consent to the reference to our firm under the
heading "Experts" in the prospectus, which is part of this registration
statement.
Crowe, Chizek and Company LLP
Cleveland, Ohio
February 25, 1999
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
WHEREAS, Metropolitan Financial Corp. (the "Corporation") proposes to
file with the Securities and Exchange Commission ("SEC") and The Nasdaq Stock
Market, Inc. ("NASDAQ") a Registration Statement on Form S-1 and other related
documents, statements and filings, for the purposes of registering under the
Securities Act of 1933 up to approximately $40,250,000 of cumulative trust
preferred securities to be issued by a wholly-owned statutory business trust of
the Corporation, an equal amount of junior subordinated debentures to be issued
by the Corporation, and up to approximately $8,050,000 in common stock of the
Corporation ("Registration Statement"); and,
WHEREAS, the Corporation intends to file an annual report on Form 10-K
for the year ended December 31, 1998 (the "10-K") and a Notice of Annual
Shareholders Meeting and Proxy Statement for the Corporation's 1999 Annual
Shareholders Meeting (the "Proxy"), and other documents, statements and filings
related thereto, with the SEC and NASDAQ on or before March 31, 1999; and,
WHEREAS, each of the directors and/or officers of the Corporation
desire to appoint attorneys-in-fact to implement the filing of the Registration
Statement, the 10-K and the Proxy and take all such further and other action
relating thereto as is set forth herein.
NOW, THEREFORE, each of the directors and/or officers of Metropolitan
Financial Corp. whose signature appears below hereby appoints and grants full
authority to Robert M. Kaye, David G. Lodge, Judith Z. Adam and David G. Slezak,
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 SEC
and NASDAQ the Registration Statement, the 10-K and the Proxy, any and all
amendments to the Registration Statement, the 10-K and the Proxy making such
changes in the Registration Statement, the 10-K and the Proxy, 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 SEC
and NASDAQ and hereby approving and ratifying all that said attorneys-in-fact,
and each of them, may lawfully do, have done or cause to be done by virtue
hereof.
(The remainder of this page is intentionally left blank)
<PAGE> 2
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
By: /s/ Robert M. Kaye Chairman of the Board, Chief
--------------------------- Executive and Director (Principal
Robert M. Kaye Executive Officer) January 19, 1999
By: /s/ David G. Lodge President, Assistant Secretary,
--------------------------- Assistant Treasurer and Director
David G. Lodge (Principal Financial and Accounting
Officer) January 19, 1999
By: /s/ Malvin E. Bank Director January 19, 1999
---------------------------
Malvin E. Bank
By: /s/ Robert R. Broadbent Director January 19, 1999
---------------------------
Robert R. Broadbent
By: /s/ Marjorie M. Carlson Director February 3, 1999
---------------------------
Marjorie M. Carlson
By: /s/ Lois K. Goodman Director January 19, 1999
---------------------------
Lois K. Goodman
By: /s/ Marguerite B. Humphrey Director January 19, 1999
---------------------------
Marguerite B. Humphrey
By: /s/ James A. Karman Director January 19, 1999
---------------------------
James A. Karman
By: /s/ Ralph D. Ketchum Director January 19, 1999
---------------------------
Ralph D. Ketchum
By: /s/ Alfonse M. Mattia Director January 19, 1999
---------------------------
Alfonse M. Mattia
By: /s/ David P. Miller Director January 19, 1999
---------------------------
David P. Miller
</TABLE>
-2-
<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 18th day
of February, 1999.
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,
<PAGE> 5
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 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
2
<PAGE> 6
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.
(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
3
<PAGE> 7
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 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
4
<PAGE> 8
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.
(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:
5
<PAGE> 9
(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 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
6
<PAGE> 10
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 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
7
<PAGE> 11
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.
(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
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<PAGE> 12
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 ByLaws of the Corporation),
any director or the entire Board of Directors of the 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
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<PAGE> 13
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.
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).
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<PAGE> 14
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
(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").
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<PAGE> 15
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 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
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<PAGE> 16
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.
(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.
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(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> 18
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 19
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.
<PAGE> 20
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 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.
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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 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
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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.
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 TrustDepartment 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
Committeesand/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
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<PAGE> 23
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 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
allmatters 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.
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<PAGE> 24
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 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.
6
<PAGE> 25
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.
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.
7
<PAGE> 26
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 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.
8
<PAGE> 27
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.
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
9
<PAGE> 28
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 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> 29
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: February 18, 1999 By: /s/ Emmett R. Harmon
---------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 30
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, 1998.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and currency and coins................................194,839
Interest-bearing balances.............................................................. 0
Held-to-maturity securities................................................................... 73,911
Available-for-sale securities................................................................1,228,194
Federal funds sold and securities purchased under agreements to resell.........................203,500
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 4,167,235
LESS: Allowance for loan and lease losses. . . . . . 66,897
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve.................4,100,338
Assets held in trading accounts......................................................................0
Premises and fixed assets (including capitalized leases).......................................139,079
Other real estate owned......................................................................... 1,532
Investments in unconsolidated subsidiaries and associated companies..............................1,052
Customers' liability to this bank on acceptances outstanding.........................................0
Intangible assets............................................................................... 3,047
Other assets................................................................................... 98,867
Total assets.................................................................................6,044,359
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 31
<TABLE>
<CAPTION>
LIABILITIES
Deposits:
<S> <C>
In domestic offices..........................................................................4,474,659
Noninterest-bearing ...................1,037,549
Interest-bearing.......................3,437,110
Federal funds purchased and Securities sold under agreements to repurchase.................... 390,060
Demand notes issued to the U.S. Treasury........................................................18,944
Trading liabilities (from Schedule RC-D).............................................................0
Other borrowed money:..........................................................................///////
With original maturity of one year or less.........................................555,000
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)....................................................... 90,951
Total liabilities............................................................................5,572,614
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.........................................................403,264
Net unrealized holding gains (losses) on available-for-sale securities.......................... 5,863
Total equity capital...........................................................................471,745
Total liabilities, limited-life preferred stock, and equity capital..........................6,044,359
</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 II
(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 II
(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 18th day
of February, 1999.
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,
<PAGE> 5
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 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
2
<PAGE> 6
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.
(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
3
<PAGE> 7
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 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
4
<PAGE> 8
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.
(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:
5
<PAGE> 9
(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 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
6
<PAGE> 10
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 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
7
<PAGE> 11
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.
(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
8
<PAGE> 12
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 ByLaws of the Corporation),
any director or the entire Board of Directors of the 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
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<PAGE> 13
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.
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).
10
<PAGE> 14
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
(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").
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<PAGE> 15
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 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
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<PAGE> 16
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.
(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.
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<PAGE> 17
(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> 18
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 19
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.
<PAGE> 20
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 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.
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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 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 keptand 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
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<PAGE> 22
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.
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
4
<PAGE> 23
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 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.
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<PAGE> 24
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 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.
6
<PAGE> 25
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.
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.
7
<PAGE> 26
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 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.
8
<PAGE> 27
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.
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
9
<PAGE> 28
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 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> 29
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: February 18, 1999 By: /s/ Emmett R. Harmon
---------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 30
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, 1998.
--------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and currency and coins....................................194,839
Interest-bearing balances.................................................................. 0
Held-to-maturity securities....................................................................... 73,911
Available-for-sale securities....................................................................1,228,194
Federal funds sold and securities purchased under agreements to resell.............................203,500
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 4,167,235
LESS: Allowance for loan and lease losses. . . . . . 66,897
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve.....................4,100,338
Assets held in trading accounts..........................................................................0
Premises and fixed assets (including capitalized leases)...........................................139,079
Other real estate owned............................................................................. 1,532
Investments in unconsolidated subsidiaries and associated companies..................................1,052
Customers' liability to this bank on acceptances outstanding.............................................0
Intangible assets................................................................................... 3,047
Other assets....................................................................................... 98,867
Total assets.....................................................................................6,044,359
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 31
<TABLE>
<CAPTION>
LIABILITIES
Deposits:
<S> <C>
In domestic offices............ ................................................................4,474,659
Noninterest-bearing . . . . . . . . 1,037,549
Interest-bearing. . . . . . . . . . 3,437,110
Federal funds purchased and Securities sold under agreements to repurchase....................... 390,060
Demand notes issued to the U.S. Treasury...........................................................18,944
Trading liabilities (from Schedule RC-D)................................................................0
Other borrowed money:.............................................................................///////
With original maturity of one year or less............................................555,000
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).......................................................... 90,951
Total liabilities...............................................................................5,572,614
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............................................................403,264
Net unrealized holding gains (losses) on available-for-sale securities............................. 5,863
Total equity capital..............................................................................471,745
Total liabilities, limited-life preferred stock, and equity capital.............................6,044,359
</TABLE>
<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 18th day
of February, 1999.
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,
<PAGE> 5
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 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
2
<PAGE> 6
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.
(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
3
<PAGE> 7
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 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
4
<PAGE> 8
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.
(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:
5
<PAGE> 9
(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 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
6
<PAGE> 10
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 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
7
<PAGE> 11
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.
(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
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<PAGE> 12
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 ByLaws of the Corporation),
any director or the entire Board of Directors of the 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
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<PAGE> 13
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.
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).
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<PAGE> 14
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
(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").
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<PAGE> 15
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 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
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<PAGE> 16
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.
(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.
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<PAGE> 17
(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> 18
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 19
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.
<PAGE> 20
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 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.
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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 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
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<PAGE> 22
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.
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
4
<PAGE> 23
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 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.
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<PAGE> 24
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 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.
6
<PAGE> 25
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.
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.
7
<PAGE> 26
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 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.
8
<PAGE> 27
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.
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
9
<PAGE> 28
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 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> 29
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: February 18, 1999 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 30
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, 1998.
--------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and currency and coins.................................194,839
Interest-bearing balances............................................................... 0
Held-to-maturity securities.................................................................... 73,911
Available-for-sale securities.................................................................1,228,194
Federal funds sold and securities purchased under agreements to resell..........................203,500
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 4,167,235
LESS: Allowance for loan and lease losses. . . . . . 66,897
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve..................4,100,338
Assets held in trading accounts.......................................................................0
Premises and fixed assets (including capitalized leases)........................................139,079
Other real estate owned.......................................................................... 1,532
Investments in unconsolidated subsidiaries and associated companies...............................1,052
Customers' liability to this bank on acceptances outstanding..........................................0
Intangible assets................................................................................ 3,047
Other assets.................................................................................... 98,867
Total assets..................................................................................6,044,359
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 31
<TABLE>
<CAPTION>
LIABILITIES
Deposits:
<S> <C>
In domestic offices...........................................................................4,474,659
Noninterest-bearing .................. 1,037,549
Interest-bearing...................... 3,437,110
Federal funds purchased and Securities sold under agreements to repurchase..................... 390,060
Demand notes issued to the U.S. Treasury.........................................................18,944
Trading liabilities (from Schedule RC-D)..............................................................0
Other borrowed money:...........................................................................///////
With original maturity of one year or less..........................................555,000
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)........................................................ 90,951
Total liabilities.............................................................................5,572,614
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..........................................................403,264
Net unrealized holding gains (losses) on available-for-sale securities........................... 5,863
Total equity capital............................................................................471,745
Total liabilities, limited-life preferred stock, and equity capital...........................6,044,359
</TABLE>
2
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
METROPOLITAN FINANCIAL CORPORATION DECEMBER 31, 1998 ANNUAL REPORT AND FORM
10-K INCLUDING THE CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION CONSOLIDATED
STATEMENTS OF OPERATIONS CONSOLIDATED STATEMENTS OF CASH FLOWS AND THE
ACCOMPANYING NOTES
</LEGEND>
<CIK> 0001003233
<NAME> METROPOLITAN FINANCIAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 19,811
<INT-BEARING-DEPOSITS> 9,275
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 217,739
<INVESTMENTS-CARRYING> 16,217
<INVESTMENTS-MARKET> 16,217
<LOANS> 1,040,197
<ALLOWANCE> 6,909
<TOTAL-ASSETS> 1,363,434
<DEPOSITS> 1,051,357
<SHORT-TERM> 66,400
<LIABILITIES-OTHER> 26,197
<LONG-TERM> 149,086
0
0
<COMMON> 0
<OTHER-SE> 42,645
<TOTAL-LIABILITIES-AND-EQUITY> 1,363,434
<INTEREST-LOAN> 74,059
<INTEREST-INVEST> 11,669
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 85,728
<INTEREST-DEPOSIT> 42,536
<INTEREST-EXPENSE> 53,784
<INTEREST-INCOME-NET> 31,944
<LOAN-LOSSES> 2,650
<SECURITIES-GAINS> 70
<EXPENSE-OTHER> 25,522
<INCOME-PRETAX> 11,088
<INCOME-PRE-EXTRAORDINARY> 7,039
<EXTRAORDINARY> 245
<CHANGES> 0
<NET-INCOME> 6,794
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.87
<YIELD-ACTUAL> 3.16
<LOANS-NON> 12,231
<LOANS-PAST> 460
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,117
<ALLOWANCE-OPEN> 5,622
<CHARGE-OFFS> 1,418
<RECOVERIES> 55
<ALLOWANCE-CLOSE> 6,909
<ALLOWANCE-DOMESTIC> 6,909
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
Exhibit 99.4
SECOND AMENDMENT TO
RESTATED LOAN AGREEMENT
THIS FIRST AMENDMENT TO RESTATED LINE OF CREDIT LOAN
AGREEMENT, is entered into on the 18 day of December, 1998, by and between
METROPOLITAN FINANCIAL CORP., an Ohio Corporation (the "Borrower"), and THE
HUNTINGTON NATIONAL BANK (the "Bank").
WITNESSETH
WHEREAS, the Borrower and the Bank entered into a Restated
Loan Agreement dated as of February 22, 1995, which restated the Loan Agreement
dated February 22, 1995 between the parties hereto (such Loan Agreement, as
emended by the amendments thereto and as restated by such Restated Loan
Agreement, as mended by the First Amendment thereto dated March 31, 1998, is
referred to herein as the "Loan Agreement");
WHEREAS, at the request of the Borrower, the Bank has agreed
to modify certain provisions of the Loan Agreement, including the amount of the
loan facility; and
WHEREAS, the Borrower and the Bank have agreed to further
amend the Loan Agreement as set forth herein and to enter into this Amendment to
effectuate such agreement. Terms defined in the Loan Agreement shall, unless
otherwise defined herein, have the meaning ascribed therein. All references to
"Paragraphs" or "Sections" herein are references to paragraphs and sections of
the Loan Agreement.
NOW, THEREFORE, for valuable consideration, the sufficiency of
which is hereby acknowledged by the parties, the parties do, subject to the
approval by the Bank's Loan Committee, hereby amend the Loan Agreement and agree
as follows:
1. The references to the Exhibit in the definition of "Note"
and in Section 2.04 are changed from "A-1" to "A-2".
2. The two references to Eight Million Dollars
($8,000,000.00) in Section 2.02(A) are hereby changed to Twelve Million Dollars
($12,000,000.00).
3. The reference to "Metropolitan Savings Bank of Cleveland"
in Section 2.02(B), 3.01(G), 6.01(C)(3) and anywhere else in the Loan Documents
are hereby changed to "Metropolitan Bank and Trust" to reflect the change in the
name of such subsidiary of the Borrower.
4. The reference to a "ninety (90) day period" in Section
2.05(A)(1) relating to the LIBO rate is hereby changed to a "thirty (30) day,
sixty (60) day or ninety (90) day period."
<PAGE> 2
Except as otherwise provided, all amendments to the Loan
Agreement set forth herein shall be deemed effective from and after the date of
this Amendment. All references in the Loan Agreement to this "Agreement",
"hereof", "herein", "hereunder" or "hereby" shall, from and after the date of
this Amendment, be deemed references to the Loan Agreement as amended by this
Amendment.
In all other respects the parties hereto hereby ratify and
affirm the terms and conditions of the Loan Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the day and year first above written.
THE BANK: THE BORROWER:
THE HUNTINGTON NATIONAL BANK METROPOLITAN FINANCIAL CORP.
By: John R. Macks By: David P. Miller
--------------------------- ---------------------------
Name: /s/ John R. Macks Name: /s/ David P. Miller
--------------------------- ---------------------------
Title: Portfolio Manager Title: Treasurer
--------------------------- ---------------------------
