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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-9861
M&T BANK CORPORATION
(Exact name of registrant as specified in its charter)
New York 16-0968385
(State of incorporation) (I.R.S. Employer Identification No.)
One M&T Plaza, Buffalo, New York 14203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716)842-5445
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $5 par value New York Stock Exchange
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
8.234% Capital Securities of M&T Capital Trust I
(and the Guarantee of M&T Bank Corporation with respect thereto)
(Title of class)
8.234% Junior Subordinated Debentures of
M&T Bank Corporation
(Title of class)
8.277% Capital Securities of M&T Capital Trust II
(and the Guarantee of M&T Bank Corporation with respect thereto)
(Title of class)
8.277% Junior Subordinated Debentures of
M&T Bank Corporation
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the Common Stock, $5 par value, held by non-affiliates
of the registrant, computed by reference to the closing price as of the close of
business on February 18, 2000: $2,279,047,672.
Number of shares of the Common Stock, $5 par value, outstanding as of the close
of business on February 18, 2000: 7,687,175 shares.
Documents Incorporated By Reference:
(1) Portions of the Proxy Statement for the 2000 Annual Meeting of
Stockholders of M&T Bank Corporation in Part III.
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M&T BANK CORPORATION
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
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CROSS-REFERENCE SHEET Form
10-K
PART I PAGE
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Item 1. Business. 5
Statistical disclosure pursuant to Guide 3
I. Distribution of assets, liabilities, and stockholders'
equity; interest rates and interest differential
A. Average balance sheets 50-51
B. Interest income/expense and resulting yield or rate
on average interest-earning assets (including non-
accrual loans) and interest-bearing liabilities 50-51
C. Rate/volume variances 19
II. Investment portfolio
A. Year-end balances 16
B. Maturity schedule and weighted average yield 62
C. Aggregate carrying value of securities that exceed ten
percent of stockholders' equity 77
III. Loan portfolio
A. Year-end balances 16,79
B. Maturities and sensitivities to changes in interest rates 59
C. Risk elements
Nonaccrual, past-due and renegotiated loans 57
Actual and pro forma interest on certain loans 79
Nonaccrual policy 70
Loan concentrations 34
IV. Summary of loan loss experience
A. Analysis of the allowance for loan losses 55
Factors influencing management's judgment concerning
the adequacy of the allowance and provision 32-34,71
B. Allocation of the allowance for loan losses 56
V. Deposits
A. Average balances and rates 50-51
B. Maturity schedule of domestic time deposits with
balances of $100,000 or more 58
VI. Return on equity and assets 18,25-26,39
VII. Short-term borrowings 83-84
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M&T BANK CORPORATION
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
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CROSS-REFERENCE SHEET--CONTINUED Form
10-K
PAGE
PART I, continued
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Item 2. Properties. 20,81
Item 3. Legal Proceedings. 20
Item 4. Submission of Matters to a Vote of Security Holders. 20
Executive Officers of the Registrant. 20-22
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters. 23
A. Principal market 23
Market prices 47
B. Approximate number of holders at year-end 16
C. Frequency and amount of dividends declared 17-18,46-47
D. Restrictions on dividends 11,112
Item 6. Selected Financial Data.
A. Selected consolidated year-end balances 16
B. Consolidated earnings, etc. 17-18
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 23-62
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk. 36-39,60,63
Item 8. Financial Statements and Supplementary Data.
A. Report of Independent Accountants 64
B. Consolidated Balance Sheet -
December 31, 1999 and 1998 65
C. Consolidated Statement of Income -
Years ended December 31, 1999, 1998 and 1997 66
D. Consolidated Statement of Cash Flows -
Years ended December 31, 1999, 1998 and 1997 67
E. Consolidated Statement of Changes in
Stockholders' Equity - Years ended December 31,
1999, 1998 and 1997 68
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M&T BANK CORPORATION
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
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CROSS-REFERENCE SHEET--CONTINUED Form
10-K
PAGE
PART II, continued
Item 8. Financial Statements and Supplementary Data, continued
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F. Notes to Financial Statements 69-115
G. Quarterly Trends 47
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. 116
PART III
Item 10. Directors and Executive Officers of the
Registrant. 116
Item 11. Executive Compensation. 116
Item 12. Security Ownership of Certain Beneficial
Owners and Management. 116
Item 13. Certain Relationships and Related Transactions. 116
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K. 117
Signatures 118-120
Exhibit Index 121-124
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PART I
Item 1. BUSINESS.
M&T Bank Corporation ("Registrant" or "M&T") is a New York business corporation
which is registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended ("BHCA") and under Article III-A of the New York Banking Law
("Banking Law"). The principal executive offices of the Registrant are located
at One M&T Plaza, Buffalo, New York 14203. The Registrant was incorporated in
November 1969. The Registrant and its direct and indirect subsidiaries are
collectively referred to herein as the "Company". As of December 31, 1999 the
Company had consolidated total assets of $22.4 billion, deposits of $15.4
billion and stockholders' equity of $1.8 billion. The Company had 5,604
full-time and 965 part-time employees as of December 31, 1999.
At December 31, 1999, the Registrant had two wholly owned bank subsidiaries:
Manufacturers and Traders Trust Company ("M&T Bank") and M&T Bank, National
Association ("M&T Bank, N.A."). The banks collectively offer a wide range of
commercial banking, trust and investment services to their customers. At
December 31, 1999, M&T Bank represented 96% of consolidated assets of the
Company.
On June 1, 1999, M&T completed the acquisition of FNB Rochester Corp. ("FNB"), a
bank holding company headquartered in Rochester, New York. Immediately after the
acquisition, FNB's banking subsidiary, First National Bank of Rochester, which
had 17 banking offices in western and central New York State, was merged with
and into M&T Bank. The acquisition was accounted for using the purchase method
of accounting and, accordingly, the operations of FNB have been included in the
financial results of the Company since the acquisition date. FNB's stockholders
received $76 million in cash and 122,516 shares of M&T common stock in exchange
for FNB shares outstanding at the time of acquisition. Assets acquired totaled
approximately $676 million and included loans and leases of $393 million and
investment securities of $148 million. Liabilities assumed on June 1 were
approximately $541 million and included $511 million of deposits.
On September 24, 1999, M&T Bank completed the acquisition of 29 upstate New York
branch offices from The Chase Manhattan Bank ("Chase"). The branch offices had
approximately $634 million of deposits and approximately $44 million of retail
installment and commercial loans at the closing. In addition, on September 30,
1999 M&T Bank received investment management and custody accounts having assets
of approximately $286 million. Chase also agreed to transfer up to approximately
$195 million of other trust and fiduciary account assets to M&T Bank following
the receipt of required court approvals. Subject to the receipt of court
approval, it is expected that this portion of the transaction will be completed
during the first quarter of 2000.
In connection with the transactions described in the two preceding paragraphs,
the Company recorded approximately $153 million of goodwill and core deposit
intangible. Nonrecurring expenses related to systems conversions and other costs
of integrating and conforming the acquired operations with and into the
operations of M&T Bank totaled $4.7 million ($3.0 million after-tax) during the
year ended December 31, 1999.
The Company from time to time considers acquiring banks, thrift institutions,
branch offices or other businesses within markets currently served or in other
nearby markets. The Company has pursued acquisition opportunities in the past,
continues to review different opportunities, including the possibility of major
acquisitions, and intends to continue this practice.
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SUBSIDIARIES
Olympia Financial Corp. ("Olympia"), a wholly owned subsidiary of M&T, is a
Delaware corporation that holds the stock of M&T Bank and is registered as a
bank holding company under the Bank Holding Company Act. Its registered office
is located at 1209 Orange Street, Wilmington, Delaware 19801.
M&T Bank is a banking corporation which is incorporated under the laws of the
State of New York. M&T Bank is a member of the Federal Reserve System and the
Federal Home Loan Bank System, and its deposits are insured by the Federal
Deposit Insurance Corporation ("FDIC") up to applicable limits. M&T acquired all
of the issued and outstanding shares of the capital stock of M&T Bank in
December 1969. Olympia acquired all of the issued and outstanding shares of the
capital stock of M&T Bank in connection with M&T's April 1, 1998 acquisition of
ONBANCorp, Inc. ("ONBANCorp"). The stock of Olympia and M&T Bank represents a
major asset of M&T. M&T Bank operates under a charter granted by the State of
New York in 1892, and the continuity of its banking business is traced to the
organization of the Manufacturers and Traders Bank in 1856. The principal
executive offices of M&T Bank are located at One M&T Plaza, Buffalo, New York
14203. As of December 31, 1999, M&T Bank had 261 banking offices located
throughout New York State, 19 offices in northeastern Pennsylvania, plus a
branch in Nassau, The Bahamas. As of December 31, 1999, M&T Bank had
consolidated total assets of $21.6 billion, deposits of $14.7 billion and
stockholder's equity of $2.1 billion. The deposit liabilities of M&T Bank are
insured by the FDIC through either its Bank Insurance Fund ("BIF") or its
Savings Association Insurance Fund ("SAIF"). Of M&T Bank's $14.7 billion in
assessable deposits at December 31, 1999, 85% were assessed as BIF-insured and
the remainder as SAIF-insured deposits. As a commercial bank, M&T Bank offers a
broad range of financial services to a diverse base of consumers, businesses,
professional clients, governmental entities and financial institutions located
in its markets. Lending is largely focused on consumers residing in New York
State and northeastern Pennsylvania, and on small and medium-size businesses
based in those areas. In addition, the Company conducts lending activities in
other states through various subsidiaries. M&T Bank and certain of its
subsidiaries also offer commercial mortgage loans secured by income producing
properties or properties used by borrowers in a trade or business. Other
financial services are also provided through operating subsidiaries.
M&T Bank, N.A., a national banking association and a member of the Federal
Reserve System and the FDIC, commenced operations on October 2, 1995. The
deposit liabilities of M&T Bank, N.A. are insured by the FDIC through the BIF.
The main office of M&T Bank, N.A. is located at 48 Main Street, Oakfield, New
York 14125. M&T Bank, N.A. offers selected deposit and loan products on a
nationwide basis, primarily through direct mail and telephone marketing
techniques. M&T Bank, N.A. is also a licensed insurance agency, and offers
insurance products primarily through the banking offices of M&T Bank. As of
December 31, 1999, M&T Bank, N.A. had total assets of $852 million, deposits of
$693 million and stockholder's equity of $50 million.
M&T Credit Corporation ("M&T Credit"), a wholly owned subsidiary of M&T Bank,
was incorporated as a New York business corporation in April 1994. M&T Credit is
a credit and leasing company offering consumer loans and commercial loans and
leases. Its headquarters are located at M&T Center, One Fountain Plaza, Buffalo,
New York 14203, with offices in Massachusetts and Pennsylvania. As of December
31, 1999, M&T Credit had assets of $699 million and stockholder's equity of $25
million. M&T Credit recorded $42 million of revenue during 1999.
M&T Financial Corporation ("M&T Financial"), a New York business corporation, is
a wholly owned subsidiary of M&T Bank which specializes in capital-equipment
leasing. M&T Financial was formed in October 1985, had assets of $79 million and
stockholder's equity of $19 million as of December 31, 1999, and recorded
approximately $4 million of revenue in 1999. The headquarters
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of M&T Financial are located at One M&T Plaza, Buffalo, New York 14203.
M&T Investment Company, Inc. ("M&T Investment Company"), a wholly owned
subsidiary of M&T Bank, was incorporated as a New Jersey business corporation in
December 1999. Operated as a New Jersey Investment Company, M&T Investment
Company owns all of the outstanding common stock and 87.5% of the preferred
stock of M&T Real Estate, Inc. As of December 31, 1999, M&T Investment Company
had assets of approximately $6.1 billion and stockholder's equity of
approximately $6.0 billion. Excluding dividends from M&T Real Estate, Inc., M&T
Investment Company recorded $534 thousand of revenue in 1999. The headquarters
of M&T Investment Company are located at One Maynard Drive, Park Ridge, New
Jersey 07656.
M&T Mortgage Corporation ("M&T Mortgage"), the wholly owned mortgage banking
subsidiary of M&T Bank, was incorporated as a New York business corporation in
November 1991. M&T Mortgage's principal activities are comprised of the
origination of residential mortgage loans and providing residential mortgage
loan servicing to M&T Bank, M&T Bank, N.A. and others. M&T Mortgage operates
throughout New York State, and also maintains branch offices in Arizona,
Colorado, Idaho, Massachusetts, Ohio, Oregon, Pennsylvania, Utah and Washington.
M&T Mortgage had assets of $519 million and stockholder's equity of $144 million
as of December 31, 1999, and recorded approximately $122 million of revenue
during 1999. Residential mortgage loans serviced by M&T Mortgage for
non-affiliates totaled $7.2 billion at December 31, 1999. The headquarters of
M&T Mortgage are located at M&T Center, One Fountain Plaza, Buffalo, New York
14203.
M&T Mortgage Reinsurance Company, Inc. ("M&T Reinsurance"), a wholly owned
subsidiary of M&T Bank, was incorporated as a Vermont business corporation in
July 1999. M&T Reinsurance enters into reinsurance contracts with insurance
companies who insure mortgage lenders against the risk of a mortgage borrower's
payment default. M&T Reinsurance receives a share of the premium for those
policies in exchange for accepting a portion of the insurer's risk of borrower
default. M&T Reinsurance had assets of approximately $720 thousand and
stockholder's equity of approximately $673 thousand as of December 31, 1999, and
recorded approximately $178 thousand of revenue during 1999. M&T Reinsurance's
principal and registered office is at 148 College Street, Burlington, Vermont
05401.
M&T Real Estate, Inc.("M&T Real Estate"), a subsidiary of M&T Investment
Company, was incorporated as a New York business corporation in August 1995. All
of the outstanding common stock and 87.5% of the preferred stock of M&T Real
Estate is owned by M&T Investment Company. The remaining 12.5% of M&T Real
Estate's preferred stock is owned by officers or former officers of the Company.
M&T Real Estate engages in commercial real estate lending and provides loan
servicing to M&T Bank and others. As of December 31, 1999, M&T Real Estate had
assets of $5.8 billion and stockholders' equity of $5.7 billion. M&T Real Estate
recorded $441 million of revenue in 1999. Commercial mortgage loans serviced for
non-affiliates totaled $21 million at December 31, 1999. The headquarters of M&T
Real Estate are located at M&T Center, One Fountain Plaza, Buffalo, New York
14203.
M&T Securities, Inc. ("M&T Securities") is a wholly owned subsidiary of M&T Bank
that was incorporated as a New York business corporation in November 1985. M&T
Securities is registered as a broker/dealer under the Securities Exchange Act of
1934, as amended, as an investment advisor under the Investment Advisors Act of
1940, as amended, and is licensed as an insurance agent. It provides securities
brokerage, investment advisory, and insurance services. As of December 31, 1999,
M&T Securities had assets of $13 million and stockholder's equity of $6 million.
M&T Securities recorded $30 million of revenue during 1999. The headquarters of
M&T Securities are located at One M&T Plaza, Buffalo, New York 14203.
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Highland Lease Corporation ("Highland Lease"), a wholly owned subsidiary of M&T
Bank, was incorporated as a New York business corporation in October 1994.
Highland Lease is a consumer leasing company with headquarters at One M&T Plaza,
Buffalo, New York 14203. As of December 31, 1999, Highland Lease had assets of
$395 million and stockholder's equity of $37 million. Highland Lease recorded
$25 million of revenue during 1999.
In December 1999, the names of First Empire Capital Trust I, First Empire
Capital Trust II, and OnBank Capital Trust I were changed to M&T Capital Trust
I, M&T Capital Trust II, and M&T Capital Trust III, respectively. During 1997,
the Company formed two Delaware business trusts and ONBANCorp formed one
Delaware business trust to issue preferred capital securities ("Capital
Securities"). M&T Capital Trust I ("Trust I") issued $150 million of 8.234%
Capital Securities on January 17, 1997, and M&T Capital Trust II ("Trust II")
issued $100 million of 8.277% Capital Securities on May 30, 1997. On February 4,
1997, M&T Capital Trust III ("Trust III" and, together with Trust I and Trust
II, the "Trusts") issued $60 million of 9.25% preferred capital securities. The
common securities ("Common Securities") of Trust I and Trust II are wholly owned
by M&T and the common securities of Trust III are wholly owned by Olympia. The
Common Securities of each Trust are the only class of each Trust's securities
possessing general voting powers. The Capital Securities represent preferred
undivided interests in the assets of the corresponding Trust and are classified
in the Company's consolidated balance sheet as long-term borrowings, with
accumulated distributions on such securities included in interest expense. Under
the Federal Reserve Board's current risk-based capital guidelines, the Capital
Securities are includable in M&T's Tier 1 capital. The proceeds from the
issuances of the Capital Securities and the Common Securities were used by the
Trusts to purchase junior subordinated deferrable interest debentures issued by
M&T in the case of Trust I and Trust II and Olympia in the case of Trust III.
The junior subordinated debentures represent the sole assets of each Trust and
payments under the junior subordinated debentures are the sole source of cash
flow for each Trust. As of December 31, 1999, Trust I had assets of $160 million
and stockholders' equity of $155 million, and during 1999 Trust I recorded $13
million of revenue. Trust II had assets of $104 million and stockholders' equity
of $103 million at December 31, 1999, and during 1999 Trust II recorded $9
million of revenue. Trust III had assets of $73 million and stockholders' equity
of $62 million at December 31, 1999, and during 1999 Trust III recorded $5
million of revenue.
The Registrant and its banking subsidiaries have a number of other
special-purpose or inactive subsidiaries. These other subsidiaries represented,
individually and collectively, an insignificant portion of the Company's
consolidated assets, net income and stockholders' equity at December 31, 1999.
SEGMENT INFORMATION, PRINCIPAL PRODUCTS/SERVICES
AND FOREIGN OPERATIONS
Information about the Registrant's business segments is included in note 19 of
Notes to Financial Statements filed herewith in Part II, Item 8, "Financial
Statements and Supplementary Data" and is further discussed in Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". The Company's international activities are discussed in note 15 of
Notes to Financial Statements filed herewith in Part II, Item 8, "Financial
Statements and Supplementary Data".
The Registrant's reportable segments have been determined based upon its
internal profitability reporting system, which is organized by strategic
business unit. Certain strategic business units have been combined for segment
information reporting purposes where the nature of the products and services,
the type of customer and the distribution of those products and services are
similar. The reportable segments are Commercial Banking,
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Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking
and Retail Banking.
The only activities that, as a class, contributed 10% or more of the sum of
consolidated interest income and other income in each of the last three years
were lending and investment securities transactions. The amount of income from
such sources during those years is set forth on the Company's Consolidated
Statement of Income filed herewith in Part II, Item 8, "Financial Statements and
Supplementary Data".
SUPERVISION AND REGULATION OF THE COMPANY
The banking industry is subject to extensive state and federal regulation and
continues to undergo significant change. The following discussion summarizes
certain aspects of the banking laws and regulations that affect the Company.
Proposals to change the laws and regulations governing the banking industry are
frequently raised in Congress, in state legislatures, and before the various
bank regulatory agencies. The likelihood and timing of any changes and the
impact such changes might have on the Company are impossible to determine with
any certainty. A change in applicable laws or regulations, or a change in the
way such laws or regulations are interpreted by regulatory agencies or courts,
may have a material impact on the business, operations and earnings of the
Company. To the extent that the following information describes statutory or
regulatory provisions, it is qualified entirely by reference to the particular
statutory or regulatory provision.
FINANCIAL SERVICES MODERNIZATION
The Gramm-Leach-Bliley Act ("Gramm-Leach") was signed into law on November 12,
1999 and enables combinations among banks, securities firms and insurance
companies beginning March 11, 2000 by repealing depression-era laws which
restricted such affiliations. Under Gramm-Leach, bank holding companies are
permitted to offer their customers virtually any type of financial service that
is financial in nature or incidental thereto, including banking, securities
underwriting, insurance (both underwriting and agency), and merchant banking.
In order to engage in these new financial activities, a bank holding company
must qualify and register with the Board of Governors of the Federal Reserve
System ("Federal Reserve Board") as a "financial holding company" by
demonstrating that each of its bank subsidiaries is "well capitalized," "well
managed," and has at least a "satisfactory" rating under the Community
Reinvestment Act of 1977 ("CRA").
These new financial activities authorized by Gramm-Leach may also be engaged
in by a "financial subsidiary" of a national or state bank, except for
insurance or annuity underwriting, insurance company portfolio investments,
real estate investment and development, and merchant banking, which must be
conducted in a financial holding company. In order for the new financial
activities to be engaged in by a financial subsidiary of a national or state
bank, Gramm-Leach requires each of the parent bank (and its sister-bank
affiliates) to be well capitalized and well managed; the aggregate
consolidated assets of all of that bank's financial subsidiaries may not
exceed the lesser of 45% of its consolidated total assets or $50 billion; the
bank must have at least a satisfactory CRA rating; and, if that bank is one
of the 100 largest national banks, it must meet certain financial rating or
other comparable requirements.
Gramm-Leach establishes a system of functional regulation, under which the
federal banking agencies will regulate the banking activities of financial
holding companies and banks' financial subsidiaries, the U.S. Securities and
Exchange Commission will regulate their securities activities and state
insurance regulators will regulate their insurance activities. Gramm-Leach also
provides new protections against the transfer and use by financial institutions
of consumers' nonpublic, personal information.
The foregoing discussion is qualified in its entirety by reference to the
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statutory provisions of Gramm-Leach and the implementing regulations which
are adopted by various government agencies pursuant to Gramm-Leach.
BANK HOLDING COMPANY REGULATION
As a registered bank holding company, the Registrant and its nonbank
subsidiaries are subject to supervision and regulation under the BHCA by the
Federal Reserve Board and the New York State Banking Superintendent ("Banking
Superintendent"). The Federal Reserve Board requires regular reports from the
Registrant and is authorized by the BHCA to make regular examinations of the
Registrant and its subsidiaries.
Although it meets the qualifications for electing to become a financial holding
company, the Registrant has elected to retain its pre-Gramm-Leach status for the
present time under the BHCA. The Registrant may not acquire direct or indirect
ownership or control of more than 5% of the voting shares of any company,
including a bank, without the prior approval of the Federal Reserve Board,
except as specifically authorized under the BHCA. The Registrant is also subject
to regulation under the Banking Law with respect to certain acquisitions of
domestic banks. Under the BHCA, the Registrant, subject to the approval of the
Federal Reserve Board, may acquire shares of non-banking corporations the
activities of which are deemed by the Federal Reserve Board to be so closely
related to banking or managing or controlling banks as to be a proper incident
thereto.
The Federal Reserve Board has enforcement powers over bank holding companies and
their non-banking subsidiaries, among other things, to interdict activities that
represent unsafe or unsound practices or constitute violations of law, rule,
regulation, administrative orders or written agreements with a federal bank
regulator. These powers may be exercised through the issuance of
cease-and-desist orders, civil money penalties or other actions.
Under the Federal Reserve Board's statement of policy with respect to bank
holding company operations, a bank holding company is required to serve as a
source of financial strength to its subsidiary depository institutions and to
commit all available resources to support such institutions in circumstances
where it might not do so absent such policy. Although this "source of strength"
policy has been challenged in litigation, the Federal Reserve Board continues to
take the position that it has authority to enforce it. For a discussion of
circumstances under which a bank holding company may be required to guarantee
the capital levels or performance of its subsidiary banks, SEE CAPITAL ADEQUACY,
below. The Federal Reserve also has the authority to terminate any activity of a
bank holding company that constitutes a serious risk to the financial soundness
or stability of any subsidiary depository institution or to terminate its
control of any bank or nonbank subsidiaries.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, as
amended (the "Interstate Banking Act") generally permits bank holding companies
to acquire banks in any state, and preempts all state laws restricting the
ownership by a bank holding company of banks in more than one state. The
Interstate Banking Act also permits a bank to merge with an out-of-state bank
and convert any offices into branches of the resulting bank if both states have
not opted out of interstate branching; permits a bank to acquire branches from
an out-of-state bank if the law of the state where the branches are located
permits the interstate branch acquisition; and permits banks to establish and
operate DE NOVO interstate branches whenever the host state opts-in to DE NOVO
branching. Bank holding companies and banks seeking to engage in transactions
authorized by the Interstate Banking Act must be adequately capitalized and
managed.
The Banking Law authorizes interstate branching by merger or acquisition on a
reciprocal basis, and permits the acquisition of a single branch without
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restriction, but does not provide for DE NOVO interstate branching.
Bank holding companies and their subsidiary banks are also subject to the
provisions of the CRA. Under the terms of the CRA, the Federal Reserve Board (or
other appropriate bank regulatory agency) is required, in connection with its
examination of a bank, to assess such bank's record in meeting the credit
needs of the communities served by that bank, including low- and moderate-
income neighborhoods. Furthermore, such assessment is also required of any bank
that has applied, among other things, to merge or consolidate with or acquire
the assets or assume the liabilities of a federally-regulated financial
institution, or to open or relocate a branch office. In the case of a bank
holding company applying for approval to acquire a bank or bank holding company,
the Federal Reserve Board will assess the record of each subsidiary bank of the
applicant bank holding company in considering the application. The Banking Law
contains provisions similar to the CRA which are applicable to New
York-chartered banks.
SUPERVISION AND REGULATION OF BANK SUBSIDIARIES
The Registrant's banking subsidiaries are subject to supervision and regulation,
and are examined regularly, by various bank regulatory agencies: M&T Bank by the
Federal Reserve Board and the Banking Superintendent; and M&T Bank, N.A. by the
Comptroller of the Currency (the "OCC"). The Registrant and its direct
non-banking subsidiaries are affiliates, within the meaning of the Federal
Reserve Act, of the Registrant's subsidiary banks and their subsidiaries. As a
result, the Registrant's subsidiary banks and their subsidiaries are subject to
restrictions on loans or extensions of credit to, purchases of assets from,
investments in, and transactions with the Registrant and its direct non-banking
subsidiaries and on certain other transactions with them or involving their
securities. Gramm-Leach places similar restrictions on the Registrant's
subsidiary banks making loans or extending credit to, purchasing assets from,
investing in, or entering into transactions with, their financial subsidiaries,
although the Registrant's subsidiary banks have not yet commenced any activities
through financial subsidiaries.
Under the "cross-guarantee" provisions of the FDI Act, insured depository
institutions under common control are required to reimburse the FDIC for any
loss suffered by either the BIF or SAIF of the FDIC as a result of the default
of a commonly controlled insured depository institution or for any assistance
provided by the FDIC to a commonly controlled insured depository institution in
danger of default. Thus, any insured depository institution subsidiary of M&T
could incur liability to the FDIC in the event of a default of another insured
depository institution owned or controlled by M&T. The FDIC's claim under the
cross-guarantee provisions is superior to claims of stockholders of the insured
depository institution or its holding company and to most claims arising out of
obligations or liabilities owed to affiliates of the institution, but is
subordinate to claims of depositors, secured creditors and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution. The FDIC may decline to enforce the cross-guarantee
provisions if it determines that a waiver is in the best interest of the BIF or
SAIF or both.
DIVIDENDS FROM BANK SUBSIDIARIES
M&T Bank and M&T Bank, N.A. are subject, under one or more of the banking laws,
to restrictions on the amount and frequency (no more often than quarterly) of
dividend declarations. Future dividend payments to the Registrant by its
subsidiary banks will be dependent on a number of factors, including the
earnings and financial condition of each such bank, and are subject to the
limitations referred to in note 20 of Notes to Financial Statements filed
herewith in Part II, Item 8, "Financial Statements and Supplementary Data," and
to other statutory powers of bank regulatory agencies.
-11-
<PAGE>
An insured depository institution is prohibited from making any capital
distribution to its owner, including any dividend, if, after making such
distribution, the depository institution fails to meet the required minimum
level for any relevant capital measure, including the risk-based capital
adequacy and leverage standards discussed below.
CAPITAL ADEQUACY
The Federal Reserve Board, the FDIC and the OCC have adopted risk-based capital
adequacy guidelines for bank holding companies and banks under their
supervision. Under these guidelines, the so-called "Tier 1 capital" and "Total
capital" as a percentage of risk-weighted assets and certain off-balance sheet
instruments must be at least 4% and 8%, respectively.
The Federal Reserve Board, the FDIC and the OCC have also imposed a leverage
standard to supplement their risk-based ratios. This leverage standard focuses
on a banking institution's ratio of Tier 1 capital to average total assets,
adjusted for goodwill and certain other items. Under these guidelines, banking
institutions that meet certain criteria, including excellent asset quality, high
liquidity, low interest rate exposure and good earnings, and that have received
the highest regulatory rating must maintain a ratio of Tier 1 capital to total
adjusted average assets of at least 3%. Institutions not meeting these criteria,
as well as institutions with supervisory, financial or operational weaknesses,
along with those experiencing or anticipating significant growth are expected to
maintain a Tier 1 capital to total adjusted average assets ratio equal to at
least 4% to 5%.
As reflected in the following table, the risk-based capital ratios and leverage
ratios of the Registrant, M&T Bank and M&T Bank, N.A. as of December 31, 1999
exceeded the required capital ratios for classification as "well capitalized,"
the highest classification under the regulatory capital guidelines.
Capital Components and Ratios at December 31, 1999
(dollars in millions)
<TABLE>
<CAPTION>
Registrant M&T Bank,
(Consolidated) M&T Bank N.A.
-------------- -------- ---------
<S> <C> <C> <C>
Capital Components
Tier 1 capital $ 1,490 $ 1,436 $ 50
Total capital 1,846 1,787 55
Risk-weighted assets
and off-balance sheet
instruments $ 18,008 $ 17,534 $ 468
Risk-based Capital Ratio
Tier 1 capital 8.27% 8.19% 10.74%
Total capital 10.25% 10.19% 11.76%
Leverage Ratio 6.92% 6.92% 6.18%
</TABLE>
The federal banking agencies, including the Federal Reserve Board and the OCC,
maintain risk-based capital standards in order to ensure that those standards
take adequate account of interest rate risk, concentration of credit risk and
the risk of nontraditional activities, as well as reflect the actual performance
and expected risk of loss on certain multifamily housing loans. Bank regulators
periodically propose amendments to the risk-based capital guidelines and related
regulatory framework. While the Company's management studies such proposals, the
timing of adoption, ultimate form and effect of any such proposed amendments on
the Company's capital requirements and operations cannot be predicted.
-12-
<PAGE>
The federal banking agencies are required to take "prompt corrective action"
in respect of depository institutions and their bank holding companies that
do not meet minimum capital requirements. FDICIA established five capital
tiers: "well capitalized", "adequately capitalized", "undercapitalized",
"significantly undercapitalized" and "critically undercapitalized". A
depository institution's capital tier, or that of its bank holding company,
depends upon where its capital levels are in relation to various relevant
capital measures, including a risk-based capital measure and a leverage ratio
capital measure, and certain other factors.
Under the implementing regulations adopted by the federal banking agencies, a
bank holding company or bank is considered "well capitalized" if it has (i) a
total risk-based capital ratio of 10% or greater, (ii) a Tier 1 risk-based
capital ratio of 6% or greater, (iii) a leverage ratio of 5% or greater and (iv)
is not subject to any order or written directive to meet and maintain a specific
capital level for any capital measure. An "adequately capitalized" bank holding
company or bank is defined as one that has (i) a total risk-based capital ratio
of 8% or greater, (ii) a Tier 1 risk-based capital ratio of 4% or greater and
(iii) a leverage ratio of 4% or greater (or 3% or greater in the case of a bank
with a composite CAMELS rating of 1). A bank holding company or bank is
considered (A) "undercapitalized" if it has (i) a total risk-based capital ratio
of less than 8%, (ii) a Tier 1 risk-based capital ratio of less than 4% or (iii)
a leverage ratio of less than 4% (or 3% in the case of a bank with a composite
CAMELS rating of 1); (B) "significantly undercapitalized" if the bank has (i) a
total risk-based capital ratio of less than 6%, or (ii) a Tier 1 risk-based
capital ratio of less than 3% or (iii) a leverage ratio of less than 3% and
(C)"critically undercapitalized" if the bank has a ratio of tangible equity to
total assets equal to or less than 2%. The Federal Reserve Board may reclassify
a "well capitalized" bank holding company or bank as "adequately capitalized" or
subject an "adequately capitalized" or "undercapitalized" institution to the
supervisory actions applicable to the next lower capital category if it
determines that the bank holding company or bank is in an unsafe or unsound
condition or deems the bank holding company or bank to be engaged in an unsafe
or unsound practice and not to have corrected the deficiency. M&T, Olympia, M&T
Bank and M&T Bank, N.A. currently meet the definition of "well capitalized"
institutions.
"Undercapitalized" depository institutions, among other things, are subject to
growth limitations, are prohibited, with certain exceptions, from making capital
distributions, are limited in their ability to obtain funding from a Federal
Reserve Bank and are required to submit a capital restoration plan. The federal
banking agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to succeed
in restoring the depository institution's capital. In addition, for a capital
restoration plan to be acceptable, the depository institution's parent holding
company must guarantee that the institution will comply with such capital
restoration plan and provide appropriate assurances of performance. If a
depository institution fails to submit an acceptable plan, including if the
holding company refuses or is unable to make the guarantee described in the
previous sentence, it is treated as if it is "significantly undercapitalized".
Failure to submit or implement an acceptable capital plan also is grounds for
the appointment of a conservator or a receiver. "Significantly undercapitalized"
depository institutions may be subject to a number of additional requirements
and restrictions, including orders to sell sufficient voting stock to become
adequately capitalized, requirements to reduce total assets and cessation of
receipt of deposits from correspondent banks. Moreover, the parent holding
company of a significantly undercapitalized depository institution may be
ordered to divest itself of the institution or of nonbank subsidiaries of the
holding company. "Critically undercapitalized" institutions, among other things,
are prohibited from making any payments of principal and interest on
subordinated debt, and are subject to the appointment of a receiver or
conservator.
-13-
<PAGE>
Each federal banking agency prescribes standards for depository institutions
and depository institution holding companies relating to internal controls,
information systems, internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth, compensation, a maximum
ratio of classified assets to capital, minimum earnings sufficient to absorb
losses, a minimum ratio of market value to book value for publicly traded
shares and other standards as they deem appropriate. The Federal Reserve
Board and OCC have adopted such standards.
Depository institutions that are not "well capitalized" or "adequately
capitalized" and have not received a waiver from the FDIC are prohibited from
accepting or renewing brokered deposits. As of December 31, 1999, M&T Bank and
M&T Bank, N.A. had approximately $998 million and $4 million in brokered
deposits, respectively.
Although M&T has issued shares of common stock in connection with acquisitions
or at other times, the Company has generally maintained capital ratios in excess
of minimum regulatory guidelines largely through internal capital generation
(i.e. net income less dividends paid). Historically, M&T's dividend payout ratio
and dividend yield, when compared with other bank holding companies, has been
relatively low, thereby allowing for capital retention to support growth or to
facilitate purchases of M&T's common stock to be held as treasury stock.
Management's policy of reinvestment of earnings and repurchase of shares of
common stock is intended to enhance M&T's earnings per share prospects and
thereby reward stockholders over time with capital gains in the form of
increased stock price rather than high dividend income.
FDIC DEPOSIT INSURANCE ASSESSMENTS
As institutions with deposits insured by the BIF and the SAIF, M&T Bank and M&T
Bank, N.A. are subject to FDIC deposit insurance assessments. Under current law
the regular insurance assessments to be paid by BIF-insured and SAIF-insured
institutions are specified in schedules issued by the FDIC that specify, at
semiannual intervals, target reserve ratios designed to maintain the reserve
ratios of each of those insurance funds at 1.25% of their estimated insured
deposits. The FDIC is also authorized to impose one or more special assessments.
The FDIC has implemented a risk-based deposit premium assessment system under
which each depository institution is placed in one of nine assessment categories
based on the institution's capital classification under the prompt corrective
action provisions described above, and whether such institution is considered by
its supervisory agency to be financially sound or to have supervisory concerns.
The adjusted assessment rates for both BIF-insured and SAIF-insured institutions
under the current system range from .00% to .27% depending upon the assessment
category into which the insured institution is placed. Neither of the Company's
banking subsidiaries paid regular insurance assessments to the FDIC in 1999.
However, the FDIC retains the ability to increase regular BIF and SAIF
assessments and to levy special additional assessments.
In addition to deposit insurance fund assessments, beginning in 1997 the FDIC
assessed BIF-assessable and SAIF-assessable deposits to fund the repayment of
debt obligations of the Financing Corporation ("FICO"). FICO is a government
agency-sponsored entity that was formed to borrow the money necessary to carry
out the closing and ultimate disposition of failed thrift institutions by the
Resolution Trust Corporation. The current annualized rates established by the
FDIC for both BIF-assessable and SAIF-assessable deposits are 2.12 basis points
(hundredths of one percent).
Any significant increases in assessment rates or additional special assessments
by the FDIC could have an adverse impact on the results of operations and
capital of M&T Bank or M&T Bank, N.A.
-14-
<PAGE>
GOVERNMENTAL POLICIES
The earnings of the Company are significantly affected by the monetary and
fiscal policies of governmental authorities, including the Federal Reserve
Board. Among the instruments of monetary policy used by the Federal Reserve
Board to implement these objectives are open-market operations in U.S.
Government securities and Federal funds, changes in the discount rate on member
bank borrowings and changes in reserve requirements against member bank
deposits. These instruments of monetary policy are used in varying combinations
to influence the overall level of bank loans, investments and deposits, and the
interest rates charged on loans and paid for deposits. The Federal Reserve Board
frequently uses these instruments of monetary policy, especially its open-market
operations and the discount rate, to influence the level of interest rates and
to affect the strength of the economy, the level of inflation or the price of
the dollar in foreign exchange markets. The monetary policies of the Federal
Reserve Board have had a significant effect on the operating results of banking
institutions in the past and are expected to continue to do so in the future. It
is not possible to predict the nature of future changes in monetary and fiscal
policies, or the effect which they may have on the Company's business and
earnings.
COMPETITION
The Company competes in offering commercial and personal financial services with
other banking institutions and with firms in a number of other industries, such
as thrift institutions, credit unions, personal loan companies, sales finance
companies, leasing companies, securities firms and insurance companies.
Furthermore, diversified financial services companies are able to offer a
combination of these services to their customers on a nationwide basis. The
Company's operations are significantly impacted by state and federal regulations
applicable to the banking industry. Moreover, the provisions of Gramm-Leach may
increase competition among diversified financial services providers, and the
Interstate Banking Act and the Banking Law may further ease entry into New York
State by out-of-state banking institutions. As a result, the number of financial
services providers and banking institutions with which the Company competes may
grow in the future.
OTHER LEGISLATIVE INITIATIVES
Proposals may be introduced in the United States Congress and in the New York
State Legislature and before various bank regulatory authorities which would
alter the powers of, and restrictions on, different types of banking
organizations and which would restructure part or all of the existing regulatory
framework for banks, bank holding companies and other providers of financial
services. Moreover, other bills may be introduced in Congress which would
further regulate, deregulate or restructure the financial services industry. It
is not possible to predict whether these or any other proposals will be enacted
into law or, even if enacted, the effect which they may have on the Company's
business and earnings.
STATISTICAL DISCLOSURE PURSUANT TO GUIDE 3
SEE cross-reference sheet for disclosures incorporated elsewhere in this Annual
Report on Form 10-K. Additional information is included in the following tables.
-15-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------------------
Item 1, Table 1
SELECTED CONSOLIDATED YEAR-END BALANCES
In thousands 1999 1998 1997
- ------------------------------------------------------------ --------------- --------------- ---------------
<S> <C> <C> <C>
Money-market assets
Interest-bearing deposits at banks $ 1,092 674 668
Federal funds sold and resell agreements 643,555 229,066 53,087
Trading account 641,114 173,122 57,291
- ------------------------------------------------------------ --------------- --------------- ---------------
Total money-market assets 1,285,761 402,862 111,046
Investment securities
U.S. Treasury and federal agencies 737,586 1,321,000 1,081,247
Obligations of states and political subdivisions 79,189 73,789 38,018
Other 1,083,747 1,390,775 605,953
- ------------------------------------------------------------ --------------- --------------- ---------------
Total investment securities 1,900,522 2,785,564 1,725,218
Loans and leases
Commercial, financial, leasing, etc. 3,697,058 3,211,427 2,406,640
Real estate - construction 525,241 489,112 254,434
Real estate - mortgage 10,152,905 9,289,521 6,765,408
Consumer 3,197,657 3,015,641 2,339,051
- ------------------------------------------------------------ --------------- --------------- ---------------
Total loans and leases 17,572,861 16,005,701 11,765,533
Unearned discount (166,090) (214,171) (268,965)
Allowance for credit losses (316,165) (306,347) (274,656)
- ------------------------------------------------------------ --------------- --------------- ---------------
Loans and leases, net 17,090,606 15,485,183 11,221,912
Goodwill and core deposit intangible 648,040 546,036 17,288
Real estate and other assets owned 10,000 11,129 8,413
Total assets 22,409,115 20,583,891 14,002,935
- ------------------------------------------------------------ --------------- --------------- ---------------
Noninterest-bearing deposits 2,260,432 2,066,814 1,458,241
NOW accounts 583,471 509,307 346,795
Savings deposits 5,198,681 4,830,678 3,344,697
Time deposits 7,088,345 7,027,083 5,762,497
Deposits at foreign office 242,691 303,270 250,928
- ------------------------------------------------------------ --------------- --------------- ---------------
Total deposits 15,373,620 14,737,152 11,163,158
Short-term borrowings 2,554,159 2,229,976 1,050,918
Long-term borrowings 1,775,133 1,567,543 427,819
Total liabilities 20,612,069 18,981,525 12,972,669
- ------------------------------------------------------------ --------------- --------------- ---------------
Stockholders' equity 1,797,046 1,602,366 1,030,266
- ------------------------------------------------------------ --------------- --------------- ---------------
In thousands 1996 1995
- ------------------------------------------------------------ ------------ ------------
<S> <C> <C>
Money-market assets
Interest-bearing deposits at banks 47,325 125,500
Federal funds sold and resell agreements 125,326 1,000
Trading account 37,317 9,709
- ------------------------------------------------------------ ------------- ------------
Total money-market assets 209,968 136,209
Investment securities
U.S. Treasury and federal agencies 1,023,038 1,087,005
Obligations of states and political subdivisions 41,445 35,250
Other 507,215 647,040
- ------------------------------------------------------------ ------------- ------------
Total investment securities 1,571,698 1,769,295
Loans and leases
Commercial, financial, leasing, etc. 2,206,282 2,013,937
Real estate - construction 90,563 77,604
Real estate - mortgage 6,199,931 5,648,590
Consumer 2,623,445 2,133,592
- ------------------------------------------------------------ ------------- ------------
Total loans and leases 11,120,221 9,873,723
Unearned discount (398,098) (317,874)
Allowance for credit losses (270,466) (262,344)
- ------------------------------------------------------------ ------------- ------------
Loans and leases, net 10,451,657 9,293,505
Goodwill and core deposit intangible 18,923 28,234
Real estate and other assets owned 8,523 7,295
Total assets 12,943,915 11,955,902
- ------------------------------------------------------------ ------------- ------------
Noninterest-bearing deposits 1,352,929 1,184,359
NOW accounts 334,787 768,559
Savings deposits 3,280,788 2,765,301
Time deposits 5,352,749 4,596,053
Deposits at foreign office 193,236 155,303
- ------------------------------------------------------------ ------------- ------------
Total deposits 10,514,489 9,469,575
Short-term borrowings 1,127,900 1,270,022
Long-term borrowings 178,002 192,791
Total liabilities 12,038,256 11,109,649
- ------------------------------------------------------------ ------------- ------------
Stockholders' equity 905,659 846,253
- ------------------------------------------------------------ ------------- ------------
</TABLE>
<TABLE>
<CAPTION>
STOCKHOLDERS, EMPLOYEES AND OFFICES
Number at year-end 1999 1998 1997 1996 1995
- -------------------------------------- ------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Stockholders 4,991 5,207 3,449 3,654 3,787
Employees 6,569 6,467 5,083 5,180 4,889
Offices 310 283 210 202 181
- -------------------------------------- ------------- ------------ ------------ ----------- -----------
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- -----------------------------------------------------------------------------------------------------------------------------------
Item 1, Table 2
CONSOLIDATED EARNINGS
IN THOUSANDS 1999 1998 1997
- ------------------------------------------------- -------------- -------------- -------------
INTEREST INCOME
<S> <C> <C> <C>
Loans and leases, including fees $ 1,323,262 1,198,639 954,974
Money-market assets
Deposits at banks 87 400 2,475
Federal funds sold and resell agreements 24,491 8,293 2,989
Trading account 3,153 4,403 1,781
Investment securities
Fully taxable 118,741 139,731 99,640
Exempt from federal taxes 8,897 7,984 5,640
- ---------------------------------------------------- ----------- -------------- -------------
Total interest income 1,478,631 1,359,450 1,067,499
- ---------------------------------------------------- ----------- -------------- -------------
INTEREST EXPENSE
NOW accounts 4,683 4,851 3,455
Savings deposits 121,888 115,345 90,907
Time deposits 367,889 388,185 327,611
Deposits at foreign office 12,016 14,973 12,160
Short-term borrowings 104,911 105,582 44,341
Long-term borrowings 107,847 58,567 29,619
- ---------------------------------------------------- ----------- -------------- -------------
Total interest expense 719,234 687,503 508,093
- ---------------------------------------------------- ----------- -------------- -------------
NET INTEREST INCOME 759,397 671,947 559,406
Provision for credit losses 44,500 43,200 46,000
- ---------------------------------------------------- ----------- -------------- -------------
Net interest income after provision
for credit losses 714,897 628,747 513,406
- ---------------------------------------------------- ----------- -------------- -------------
OTHER INCOME
Mortgage banking revenues 71,819 65,646 51,547
Service charges on deposit accounts 73,612 57,357 43,377
Trust income 40,751 38,211 30,688
Merchant discount and other credit card fees 7,515 12,436 19,395
Trading account and foreign exchange gains 315 3,963 3,690
Gain (loss) on sales of bank investment securities 1,575 1,761 (280)
Gain on sales of venture capital investments 80 - 2,677
Other revenues from operations 86,708 83,565 39,435
- ---------------------------------------------------- ----------- -------------- -------------
Total other income 282,375 262,939 190,529
- ---------------------------------------------------- ----------- -------------- -------------
OTHER EXPENSE
Salaries and employee benefits 284,822 259,487 220,017
Equipment and net occupancy 73,131 66,553 53,299
Printing, postage and supplies 17,510 17,603 13,747
Amortization of goodwill and core deposit intangible 49,715 34,487 7,291
Deposit insurance 2,798 2,710 1,935
Other costs of operations 150,982 185,283 125,487
- ---------------------------------------------------- ----------- -------------- -------------
Total other expense 578,958 566,123 421,776
- ---------------------------------------------------- ----------- -------------- -------------
Income before income taxes 418,314 325,563 282,159
Income taxes 152,688 117,589 105,918
- ---------------------------------------------------- ----------- -------------- -------------
NET INCOME $ 265,626 207,974 176,241
- ---------------------------------------------------- ----------- -------------- -------------
DIVIDENDS DECLARED
Common $ 35,128 28,977 21,207
Preferred - - -
- ---------------------------------------------------- ----------- -------------- -------------
IN THOUSANDS 1996 1995
- ------------------------------------------------- -------------- ---------------
INTEREST INCOME
<S> <C> <C>
Loans and leases, including fees 883,500 796,501
Money-market assets
Deposits at banks 2,413 8,181
Federal funds sold and resell agreements 2,985 3,007
Trading account 980 1,234
Investment securities
Fully taxable 107,415 118,791
Exempt from federal taxes 2,637 2,760
- ---------------------------------------------------- -------------- ---------------
Total interest income 999,930 930,474
- ---------------------------------------------------- -------------- ---------------
INTEREST EXPENSE
NOW accounts 9,430 11,902
Savings deposits 84,822 87,612
Time deposits 286,088 239,882
Deposits at foreign office 12,399 6,952
Short-term borrowings 59,442 84,225
Long-term borrowings 14,227 11,157
- ---------------------------------------------------- -------------- ---------------
Total interest expense 466,408 441,730
- ---------------------------------------------------- -------------- ---------------
NET INTEREST INCOME 533,522 488,744
Provision for credit losses 43,325 40,350
- ---------------------------------------------------- -------------- ---------------
Net interest income after provision
for credit losses 490,197 448,394
- ---------------------------------------------------- -------------- ---------------
OTHER INCOME
Mortgage banking revenues 44,484 37,142
Service charges on deposit accounts 40,659 38,290
Trust income 27,672 25,477
Merchant discount and other credit card fees 18,266 10,675
Trading account and foreign exchange gains 2,421 2,783
Gain (loss) on sales of bank investment securities (37) 4,479
Gain on sales of venture capital investments 3,175 2,619
Other revenues from operations 31,110 25,753
- ---------------------------------------------------- -------------- ---------------
Total other income 167,750 147,218
- ---------------------------------------------------- -------------- ---------------
OTHER EXPENSE
Salaries and employee benefits 208,342 188,222
Equipment and net occupancy 51,346 50,526
Printing, postage and supplies 15,167 14,442
Amortization of goodwill and core deposit intangible 6,292 6,293
Deposit insurance 9,337 14,675
Other costs of operations 118,494 100,281
- ---------------------------------------------------- -------------- ---------------
Total other expense 408,978 374,439
- ---------------------------------------------------- -------------- ---------------
Income before income taxes 248,969 221,173
Income taxes 97,866 90,137
- ---------------------------------------------------- -------------- ---------------
NET INCOME 151,103 131,036
- ---------------------------------------------------- -------------- ---------------
DIVIDENDS DECLARED
Common 18,617 16,224
Preferred 900 3,600
- ---------------------------------------------------- -------------- ---------------
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------------------------------
Item 1, Table 3
COMMON SHAREHOLDER DATA
1999 1998 1997 1996 1995
- ---------------------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Per Share
Net income
Basic $ 34.05 27.30 26.60 22.54 19.61
Diluted 32.83 26.16 25.26 21.08 17.98
Cash dividends declared 4.50 3.80 3.20 2.80 2.50
Stockholders' equity at year-end 232.41 207.94 155.86 135.45 125.33
Tangible stockholders' equity at year-end 151.40 139.89 153.24 132.62 120.94
Dividend payout ratio 13.22 % 13.93 % 12.03 % 12.39 % 12.73 %
- ---------------------------------------------------- ------- ------ ------ ------ ------
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------------------------
Item 1, Table 4
CHANGES IN INTEREST INCOME AND EXPENSE*
1999 compared with 1998
----------------------------------------
Resulting from
Total changes in:
---------------------------
Increase (decrease) in thousands change Volume Rate
- ----------------------------------------------------------------- ------------ ------------- ------------
Interest income
<S> <C> <C> <C>
Loans and leases, including fees $ 124,849 173,474 (48,625)
Money-market assets
Deposits at banks (313) (305) (8)
Federal funds sold and agreements to resell securities 16,198 16,499 (301)
Trading account (1,303) (1,250) (53)
Investment securities
U.S. Treasury and federal agencies (34,922) (30,636) (4,286)
Obligations of states and political subdivisions 94 101 (7)
Other 15,102 17,203 (2,101)
- ----------------------------------------------------------------- ----------
Total interest income $ 119,705
- ----------------------------------------------------------------- ----------
Interest expense
Interest-bearing deposits
NOW accounts $ (168) 810 (978)
Savings deposits 6,543 17,854 (11,311)
Time deposits (20,296) 2,885 (23,181)
Deposits at foreign office (2,957) (1,667) (1,290)
Short-term borrowings (671) 7,074 (7,745)
Long-term borrowings 49,280 57,149 (7,869)
- ----------------------------------------------------------------- ----------
Total interest expense $ 31,731
- ----------------------------------------------------------------- ----------
1998 compared with 1997
--------------------------------------------
Resulting from
Total changes in:
----------------------------
Increase (decrease) in thousands change Volume Rate
- ----------------------------------------------------------------- -------------- -------------- ------------
Interest income
<S> <C> <C> <C>
Loans and leases, including fees 243,937 279,155 (35,218)
Money-market assets
Deposits at banks (2,075) (1,414) (661)
Federal funds sold and agreements to resell securities 5,304 5,298 6
Trading account 2,587 2,723 (136)
Investment securities
U.S. Treasury and federal agencies 17,062 19,964 (2,902)
Obligations of states and political subdivisions 1,734 1,878 (144)
Other 24,748 23,816 932
- ----------------------------------------------------------------- --------------
Total interest income 293,297
- ----------------------------------------------------------------- --------------
Interest expense
Interest-bearing deposits
NOW accounts 1,396 1,008 388
Savings deposits 24,438 26,516 (2,078)
Time deposits 60,574 66,505 (5,931)
Deposits at foreign office 2,813 3,023 (210)
Short-term borrowings 61,241 60,997 244
Long-term borrowings 28,948 32,764 (3,816)
- ----------------------------------------------------------------- --------------
Total interest expense 179,410
- ----------------------------------------------------------------- --------------
</TABLE>
* Interest income data are on a taxable-equivalent basis. The apportionment
of changes resulting from the combined effect of both volume and rate was
based on the separately determined volume and rate changes.
-19-
<PAGE>
Item 2. PROPERTIES.
Both M&T and M&T Bank maintain their executive offices at One M&T Plaza in
Buffalo, New York. This twenty-one story headquarters building, containing
approximately 276,000 rentable square feet of space, is owned in fee by M&T
Bank, and was completed in 1967. M&T, M&T Bank and their subsidiaries occupy
approximately 84% of the building and the remainder is leased to non-affiliated
tenants. At December 31, 1999, the cost of this property (including improvements
subsequent to the initial construction), net of accumulated depreciation, was
$8.9 million.
In September 1992, M&T Bank acquired an additional facility in Buffalo, New York
with approximately 365,000 rentable square feet of space at a cost of
approximately $12 million. Approximately 77% of this facility, known as M&T
Center, is occupied by M&T Bank and its subsidiaries, with the remainder leased
to non-affiliated tenants. At December 31, 1999, the cost of this building
(including improvements subsequent to acquisition), net of accumulated
depreciation, was $15.1 million.
M&T Bank also owns and occupies two separate facilities in the Buffalo area
which support certain back-office and operations functions of the Company. The
total square footage of these facilities approximates 223,000 square feet and
their combined cost (including improvements subsequent to acquisition), net of
accumulated depreciation, was $13.1 million at December 31, 1999.
As a result of the April 1, 1998 ONBANCorp merger, M&T Bank acquired a facility
in Syracuse, New York with approximately 136,000 rentable square feet of space.
Approximately 48% of this facility is occupied by M&T Bank, with the remainder
leased to non-affiliated tenants. At December 31, 1999, the cost of this
building, net of accumulated depreciation, was $7.9 million.
The cost, net of accumulated depreciation and amortization, of the Company's
premises and equipment is detailed in note 6 of Notes to Financial Statements
filed herewith in Part II, Item 8, "Financial Statements and Supplementary
Data". Of the 281 domestic banking offices of the Registrant's subsidiary banks,
98 are owned in fee and 183 are leased.
Item 3. LEGAL PROCEEDINGS.
M&T and its subsidiaries are subject in the normal course of business to various
pending and threatened legal proceedings in which claims for monetary damages
are asserted. Management, after consultation with legal counsel, does not
anticipate that the aggregate ultimate liability, if any, arising out of
litigation pending against M&T or its subsidiaries will be material to M&T's
consolidated financial position, but at the present time is not in a position to
determine whether such litigation will have a material adverse effect on M&T's
consolidated results of operations in any future reporting period.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not
applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Registrant's executive officers is presented below as
of February 25, 2000. The year the officer was first appointed to the indicated
position with the Registrant or its subsidiaries is shown parenthetically. In
the case of each corporation noted below, officers' terms run until the first
meeting of the board of directors after such corporation's annual meeting, and
until their successors are elected and qualified.
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<PAGE>
Robert J. Bennett, age 58, is chairman of the board and a director (1998)
of the Registrant. He is a vice chairman of the board and a director
(1998) of M&T Bank and serves as chairman of the Directors Advisory
Council of M&T Bank's Syracuse Division. Mr. Bennett is also a
director (1998) of M&T Bank, N.A. He served as chairman of the board,
president, chief executive officer and a director of ONBANCorp from
May 1989 until its merger with M&T on April 1, 1998.
Robert G. Wilmers, age 65, is president (1988), chief executive officer
(1983) and a director (1982) of the Registrant. Prior to the
acquisition of ONBANCorp, Mr. Wilmers held the additional position of
chairman of the board of the Registrant from April 1994 through March
1998. He is chairman of the board, chief executive officer (1983) and
a director (1982) of M&T Bank, and served as president of M&T Bank
from March 1984 to June 1996. Mr. Wilmers is chairman of the board
and a director of M&T Bank, N.A.(1995). He is a director of M&T
Financial (1983).
Emerson L. Brumback, age 48, is an executive vice president (1997) of
the Registrant and M&T Bank, and is in charge of the Company's Retail
Banking Division. Mr. Brumback is chairman of the board (1999) and a
director (1997) of Highland Lease and executive vice president (1998)
and a director of M&T Bank, N.A.(1997). He is chairman of the board
(1999) and a director (1997) of M&T Credit and a director of M&T
Mortgage (1997), M&T Reinsurance (1999) and M&T Securities (1997).
Mr. Brumback was executive vice president, national retail
distribution, at BancOne Corporation prior to joining the Company.
Atwood Collins, III, age 53, is an executive vice president of the
Registrant (1997) and M&T Bank (1996) and is chairman of the
Directors Advisory Council (1998) of M&T Bank's New York City
Division. Previously, Mr. Collins served as president and chief
executive officer of the New York City Division of M&T Bank (1997),
and as president, chief executive officer and a director (1995) of
The East New York Saving Bank, which had been a wholly owned
subsidiary of the Registrant prior to its merger with and into M&T
Bank on May 24, 1997. He is a director of M&T Real Estate (1995). Mr.
Collins has responsibility for managing the Company's middle market,
commercial real estate and business banking activities in
Westchester, Putnam and Rockland counties of New York State and
Connecticut, business banking in New York City and Investment
banking, Institutional and Correspondent banking activities. He also
manages the Company's Facilities Management and Services group.
Mark J. Czarnecki, age 44, is an executive vice president of the
Registrant (1999) and M&T Bank (1997) and is in charge of the M&T
Investment Group, which is comprised of M&T Securities, the Insurance
Services Division of M&T Bank, N.A. and the Trust and Investment
Services Division of M&T Bank. Mr. Czarnecki is a director of M&T
Securities (1999) and an executive vice president of M&T Bank, N.A.
(1997). Mr. Czarnecki has held a number of management positions with
M&T Bank since 1977, most recently as senior vice president of the
private client services group of the Trust and Investment Services
Division (1994), and prior thereto as an administrative vice
president and regional manager for the Retail Banking Division.
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<PAGE>
Brian E. Hickey, age 47, is an executive vice president of the
Registrant (1997) and M&T Bank (1996) and is president and a member
of the Directors Advisory Council (1994) of the Rochester Division of
M&T Bank. Mr. Hickey is a director of M&T Financial (1996). In
addition to managing all of M&T Bank's business segments in the
Rochester market, Mr. Hickey has responsibility for managing the
Company's Western New York Commercial Banking Division.
James L. Hoffman, age 60, is an executive vice president of the
Registrant (1997) and M&T Bank (1996) and is president (1992) of the
Hudson Valley Division of M&T Bank. Mr. Hoffman is a director of M&T
Investment Company (1999). Mr. Hoffman served as chairman of the
board, president, chief executive officer and a director (1983) of
The First National Bank of Highland, which had been a wholly owned
subsidiary of the Registrant prior to its merger with and into M&T
Bank on February 29, 1992.
Adam C. Kugler, age 42, is an executive vice president and treasurer
(1997) of the Registrant and M&T Bank, and is in charge of the
Company's Treasury Division. Mr. Kugler is chairman of the board and
a director of M&T Investment Company (1999), a director of M&T
Financial (1997), M&T Securities (1997) and is an executive vice
president, Treasurer and a director of M&T Bank, N.A. (1997). Mr
Kugler was previously a senior vice president in the Treasury
Division of M&T Bank.
Ray E. Logan, age 62, is an executive vice president of M&T Bank (1999)
and is in charge of the Company's Human Resources Division. Mr. Logan
served as senior vice president of M&T Bank from 1986 to 1999.
John L. Pett, age 51, is an executive vice president (1997) and chief
credit officer (1995) of the Registrant and is an executive vice
president and chief credit officer of M&T Bank (1996). Mr. Pett is a
director of Highland Lease (1997) and M&T Credit (1997). He is an
executive vice president (1998) and a director (1996) of M&T Bank,
N.A. Mr. Pett served as senior vice president of the Registrant from
1991 to 1997.
Michael P. Pinto, age 44, is an executive vice president and chief
financial officer of the Registrant (1997) and M&T Bank (1996), and
is in charge of the Company's Finance Division and its Technology and
Banking Operations Division. Mr. Pinto is chairman of the board,
president and a director of Olympia Financial Corp. (1997), and a
director of M&T Financial (1996), M&T Mortgage (1996), M&T Real
Estate (1996) and M&T Investment Company (1999). He is an executive
vice president and chief financial officer (1996) and a director
(1998) of M&T Bank, N.A. Mr. Pinto served as senior vice president
and controller of the Registrant from 1993 to 1997.
Robert E. Sadler, Jr., age 54, is an executive vice president (1990) and
a director (1999) of the Registrant, president and a director of M&T
Bank (1996), and is in charge of the Company's Commercial Banking
Division. Mr. Sadler is president, chief executive officer and a
director of M&T Bank, N.A.(1995); chairman of the board (1989) and a
director of M&T Financial (1985); chairman of the board and a
director of M&T Mortgage (1991); chairman of the board and a director
of M&T Securities (1994); and chairman of the board, president and a
director of M&T Real Estate (1995).
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS. The Registrant's common stock is traded under the symbol
MTB on the New York Stock Exchange. SEE cross-reference sheet for
disclosures incorporated elsewhere in this Annual Report on
Form 10-K for market prices of the Registrant's common stock,
approximate number of common stockholders at year-end, frequency
and amounts of dividends on common stock and restrictions on the
payment of dividends.
Item 6. SELECTED FINANCIAL DATA. SEE cross-reference sheet for
disclosures incorporated elsewhere in this Annual Report on Form
10-K.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
CORPORATE PROFILE AND SIGNIFICANT DEVELOPMENTS
M&T Bank Corporation ("M&T") is a bank holding company headquartered in Buffalo,
New York with consolidated assets of $22.4 billion at December 31, 1999. M&T and
its consolidated subsidiaries are hereinafter referred to collectively as "the
Company." M&T's wholly owned banking subsidiaries are Manufacturers and Traders
Trust Company ("M&T Bank") and M&T Bank, National Association ("M&T Bank,
N.A.").
M&T Bank, with total assets of $21.6 billion at December 31, 1999, is a
New York-chartered commercial bank with 261 banking offices throughout New York
State, 19 banking offices in northeastern Pennsylvania and an office in Nassau,
The Bahamas. M&T Bank and its subsidiaries offer a broad range of financial
services to a diverse base of consumers, businesses, professional clients,
governmental entities and financial institutions located in its markets. Lending
is largely focused on consumers residing in New York State and northeastern
Pennsylvania, and on small and medium size businesses based in those areas.
Certain lending activities are also conducted in other states through various
subsidiaries. M&T Bank's subsidiaries include Highland Lease Corporation, a
consumer leasing company; M&T Credit Corporation, a consumer lending and
commercial leasing and lending company; M&T Financial Corporation, a commercial
leasing company; M&T Mortgage Corporation, a residential mortgage banking
company; M&T Real Estate, Inc., a commercial mortgage lender; and M&T
Securities, Inc., a broker/dealer.
M&T Bank, N.A., with total assets of $852 million at December 31, 1999,
is a national bank with an office in Oakfield, New York. M&T Bank, N.A. offers
selected deposit, loan and insurance products on a nationwide basis, primarily
through telephone and direct mail marketing techniques. Insurance products are
also offered by M&T Bank, N.A. through banking offices of M&T Bank.
On September 24, 1999, M&T Bank completed the acquisition of 29 upstate
New York branches from The Chase Manhattan Bank ("Chase"). The branches had
approximately $634 million of deposits and approximately $44 million of retail
installment and commercial loans at the closing. In addition, on September 30,
1999 M&T Bank received from Chase investment management and custody accounts
having assets of approximately $286 million. Chase also agreed to transfer up to
approximately $195 million of other trust and fiduciary account assets to M&T
Bank following the receipt of required court approvals. It is expected that this
portion of the transaction will be completed in the first quarter of 2000.
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<PAGE>
On June 1, 1999, M&T completed the acquisition of FNB Rochester Corp.
("FNB"), a bank holding company headquartered in Rochester, New York.
Immediately after the acquisition, FNB's banking subsidiary, First National Bank
of Rochester, which had 17 banking offices in western and central New York
State, was merged with and into M&T Bank. The acquisition was accounted for
using the purchase method of accounting, and, accordingly, the operations of FNB
have been included in the financial results of the Company since the acquisition
date. FNB's stockholders received $76 million in cash and 122,516 shares of M&T
common stock in exchange for FNB shares outstanding at the time of acquisition.
Assets acquired totaled approximately $676 million and included loans and leases
of $393 million and investment securities of $148 million. Liabilities assumed
on June 1 were approximately $541 million and included $511 million of deposits.
In connection with the transactions described in the two preceding
paragraphs the Company recorded approximately $153 million of goodwill and core
deposit intangible. Nonrecurring expenses related to systems conversions and
other costs of integrating and conforming the acquired operations with and into
M&T Bank totaled $4.7 million ($3.0 million after-tax) during the year ended
December 31, 1999 and consisted largely of expenses for professional services
and other temporary help fees associated with the conversion of systems and/or
integration of operations; initial marketing and promotion expenses designed to
introduce M&T Bank to Chase and FNB customers; and printing, supplies and other
costs. Since the systems conversions and integration of operations are complete,
the Company does not expect to incur a material amount of additional integration
costs. In accordance with generally accepted accounting principles, included in
the determination of goodwill were charges totaling $4.1 million, net of
applicable income taxes, for severance of former Chase and FNB employees; legal
and other professional fees; and termination of contracts for data processing
and other services. As of December 31, 1999, the remaining unpaid portion of
merger-related expenses and charges included in the determination of goodwill
were $130 thousand and $960 thousand, respectively. The resolution of any
preacquisition contingencies is not expected to have a material impact on the
allocation of the purchase price or the amount of goodwill recorded as part of
the acquisitions.
On April 1, 1998, M&T completed the acquisition of ONBANCorp, Inc.
("ONBANCorp"), a bank holding company headquartered in Syracuse, New York.
Immediately after the acquisition, ONBANCorp's two banking subsidiaries, OnBank
& Trust Co. in Syracuse, which operated 59 offices in upstate New York, and
Franklin First Savings Bank in Wilkes-Barre, Pennsylvania, which operated 19
offices in northeastern Pennsylvania, were merged with and into M&T Bank. The
acquisition was accounted for using the purchase method of accounting and,
accordingly, the operations acquired from ONBANCorp have been included in the
financial results of the Company since the acquisition date. ONBANCorp's
stockholders received $266 million in cash and 1,429,998 shares of M&T common
stock in exchange for ONBANCorp shares outstanding at the time of acquisition.
The accompanying table provides a summary of assets acquired
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and liabilities assumed on April 1, 1998 in connection with the ONBANCorp
transaction:
<TABLE>
<CAPTION>
Assets
(in thousands)
<S> <C>
Investment securities $1,576,604
Loans and leases, net of unearned discount 2,970,306
Allowance for possible credit losses (27,905)
---------
Loans and leases, net 2,942,401
Goodwill and core deposit intangible 562,533
Other assets 411,727
---------
Total assets $5,493,265
==========
Liabilities
Deposits $3,767,729
Short-term borrowings 541,689
Long-term borrowings 268,617
Other liabilities 41,680
---------
Total liabilities $4,619,715
==========
</TABLE>
In connection with the ONBANCorp acquisition, the Company recorded
approximately $563 million of goodwill and core deposit intangible, and incurred
nonrecurring expenses related to systems conversions and other costs of
integrating and conforming the acquired operations with and into the operations
of M&T Bank of approximately $21.3 million ($14.0 million after-tax) during the
year ended December 31, 1998. Included in the determination of goodwill were
charges totaling $16.8 million, net of applicable income taxes, for severance of
former ONBANCorp employees; investment banking, legal and other professional
fees; and termination of ONBANCorp contracts for data processing and other
services. As of December 31, 1998, the remaining unpaid portion of
merger-related expenses and charges included in the determination of goodwill
were $2.1 million and $1.1 million, respectively. Substantially all of these
balances were paid during 1999.
In December 1999, M&T Bank entered into a definitive agreement to
acquire Matthews, Bartlett & Dedecker, Inc. ("MBD"), an insurance agency located
in Buffalo, New York. MBD provides insurance services principally to the
commercial market and will operate as a subsidiary of M&T Bank. It is expected
that the acquisition will be completed in the first quarter of 2000 and that it
will not have a material impact on the Company's financial position or results
of operations.
OVERVIEW
M&T reported net income in 1999 of $265.6 million or $32.83 of diluted earnings
per common share, increases of 28% and 25%, respectively, from $208.0 million or
$26.16 per diluted share in 1998. Basic earnings per common share rose to $34.05
in 1999, an increase of 25% from $27.30 in 1998. Net income totaled $176.2
million in 1997, while diluted and basic earnings per share were $25.26 and
$26.60, respectively. The after-tax impact of nonrecurring expenses associated
with the merger and acquisition activity previously described was $3.0 million
($4.7 million pre-tax) or $.37 of diluted earnings per share and $.38 of basic
earnings per share in 1999, compared with $14.0 million ($21.3 million pre-tax)
or $1.76 of diluted earnings per share and $1.84 of basic earnings per share in
1998. The impact on 1999's net income resulting from the FNB and Chase branch
acquisitions was not material.
Net income represented a return on average assets in 1999 of 1.26%,
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compared with 1.14% in 1998 and 1.32% in 1997. The return on average common
stockholders' equity was 15.30% in 1999, 13.86% in 1998 and 18.49% in 1997.
Excluding the impact of merger-related expenses, the rates of return on average
assets and average common equity in 1999 were 1.28% and 15.47%, respectively,
compared with 1.21% and 14.79%, respectively, in 1998.
Growth in average loans and leases was the most significant factor
contributing to a 13% increase in taxable-equivalent net interest income to $767
million in 1999 from $679 million in 1998. Average loans and leases rose to
$16.4 billion in 1999, an increase of 15% from $14.3 billion in 1998. Similarly,
average earning assets totaled $19.1 billion in 1999, up 13% from $16.9 billion
in 1998. A 30% increase in average loans outstanding in 1998, including the
impact of the $3.0 billion of loans obtained on April 1, 1998 in the ONBANCorp
acquisition, was the most significant factor for the rise in that year's net
interest income from $565 million in 1997. Average loans and average earning
assets in 1997 were $11.0 billion and $12.8 billion, respectively. Improvement
in 1998's net interest income resulting from asset growth was partially offset
by a reduction of the Company's net interest margin, or taxable-equivalent net
interest income expressed as a percentage of average earning assets. Net
interest margin in 1999 was 4.02%, compared with 4.01% in 1998 and 4.42% in
1997.
The provision for credit losses in 1999 was $44.5 million, compared
with $43.2 million in 1998 and $46.0 million in 1997. Net charge-offs totaled
$40.3 million in 1999, compared with $39.4 million in 1998 and $41.8 million in
1997. Net charge-offs as a percentage of average loans outstanding declined to
.25% in 1999, from .28% in 1998 and .38% in 1997.
In January 1998, M&T contributed appreciated investment securities with
a fair value of $24.6 million to an affiliated, tax-exempt private charitable
foundation. As a result of the contribution, in 1998 the Company recognized
charitable contributions expense of $24.6 million and recognized tax-exempt
other income of $15.3 million. The contribution provided an income tax benefit
of approximately $10.0 million and, accordingly, resulted in an after-tax
increase in 1998's net income of $700 thousand, or $.09 per diluted share.
Excluding the effect of this contribution, noninterest income of $282 million in
1999 increased 14% from $248 million in 1998 and was 48% above the $191 million
earned in 1997. Growth in mortgage banking revenues, fees earned from deposit
services, and a full year of revenues associated with operations obtained in the
ONBANCorp acquisition were factors contributing to the increase from 1998 to
1999. Revenues related to operations and/or market areas associated with the
ONBANCorp acquisition, along with higher revenues from mortgage banking, trust
activities and bank owned life insurance contributed to the increase from 1997
to 1998. Approximately 40% of the increase from 1997 to 1998 was attributable to
revenues related to operations and/or market areas associated with the ONBANCorp
acquisition.
Noninterest expenses associated with operations, which exclude
amortization of goodwill and core deposit intangible and certain nonrecurring
expenses, were $525 million in 1999, an increase of 8% from $486 million in
1998. The excluded items consist of nonrecurring merger-related expenses of $4.7
million and $21.3 million in 1999 and 1998, respectively, amortization of
goodwill and core deposit intangible of $49.7 million in 1999 and $34.5 million
in 1998, and $24.6 million of expense related to the previously mentioned
contribution to the affiliated charitable foundation in 1998. Higher expenses
related to salaries, employee benefits and occupancy contributed to the higher
expense level in 1999 compared with 1998. After excluding $7.3 million of
amortization of goodwill and core deposit intangible, noninterest expenses
associated with operations in 1997 totaled $414 million. Operating expenses
related to the acquired operations of ONBANCorp significantly contributed to the
increase from 1997 to 1998.
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The efficiency ratio, or noninterest expense divided by the sum of
taxable-equivalent net interest income and noninterest income, measures how much
of a company's revenue is consumed by operating expenses. Reflecting the smooth
integration of the 1998 and 1999 acquisitions, M&T's efficiency ratio,
calculated using the adjusted income and expense totals noted above and
excluding gains from sales of bank investment securities from noninterest
income, improved significantly to 50.06% in 1999 from 52.51% in 1998 and 54.82%
in 1997.
CASH OPERATING RESULTS
As a result of the acquisitions of ONBANCorp, FNB and the Chase branches and, to
a significantly lesser extent, acquisitions of other entities in prior years,
the Company had recorded as assets goodwill and core deposit intangible totaling
$648 million and $546 million at December 31, 1999 and 1998, respectively. Since
the amortization of goodwill and core deposit intangible does not result in a
cash expense, M&T believes that supplemental reporting of its operating results
on a "cash" (or "tangible") basis (which excludes the after-tax effect of
amortization of goodwill and core deposit intangible and the related asset
balances) represents a relevant measure of financial performance. The
supplemental cash basis data presented herein do not exclude the effect of other
non-cash operating expenses such as depreciation, provision for credit losses,
or deferred income taxes associated with the results of operations. Unless noted
otherwise, cash basis data does, however, exclude the after-tax impact of
nonrecurring merger-related expenses associated with the acquisitions of
ONBANCorp, FNB and the Chase branches.
Cash net income rose 23% to $311.0 million in 1999 from $251.9 million
in 1998. Diluted and basic cash earnings per share in 1999 were each up 21% to
$38.44 and $39.87, respectively, from $31.69 and $33.06 in 1998. In 1997, cash
net income was $182.4 million while diluted and basic cash earnings per share
were $26.14 and $27.53, respectively. The impact of the FNB and Chase branch
acquisitions on 1999 cash net income was not material.
Cash return on average tangible assets was 1.52% in 1999, compared with
1.41% in 1998 and 1.37% in 1997. Cash return on average tangible common equity
was 26.71% in 1999, compared with 23.08% and 19.56% in 1998 and 1997,
respectively. Including the effect of merger-related expenses, the cash return
on average tangible assets for 1999 and 1998 was 1.50% and 1.33%, respectively,
and the cash return on average tangible common equity was 26.45% and 21.80%,
respectively.
NET INTEREST INCOME/LENDING AND FUNDING ACTIVITIES
Taxable-equivalent net interest income rose 13% to $767 million in 1999 from
$679 million in 1998, largely the result of growth in average earning assets,
which increased $2.2 billion or 13% to $19.1 billion in 1999 from $16.9 billion
in 1998. Taxable-equivalent net interest income and average earning assets in
1997 were $565 million and $12.8 billion, respectively. The growth in average
earning assets in 1999 and 1998 was largely attributable to higher average loans
and leases outstanding. Average loans and leases totaled $16.4 billion in 1999,
up 15% from $14.3 billion in 1998 and 50% higher than $11.0 billion in 1997. The
impact of the $393 million of loans obtained in the FNB transaction in June 1999
and the full-year impact of loans acquired in the April 1998 ONBANCorp
transaction contributed to the higher average loan balances in 1999 compared
with 1998. The primary reason for the higher loan balances in 1998 as compared
to 1997 was the $3.0 billion of loans obtained in the ONBANCorp acquisition,
including approximately $450 million of commercial loans, $380 million of
commercial real estate loans, $1.2 billion
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<PAGE>
of residential mortgage loans and $930 million of consumer loans. Partially
offsetting these increases in average loans and leases in 1998 was the impact of
the July 1998 sale of M&T's retail credit card business, including approximately
$186 million of outstanding credit card balances as of the sale date. Average
credit card balances, including cards issued to small businesses, were $10
million in 1999, compared with $136 million in 1998 and $268 million in 1997.
The accompanying table 4 summarizes average loans and leases outstanding in 1999
and percentage changes in the major components of the portfolio over the past
two years.
Loans secured by real estate, including home equity loans and
outstanding home equity lines of credit which the Company classifies as consumer
loans, represented approximately 66% of the loan and lease portfolio during 1999
and 1998, up from 64% in 1997. At December 31, 1999, the Company held
approximately $6.5 billion of commercial real estate loans, $4.1 billion of
consumer real estate mortgage loans secured by one-to-four family residential
properties and $885 million of outstanding home equity loans and lines of
credit, compared with $5.5 billion, $4.3 billion and $739 million, respectively,
at December 31, 1998.
Commercial real estate loans originated by the Company are
predominately secured by properties in the New York City metropolitan area,
including areas in neighboring states generally considered to be within
commuting distance of New York City, and Western New York, which includes
Buffalo, Niagara Falls, Rochester and surrounding areas. Commercial real estate
loans are also originated in the Syracuse, Albany, Hudson Valley and Southern
Tier regions of New York State, as well as in northeastern Pennsylvania.
Historically, commercial real estate loans originated by the Company are
fixed-rate instruments with monthly payments and a balloon payment of the
remaining unpaid principal at maturity, in many cases five years after
origination. For borrowers in good standing, the terms of such loans may be
extended by the customer for an additional five years at the then-current market
rate of interest. In response to customer needs, in recent years the Company has
also originated fixed-rate commercial real estate loans with maturities of
greater than five years. In general, these loans have original maturity terms of
approximately ten years. The Company also originates adjustable-rate commercial
real estate loans. As of December 31, 1999, approximately 27% of the commercial
real estate loan portfolio consisted of adjustable-rate loans. The accompanying
table 6 presents commercial real estate loans by geographic area, type of
collateral and size of the loans outstanding at December 31, 1999. Of the $3.2
billion of commercial real estate loans in the New York City metropolitan area,
approximately 50% were secured by multi-family residential properties, 20% by
retail space and 12% by office space. The Company's experience has been that
office space and retail properties tend to demonstrate more volatile
fluctuations in value through economic cycles and changing economic conditions
than do multi-family residential properties. Approximately 54% of the aggregate
dollar amount of New York City area loans were for $5 million or less, while
loans of more than $10 million made up approximately 28% of the total.
Commercial real estate loans secured by properties elsewhere in New York State
tend to have a greater diversity of collateral types and include a significant
amount of lending to customers who use the mortgaged property in their trade or
business. Approximately 77% of the aggregate dollar amount of these New York
State loans were for $5 million or less.
Commercial real estate loans secured by properties located outside of
New York State and outside of areas of neighboring states considered to be part
of the New York City metropolitan area comprised 10% of total commercial real
estate loans as of December 31, 1999.
Of the $395 million of commercial construction loans presented in the
accompanying table 6, $226 million represent loans for which the Company has
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<PAGE>
also committed to provide permanent financing. At December 31, 1999, commercial
construction loans represented 2% of total loans and leases.
Real estate loans secured by one-to-four family residential properties
totaled $4.1 billion at December 31, 1999, including approximately 67% secured
by properties located in New York State. At December 31, 1999, $239 million of
residential real estate loans were held for sale by M&T Mortgage Corporation,
the Company's mortgage banking subsidiary.
Consumer loans and leases represented approximately 18% of the average
loan portfolio during 1999, compared with 19% and 21% in 1998 and 1997,
respectively. Automobile loans and leases and home equity loans and lines of
credit represent the largest components of the consumer loan portfolio.
Approximately 96% of home equity loans and lines of credit outstanding at
December 31, 1999 were secured by properties in New York State. At December 31,
1999, 40% of the automobile loan and lease portfolio was to customers residing
in New York State, while the remainder was largely to customers in Pennsylvania.
Automobile loans and leases are generally originated through dealers, however,
all applications submitted by dealers are subject to the Company's normal
underwriting and loan approval procedures. Automobile loans and leases
represented approximately 9% of the Company's average loan portfolio during
1999, while no other consumer loan product represented more than 5%. The average
outstanding balance of automobile leases outstanding was approximately $375
million in 1999, $315 million in 1998 and $147 million in 1997. Due to poorer
than expected results, during 1998 and 1997 the Company terminated all of its
co-branded credit card programs and sold its retail credit card business on July
31, 1998, including outstanding balances of approximately $186 million.
The Company's portfolio of investment securities averaged $2.1 billion
in 1999, $2.4 billion in 1998 and $1.7 billion in 1997. The investment
securities portfolio is largely comprised of residential mortgage-backed
securities and collateralized mortgage obligations, commercial real estate
mortgage-backed securities, and shorter-term U.S. Treasury notes. The Company
has also invested in debt securities issued by municipalities and debt and
preferred equity securities issued by government-sponsored agencies and certain
financial institutions. When purchasing investment securities, the Company
considers its overall interest-rate risk profile as well as the adequacy of
expected returns relative to prepayment and other risks assumed. The Company
occasionally sells investment securities as a result of changes in interest
rates and spreads, actual or anticipated prepayments, or credit risk associated
with a particular security. The size of the investment securities portfolio is
influenced by such factors as demand for loans, which generally yield more than
investment securities, ongoing repayments, the level of deposits, and management
of balance sheet size and resulting capital ratios.
Money-market assets, which are comprised of interest-earning deposits
at banks, interest-earning trading account assets, Federal funds sold and
agreements to resell securities, averaged $517 million in 1999, compared with
$230 million in 1998 and $123 million in 1997.
Core deposits represent the most significant source of funding to the
Company and consist of noninterest-bearing deposits, interest-bearing
transaction accounts, savings deposits and nonbrokered domestic time deposits
under $100,000. Core deposits generally carry lower interest rates than
wholesale funds of comparable maturities. The Company's branch network is its
principal source of core deposits. Certificates of deposit under $100,000
generated on a nationwide basis by M&T Bank, N.A. are also included in core
deposits. Average core deposits were $11.9 billion in 1999, up from $10.7
billion in 1998 and $8.3 billion in 1997. The increases in average core deposits
in 1999 and 1998 reflect the 1999 Chase branch and FNB
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acquisitions and the 1998 ONBANCorp acquisition. Core deposits obtained in the
Chase branch acquisition as of September 24, 1999 and in the FNB acquisition as
of June 1, 1999 were $618 million and $419 million, respectively. Core deposits
obtained in the acquisition of ONBANCorp totaled approximately $2.8 billion on
April 1, 1998. Average core deposits of M&T Bank, N.A. were $429 million in
1999, $401 million in 1998 and $432 million in 1997. Funding provided by core
deposits totaled 62% of average earning assets in 1999, compared with 63% in
1998 and 65% in 1997. The accompanying table 7 summarizes average core deposits
in 1999 and percentage changes in the components over the past two years.
Supplementing core deposits, the Company obtains funding through
domestic time deposits of $100,000 or more, deposits originated through the
Company's offshore branch office, and brokered certificates of deposit. Domestic
time deposits over $100,000, excluding brokered certificates of deposit,
averaged $1.6 billion in 1999, compared with $1.3 billion in 1998 and $1.0
billion in 1997. Offshore branch deposits, comprised primarily of accounts with
balances of $100,000 or more, averaged $254 million in 1999, compared with $288
million and $230 million in 1998 and 1997, respectively. Brokered deposits
averaged $1.1 billion in 1999, compared with $1.4 billion in 1998 and 1997, and
totaled $1.0 billion at December 31, 1999. Brokered deposits have been used as
an alternative to short-term borrowings to lengthen the average maturity of
interest-bearing liabilities. The weighted-average remaining term to maturity of
brokered deposits at December 31, 1999 was 1.3 years. However, certain of the
deposits have provisions that allow early redemption. In connection with the
Company's management of interest rate risk, interest rate swaps have been
entered into under which the Company receives a fixed rate of interest and pays
a variable rate and that have notional amounts and terms similar to the amounts
and terms of many of the brokered deposits. Additional amounts of brokered
deposits may be solicited in the future depending on market conditions and the
cost of funds available from alternative sources at the time.
The Company also uses borrowings from banks, securities dealers, the
Federal Home Loan Bank of New York and the Federal Home Loan Bank of Pittsburgh
(together, the "FHLB"), and others as sources of funding. Short-term borrowings
averaged $2.1 billion in 1999, $1.9 billion in 1998 and $812 million in 1997.
The average balance of long-term borrowings was $1.7 billion in 1999, compared
with $835 million in 1998 and $373 million in 1997. Included in average
long-term borrowings were amounts borrowed from the FHLB of $1.2 billion in
1999, $343 million in 1998 and $2 million in 1997, as well as $175 million of
subordinated capital notes issued in prior years by M&T Bank. Average long-term
borrowings also include trust preferred securities with a carrying value of $319
million that were issued by special-purpose entities in 1997. Further
information regarding the trust preferred securities, as well as information
regarding contractual maturities of long-term borrowings, is provided in note 8
of Notes to Financial Statements.
Net interest income is impacted by changes in the composition of the
Company's earning assets and interest-bearing liabilities, as described herein,
as well as changes in interest rates and spreads. Net interest spread, or the
difference between the yield on earning assets and the rate paid on
interest-bearing liabilities, was 3.48% in 1999, compared with 3.44% in 1998.
The yield on earning assets decreased 29 basis points (hundredths of one
percent) to 7.79% in 1999 from 8.08% in 1998. Similarly, the rate paid on
interest-bearing liabilities decreased 33 basis points to 4.31% in 1999 from
4.64% in 1998. The declines in yields on earning assets and rates paid on
interest-bearing liabilities were due to generally lower interest rates in 1999
when compared with 1998. However, actions taken by the Federal Reserve during
the third and fourth quarters of 1999 have resulted in an increase in interest
rates. In 1997, the net interest spread was 3.73%, the yield on earning assets
was 8.39% and the rate paid on interest-bearing
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liabilities was 4.66%. Lower yielding residential real estate loans, consumer
loans and investment securities acquired in the ONBANCorp transaction; the July
1998 sale of the Company's retail credit card business; and competitive pressure
on interest rates charged for newly originated loans, particularly commercial
loans and commercial real estate loans, contributed to the decline in yield in
1998 as compared with 1997.
Net interest-free funds consist largely of noninterest-bearing demand
deposits and stockholders' equity, partially offset by goodwill and core deposit
intangible, bank owned life insurance and other non-earning assets. Net
interest-free funds contributed .54% to net interest margin in 1999, compared
with .57% in 1998 and .69% in 1997. Average net interest-free funds totaled $2.4
billion in 1999, $2.1 billion in 1998 and $1.9 billion in 1997. The decline in
the contribution to net interest margin of net interest-free funds in 1999 and
1998 from 1997 was due, in part, to the goodwill and core deposit intangible
assets recorded in conjunction with the FNB, Chase branch and ONBANCorp
acquisitions (which averaged $587 million in 1999 and $413 million in 1998) and
the cash surrender value of bank owned life insurance (which averaged $379
million in 1999, compared with $314 million in 1998 and $41 million in 1997).
Increases in the cash surrender value of bank owned life insurance are not
included in interest income, but rather are recorded in "other revenues from
operations." These two noninterest-earning assets mitigated much of the benefit
derived from increases in stockholders' equity and/or noninterest-bearing
deposits resulting from the FNB, Chase branch and ONBANCorp transactions.
Future changes in market interest rates or spreads, as well as changes
in the composition of the Company's portfolios of earning assets and
interest-bearing liabilities that result in reductions in spreads could
adversely impact the Company's net interest margin and net interest income.
Management assesses the potential impact of future changes in interest rates and
spreads by projecting net interest income under a number of different interest
rate scenarios. As part of the management of interest rate risk, the Company
utilizes interest rate swap agreements to modify the repricing characteristics
of certain portions of the loan and deposit portfolios. Revenue and expense
arising from these agreements are reflected in either the yields earned on
assets or, as appropriate, the rates paid on interest-bearing liabilities.
Excluding forward-starting swaps, the notional amount of interest rate swaps
entered into for interest rate risk management purposes as of December 31, 1999
was approximately $1.7 billion. In general, under the terms of these swaps, the
Company receives payments based on the outstanding notional amount of the swaps
at fixed rates of interest and makes payments at variable rates. However, under
terms of $99 million of swaps, the Company pays a fixed rate of interest and
receives a variable rate. To help manage exposure resulting from changing
interest rates in future years, as of December 31, 1999, the Company had also
entered into forward-starting swaps with an aggregate notional amount of $373
million in which the Company will pay a fixed rate of interest and receive a
variable rate. Such forward-starting swaps had no effect on the Company's net
interest income through December 31, 1999. The average notional amounts of
interest rate swaps entered into for interest rate risk management purposes, the
related effect on net interest income and margin, and the weighted-average rate
paid or received on those swaps are presented in the accompanying table 8.
The Company estimates that as of December 31, 1999 it would have
received approximately $25 million if all interest rate swap agreements entered
into for interest rate risk management purposes had been terminated, compared
with $23 million and $16 million at December 31, 1998 and 1997, respectively.
The estimated fair value of the interest rate swap portfolio results from the
effects of changing interest rates and should be considered in the context of
the entire balance sheet and the Company's overall interest rate risk profile.
With the exception of swaps having a notional amount of
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$50 million that were entered into for the purpose of modifying the repricing
characteristics of fixed-rate, available for sale investment securities, changes
in the estimated fair value of interest rate swaps entered into for interest
rate risk management purposes are not recorded in the consolidated financial
statements. Additional information about interest rate swaps is included in note
16 of Notes to Financial Statements.
PROVISION FOR CREDIT LOSSES
The purpose of the provision for credit losses is to adjust the Company's
allowance for credit losses to a level that is adequate to absorb losses
inherent in the loan and lease portfolio. The provision for credit losses was
$44.5 million in 1999, compared with $43.2 million in 1998 and $46.0 million in
1997. Net loan charge-offs in 1999 were $40.3 million, compared with $39.4
million in 1998 and $41.8 million in 1997. Net loan charge-offs as a percentage
of average loans outstanding were .25% in 1999, .28% in 1998 and .38% in 1997.
Nonperforming loans totaled $103.2 million or .59% of loans and leases
outstanding at December 31, 1999, compared with $117.0 million or .74% a year
earlier and $80.7 million or .70% at December 31, 1997. The allowance for credit
losses was $316.2 million or 1.82% of net loans and leases at the end of 1999,
compared with $306.3 million or 1.94% at December 31, 1998 and $274.7 million or
2.39% at December 31, 1997. The ratio of the allowance to nonperforming loans at
year-end 1999, 1998 and 1997 was 306%, 262% and 341%, respectively.
The decline in the allowance as a percentage of total loans at December
31, 1999 and 1998 as compared with December 31, 1997 and prior years reflects
management's evaluation of the loan and lease portfolio as of each date, the
relatively favorable economic environment for many commercial borrowers in the
two recent years, the July 1998 sale of the retail credit card business, and
other factors. Management regularly assesses the adequacy of the allowance by
performing an ongoing evaluation of the loan and lease portfolio, including such
factors as the differing economic risks associated with each loan category, the
current financial condition of specific borrowers, the economic environment in
which borrowers operate, the level of delinquent loans and the value of any
collateral. Significant loans are individually analyzed, while other smaller
balance loans are evaluated by loan category. Given the concentration of
commercial real estate loans in the Company's loan portfolio, particularly the
large concentration of loans secured by properties in New York State, in
general, and in the New York City metropolitan area, in particular, coupled with
the amount of commercial and industrial loans to businesses in areas of New York
State outside of the New York City metropolitan area and significant growth in
recent years in loans to individual consumers, management cautiously evaluated
the impact of interest rates and overall economic conditions on the ability of
borrowers to meet repayment obligations when assessing the adequacy of the
Company's allowance for credit losses as of December 31, 1999. Based upon the
results of such review, management believes that the allowance for credit losses
at December 31, 1999 was adequate to absorb credit losses inherent in the
portfolio as of that date.
The accompanying table 10 presents a comparative allocation of the
allowance for credit losses for each of the past five year-ends. Amounts were
allocated to specific loan categories based upon management's classification of
loans under the Company's internal loan grading system and assessment of
near-term charge-offs and losses existing in specific larger balance loans that
are reviewed in detail by the Company's internal loan review department and
pools of other loans that are not individually analyzed. The unallocated portion
of the allowance is intended to provide for probable losses that are not
otherwise identifiable resulting from (i) comparatively poorer economic
conditions and an unfavorable business climate
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in market regions served by the Company, in particular areas of New York State
outside of the New York City metropolitan area that have not experienced the
same degree of economic growth evident in much of the rest of the country in
recent years, (ii) portfolio concentrations regarding loan type, collateral type
and geographic location, in particular the large concentration of commercial
real estate loans secured by properties in the New York City metropolitan area
and other areas of New York State, (iii) the effect of expansion into new
markets, including market areas of New York State and Pennsylvania entered
through the acquisition of ONBANCorp, and/or new loan product types, including
expansion of automobile loan and leasing activities in recent years, and, (iv)
the possible use of imprecise estimates in determining the allocated portion of
the allowance. The economy in New York State, in general, and the Upstate New
York region (comprised of areas outside of metropolitan New York City), in
particular, continues to lag behind the rest of the country. Marginal job
growth, coupled with a declining population base, has left the Upstate New York
region susceptible to potential credit problems, particularly related to
commercial customers. Given the Company's high concentration of commercial loans
and commercial real estate loans in New York State, including the Upstate New
York region, and considering the other factors already discussed, the level of
the unallocated portion of the allowance for credit losses is deemed prudent and
reasonable. Nevertheless, the allowance is general in nature and is available to
absorb losses from any loan or lease category. Accordingly, the amounts
presented in the table are not necessarily indicative of future losses within
the individual loan categories.
Several factors influence the Company's credit loss experience,
including overall economic conditions affecting businesses and consumers, in
general, and, due to the size of the Company's commercial real estate loan
portfolio, real estate valuations, in particular. Commercial real estate
valuations include many assumptions and, as a result, can be highly subjective.
Commercial real estate values can be significantly affected over relatively
short periods of time by changes in business climate and economic conditions,
and, in many cases, the results of operations of businesses and other occupants
of the real property. Nonperforming commercial real estate loans totaled $13.4
million, $19.3 million and $17.4 million at December 31, 1999, 1998 and 1997,
respectively. During 1999, the Company realized net recoveries of charged-off
commercial real estate loans of $2.2 million. During 1998 and 1997, net
charge-offs of commercial real estate loans were $3.6 million and $.9 million,
respectively.
Net charge-offs of consumer loans and leases were $21.7 million in
1999, or .72% of average consumer loans outstanding during the year, compared
with $31.5 million or 1.13% in 1998 and $35.8 million or 1.55% in 1997.
Charge-offs of credit card balances and indirect automobile loans and leases
represented the most significant types of consumer loans charged off during the
past three years. Net credit card and indirect automobile loan charge-offs
during 1999 were $.6 million and $8.3 million, respectively, compared with $14.4
million and $10.5 million, respectively, in 1998 and $19.0 million and $11.2
million, respectively, in 1997. As previously noted, the Company sold its retail
credit card business in July 1998. Nonperforming consumer loans and leases
totaled $27.3 million or .88% of outstanding consumer loans at December 31,
1999, compared with $28.3 million or .98% at December 31, 1998 and $21.9 million
or .99% at December 31, 1997.
Net charge-offs of commercial loans and leases in 1999 totaled $17.0
million, compared with $2.7 million in 1998 and $1.9 million in 1997. The
increase in charge-offs in 1999 compared with prior years was largely the result
of two commercial loans with partial charge-offs aggregating $15.0 million.
Nonperforming commercial loans and leases totaled $22.5 million, $20.6 million
and $10.2 million at December 31, 1999, 1998 and 1997, respectively.
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Net charge-offs of residential real estate loans were $3.9 million in
1999, compared with $1.6 million and $3.1 million in 1998 and 1997,
respectively. Residential real estate loans classified as nonperforming at
December 31, 1999, 1998 and 1997 totaled $40.0 million, $48.9 million and $31.2
million, respectively.
Commercial real estate loans secured by multi-family properties in the
New York City metropolitan area represented 9% of loans outstanding at December
31, 1999. The Company had no concentrations of credit extended to any specific
industry that exceeded 10% of total loans at December 31, 1999. Furthermore, the
Company had no exposure to less developed countries, and only $22 million of
outstanding foreign loans at December 31, 1999.
Assets acquired in settlement of defaulted loans totaled $10.0 million
at December 31, 1999, compared with $11.1 million a year earlier and $8.4
million at the end of 1997.
OTHER INCOME
Other income rose 14% to $282 million in 1999 from $248 million in 1998, after
excluding $15.3 million of tax-exempt income in 1998 resulting from the
previously noted transfer of appreciated investment securities to an affiliated,
tax-exempt charitable foundation. Growth in mortgage banking revenues, fees
earned from deposit services, and a full year of revenues associated with
operations obtained in the ONBANCorp acquisition contributed to the improvement.
Other income was $191 million in 1997. Revenues related to operations and/or
market areas associated with the ONBANCorp acquisition, along with higher
revenues from mortgage banking, trust activities and bank owned life insurance
contributed to the increase from 1997 to 1998. Approximately 40% of the increase
from 1997 to 1998 was attributable to revenues related to operations and/or
market areas associated with the former ONBANCorp.
Mortgage banking revenues, which consist of residential mortgage loan
servicing fees, gains from sales of residential mortgage loans and loan
servicing rights, and other residential mortgage loan-related fees, increased to
$71.8 million in 1999 from $65.6 million in 1998 and $51.5 million in 1997.
Revenues from servicing residential mortgage loans for others were $26.8 million
in 1999, compared with $29.3 million in 1998 and $25.7 million in 1997. Gains
from sales of residential mortgage loans and loan servicing rights totaled $39.7
million in 1999, $32.4 million in 1998 and $23.1 million in 1997. The Company
maintains residential mortgage loan origination offices in New York State, as
well as in Arizona, Colorado, Idaho, Massachusetts, Ohio, Oregon, Pennsylvania,
Utah and Washington. Residential mortgage loans originated for sale to other
investors totaled $2.5 billion in 1999, compared with $2.8 billion and $1.6
billion in 1998 and 1997, respectively. Residential mortgage loans serviced for
others were $7.2 billion, $7.3 billion and $7.5 billion at December 31, 1999,
1998 and 1997, respectively. Capitalized servicing assets were $61 million at
December 31, 1999 and 1997, compared with $62 million at December 31, 1998.
Reflecting a third quarter 1999 increase in fees, combined with the
impact of the FNB, Chase branch and ONBANCorp acquisitions, service charges on
deposit accounts rose 28% to $73.6 million in 1999 from $57.4 million in 1998,
and 70% from $43.4 million in 1997. Fees for services provided to customers in
the areas formerly served by ONBANCorp contributed approximately three-fourths
of the increase from 1997 to 1998. Trust income increased 7% to $40.8 million in
1999 from $38.2 million in 1998 and 33% from $30.7 million in 1997. The
increases in both 1999 and 1998 were largely due to higher revenues for
investment management services. Merchant discount and other credit card fees in
1999 totaled $7.5 million, compared with $12.4
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million in 1998 and $19.4 million in 1997. As noted earlier, during 1997 and
1998 the Company terminated all of its co-branded credit card programs, and sold
its retail credit card business on July 31, 1998. Total credit card fees
included in merchant discount and credit card fees in 1999 were approximately $2
million, compared with approximately $9 million and $16 million in 1998 and
1997, respectively. Through the date of sale, the results of operations of the
retail credit card business in 1998, including internal allocations of the
provision for credit losses, interest expense and other expenses, were
essentially break-even. On the same basis, the Company's retail credit card
business incurred losses of approximately $10 million in 1997. Trading account
and foreign exchange activity resulted in gains of $315 thousand in 1999, down
from $4.0 million in 1998 and $3.7 million in 1997. The decline in 1999 was
largely the result of an approximate $3 million loss incurred as a result of a
counterparty defaulting on the settlement of outstanding foreign exchange
contracts. During 1999, the Company sold bank investment securities resulting in
gains of $1.6 million. Similar gains on sales of bank investment securities in
1998 were $1.8 million, compared with losses of $280 thousand in 1997.
Other revenues from operations increased to $86.8 million in 1999,
compared with $68.3 million in 1998 (excluding the effect of the contribution of
securities to the affiliated foundation) and $42.1 million in 1997. Such amounts
include $22.5 million, $17.6 million and $2.3 million in 1999, 1998 and 1997,
respectively, of tax-exempt income earned from bank owned life insurance. Also
included in other revenues from operations were revenues from the sales of
mutual funds and annuities of $24.5 million, $18.0 million and $15.3 million in
1999, 1998 and 1997, respectively. A $7.0 million increase in revenues from
letter of credit and other credit-related fees also contributed to the rise in
other revenues from operations in 1999 from 1998. Other items that contributed
to the increase in 1998 as compared with 1997 include a $3.2 million gain from
the sale of the Company's retail credit card business and higher revenues for
automated teller machine service fees.
OTHER EXPENSE
Excluding amortization of goodwill and core deposit intangible of $49.7 million
in 1999, $34.5 million in 1998 and $7.3 million in 1997; nonrecurring
merger-related expenses of $4.7 million and $21.3 million in 1999 and 1998,
respectively; and $24.6 million of expense recognized in 1998 related to the
previously discussed transfer of securities to an affiliated charitable
foundation, other expense totaled $525 million in 1999, 8% higher than $486
million in 1998 and 27% higher than $414 million in 1997. Expenses related to
acquired operations significantly contributed to the higher expense levels in
1999 and 1998. However, since the operating systems and support operations
related to ONBANCorp, FNB and the former Chase branches have been combined with
those of the Company, the Company's operating expenses cannot be precisely
divided between or attributed directly to the acquired operations or to the
Company as it existed prior to each transaction.
Salaries and employee benefits expense was $285 million in 1999, 10%
higher than the $259 million in 1998 and 29% higher than the $220 million in
1997. Salaries and benefits related to acquired operations, merit salary
increases, higher expenses for incentive compensation arrangements and higher
medical benefit costs were factors for the increase in 1999 from 1998. Salaries
and employee benefits related to the operations acquired from ONBANCorp largely
contributed to the increased expense level in 1998 over 1997. Merit salary
increases and expenses associated with incentive compensation plans also
contributed to the 1998 increase. Partially offsetting the impact of these
higher expenses were decreases in expense associated with stock appreciation
rights of $4.4 million in 1999 as compared with 1998 and $6.3 million in 1998 as
compared with 1997. The number of
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full-time equivalent employees was 6,171 at December 31, 1999, compared with
6,044 at December 31, 1998 and 4,781 at December 31, 1997.
Excluding one time merger-related expenses, the already discussed
charitable contributions expense in 1998, and amortization of goodwill and core
deposit intangible, nonpersonnel expense totaled $240 million in 1999, 5% higher
than $228 million in 1998. Higher equipment and net occupancy expenses, largely
attributable to the impact of the operations acquired in 1998 and 1999, were
significant factors contributing to the rise. Nonpersonnel expense was $194
million in 1997, after excluding amortization of goodwill and core deposit
intangible. The increase in expenses from 1997 to 1998 was largely the result of
expenses related to the acquired operations of ONBANCorp plus an increase in the
amortization of capitalized servicing rights. Amortization of capitalized
servicing rights totaled $19.8 million in 1999, $19.7 million in 1998 and $14.4
million in 1997. Partially offsetting the expense increases from 1997 to 1998
was an $8.1 million decline in co-branded credit card rebate and other operating
expenses based on card usage.
INCOME TAXES
The provision for income taxes was $153 million in 1999, up from $118 million in
1998 and $106 million in 1997. The effective tax rates were 36.5% in 1999, 36.1%
in 1998 and 37.5% in 1997. A reconciliation of income tax expense to the amount
computed by applying the statutory federal income tax rate to pre-tax income is
provided in note 11 of Notes to Financial Statements.
INTERNATIONAL ACTIVITIES
The Company's net investment in international assets was $27 million and $33
million at December 31, 1999 and 1998, respectively. Total offshore deposits
were $243 million at December 31, 1999 and $303 million at December 31, 1998.
LIQUIDITY, MARKET RISK, AND INTEREST RATE SENSITIVITY
As a financial intermediary, the Company is exposed to various risks including
liquidity and market risk. Liquidity refers to the Company's ability to ensure
that sufficient cash flow and liquid assets are available to satisfy demands for
loans and deposit withdrawals, to fund operating expenses, and to be used for
other corporate purposes. Liquidity risk arises whenever the maturities of
financial instruments included in assets and liabilities differ.
Core deposits have historically been the most significant funding
source for the Company. Core deposits are generated from a large base of
consumer, corporate and institutional customers, which over the past several
years has become more geographically diverse as a result of acquisitions and
expansion of the Company's businesses. Nevertheless, in recent years the Company
has faced increased competition in offering services and products from a large
array of financial market participants, including banks, thrifts, mutual funds,
securities dealers and others. As a result, and consistent with banking industry
experience in general, the Company has experienced a reduction in the percentage
of earning assets funded by core deposits. Core deposits financed 63% of the
Company's earning assets at December 31, 1999, compared with 62% and 64% at
December 31, 1998 and 1997, respectively.
The Company supplements funding provided through core deposits with
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various short-term and long-term wholesale borrowings, including Federal funds
purchased and securities sold under agreements to repurchase, brokered
certificates of deposit, and borrowings from the FHLB and others. M&T Bank had a
credit facility with the FHLB aggregating $2.3 billion at December 31, 1999.
Outstanding borrowings totaled $1.8 billion at December 31, 1999 and $1.5
billion at December 31, 1998. Such borrowings are secured by loans and
investment securities. M&T Bank and M&T Bank, N.A. had available lines of credit
with the Federal Reserve Bank of New York totaling approximately $4 billion. The
amounts of these lines are dependent upon the balance of loans and securities
pledged as collateral. There were no borrowings outstanding under these lines at
either December 31, 1999 or 1998. Although informal and sometimes reciprocal,
sources of funding are available to the Company through various arrangements for
unsecured short-term borrowings from a wide group of banks and other financial
institutions. In addition to deposits and borrowings, other sources of liquidity
include maturities of money-market assets and investment securities, repayments
of loans and investment securities, and cash generated from operations, such as
fees collected for services.
M&T's primary source of funds to pay for operating expenses,
stockholder dividends and treasury stock repurchases has historically been the
receipt of dividends from its banking subsidiaries, which are subject to various
regulatory limitations. These historic sources of cash flow were augmented in
1997 by the proceeds from issuance of $250 million of trust preferred
securities, which provided a substantial portion of M&T's funding needs during
1998 and 1997. Additional information regarding the trust preferred securities
is included in note 8 of Notes to Financial Statements. M&T also maintains a $30
million line of credit with an unaffiliated commercial bank, of which borrowings
outstanding at December 31, 1999 totaled $29 million. A similar $25 million line
of credit that expired during 1999 was entirely available for borrowing at
December 31, 1998.
Management closely monitors the Company's liquidity position for
compliance with internal policies and believes that available sources of
liquidity are adequate to meet funding needs anticipated in the normal course of
business. Furthermore, management does not anticipate engaging in any
activities, either currently or in the long-term, which would cause a
significant strain on liquidity at either M&T or its subsidiary banks.
Market risk is the risk of loss from adverse changes in market prices
and/or interest rates of the Company's financial instruments. The primary market
risk the Company is exposed to is interest rate risk. The core banking
activities of lending and deposit-taking expose the Company to interest rate
risk, which occurs when assets and liabilities reprice at different times as
interest rates change. As a result, net interest income earned by the Company is
subject to the effects of changing interest rates. The Company measures interest
rate risk by calculating the variability of net interest income in future years
under various interest rate scenarios using projected balances for earning
assets, interest-bearing liabilities and off-balance sheet financial
instruments. Management's philosophy toward interest rate risk management is to
limit the variability of net interest income. The balances of both on- and
off-balance sheet financial instruments used in the projections are based on
expected growth from forecasted business opportunities, anticipated prepayments
of mortgage-related assets and expected maturities of investment securities,
loans and deposits. Management supplements the modeling technique described
above with analyses of market values of the Company's financial instruments. The
Company has entered into interest rate swap agreements to help manage exposure
to interest rate risk. At December 31, 1999, the aggregate notional amount of
interest rate swaps entered into for interest rate risk management purposes was
approximately $2.0 billion, including approximately $373 million of forward
starting swaps. Information about interest rate swaps entered into for interest
rate risk
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<PAGE>
management purposes is included herein under "Net Interest Income/Lending and
Funding Activities" and in note 16 of Notes to Financial Statements.
The Company's Asset-Liability Committee, which includes members of
senior management, monitors interest rate sensitivity with the aid of a computer
model that considers the impact of ongoing lending and deposit gathering
activities, as well as statistically derived interrelationships in the magnitude
and timing of the repricing of financial instruments, including the effect of
changing interest rates on expected prepayments and maturities. When deemed
prudent, management has taken action, and intends to do so in the future, to
mitigate exposure to interest rate risk through the use of on- or off-balance
sheet financial instruments. Possible actions include, but are not limited to,
changes in the pricing of loan and deposit products, modifying the composition
of earning assets and interest-bearing liabilities, and entering into or
modifying existing interest rate swap agreements.
The accompanying table 14 as of December 31, 1999 and 1998 displays the
estimated impact on net interest income from non-trading financial instruments
resulting from changes in interest rates during the first modeling year.
Many assumptions were utilized by the Company to calculate the impact
that changes in interest rates may have on the Company's net interest income.
The more significant assumptions relate to the rate of prepayments of
mortgage-related assets, cash flows from derivative and other financial
instruments held for non-trading purposes, loan and deposit volumes and pricing,
and deposit maturities. The Company also assumed gradual changes in rates of 100
and 200 basis points up and down during a twelve-month period. As these
assumptions are inherently uncertain, the Company cannot precisely predict the
impact of changes in interest rates on net interest income. Actual results may
differ significantly from those presented due to timing, magnitude, and
frequency of interest rate changes and changes in market conditions, as well as
any actions, such as those previously described, which management may take to
counter these changes.
In accordance with industry practice, cumulative totals of net assets
(liabilities) repricing on a contractual basis within the specified time frames,
as adjusted for the impact of interest rate swap agreements entered into for
interest rate risk management purposes, are presented in the accompanying table
15. Management believes this measure does not appropriately depict interest rate
risk since changes in interest rates do not necessarily affect all categories of
earning assets and interest-bearing liabilities equally nor, as assumed in the
table, on the contractual maturity or repricing date. Furthermore, this static
presentation of interest rate risk fails to consider the effect of ongoing
lending and deposit gathering activities, projected changes in balance sheet
composition or any subsequent interest rate risk management activities the
Company is likely to implement.
The Company engages in trading activities to meet the financial needs
of customers and to profit from perceived market opportunities. Trading
activities are conducted utilizing financial instruments that include forward
and futures contracts related to foreign currencies and mortgage-backed
securities, U.S. Treasury and other government securities, mortgage-backed
securities and interest rate contracts, such as swaps. The Company generally
mitigates the foreign currency and interest rate risk associated with trading
activities by entering into offsetting trading positions. The amounts of gross
and net trading positions as well as the type of trading activities conducted by
the Company are subject to a well-defined series of potential loss exposure
limits established by the Asset-Liability Committee.
The notional amounts of interest rate and foreign currency and other
option and futures contracts totaled $799 million and $573 million,
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<PAGE>
respectively, at December 31, 1999 and $436 million and $2.0 billion,
respectively, at December 31, 1998. The notional amounts of these trading
contracts are not recorded in the consolidated balance sheet. However, the fair
values of all financial instruments used for trading activities are recorded in
the consolidated balance sheet. The fair values of all trading account assets
and liabilities were $641 million and $633 million, respectively, at December
31, 1999 and $173 million and $51 million, respectively, at December 31, 1998.
Included in trading account assets at December 31, 1999 were mortgage-backed
securities which M&T held as collateral securing certain agreements to resell
securities. The obligations to return such collateral were recorded as
noninterest-bearing trading account liabilities and were included in accrued
interest and other liabilities in the Company's consolidated balance sheet. The
fair value of such collateral (and the related obligation to return collateral)
was $600 million at December 31, 1999. There was no similar collateral held at
December 31, 1998.
Given the Company's policies, limits and positions, management believes
that the potential loss exposure to the Company resulting from market risk
associated with trading activities was not material as of December 31, 1999 and
1998. Additional information related to trading derivative contracts is included
in note 16 of Notes to Financial Statements.
CAPITAL
Stockholders' equity at December 31, 1999 was $1.8 billion or 8.02% of total
assets, compared with $1.6 billion or 7.78% at December 31, 1998 and $1.0
billion or 7.36% at December 31, 1997. On a per share basis, stockholders'
equity increased 12% to $232.41 at December 31, 1999 from $207.94 at December
31, 1998 and was up 49% from $155.86 at December 31, 1997. Excluding goodwill
and core deposit intangible, net of applicable tax effect, tangible equity per
share was $151.40 at December 31, 1999, compared with $139.89 at December 31,
1998 and $153.24 at December 31, 1997. The ratio of average total stockholders'
equity to average total assets was 8.24%, 8.20% and 7.16% in 1999, 1998 and
1997, respectively.
M&T issued shares of common stock in 1999 and 1998 to complete the
acquisitions of FNB and ONBANCorp. On June 1, 1999, 122,516 shares of common
stock were issued to former holders of FNB common stock resulting in an addition
to stockholders' equity of $58.7 million. On April 1, 1998, M&T issued 1,429,998
shares of common stock to former holders of ONBANCorp common stock and assumed
employee stock options to purchase 61,772 shares of M&T common stock, resulting
in additions to stockholders' equity of $587.8 million and $19.4 million,
respectively.
Stockholders' equity at December 31, 1999 reflected a loss of $26.0
million, or $3.37 per share, for the net after-tax impact of unrealized losses
on investment securities classified as available for sale, compared with
unrealized gains of $2.9 million, or $.37 per common share, at December 31, 1998
and $12.0 million, or $1.82 per common share, at December 31, 1997. Such
unrealized gains or losses are generally due to changes in interest rates and
represent the difference, net of applicable income tax effect, between the
estimated fair value and amortized cost of investment securities classified as
available for sale. The market valuation of investment securities should be
considered in the context of the entire balance sheet of the Company. With the
exception of investment securities classified as available for sale, trading
account assets and liabilities, and residential mortgage loans held for sale,
the carrying values of financial instruments in the balance sheet are generally
not adjusted for appreciation or depreciation in market value resulting from
changes in interest rates.
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<PAGE>
Cash dividends on M&T's common stock of $35.1 million were paid in
1999, compared with $29.0 million and $21.2 million in 1998 and 1997,
respectively. In the third quarter of 1999 M&T's quarterly common stock dividend
rate was increased to $1.25 per share from $1.00 per share. In total, dividends
per common share increased to $4.50 in 1999 from $3.80 in 1998 and $3.20 in
1997.
The rate of internal capital generation, or net income (excluding the
after-tax effect of gains or losses from sales of bank investment securities)
less dividends paid expressed as a percentage of average total stockholders'
equity, was 13.22% in 1999, 11.86% in 1998 and 16.28% in 1997.
During 1999, 1998 and 1997, M&T repurchased an aggregate of 854,438
shares of its common stock at an aggregate cost of $379.4 million: 167,833
shares in 1999, 479,532 shares in 1998 and 207,073 shares in 1997, at a cost of
$79.8 million, $231.8 million and $67.8 million, respectively. In November 1999,
M&T announced its intent to repurchase and hold as treasury stock up to 190,465
shares of common stock for reissuance upon the possible future exercise of
outstanding stock options. As of December 31, 1999, M&T had repurchased 31,910
shares of common stock pursuant to such plan at an average cost of $465.28 per
share.
Federal regulators generally require banking institutions to maintain
"core capital" and "total capital" ratios of at least 4% and 8%, respectively,
of risk-adjusted total assets. In addition to the risk-based measures, Federal
bank regulators have also implemented a minimum "leverage" ratio guideline of 3%
of the quarterly average of total assets. Core capital includes the $319 million
carrying value of trust preferred securities. As of December 31, 1999, total
capital further included $130 million of subordinated notes issued by M&T Bank
in prior years. The capital ratios of the Company and its banking subsidiaries,
M&T Bank and M&T Bank, N.A., as of December 31, 1999 and 1998 are presented in
note 20 of Notes to Financial Statements.
YEAR 2000
The "Year 2000" problem relates to the ability of computer systems, including
those in non-information technology equipment and systems ("Computer Systems"),
to distinguish date data between the twentieth and twenty-first centuries. Over
the past several years the Company devoted resources to identify, remediate as
appropriate, and test its own Computer Systems and to monitor and test as
appropriate Computer Systems of entities doing business with or providing
services to the Company. As a result of such efforts, the Company is not aware
of any significant adverse impact resulting from the failure of Computer Systems
on which it relies to accurately process date data before or after January 1,
2000. Nevertheless, in 2000 the Company will continue to monitor its Computer
Systems and the performance of commercial and other loan customers, funds
providers, and capital market/asset management counterparties for indications of
Year 2000-related problems.
Through December 31, 1999, the Company spent approximately $8.6 million
(including approximately $3.2 million during 1999, $3.8 million in 1998 and $1.2
million in 1997) in addressing its potential Year 2000 problems. Management
believes that the Company is continuing to devote appropriate financial and
human resources to monitor its Computer Systems and the ongoing performance of
customers and others, however, it is anticipated that additional costs related
to such activities will not be significant. A majority of the Company's Year
2000-related costs were internal costs and constituted resources that would
otherwise have been reallocated within the Company. Such reallocation did not
have a material adverse impact on the
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<PAGE>
Company's financial condition or results of operations.
The preceding discussion of Year 2000 initiatives contains
forward-looking statements as to Year 2000 issues. See also the discussion of
Future Factors under the caption "Forward-Looking Statements," which are
incorporated by reference into the preceding discussion.
FOURTH QUARTER RESULTS
M&T reported net income in the fourth quarter of 1999 of $66.1 million or $8.20
of diluted earnings per common share, increases of 14% and 15%, respectively,
from $57.8 million or $7.14 per diluted share in the final quarter of 1998.
Basic earnings per share were up 14% to $8.48 in the recent quarter from $7.44
in the year-earlier quarter. Net income for the fourth quarter of 1999 expressed
as an annualized rate of return on average assets was 1.18% compared with 1.14%
in the comparable 1998 quarter. The annualized rate of return on average common
stockholders' equity in the recent quarter was 14.58%, compared with 14.20% in
1998's fourth quarter. Cash net income in the fourth quarter of 1999 rose to
$78.4 million, up 17% from $67.3 million earned in the year-earlier quarter.
Diluted cash earnings per share increased 17% to $9.73 in 1999's final quarter
from $8.31 in the comparable 1998 period. Cash return on average tangible assets
was an annualized 1.45% in the recent quarter, compared with 1.36% in the
corresponding 1998 quarter. Cash return on average tangible common equity rose
to an annualized 26.67% in the fourth quarter of 1999 from 24.57% in the
year-earlier quarter. Excluding nonrecurring expenses and amortization of
acquired intangibles, the impact of the Chase branch acquisition in the fourth
quarter of 1999 on net income was negligible.
Taxable-equivalent net interest income rose to $199 million in the
fourth quarter of 1999, an increase of $22 million or 12% from $177 million in
the comparable 1998 quarter. An 11% increase in average loans and leases
outstanding and a widening of the net interest margin were significant factors
contributing to the improvement in net interest income. Average loans and leases
for the fourth quarter of 1999 totaled $17.1 billion, up from $15.4 billion
during the year-earlier quarter. Earning assets averaged $19.8 billion in the
final quarter of 1999, an 8% increase from $18.4 billion in the corresponding
1998 quarter. Net interest margin was 3.99% in the fourth quarter of 1999, up
from 3.82% in 1998's final quarter. The yield on earning assets was 7.85% in the
recent quarter, up 8 basis points from 7.77% in the year-earlier period when
competitive pressure on interest rates charged for loans originated in 1998 had
the impact of lowering loan yields. The rate paid on interest-bearing
liabilities was 4.43% in 1999's final quarter, compared with 4.50% in the
year-earlier period. The resulting net interest spread was 3.42% in the recent
quarter, compared with 3.27% in the fourth quarter of 1998. During the third and
fourth quarters of 1999, the Federal Reserve took actions to increase the
general level of interest rates. Although not necessarily indicative of a trend
or of future results, the net interest spread in 1999's fourth quarter was below
that achieved in any other quarter of 1999.
The provision for credit losses was $14.0 million in the fourth quarter
of 1999, up from $7.5 million in the corresponding 1998 quarter. Net charge-offs
totaled $12.8 million in 1999's fourth quarter, compared with $10.7 million in
the year-earlier period. The increase in net charge-offs from the fourth quarter
of 1998 was largely due to a $5.0 million partial charge-off of a commercial
loan in the recent quarter. Net charge-offs as an annualized percentage of
average loans and leases were .30% in the final 1999 quarter, compared with .28%
in the corresponding 1998 quarter. Largely due to the impact of the third
quarter increase in fees charged for certain deposit services and higher
revenues from letter of credit and other credit-related
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<PAGE>
fees, other income increased 8% to $70.4 million in the fourth quarter of 1999
from $65.0 million in the fourth quarter of 1998. Reflecting the impact of
expenses related to the FNB and Chase branch transactions, primarily expenses
for salaries and benefits, equipment and net occupancy, and amortization of
goodwill and core deposit intangible, other expense increased 7% to $149.0
million in 1999's final quarter from $138.8 million in the corresponding 1998
period.
SEGMENT INFORMATION
In accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 131, "Disclosures About Segments of an Enterprise and Related
Information," the Company's reportable segments have been determined based upon
its internal profitability reporting system, which is organized by strategic
business unit. Certain strategic business units have been combined for segment
information reporting purposes where the nature of the products and services,
the type of customer, and the distribution of those products and services are
similar. The reportable segments are Commercial Banking, Commercial Real Estate,
Discretionary Portfolio, Residential Mortgage Banking and Retail Banking.
The financial information of the Company's segments was compiled
utilizing the accounting policies described in note 19 of Notes to Financial
Statements. The management accounting policies and processes utilized in
compiling segment financial information are highly subjective and, unlike
financial accounting, are not based on authoritative guidance similar to
generally accepted accounting principles. As a result, reported segments and the
financial results of such segments are not necessarily comparable with similar
information reported by other financial institutions. Furthermore, changes in
management structure or allocation methodologies and procedures may result in
changes in reported segment financial data. Financial information about the
Company's segments is presented in note 19 of Notes to Financial Statements.
The Commercial Banking segment provides a wide range of credit products
and banking services for middle-market and large commercial customers, largely
within the markets the Company serves. Among the services provided by this
segment are commercial lending and leasing, deposit products, and cash
management services. The Commercial Banking segment's earnings rose 15% to $77.6
million in 1999 from $67.4 million in 1998. The higher net income in 1999 when
compared with 1998 resulted largely from increases of $17.8 million in net
interest income, resulting from a 17% increase in average loans outstanding, and
of $6.1 million in letter of credit and other credit-related fee income. Growth
in most markets served by the Company, as well as the full year impact of loans
acquired from ONBANCorp, contributed to the higher loan balances. Reflecting
higher net charge-offs, including charge-offs of $11.2 million related to one
commercial customer, the segment's provision for credit losses increased to
$11.3 million in 1999 from $3.0 million in 1998. Net income in 1997 was $54.3
million. Higher net interest income of $26.8 million, the result of commercial
loans obtained from ONBANCorp and loan growth in most of the markets already
served by the Company, was the leading factor contributing to the increase in
net income from 1997 to 1998.
The Commercial Real Estate segment provides credit and deposit services
to its customers. Loans are largely secured by properties in the New York City
metropolitan area and in Western New York, however, loans are also originated in
the other regions in New York State and northeastern Pennsylvania. Commercial
real estate loans may be secured by apartment/multifamily buildings, office
space, retail space, industrial space or other types of collateral. The
Commercial Real Estate segment earned $64.2 million in 1999, an increase of 12%
from $57.3 million earned a year
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<PAGE>
earlier. Higher net interest income of $12.8 million, the result of a 15%
increase in average loan balances outstanding, was the major factor for the
increase in net income. Higher loan balances were due to loan growth in
substantially all markets served by the Company and the full-year impact of
commercial real estate loans acquired from ONBANCorp. The Commercial Real Estate
segment earned $53.0 million in 1997. The impact of commercial real estate loans
added to the Company's portfolio in the ONBANCorp transaction contributed to the
growth in this segment's net income from 1997 to 1998.
The Discretionary Portfolio segment includes securities, residential
mortgage loans and other assets; short-term and long-term borrowed funds;
brokered certificates of deposit and interest rate swaps related thereto; and
offshore branch deposits. This segment also provides services to commercial
customers and consumers that include foreign exchange, securities trading and
municipal bond underwriting and sales. The Discretionary Portfolio segment
contributed net income of $38.2 million in 1999, compared with $31.7 million in
1998 and $18.5 million in 1997. A $4.9 million increase in tax-exempt income
earned from bank owned life insurance and higher net interest income from
holdings of residential mortgage loans contributed to the increase in 1999.
Partially offsetting these increases was the previously mentioned $3 million
settlement loss on foreign exchange contracts. The improvement from 1997 to 1998
was attributable to a $15.3 million rise in tax-exempt income earned from bank
owned life insurance. The April 1, 1998 ONBANCorp acquisition added
approximately $.9 billion of residential mortgage loans and $.8 billion of
investment securities to the average balance of the Company's discretionary
portfolio that also contributed to 1998's improvement.
The Residential Mortgage Banking segment originates and services
residential mortgage loans for consumers and sells substantially all of those
loans in the secondary market to investors or to banking subsidiaries of M&T.
The Company maintains mortgage loan origination offices in New York State, as
well as Arizona, Colorado, Idaho, Massachusetts, Ohio, Oregon, Pennsylvania,
Utah and Washington. The Company also periodically purchases the rights to
service residential mortgage loans. Residential mortgage loans held for sale are
included in this segment. Net income of this segment was $20.8 million in 1999,
compared with $19.5 million in 1998 and $11.0 million in 1997. A $6.2 million
decrease in noninterest expenses associated with origination and servicing
activities, partially offset by a $4.1 million decline in revenue, led to the
improved net income in this segment during 1999 as compared with 1998. The lower
expense level included a $1.7 million decrease in the valuation allowance for
capitalized servicing assets during 1999, compared with a $1.0 million addition
to such allowance in 1998. The decline in revenue was the result of a lower
volume of loans originated for sale during 1999 as compared with 1998, including
loans originated for transfer to M&T's bank subsidiaries. The increase in net
income from 1997 to 1998 was largely the result of an 81% increase in
residential mortgage loans originated and a 14% increase in loans serviced,
including loans transferred to and serviced for M&T's bank subsidiaries. A
favorable interest rate environment was the primary factor leading to the
increased origination volume in 1998.
The Retail Banking segment offers a variety of consumer and small
business services through several delivery channels which include traditional
and "in-store" banking offices, automated teller machines, telephone banking and
personal computer banking. The Company has banking offices throughout New York
State and in northeastern Pennsylvania. The Retail Banking segment also offers
certain deposit and loan products on a nationwide basis through M&T Bank, N.A.
Credit services offered by this segment include consumer installment loans,
student loans, automobile loans and leases (both directly and indirectly through
dealers), home equity loans and lines of credit, and loans and leases to small
businesses. The financial results of Retail Banking also include the $3.2
million gain that resulted from the sale of the
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<PAGE>
retail credit card business in July 1998 and the results of providing retail
credit card services to customers. The segment also offers to its customers
deposit products, including demand, savings and time accounts; investment
products, including mutual funds and annuities; and other services. The Retail
Banking segment reported net income of $111.5 million in 1999, up 11% from
$100.1 million in 1998. The impact of the acquisitions of FNB on June 1, 1999
and ONBANCorp on April 1, 1998 and increased service charges on deposit
accounts, reflecting third quarter 1999 rate increases, were the leading factors
contributing to the increase. In 1997, Retail Banking had net income of $65.7
million. The increase from 1997 to 1998 was largely the result of the April 1,
1998 acquisition of ONBANCorp and a $16.3 million decrease in the provision for
credit losses. The decrease in the provision was largely due to the July 1998
sale of the Company's retail credit card business and the 1997 and 1998
termination of all of the Company's co-branded credit card programs.
RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, (b) a hedge of
the exposure to variable cash flows of a forecasted transaction, or (c) a hedge
of the foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available for sale security, or a foreign
currency denominated forecasted transaction.
Pursuant to SFAS No. 133, the accounting for changes in the fair value
of a derivative will depend on the intended use of the derivative and the
resulting designation. An entity that elects to apply hedge accounting will be
required to establish at the inception of the hedge the method it will use for
assessing the effectiveness of the hedging derivative and the measurement
approach for determining the ineffective aspect of the hedge. Those methods must
be consistent with the entity's approach to managing risk.
SFAS No. 133 was to be effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. In June 1999, the FASB amended SFAS No.
133, deferring the effective date by one year. Initial application of SFAS No.
133 must be as of the beginning of an entity's fiscal quarter; on that date,
hedging relationships must be designated anew and documented pursuant to the
provisions of the statement. Early application of all of the provisions of SFAS
No. 133 is encouraged, but is permitted only as of the beginning of any fiscal
quarter that begins after issuance of the statement. SFAS No. 133 may not be
applied retroactively to financial statements of prior periods.
The manner of adoption expected to be utilized by the Company has yet
to be determined and, as a result, the estimated impact that adopting the
provisions of SFAS No. 133 will have on the Company's financial statements has
not been quantified. The Company anticipates that adoption of SFAS No. 133 could
increase the volatility of reported earnings and stockholders' equity and could
result in the modification of certain data processing systems and hedging
practices.
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<PAGE>
FORWARD-LOOKING STATEMENTS
This Financial Review and other sections of this Annual Report contain
forward-looking statements that are based on current expectations, estimates and
projections about the Company's business, management's beliefs and assumptions
made by management. These statements are not guarantees of future performance
and involve certain risks, uncertainties and assumptions ("Future Factors")
which are difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in such forward-looking
statements. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
Future Factors include changes in interest rates, spreads on earning
assets and interest-bearing liabilities, and interest rate sensitivity; credit
losses; sources of liquidity; legislation affecting the financial services
industry as a whole, and the Company individually; regulatory supervision and
oversight, including required capital levels; increasing price and
product/service competition by competitors, including new entrants; rapid
technological developments and changes; the ability to continue to introduce
competitive new products and services on a timely, cost-effective basis; the mix
of products/services; containing costs and expenses; governmental and public
policy changes, including environmental regulations; protection and validity of
intellectual property rights; reliance on large customers; technological,
implementation and cost/financial risks in large, multi-year contracts;
technological, implementation and financial risks associated with Year 2000
issues; the outcome of pending and future litigation and governmental
proceedings; continued availability of financing; and financial resources in the
amounts, at the times and on the terms required to support the Company's future
businesses. These are representative of the Future Factors that could affect the
outcome of the forward-looking statements. In addition, such statements could be
affected by general industry and market conditions and growth rates, general
economic conditions, including interest rate and currency exchange rate
fluctuations, and other Future Factors.
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<PAGE>
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M&T BANK CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------
Table 1
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1999 1998 Change
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR
PERFORMANCE
Net income (thousands) $265,626 207,974 + 28%
Return on
Average assets 1.26% 1.14%
Average common equity 15.30% 13.86%
Net interest margin 4.02% 4.01%
Net charge-offs/average loans .25% .28%
Efficiency ratio* 54.80% 56.24%
- -------------------------------------------------------------------------------
PER COMMON SHARE DATE
Basic earnings $ 34.05 27.30 + 25%
Diluted earnings 32.83 26.16 + 25%
Cash dividends 4.50 3.80 + 18%
- -------------------------------------------------------------------------------
CASH (TANGIBLE) OPERATING RESULTS**
Net income (thousands)*** $311,001 251,922 + 23%
Diluted earnings per common share*** 38.44 31.69 + 21%
Return on
Average tangible assets 1.52% 1.41%
Average tangible common equity 26.71% 23.08%
Efficiency ratio* 50.06% 52.51%
- -------------------------------------------------------------------------------
AT DECEMBER 31
- -------------------------------------------------------------------------------
BALANCE SHEET DATA (MILLIONS)
Loans and leases,
net of unearned discount $ 17,407 15,792 + 10%
Total assets 22,409 20,584 + 9%
Deposits 15,374 14,737 + 4%
Stockholders' equity 1,797 1,602 + 12%
- -------------------------------------------------------------------------------
LOAN QUALITY
Allowance for credit losses/net loans 1.82% 1.94%
Nonperforming assets ratio .65% .81%
- -------------------------------------------------------------------------------
CAPITAL
Tier 1 risk-based capital ratio 8.27% 8.40%
Total risk-based capital ratio 10.25% 10.56%
Leverage ratio 6.92% 7.02%
Common equity/total assets 8.02% 7.78%
Common equity (book value) per share $ 232.41 207.94 + 12%
Tangible common equity per share 151.40 139.89 + 8%
Market price per share:
Closing 414.25 518.94 - 20%
High 582.50 582.00
Low 406.00 400.00
- -------------------------------------------------------------------------------
</TABLE>
*Excludes impact of nonrecurring merger-related expenses, net securities
transactions and contribution of appreciated investment securities to
affiliated, tax-exempt charitable foundation in 1998.
**Excludes amortization and balances related to goodwill and core deposit
intangible and nonrecurring merger-related expenses which, except in the
calculation of the efficiency ratio, are net of applicable income tax effects.
***Cash net income excludes the after tax impact of nonrecurring
merger-related expenses of $3.0 million of $.37 per diluted share in 1999 and
$14.0 million or $1.76 per diluted share in 1998.
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M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 2
QUARTERLY TRENDS
<TABLE>
<CAPTION>
1999
Quarters
- -------------------------------------------------------------------------------------------------------------------
Fourth Third Second First
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EARNINGS AND DIVIDENDS
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
Interest income (taxable-equivalent basis) $391,792 375,021 361,158 358,370
Interest expense 192,766 179,961 171,269 175,238
- -------------------------------------------------------------------------------------------------------------------
Net interest income 199,026 195,060 189,889 183,132
Less: provision for credit losses 14,000 13,500 8,500 8,500
Other income 70,354 72,499 66,806 72,716
Less: other expense 149,047 144,898 145,547 139,466
- -------------------------------------------------------------------------------------------------------------------
Income before income taxes 106,333 109,161 102,648 107,882
Applicable income taxes 38,132 39,633 35,772 39,151
Taxable-equivalent adjustment 2,083 1,964 1,838 1,825
- -------------------------------------------------------------------------------------------------------------------
Net income $ 66,118 67,564 65,038 66,906
- -------------------------------------------------------------------------------------------------------------------
Per common share data
Basic earnings $8.48 8.57 8.35 8.65
Diluted earnings 8.20 8.29 8.00 8.34
Cash dividends $1.25 1.25 1.00 1.00
Average common shares outstanding
Basic 7,795 7,880 7,793 7,731
Diluted 8,058 8,147 8,132 8,023
- -------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS, ANNUALIZED
Return on
Average assets 1.18% 1.27% 1.27% 1.34%
Average common stockholders' equity 14.58% 14.97% 15.23% 16.56%
Net interest margin on average earning 3.99% 4.03% 4.09% 3.98%
assets (taxable-equivalent basis)
Nonperforming assets to total assets,
at end of quarter .51% .58% .56% .62%
Efficiency ratio * 55.33% 53.62% 55.72% 54.56%
- -------------------------------------------------------------------------------------------------------------------
CASH (TANGIBLE) OPERATING RESULTS **
Net income (in thousands) $78,443 79,714 76,511 76,333
Diluted net income per common share 9.73 9.78 9.41 9.51
Annualized return on
Average tangible assets 1.45% 1.54% 1.53% 1.57%
Average tangible common stockholders' equity 26.67% 26.43% 26.13% 27.66%
Efficiency ratio * 49.71% 48.91% 51.36% 50.31%
- -------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
DOLLARS IN MILLIONS, EXCEPT PER SHARE
Average balances
Total assets $22,147 21,183 20,579 20,298
Earning assets 19,806 19,184 18,636 18,664
Investment securities 1,974 2,048 2,064 2,497
Loans and leases, net of unearned discount 17,147 16,678 16,056 15,761
Deposits 15,472 14,821 14,578 14,497
Stockholders' equity 1,800 1,791 1,713 1,638
- -------------------------------------------------------------------------------------------------------------------
At end of quarter
Total assets $22,409 21,759 21,205 20,285
Earning assets 19,964 19,467 19,050 18,382
Investment securities 1,901 1,953 2,078 2,088
Loans and leases, net of unearned discount 17,407 16,984 16,513 15,813
Deposits 15,374 15,417 14,909 14,476
Stockholders' equity 1,797 1,817 1,773 1,667
Equity per common share 232.41 230.51 224.81 215.34
Tangible equity per common share 151.40 149.37 149.14 148.95
- -------------------------------------------------------------------------------------------------------------------
MARKET PRICE PER COMMON SHARE
High $512 575 582 1/2 518 3/4
Low 406 412 1/2 462 1/2 464
Closing 414 1/4 459 550 479
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1998 Quarters
- -----------------------------------------------------------------------------------------------------------------------
Fourth Third Second First
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EARNINGS AND DIVIDENDS
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
Interest income (taxable-equivalent basis) 360,571 361,921 364,838 279,306
Interest expense 183,424 184,850 184,644 134,585
- -----------------------------------------------------------------------------------------------------------------------
Net interest income 177,147 177,071 180,194 144,721
Less: provision for credit losses 7,500 10,500 13,200 12,000
Other income 64,985 63,986 65,075 68,893
Less: other expense 138,756 138,490 155,004 133,873
- -----------------------------------------------------------------------------------------------------------------------
Income before income taxes 95,876 92,067 77,065 67,741
Applicable income taxes 36,064 33,693 30,587 17,245
Taxable-equivalent adjustment 1,969 1,897 1,779 1,541
- -----------------------------------------------------------------------------------------------------------------------
Net income 57,843 56,477 44,699 48,955
- -----------------------------------------------------------------------------------------------------------------------
Per common share data
Basic earnings 7.44 7.09 5.55 7.34
Diluted earnings 7.14 6.81 5.32 7.01
Cash dividends 1.00 1.00 1.00 .80
Average common shares outstanding
Basic 7,778 7,966 8,051 6,666
Diluted 8,105 8,288 8,409 6,981
- -----------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS, ANNUALIZED
Return on
Average assets 1.14% 1.15% .92% 1.41%
Average common stockholders' equity 14.20% 13.48% 10.77% 18.86%
Net interest margin on average earning 3.82% 3.93% 4.02% 4.39%
assets (taxable-equivalent basis)
Nonperforming assets to total assets,
at end of quarter .62% .67% .69% .53%
Efficiency ratio* 57.56% 56.30% 56.45% 54.29%
- -----------------------------------------------------------------------------------------------------------------------
CASH (TANGIBLE) OPERATING RESULTS**
Net income (in thousands) 67,326 67,703 65,445 51,448
Diluted net income per common share 8.31 8.17 7.78 7.37
Annualized return on
Average tangible assets 1.36% 1.42% 1.38% 1.49%
Average tangible common stockholders' equity 24.57% 23.90% 23.50% 20.13%
Efficiency ratio* 53.03% 51.78% 52.01% 53.37%
- -----------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
DOLLARS IN MILLIONS, EXCEPT PER SHARE
Average balances
Total assets 20,101 19,455 19,547 14,055
Earning assets 18,401 17,881 17,992 13,357
Investment securities 2,617 2,533 2,858 1,614
Loans and leases, net of unearned discount 15,389 15,124 14,978 11,602
Deposits 14,617 14,552 14,726 10,988
Stockholders' equity 1,616 1,662 1,664 1,053
- -----------------------------------------------------------------------------------------------------------------------
At end of quarter
Total assets 20,584 19,478 20,138 14,570
Earning assets 18,926 17,905 18,419 13,778
Investment securities 2,786 2,446 2,707 1,530
Loans and leases, net of unearned discount 15,792 15,163 15,245 12,033
Deposits 14,737 14,394 14,813 11,085
Stockholders' equity 1,602 1,649 1,659 1,069
Equity per common share 207.94 209.03 207.18 160.06
Tangible equity per common share 139.89 141.43 139.37 157.75
- -----------------------------------------------------------------------------------------------------------------------
MARKET PRICE PER COMMON SHARE
High 539 1/2 582 554 504
Low 400 410 480 429
Closing 518 15/16 461 554 499 7/8
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Excludes impact of nonrecurring merger-related expenses, net securities
transactions and contribution of appreciated investment securities to
affiliated, tax-exempt charitable foundation during the quarter ended
March 31, 1998.
** Excludes amortization and balances related to goodwill and core deposit
intangible and nonrecurring merger-related expenses which, except in the
calculation of the efficiency ratio, are net of applicable income tax
effects.
-47-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 3
EARNINGS SUMMARY
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
Increase (decrease)* Compound
1998 to 1999 1997 to 1998 growth rate
- -------------- ------------- 5 years
Amount % Amount % 1999 1998 1997 1996 1995 1994 to 1999
- -------- ---- ------- ---- -------------------------------- --------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 119.7 9 $ 293.3 27 Interest income** $ 1,486.3 1,366.6 1,073.3 1,004.4 935.1 15 %
31.7 5 179.4 35 Interest expense 719.2 687.5 508.1 466.4 441.7 21
- -------- ---- ------- ---- -------------------------------- --------- -------- -------- -------- -------- ------------
88.0 13 113.9 20 Net interest income** 767.1 679.1 565.2 538.0 493.4 10
Less: provision for
1.3 3 (2.8) (6) credit losses 44.5 43.2 46.0 43.3 40.4 (6)
Gain (loss) on sales of bank
(.2) - 2.1 - investment securities 1.6 1.8 (.3) - 4.5 -
19.6 8 70.4 37 Other income 280.8 261.2 190.8 167.8 142.8 18
Less:
25.3 10 39.5 18 Salaries and employee benefits 284.8 259.5 220.0 208.3 188.2 12
(12.5) (4) 104.8 52 Other expense 294.1 306.6 201.8 200.7 186.3 11
- -------- ---- ------- ---- -------------------------------- --------- -------- -------- -------- -------- ------------
93.3 28 44.9 16 Income before income taxes 426.1 332.8 287.9 253.5 225.8 16
Less:
.6 8 1.4 24 Taxable-equivalent adjustment** 7.8 7.2 5.8 4.5 4.7 14
35.1 30 11.7 11 Income taxes 152.7 117.6 105.9 97.9 90.1 15
- -------- ---- ------- ---- -------------------------------- --------- -------- -------- -------- -------- ------------
57.6 28 $ 31.8 18 Net income $ 265.6 208.0 176.2 151.1 131.0 18 %
- -------- ---- ------- ---- -------------------------------- --------- -------- -------- -------- -------- ------------
</TABLE>
* CHANGES WERE CALCULATED FROM UNROUNDED AMOUNTS.
** INTEREST INCOME DATA ARE ON A TAXABLE-EQUIVALENT BASIS. THE
TAXABLE-EQUIVALENT ADJUSTMENT REPRESENTS ADDITIONAL INCOME TAXES THAT
WOULD BE DUE IF ALL INTEREST INCOME WERE SUBJECT TO INCOME TAXES. THIS
ADJUSTMENT, WHICH IS RELATED TO INTEREST RECEIVED ON QUALIFIED
MUNICIPAL SECURITIES, INDUSTRIAL REVENUE FINANCINGS AND PREFERRED
EQUITY SECURITIES OF GOVERNMENT-SPONSORED AGENCIES, IS BASED ON A
COMPOSITE INCOME TAX RATE OF APPROXIMATELY 41% FOR 1999, 1998 AND 1997,
AND 42% FOR 1996 AND 1995.
-48-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 4
<TABLE>
<CAPTION>
AVERAGE LOANS AND LEASES
(NET OF UNEARNED DISCOUNT) Percent increase
(decrease) from
--------------------------------------------------
DOLLARS IN MILLIONS 1999 1998 to 1999 1997 to 1998
- --------------------------- -------------- -------------------- --------------------
<S> <C> <C> <C>
Commercial, financial, etc. $3,331 18% 25%
Real estate - commercial 5,908 18 20
Real estate - consumer 4,182 14 65
Consumer
Automobile 1,446 11 25
Home equity 805 11 12
Credit cards 10 (93) (49)
Other 733 20 73
- --------------------------- -------------- -------------------- --------------------
Total consumer 2,994 8 20
- --------------------------- -------------- -------------------- --------------------
Total $16,415 15% 30%
- --------------------------- -------------- -------------------- --------------------
</TABLE>
-49-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 5
AVERAGE BALANCE SHEETS AND TAXABLE-EQUIVALENT RATES
<TABLE>
<CAPTION>
1999 1998
----------------------------------------- ----------------------
Average Average Average
AVERAGE BALANCE IN MILLIONS; INTEREST IN THOUSANDS balance Interest rate balance Interest
- ------------------------------------------------------ --------------- ----------------------- -------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc. $ 3,331 $ 268,279 8.05% 2,831 235,628
Real estate 10,090 807,761 8.01 8,682 715,666
Consumer 2,994 249,670 8.34 2,773 249,567
- ------------------------------------------------------ --------------- ----------------------- -------- -------------
Total loans and leases, net 16,415 1,325,710 8.08 14,286 1,200,861
- ------------------------------------------------------ --------------- ----------------------- -------- -------------
Money-market assets
Interest-bearing deposits at banks 2 87 3.78 10 400
Federal funds sold and agreements
to resell securities 467 24,491 5.24 153 8,293
Trading account 48 3,221 6.71 67 4,524
- ------------------------------------------------------ --------------- ----------------------- -------- -------------
Total money-market assets 517 27,799 5.37 230 13,217
- ------------------------------------------------------ --------------- ----------------------- -------- -------------
Investment securities**
U.S. Treasury and federal agencies 920 53,108 5.77 1,448 88,030
Obligations of states and political subdivisions 74 4,660 6.28 73 4,566
Other 1,150 75,064 6.53 887 59,962
- ------------------------------------------------------ --------------- ----------------------- -------- -------------
Total investment securities 2,144 132,832 6.20 2,408 152,558
- ------------------------------------------------------ --------------- ----------------------- -------- -------------
TOTAL EARNING ASSETS 19,076 1,486,341 7.79 16,924 1,366,636
- ------------------------------------------------------ --------------- ----------------------- -------- -------------
Allowance for credit losses (312) (302)
Cash and due from banks 464 394
Other assets 1,829 1,293
- ------------------------------------------------------ --------------- --------
Total assets $21,057 18,309
- ------------------------------------------------------ --------------- --------
Liabilities and stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts $ 389 4,683 1.21 327 4,851
Savings deposits 5,163 121,888 2.36 4,430 115,345
Time deposits 7,074 367,889 5.20 7,022 388,185
Deposits at foreign office 254 12,016 4.73 288 14,973
- ------------------------------------------------------ --------------- ----------------------- -------- -------------
Total interest-bearing deposits 12,880 506,476 3.93 12,067 523,354
- ------------------------------------------------------ --------------- ----------------------- -------- -------------
Short-term borrowings 2,056 104,911 5.10 1,923 105,582
Long-term borrowings 1,748 107,847 6.17 835 58,567
- ------------------------------------------------------ --------------- ----------------------- -------- -------------
TOTAL INTEREST-BEARING LIABILITIES 16,684 719,234 4.31 14,825 687,503
- ------------------------------------------------------ --------------- ----------------------- -------- -------------
Noninterest-bearing deposits 1,965 1,666
Other liabilities 672 317
- ------------------------------------------------------ --------------- --------
Total liabilities 19,321 16,808
- ------------------------------------------------------ --------------- --------
Stockholders' equity 1,736 1,501
- ------------------------------------------------------ --------------- --------
Total liabilities and stockholders' equity $21,057 18,309
- ------------------------------------------------------ --------------- --------
Net interest spread 3.48
Contribution of interest-free funds .54
- ------------------------------------------------------ ----------------------- -------------
Net interest income/margin on earning assets $ 767,107 4.02% 679,133
- ------------------------------------------------------ ----------------------- -------------
</TABLE>
*INCLUDES NONACCRUAL LOANS.
<TABLE>
<CAPTION>
1997
------------ -------------------------------------------------
Average Average Average
AVERAGE BALANCE IN MILLIONS; INTEREST IN THOUSANDS rate balance Interest rate
- ------------------------------------------------------ ------- ---------- ------------------ -------------
<S> <C> <C> <C> <C>
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc. 8.32 % 2,257 190,189 8.43 %
Real estate 8.24 6,408 552,793 8.63
Consumer 9.00 2,308 213,942 9.27
- ------------------------------------------------------ ----------- --------------- ------------- -------------
Total loans and leases, net 8.41 10,973 956,924 8.72
- ------------------------------------------------------ ----------- --------------- ------------- -------------
Money-market assets
Interest-bearing deposits at banks 3.86 42 2,475 5.95
Federal funds sold and agreements
to resell securities 5.43 55 2,989 5.42
Trading account 6.79 26 1,937 7.27
- ------------------------------------------------------ ----------- --------------- ------------- -------------
Total money-market assets 5.75 123 7,401 6.00
- ------------------------------------------------------ ----------- --------------- ------------- -------------
Investment securities**
U.S. Treasury and federal agencies 6.08 1,122 70,968 6.33
Obligations of states and political subdivisions 6.29 43 2,832 6.61
Other 6.76 534 35,214 6.59
- ------------------------------------------------------ ----------- --------------- ------------- -------------
Total investment securities 6.33 1,699 109,014 6.42
- ------------------------------------------------------ ----------- --------------- ------------- -------------
TOTAL EARNING ASSETS 8.08 12,795 1,073,339 8.39
- ------------------------------------------------------ ----------- --------------- ------------- -------------
Allowance for credit losses (273)
Cash and due from banks 308
Other assets 479
- ------------------------------------------------------ ---------------
Total assets 13,309
- ------------------------------------------------------ ---------------
Liabilities and stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts 1.48 257 3,455 1.34
Savings deposits 2.60 3,420 90,907 2.66
Time deposits 5.53 5,818 327,611 5.63
Deposits at foreign office 5.20 230 12,160 5.29
- ------------------------------------------------------ ----------- --------------- ------------- -------------
Total interest-bearing deposits 4.34 9,725 434,133 4.46
- ------------------------------------------------------ ----------- --------------- ------------- -------------
Short-term borrowings 5.49 812 44,341 5.46
Long-term borrowings 7.02 373 29,619 7.94
- ------------------------------------------------------ ----------- --------------- ------------- -------------
TOTAL INTEREST-BEARING LIABILITIES 4.64 10,910 508,093 4.66
- ------------------------------------------------------ ----------- --------------- ------------- -------------
Noninterest-bearing deposits 1,228
Other liabilities 218
- ------------------------------------------------------ ---------------
Total liabilities 12,356
- ------------------------------------------------------ ---------------
Stockholders' equity 953
- ------------------------------------------------------ ---------------
Total liabilities and stockholders' equity 13,309
- ------------------------------------------------------ ---------------
Net interest spread 3.44 3.73
Contribution of interest-free funds .57 .69
- ------------------------------------------------------ ----------- ------------- -------------
Net interest income/margin on earning assets 4.01 % 565,246 4.42 %
- ------------------------------------------------------ ----------- ------------- -------------
</TABLE>
*INCLUDES NONACCRUAL LOANS.
-50-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
AVERAGE BALANCE SHEETS AND TAXABLE-EQUIVALENT RATES
<TABLE>
<CAPTION>
1996
--------------------------------------------------------
Average Average
AVERAGE BALANCE IN MILLIONS; INTEREST IN THOUSANDS balance Interest rate
- ------------------------------------------------------ --------------- -------------------- -------------
<S> <C> <C> <C>
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc. $ 2,031 166,170 8.18 %
Real estate 5,893 514,619 8.73
Consumer 2,190 204,831 9.35
- ------------------------------------------------------ --------------- -------------------- -------------
Total loans and leases, net 10,114 885,620 8.76
- ------------------------------------------------------ --------------- -------------------- -------------
Money-market assets
Interest-bearing deposits at banks 38 2,413 6.30
Federal funds sold and agreements
to resell securities 55 2,985 5.45
Trading account 17 1,100 6.53
- ------------------------------------------------------ --------------- -------------------- -------------
Total money-market assets 110 6,498 5.91
- ------------------------------------------------------ --------------- -------------------- -------------
Investment securities**
U.S. Treasury and federal agencies 1,200 74,023 6.17
Obligations of states and political subdivisions 41 2,678 6.57
Other 565 35,598 6.30
- ------------------------------------------------------ --------------- -------------------- -------------
Total investment securities 1,806 112,299 6.22
- ------------------------------------------------------ --------------- -------------------- -------------
TOTAL EARNING ASSETS 12,030 1,004,417 8.35
- ------------------------------------------------------ --------------- -------------------- -------------
Allowance for credit losses (269)
Cash and due from banks 334
Other assets 384
- ------------------------------------------------------ ---------------
Total assets $ 12,479
- ------------------------------------------------------ ---------------
Liabilities and stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts $ 659 9,430 1.43
Savings deposits 2,956 84,822 2.87
Time deposits 5,137 286,088 5.57
Deposits at foreign office 239 12,399 5.19
- ------------------------------------------------------ --------------- -------------------- -------------
Total interest-bearing deposits 8,991 392,739 4.37
- ------------------------------------------------------ --------------- -------------------- -------------
Short-term borrowings 1,121 59,442 5.30
Long-term borrowings 189 14,227 7.51
- ------------------------------------------------------ --------------- -------------------- -------------
TOTAL INTEREST-BEARING LIABILITIES 10,301 466,408 4.53
- ------------------------------------------------------ --------------- -------------------- -------------
Noninterest-bearing deposits 1,169
Other liabilities 146
- ------------------------------------------------------ ---------------
Total liabilities 11,616
- ------------------------------------------------------ ---------------
Stockholders' equity 863
- ------------------------------------------------------ ---------------
Total liabilities and stockholders' equity $ 12,479
- ------------------------------------------------------ ---------------
Net interest spread 3.82
Contribution of interest-free funds .65
- ------------------------------------------------------ -------------------- -------------
Net interest income/margin on earning assets 538,009 4.47 %
- ------------------------------------------------------ -------------------- -------------
</TABLE>
<TABLE>
<CAPTION>
1995
-------------------------------------------------------
Average Average
AVERAGE BALANCE IN MILLIONS; INTEREST IN THOUSANDS balance Interest rate
- ------------------------------------------------------ --------------- ------------------- ------------
<S> <C> <C> <C>
Assets
Earning assets
Loans and leases, net of unearned discount*
Commercial, financial, etc. 1,804 155,951 8.64 %
Real estate 5,301 473,833 8.94
Consumer 1,752 169,149 9.65
- ------------------------------------------------------ --------------- ------------------- ------------
Total loans and leases, net 8,857 798,933 9.02
- ------------------------------------------------------ --------------- ------------------- ------------
Money-market assets
Interest-bearing deposits at banks 110 8,181 7.44
Federal funds sold and agreements
to resell securities 48 3,007 6.29
Trading account 20 1,339 6.82
- ------------------------------------------------------ --------------- ------------------- ------------
Total money-market assets 178 12,527 7.06
- ------------------------------------------------------ --------------- ------------------- ------------
Investment securities**
U.S. Treasury and federal agencies 1,242 74,248 5.98
Obligations of states and political subdivisions 50 3,420 6.90
Other 743 45,988 6.19
- ------------------------------------------------------ --------------- ------------------- ------------
Total investment securities 2,035 123,656 6.08
- ------------------------------------------------------ --------------- ------------------- ------------
TOTAL EARNING ASSETS 11,070 935,116 8.45
- ------------------------------------------------------ --------------- ------------------- ------------
Allowance for credit losses (254)
Cash and due from banks 326
Other assets 343
- ------------------------------------------------------ ---------------
Total assets 11,485
- ------------------------------------------------------ ---------------
Liabilities and stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
NOW accounts 761 11,902 1.56
Savings deposits 2,922 87,612 3.00
Time deposits 4,112 239,882 5.83
Deposits at foreign office 133 6,952 5.23
- ------------------------------------------------------ --------------- ------------------- ------------
Total interest-bearing deposits 7,928 346,348 4.37
- ------------------------------------------------------ --------------- ------------------- ------------
Short-term borrowings 1,423 84,225 5.92
Long-term borrowings 146 11,157 7.64
- ------------------------------------------------------ --------------- ------------------- ------------
TOTAL INTEREST-BEARING LIABILITIES 9,497 441,730 4.65
- ------------------------------------------------------ --------------- ------------------- ------------
Noninterest-bearing deposits 1,093
Other liabilities 112
- ------------------------------------------------------ ---------------
Total liabilities 10,702
- ------------------------------------------------------ ---------------
Stockholders' equity 783
- ------------------------------------------------------ ---------------
Total liabilities and stockholders' equity 11,485
- ------------------------------------------------------ ---------------
Net interest spread 3.80
Contribution of interest-free funds .66
- ------------------------------------------------------ ------------------- ------------
Net interest income/margin on earning assets 493,386 4.46 %
- ------------------------------------------------------ ------------------- ------------
</TABLE>
*INCLUDES NONACCRUAL LOANS.
**INCLUDES AVAILABLE FOR SALE SECURITIES AT AMORTIZED COST.
-51-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 6
COMMERCIAL REAL ESTATE LOANS
(net of unearned discount)
December 31, 1999
<TABLE>
<CAPTION>
Percent of dollars outstanding by loan size
Out- -------------------------------------------
Dollars in millions standings $0-1 $1-5 $5-10 $10+
- ------------------------------------------------ ---------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Metropolitan New York City
Apartments/Multifamily $ 1,625.2 7 % 22 % 7 % 14 %
Office 399.4 1 3 3 5
Retail 659.9 3 10 4 3
Construction 127.0 - 1 1 1
Industrial 37.2 1 1 - -
Other 395.0 1 4 3 5
- ------------------------------------------------ --------- ----- ------ ------ -----
Total Metropolitan New York City $ 3,243.7 13 % 41 % 18 % 28 %
- ------------------------------------------------ --------- ----- ------ ------ -----
Other New York State
Apartments/Multifamily $ 309.6 4 % 6 % 2 % - %
Office 810.2 9 15 5 2
Retail 304.2 4 5 1 1
Construction 237.1 1 3 2 3
Industrial 239.6 5 4 1 -
Other 745.6 11 10 3 3
- ------------------------------------------------ --------- ----- ------ ------ -----
Total other New York State $ 2,646.3 34 % 43 % 14 % 9 %
- ------------------------------------------------ --------- ----- ------ ------ -----
Other
Apartments/Multifamily $ 203.5 4 % 17 % 5 % 7 %
Office 21.9 1 2 - -
Retail 120.0 1 6 3 9
Construction 31.4 - 2 1 2
Industrial 54.9 1 6 2 -
Other 187.5 3 13 5 10
- ------------------------------------------------ --------- ----- ------ ------ -----
Total other $ 619.2 10 % 46 % 16 % 28 %
- ------------------------------------------------ --------- ----- ------ ------ -----
Total commercial real estate loans $ 6,509.2 21 % 42 % 16 % 21 %
- ------------------------------------------------ --------- ----- ------ ------ -----
</TABLE>
-52-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 7
AVERAGE CORE DEPOSITS
<TABLE>
<CAPTION>
Percent increase from
Dollars in millions 1999 1998 to 1999 1997 to 1998
- ------------------------------- ------------- -------------------- ---------------------
<S> <C> <C> <C>
NOW accounts $ 389 19 % 27 %
Savings deposits 5,163 17 30
Time deposits under $100,000 4,348 1 25
Noninterest-bearing deposits 1,965 18 36
- ------------------------------- ------------- -------------------- ---------------------
Total $ 11,865 11 % 29 %
- ------------------------------- ------------- -------------------- ---------------------
- ------------------------------- ------------- -------------------- ---------------------
</TABLE>
-53-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 8
INTEREST RATE SWAPS
<TABLE>
<CAPTION>
Year ended December 31
-----------------------------------------------------------------------------------
1999 1998 1997
----------------------- ------------------------- ----------------------------
DOLLARS IN THOUSANDS Amount Rate* Amount Rate* Amount Rate*
- --------------------------------- ----------- ---------- ------------ -------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in:
Interest income $ 12,750 .07 % $ 3,378 .02 % $ (142) --- %
Interest expense (13,350) (.08) (12,778) (.09) (14,231) (.13)
- --------------------------------- ----------- ---------- ----------- -------- ----------- ---------
Net interest income/margin $ 26,100 .14 % $ 16,156 .10 % $ 14,089 .11 %
- --------------------------------- ----------- ---------- ----------- -------- ----------- ---------
Average notional amount** $ 1,944,813 $ 2,521,426 $ 2,691,638
Rate received*** 6.69 % 6.70 % 6.68 %
Rate paid*** 5.35 % 6.06 % 6.16 %
- --------------------------------- ---------- -------- ---------
- --------------------------------- ---------- -------- ---------
</TABLE>
* Computed as a percentage of average earning assets or interest-bearing
liabilities.
** Excludes forward-starting interest rate swaps.
*** Weighted-average rate paid or received on interest rate swaps in effect
during year.
-54-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 9
LOAN CHARGE-OFFS, PROVISION AND ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1999 1998 1997 1996 1995
- ----------------------------------------------------- ----------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for credit losses beginning balance $ 306,347 274,656 270,466 262,344 243,332
- ----------------------------------------------------- ----------- ------------ ------------ ---------- ----------
Charge-offs during year
Commercial, financial, agricultural, etc. 19,246 5,457 4,539 6,120 5,475
Real estate - construction - 950 - - -
Real estate - mortgage 5,241 7,210 9,910 7,389 10,750
Consumer 35,168 42,684 44,880 36,037 14,982
- ----------------------------------------------------- ----------- ------------ ------------ ---------- ----------
Total charge-offs 59,655 56,301 59,329 49,546 31,207
- ----------------------------------------------------- ----------- ------------ ------------ ---------- ----------
Recoveries during year
Commercial, financial, agricultural, etc. 2,244 2,783 2,609 3,671 3,967
Real estate - construction 406 - - 50 87
Real estate - mortgage 3,201 2,894 5,869 3,049 2,137
Consumer 13,486 11,210 9,041 7,573 3,678
- ----------------------------------------------------- ----------- ------------ ------------ ---------- ----------
Total recoveries 19,337 16,887 17,519 14,343 9,869
- ----------------------------------------------------- ----------- ------------ ------------ ---------- ----------
Net charge-offs 40,318 39,414 41,810 35,203 21,338
Provision for credit losses 44,500 43,200 46,000 43,325 40,350
Allowance for credit losses acquired during the year 5,636 27,905 - - -
- ----------------------------------------------------- ----------- ------------ ------------ ---------- ----------
Allowance for credit losses ending balance $ 316,165 306,347 274,656 270,466 262,344
- ----------------------------------------------------- ----------- ------------ ------------ ---------- ----------
Net charge-offs as a percent of:
Provision for credit losses 90.60 % 91.24 % 90.89 % 81.25 % 52.88 %
Average loans and leases, net of
unearned discount .25 % .28 % .38 % .35 % .24 %
- ----------------------------------------------------- ----------- ------------ ------------ ---------- ---------
Allowance for credit losses as a
percent of loans and leases, net
of unearned discount, at year-end 1.82 % 1.94 % 2.39 % 2.52 % 2.75 %
- ----------------------------------------------------- ----------- ------------ ------------ ---------- ---------
- ----------------------------------------------------- ----------- ------------ ------------ ---------- ---------
</TABLE>
-55-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 10
ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES TO LOAN CATEGORIES
<TABLE>
<CAPTION>
December 31
------------------------------------------------------------
DOLLARS IN THOUSANDS 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, financial, agricultural, etc. $ 78,019 57,744 42,816 39,556 36,793
Real estate - mortgage 92,982 91,692 70,354 73,879 75,894
Consumer 46,235 45,356 57,757 34,224 23,385
Unallocated 98,929 111,555 103,729 122,807 126,272
- -------------------------------------------------------------------------------------------------------
Total $ 316,165 306,347 274,656 270,466 262,344
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
As a percentage of gross loans
and leases outstanding
- -------------------------------------------------------------------------------------------------------
Commercial, financial, agricultural, etc. 2.11% 1.76% 1.78% 1.79% 1.83%
Real estate - mortgage 0.92 0.99 1.04 1.19 1.34
Consumer 1.45 1.53 2.47 1.30 1.10
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
-56-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 11
NONPERFORMING ASSETS
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
---------- ---------- ---------- ---------- ----------
December 31 1999 1998 1997 1996 1995
- ----------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 61,816 70,999 38,588 58,232 75,224
Loans past due
90 days or more 31,017 37,784 30,402 39,652 17,842
Renegotiated loans 10,353 8,262 11,660 - -
- ----------------------------------------- ---------- ---------- ---------- ---------- ----------
Total nonperforming loans 103,186 117,045 80,650 97,884 93,066
- ----------------------------------------- ---------- ---------- ---------- ---------- ----------
Real estate and other assets owned 10,000 11,129 8,413 8,523 7,295
- ----------------------------------------- ---------- ---------- ---------- ---------- ----------
Total nonperforming assets $ 113,186 128,174 89,063 106,407 100,361
- ----------------------------------------- ---------- ---------- ---------- ---------- ----------
Government guaranteed
nonperforming loans* $ 16,529 14,316 17,712 25,847 7,779
- ----------------------------------------- ---------- ---------- ---------- ---------- -----------
Nonperforming loans
to total loans and leases,
net of unearned discount .59 % .74 % .70 % .91 % .97 %
Nonperforming assets
to total net loans and leases and
real estate and other assets owned .65 % .81 % .77 % .99 % 1.05 %
- ----------------------------------------- ---------- ---------- ---------- ---------- ----------
- ----------------------------------------- ---------- ---------- ---------- ---------- ----------
</TABLE>
* INCLUDED IN TOTAL NONPERFORMING LOANS.
-57-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 12
MATURITY OF DOMESTIC CERTIFICATES OF DEPOSIT AND TIME DEPOSITS
WITH BALANCES OF $100,000 OR MORE
<TABLE>
<CAPTION>
IN THOUSANDS December 31, 1999
- ------------------------------------------------ ----------------
<S> <C>
Under 3 months $ 1,086,712
3 to 6 months 482,737
6 to 12 months 331,832
Over 12 months 748,633
- ------------------------------------------------ ----------------
Total $ 2,649,914
================================================ ================
</TABLE>
-58-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 13
MATURITY DISTRIBUTION OF LOANS*
IN THOUSANDS
<TABLE>
<CAPTION>
2001 - After
December 31, 1999 Demand 2000 2004 2004
- ---------------------------------------------- -------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
Commercial, financial, agricultural, etc. $ 2,280,423 440,930 569,321 252,656
Real estate - construction 95,121 328,670 93,201 7,576
- ---------------------------------------------- -------------- ----------------- --------------- -----------------
Total $ 2,375,544 769,600 662,522 260,232
- ---------------------------------------------- -------------- ----------------- --------------- -----------------
- ---------------------------------------------- -------------- ----------------- --------------- -----------------
Floating or adjustable interest rates $ 501,874 184,811
Fixed or predetermined interest rates 160,648 75,421
- ---------------------------------------------- --------------- -----------------
Total $ 662,522 260,232
- ---------------------------------------------- --------------- -----------------
- ---------------------------------------------- --------------- -----------------
</TABLE>
*The data do not include nonaccrual loans.
-59-
<PAGE>
--------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------
Table 14
SENSITIVITY OF NET INTEREST INCOME TO CHANGES IN INTEREST RATES
IN THOUSANDS
<TABLE>
<CAPTION>
Calculated increase (decrease)
in projected net interest income
December 31
Changes in interest rates 1999 1998
- ------------------------------------------------------- ------------------------------------
<S> <C> <C>
+200 basis points $7,996 (7,668)
+100 basis points 4,476 335
- -100 basis points 4,198 5,161
- -200 basis points 2,462 4,498
- ------------------------------------------------------- ------------------------------------
- ------------------------------------------------------- ------------------------------------
</TABLE>
-60-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 15
CONTRACTUAL REPRICING DATA
DOLLARS IN THOUSANDS BY REPRICING DATE
<TABLE>
<CAPTION>
Three Four to One to
months twelve five After five
December 31, 1999 or less months years years Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans and leases, net $ 6,582,272 1,575,935 4,918,278 4,330,286 17,406,771
Money-market assets 656,369 659 - - 657,028
Investment securities 277,614 324,942 392,694 905,272 1,900,522
- -----------------------------------------------------------------------------------------------------------------------
TOTAL EARNING ASSETS 7,516,255 1,901,536 5,310,972 5,235,558 19,964,321
- -----------------------------------------------------------------------------------------------------------------------
NOW accounts 583,471 - - - 583,471
Savings deposits 5,198,681 - - - 5,198,681
Time deposits 1,900,076 2,896,537 2,225,012 66,720 7,088,345
Deposits at foreign office 242,691 - - - 242,691
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-BEARING
DEPOSITS 7,924,919 2,896,537 2,225,012 66,720 13,113,188
- -----------------------------------------------------------------------------------------------------------------------
Short-term borrowings 2,483,159 71,000 - - 2,554,159
Long-term borrowings 372 30,850 1,199,596 544,315 1,775,133
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-BEARING
LIABILITIES 10,408,450 2,998,387 3,424,608 611,035 17,442,480
- -----------------------------------------------------------------------------------------------------------------------
Interest rate swaps (631,063) 580,635 427,706 (377,278) -
- -----------------------------------------------------------------------------------------------------------------------
Periodic gap $ (3,523,258) (516,216) 2,314,070 4,247,245
Cumulative gap (3,523,258) (4,039,474) (1,725,404) 2,521,841
Cumulative gap as a %
of total earning assets (17.6)% (20.2)% (8.6)% 12.6 %
</TABLE>
-61-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Table 16
MATURITY AND TAXABLE-EQUIVALENT YIELD OF INVESTMENT SECURITIES
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
One year One to Five to Over
December 31, 1999 or less five years ten years ten years Total
- ----------------------------------------------- --------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT SECURITIES AVAILABLE FOR SALE*
U.S. Treasury and federal agencies
Carrying value $ 14,119 148,940 24,784 4,771 192,614
Yield 5.22 % 4.74 % 6.94 % 5.52 % 5.08 %
Mortgage-backed securities**
Government issued or guaranteed
Carrying value 40,398 112,757 86,783 305,034 544,972
Yield 6.07 % 6.23 % 6.37 % 6.00 % 6.11 %
Privately issued
Carrying value 31,235 179,734 198,813 218,234 628,016
Yield 6.05 % 6.05 % 6.04 % 6.60 % 6.24 %
Other debt securities
Carrying value - 4,253 148,662 50 152,965
Yield - 5.64 % 6.46 % 6.13 % 6.44 %
Equity securities
Carrying value - - - - 162,193
Yield - - - - 8.11 %
- ----------------------------------------------- --------- ------------ ----------- ------------ -----------
Total investment securities
available for sale
Carrying value $ 85,752 445,684 459,042 528,089 1,680,760
Yield 5.93 % 5.65 % 6.29 % 6.24 % 6.26 %
- ----------------------------------------------- --------- ------------ ----------- ------------ -----------
INVESTMENT SECURITIES HELD TO MATURITY
Obligations of states and
political subdivisions
Carrying value $ 60,036 12,987 5,111 1,055 79,189
Yield 6.30 % 6.90 % 7.14 % 9.87 % 6.50 %
Other debt securities
Carrying value - 13,427 - 1,955 15,382
Yield - 12.36 % - 7.97 % 11.80 %
- ----------------------------------------------- --------- ------------ ----------- ------------ -----------
Total investment securities
held to maturity
Carrying value $ 60,036 26,414 5,111 3,010 94,571
Yield 6.30 % 9.67 % 7.14 % 8.64 % 7.36 %
- ----------------------------------------------- --------- ------------ ----------- ------------ -----------
OTHER INVESTMENT SECURITIES - - - - 125,191
- ----------------------------------------------- --------- ------------ ----------- ------------ -----------
Total investment securities
Carrying value $ 145,788 472,098 464,153 531,099 1,900,522
Yield 6.08 % 5.87 % 6.30 % 6.25 % 5.90 %
- ----------------------------------------------- --------- ------------ ----------- ------------ -----------
- ----------------------------------------------- --------- ------------ ----------- ------------ -----------
</TABLE>
* INVESTMENT SECURITIES AVAILABLE FOR SALE ARE PRESENTED AT ESTIMATED FAIR
VALUE. YIELDS ON SUCH SECURITIES ARE BASED ON AMORTIZED COST.
** MATURITIES ARE REFLECTED BASED UPON CONTRACTUAL PAYMENTS DUE. ACTUAL
MATURITIES ARE EXPECTED TO BE SIGNIFICANTLY SHORTER AS A RESULT OF LOAN
REPAYMENTS IN THE UNDERLYING MORTGAGE POOLS.
-62-
<PAGE>
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Incorporated by reference to the discussion contained under the
captions "Liquidity, Market Risk, and Interest Rate Sensitivity" and
"Capital," and Table 14.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Financial Statements
and Supplementary Data consist of the financial statements as indexed
and presented below and table 2 "Quarterly Trends" presented in Part
II, Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Report of Independent Accountants
Consolidated Balance Sheet -
December 31, 1999 and 1998
Consolidated Statement of Income -
Years ended December 31, 1999, 1998 and 1997
Consolidated Statement of Cash Flows -
Years ended December 31, 1999, 1998 and 1997
Consolidated Statement of Changes in Stockholders'
Equity - Years ended December 31, 1999, 1998 and 1997
Notes to Financial Statements
-63-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
M&T Bank Corporation:
We have audited the accompanying consolidated balance sheet of M&T Bank
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income, cash flows and changes in stockholders'
equity for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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 M&T Bank Corporation
and subsidiaries at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ PRICEWATERHOUSECOOPERS LLP
Buffalo, New York
January 10, 2000
-64-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31
---------------------------------------
DOLLARS IN THOUSANDS, EXCEPT PER SHARE 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets Cash and due from banks $ 592,755 493,792
Money-market assets
Interest-bearing deposits at banks 1,092 674
Federal funds sold and
agreements to resell securities 643,555 229,066
Trading account 641,114 173,122
------------------------------------------------------------------------------------------------
Total money-market assets 1,285,761 402,862
------------------------------------------------------------------------------------------------
Investment securities
Available for sale (cost: $1,724,713 in 1999;
$2,578,940 in 1998) 1,680,760 2,583,740
Held to maturity (market value: $92,909 in 1999;
$87,365 in 1998) 94,571 87,282
Other (market value: $125,191 in 1999;
$114,542 in 1998) 125,191 114,542
------------------------------------------------------------------------------------------------
Total investment securities 1,900,522 2,785,564
------------------------------------------------------------------------------------------------
Loans and leases 17,572,861 16,005,701
Unearned discount (166,090) (214,171)
Allowance for credit losses (316,165) (306,347)
------------------------------------------------------------------------------------------------
Loans and leases, net 17,090,606 15,485,183
------------------------------------------------------------------------------------------------
Premises and equipment 173,815 162,842
Goodwill and core deposit intangible 648,040 546,036
Accrued interest and other assets 717,616 707,612
------------------------------------------------------------------------------------------------
Total assets $ 22,409,115 20,583,891
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Liabilities Noninterest-bearing deposits $ 2,260,432 2,066,814
NOW accounts 583,471 509,307
Savings deposits 5,198,681 4,830,678
Time deposits 7,088,345 7,027,083
Deposits at foreign office 242,691 303,270
------------------------------------------------------------------------------------------------
Total deposits 15,373,620 14,737,152
------------------------------------------------------------------------------------------------
Federal funds purchased and agreements
to repurchase securities 1,788,858 1,746,078
Other short-term borrowings 765,301 483,898
Accrued interest and other liabilities 909,157 446,854
Long-term borrowings 1,775,133 1,567,543
------------------------------------------------------------------------------------------------
Total liabilities 20,612,069 18,981,525
- -------------------------------------------------------------------------------------------------------------------------
Stockholders' equity Preferred stock, $1 par, 1,000,000 shares authorized,
none outstanding - -
Common stock, $5 par, 15,000,000 shares
authorized, 8,101,539 shares issued 40,508 40,508
Common stock issuable, 8,397 shares in 1999;
8,028 shares in 1998 3,937 3,752
Additional paid-in capital 458,729 480,014
Retained earnings 1,501,530 1,271,071
Accumulated other comprehensive income, net (26,047) 2,869
Treasury stock - common, at cost - 377,738 shares
in 1999; 403,769 shares in 1998 (181,611) (195,848)
------------------------------------------------------------------------------------------------
Total stockholders' equity 1,797,046 1,602,366
------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 22,409,115 20,583,891
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
-65-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------------------------------
IN THOUSANDS, EXCEPT PER SHARE 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income Loans and leases, including fees $ 1,323,262 1,198,639 954,974
Money-market assets
Deposits at banks 87 400 2,475
Federal funds sold and agreements
to resell securities 24,491 8,293 2,989
Trading account 3,153 4,403 1,781
Investment securities
Fully taxable 118,741 139,731 99,640
Exempt from federal taxes 8,897 7,984 5,640
- -------------------------------------------------------------------------------------------------------------------------
Total interest income 1,478,631 1,359,450 1,067,499
- -------------------------------------------------------------------------------------------------------------------------
Interest expense NOW accounts 4,683 4,851 3,455
Savings deposits 121,888 115,345 90,907
Time deposits 367,889 388,185 327,611
Deposits at foreign office 12,016 14,973 12,160
Short-term borrowings 104,911 105,582 44,341
Long-term borrowings 107,847 58,567 29,619
- -------------------------------------------------------------------------------------------------------------------------
Total interest expense 719,234 687,503 508,093
- -------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 759,397 671,947 559,406
Provision for credit losses 44,500 43,200 46,000
- -------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for credit losses 714,897 628,747 513,406
- -------------------------------------------------------------------------------------------------------------------------
Other income Mortgage banking revenues 71,819 65,646 51,547
Service charges on deposit accounts 73,612 57,357 43,377
Trust income 40,751 38,211 30,688
Merchant discount and other credit card fees 7,515 12,436 19,395
Trading account and foreign exchange gains 315 3,963 3,690
Gain (loss) on sales of bank investment securities 1,575 1,761 (280)
Other revenues from operations 86,788 83,565 42,112
- -------------------------------------------------------------------------------------------------------------------------
Total other income 282,375 262,939 190,529
- -------------------------------------------------------------------------------------------------------------------------
Other expense Salaries and employee benefits 284,822 259,487 220,017
Equipment and net occupancy 73,131 66,553 53,299
Printing, postage and supplies 17,510 17,603 13,747
Amortization of goodwill and core
deposit intangible 49,715 34,487 7,291
Other costs of operations 153,780 187,993 127,422
- -------------------------------------------------------------------------------------------------------------------------
Total other expense 578,958 566,123 421,776
- -------------------------------------------------------------------------------------------------------------------------
Income before income taxes 418,314 325,563 282,159
Income taxes 152,688 117,589 105,918
- -------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 265,626 207,974 176,241
- -------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE
Basic $34.05 27.30 26.60
Diluted 32.83 26.16 25.26
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
-66-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------
IN THOUSANDS 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from Net income $ 265,626 207,974 176,241
operating activities Adjustments to reconcile net income to net cash
provided by operating activities
Provision for credit losses 44,500 43,200 46,000
Depreciation and amortization of premises
and equipment 27,488 25,432 20,745
Amortization of capitalized servicing rights 19,773 19,650 14,366
Amortization of goodwill and core deposit intangible 49,715 34,487 7,291
Provision for deferred income taxes 1,816 (2,965) (7,331)
Asset write-downs 1,771 3,905 1,501
Net gain on sales of assets (279) (4,607) (1,002)
Net change in accrued interest receivable, payable 473 13,991 11,806
Net change in other accrued income and expense (124,772) 71,914 80,439
Net change in loans held for sale 206,448 (255,791) 4,234
Net change in trading account assets and liabilities 114,062 (120,542) 5,094
--------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 606,621 36,648 359,384
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from Proceeds from sales of investment securities
investing activities Available for sale 89,509 223,929 217,221
Other 7,224 11,906 -
Proceeds from maturities of investment securities
Available for sale 1,061,118 1,071,889 255,498
Held to maturity 55,096 91,060 89,161
Purchases of investment securities
Available for sale (165,852) (846,020) (628,168)
Held to maturity (52,793) (42,930) (54,218)
Other (15,204) (21,872) (3,936)
Net (increase) decrease in interest-bearing
deposits at banks (418) (6) 46,657
Additions to capitalized servicing rights (17,257) (16,741) (29,818)
Net increase in loans and leases (1,429,849) (1,299,195) (820,335)
Proceeds from sale of retail credit card business - 189,818 -
Capital expenditures, net (22,933) (16,785) (13,270)
Acquisitions, net of cash acquired:
Banks and bank holding companies (51,423) 20,790 -
Deposits and banking offices 529,754 - 123,043
Purchases of bank owned life insurance - (150,000) (200,000)
Other, net 19,808 (2,137) (356)
--------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities 6,780 (786,294) (1,018,521)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from Net increase (decrease) in deposits (508,240) (190,445) 508,930
financing activities Net increase (decrease) in short-term borrowings 324,370 648,784 (77,931)
Proceeds from long-term borrowings 353,991 875,000 250,000
Payments on long-term borrowings (165,593) (3,136) (189)
Purchases of treasury stock (79,784) (231,779) (67,771)
Dividends paid - common (35,128) (28,977) (21,207)
Other, net 10,435 16,165 4,212
--------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (99,949) 1,085,612 596,044
--------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents $ 513,452 335,966 (63,093)
Cash and cash equivalents at beginning of year 722,858 386,892 449,985
Cash and cash equivalents at end of year $ 1,236,310 722,858 386,892
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental Interest received during the year $ 1,484,098 1,365,239 1,054,094
disclosure of cash Interest paid during the year 723,106 683,467 487,576
flow information Income taxes paid during the year 252,484 47,188 43,562
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental schedule Real estate acquired in settlement of loans $ 11,631 8,503 9,142
of noncash investing Acquisition of banks and bank holding companies
and financing activities Common stock issued 58,746 587,819 -
Fair value of
Assets acquired (noncash) 650,841 5,206,168 -
Liabilities assumed 540,672 4,619,715 -
Stock options - 19,424 -
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
-67-
<PAGE>
- --------------------------------------------------------------------------------
M&T BANK CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Common Additional other
Preferred Common stock paid-in Retained comprehensive
IN THOUSANDS, EXCEPT PER SHARE stock stock issuable capital earnings income, net
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 Balance - January 1, 1997 $ - 40,487 - 96,597 937,072 (2,485)
Comprehensive income:
Net income - - - - 176,241 -
Other comprehensive income, net of tax:
Unrealized gains on investment securities,
net of reclassification adjustment - - - - - 14,501
Purchases of treasury stock - - - - - -
Exercise of stock options - - - 6,636 - -
Common stock cash dividends -
$3.20 per share - - - - (21,207) -
- ------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1997 $ - 40,487 - 103,233 1,092,106 12,016
- ------------------------------------------------------------------------------------------------------------------------------------
1998 Comprehensive income:
Net income - - - - 207,974 -
Other comprehensive income, net of tax:
Unrealized losses on investment securities,
net of reclassification adjustment - - - - - (9,147)
Purchases of treasury stock - - - - - -
Acquisition of ONBANCorp:
Common stock issued - 10 - 364,427 - -
Fair value of stock options - - - 19,424 - -
Stock-based compensation plans:
Exercise of stock options - 11 - (7,114) - -
Directors' stock plan - - - 49 - -
Deferred bonus plan, net, including
dividend equivalents - - 3,752 (5) (32) -
Common stock cash dividends -
$3.80 per share - - - - (28,977) -
- ------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1998 $ - 40,508 3,752 480,014 1,271,071 2,869
- ------------------------------------------------------------------------------------------------------------------------------------
1999 Comprehensive income:
Net income - - - - 265,626 -
Other comprehensive income, net of tax:
Unrealized losses on investment securities,
net of reclassification adjustment - - - - - (28,916)
Purchases of treasury stock - - - - - -
Acquisition of FNB Rochester Corp.:
Common stock issued - - - (718) - -
Stock-based compensation plans:
Exercise of stock options - - - (20,558) - -
Directors' stock plan - - - 8 - -
Deferred bonus plan, net, including
dividend equivalents - - 185 (17) (39) -
Common stock cash dividends -
$4.50 per share - - - - (35,128) -
- ------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1999 $ - 40,508 3,937 458,729 1,501,530 (26,047)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Treasury
IN THOUSANDS, EXCEPT PER SHARE stock Total
- -------------------------------------------------------------- -------------------------------------
<S> <C> <C>
1997 Balance - January 1, 1997 (166,012) 905,659
Comprehensive income:
Net income - 176,241
Other comprehensive income, net of tax:
Unrealized gains on investment securities,
net of reclassification adjustment - 14,501
-------
190,742
Purchases of treasury stock (67,771) (67,771)
Exercise of stock options 16,207 22,843
Common stock cash dividends -
$3.20 per share - (21,207)
- -------------------------------------------------------------- -----------------------------------
Balance - December 31, 1997 (217,576) 1,030,266
- -------------------------------------------------------------- -----------------------------------
1998 Comprehensive income:
Net income - 207,974
Other comprehensive income, net of tax:
Unrealized losses on investment securities,
net of reclassification adjustment - (9,147)
--------
198,827
Purchases of treasury stock (231,779) (231,779)
Acquisition of ONBANCorp:
Common stock issued 223,382 587,819
Fair value of stock options - 19,424
Stock-based compensation plans:
Exercise of stock options 29,788 22,685
Directors' stock plan 177 226
Deferred bonus plan, net, including
dividend equivalents 160 3,875
Common stock cash dividends -
$3.80 per share - (28,977)
- -------------------------------------------------------------- -----------------------------------
Balance - December 31, 1998 (195,848) 1,602,366
- -------------------------------------------------------------- -----------------------------------
1999 Comprehensive income:
Net income - 265,626
Other comprehensive income, net of tax:
Unrealized losses on investment securities,
net of reclassification adjustment - (28,916)
-------
236,710
Purchases of treasury stock (79,784) (79,784)
Acquisition of FNB Rochester Corp.:
Common stock issued 59,464 58,746
Stock-based compensation plans:
Exercise of stock options 33,791 13,233
Directors' stock plan 300 308
Deferred bonus plan, net, including
dividend equivalents 466 595
Common stock cash dividends -
$4.50 per share - (35,128)
- -------------------------------------------------------------- -----------------------------------
Balance - December 31, 1999 (181,611) 1,797,046
- -------------------------------------------------------------- -----------------------------------
</TABLE>
See accompanying notes to financial statements.
-68-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES
M&T Bank Corporation ("M&T") is a bank holding company headquartered in Buffalo,
New York. Through subsidiaries, M&T provides individuals, corporations and other
businesses, and institutions with commercial and retail banking services,
including loans and deposits, trust, mortgage banking, asset management and
other financial services. Banking activities are largely focused on consumers
residing in New York State and northeastern Pennsylvania and on small and
medium-size businesses based in those areas. Certain subsidiaries also conduct
activities in other states.
The accounting and reporting policies of M&T and subsidiaries ("the
Company") conform to generally accepted accounting principles and to general
practices within the banking industry. Certain reclassifications have been made
to the 1998 and 1997 financial statements to conform with 1999 financial
statement presentation. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The more significant accounting policies are as follows:
Consolidation
The consolidated financial statements include M&T and all of its subsidiaries.
All significant intercompany accounts and transactions have been eliminated in
consolidation. The financial statements of M&T included in note 21 report
investments in subsidiaries under the equity method.
Consolidated Statement of Cash Flows
For purposes of this statement, cash and due from banks, Federal funds sold and
agreements to resell securities are considered cash and cash equivalents.
Trading account
Financial instruments used for trading purposes are stated at fair value.
Realized gains and losses and unrealized changes in fair value of financial
instruments utilized in trading activities are included in trading account and
foreign exchange gains in the consolidated statement of income.
Investment securities
Investments in debt securities are classified as held to maturity and stated at
amortized cost when management has the positive intent and ability to hold such
securities to maturity. Investments in other debt securities and equity
securities having readily determinable fair values are classified as available
for sale and stated at estimated fair value. Unrealized gains or losses related
to investment securities available for sale are reflected in
-69-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Investment securities, continued
accumulated other comprehensive income, net of applicable income taxes.
Other securities are stated at cost and include stock of the Federal
Reserve Bank of New York and the Federal Home Loan Bank of New York.
Amortization of premiums and accretion of discounts for investment
securities available for sale and held to maturity are included in interest
income. The cost basis of individual securities is written down to estimated
fair value through a charge to earnings when declines in value below amortized
cost are considered to be other than temporary. Realized gains and losses on the
sales of investment securities are determined using the specific identification
method.
Loans
Interest income on loans is accrued on a level yield method. Loans are placed on
nonaccrual status and previously accrued interest thereon is charged against
income when principal or interest is delinquent 90 days, unless management
determines that the loan status clearly warrants other treatment. Loan balances
are charged off when it becomes evident that such balances are not fully
collectible. Loan fees and certain direct loan origination costs are deferred
and recognized as an interest yield adjustment over the life of the loan. Net
deferred fees have been included in unearned discount as a reduction of loans
outstanding. Loans held for sale are carried at the lower of aggregate cost or
fair market value. Valuation adjustments made on these loans are included in
mortgage banking revenues.
Except for consumer and residential mortgage loans that are considered
smaller balance homogenous loans and are evaluated collectively, the Company
considers a loan to be impaired when, based on current information and events,
it is probable that the Company will be unable to collect all amounts according
to the contractual terms of the loan agreement or the loan is delinquent 90
days. Impaired loans are classified as either nonaccrual or as loans
renegotiated at below market rates. Loans less than 90 days delinquent are
deemed to have a minimum delay in payment and are generally not considered
impaired. Impairment of a loan is measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate, the
loan's observable market price, or the fair value of collateral if the loan is
collateral dependent. Interest received on impaired loans placed on nonaccrual
status is applied to reduce the carrying value of the loan or, if principal is
considered fully collectible, recognized as interest income.
-70-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Allowance for credit losses
The allowance for credit losses represents the amount which, in management's
judgment, will be adequate to absorb credit losses inherent in the loan and
lease portfolio as of the balance sheet date. The adequacy of the allowance is
determined by management's evaluation of the loan and lease portfolio based on
such factors as the differing economic risks associated with each loan category,
the current financial condition of specific borrowers, the economic environment
in which borrowers operate, any delinquency in payments, and the value of any
collateral.
Premises and equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation expense is computed principally using the straight-line method over
the estimated useful lives of the assets.
Capitalized servicing rights
Servicing rights retained in a sale or securitization of financial assets are
measured at the date of transfer by allocating the previous carrying amount
between the assets transferred and the servicing rights based on their relative
fair values. Servicing assets purchased or servicing liabilities assumed are
initially measured at fair value. Capitalized servicing assets are included in
other assets and amortized in proportion to and over the period of estimated net
servicing income.
To estimate the fair value of servicing rights, the Company considers
market prices for similar assets and the present value of expected future cash
flows associated with the servicing rights calculated using assumptions that
market participants would use in estimating future servicing income and expense.
Such assumptions include estimates of the cost of servicing loans, loan default
rates, an appropriate discount rate, and prepayment speeds. For purposes of
evaluating and measuring impairment of capitalized servicing rights, the Company
stratifies such assets based on predominant risk characteristics of underlying
financial instruments that are expected to have the most impact on projected
prepayments, cost of servicing and other factors affecting future cash flows
associated with the servicing rights. Such factors may include financial asset
or loan type, note rate and term. The amount of impairment recognized is the
amount by which the carrying value of the capitalized servicing rights for a
stratum exceeds estimated fair value. Impairment is recognized through a
valuation allowance.
Goodwill and core deposit intangible
The excess of the cost of acquired entities or operations over the fair value of
identifiable assets acquired less liabilities assumed is recorded as goodwill.
Substantially all of the Company's goodwill is being amortized
-71-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Goodwill and core deposit intangible, continued
using the straight-line method over twenty years. Core deposit intangibles are
amortized using an accelerated method over estimated useful lives of seven to
ten years. The Company periodically assesses whether events or changes in
circumstances indicate that the carrying amounts of goodwill and core deposit
intangible may be impaired. Impairment is measured using estimates of future
cash flows or earnings potential of the operations acquired.
Stock-based compensation
Compensation expense is not recognized for stock option awards to employees
under the Company's stock option plan since the exercise price of options is
equal to the market price of the underlying stock at the date of grant.
Compensation expense for stock appreciation rights issued separately from stock
options is recognized based upon changes in the quoted market value of M&T's
common stock. The pro forma effects of stock-based compensation arrangements are
based on the estimated grant date fair value of stock options that are expected
to vest calculated pursuant to the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." Pro forma compensation expense, net of applicable income tax
effect, is recognized over the vesting period.
Income taxes
Deferred tax assets and liabilities are recognized for the future tax effects
attributable to differences between the financial statement value of existing
assets and liabilities and their respective tax bases and carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates and
laws. Investment tax credits related to leveraged leasing property are amortized
into income tax expense over the life of the lease agreement.
Financial futures
Outstanding financial futures contracts represent future commitments and are not
included in the consolidated balance sheet. Futures contracts used in trading
activities are marked to market and the resulting gains or losses are recognized
in trading account and foreign exchange gains. On occasion the Company uses
interest rate futures contracts as part of its management of interest rate risk.
Gains and losses on futures contracts designated as hedges are amortized as an
adjustment to interest income or expense over the life of the item hedged.
Interest rate swap agreements
For interest rate swap agreements used to manage interest rate risk arising
-72-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Interest rate swap agreements, continued
from financial assets and liabilities, amounts receivable or payable are
recognized as accrued under the terms of the agreement and the net interest
differential, including any amortization of premiums paid or accretion of
discounts received, is recorded as an adjustment to interest income or expense
of the related asset or liability. To qualify for such accounting treatment, an
interest rate swap must (i) be designated as having been entered into for
interest rate risk management purposes and linked to a specific financial
instrument or pool of similar financial instruments in the Company's
consolidated balance sheet and (ii) have interest rate and repricing
characteristics that have a sufficient degree of correlation with the
corresponding characteristics of the designated on-balance sheet financial
instrument. Gains or losses resulting from early termination of interest rate
swap agreements used to manage interest rate risk are amortized over the shorter
of the remaining term or estimated life of the agreement or the on-balance sheet
financial instrument to which the swap had been linked. Agreements that do not
satisfy the requirements noted above, including those entered into for trading
purposes, are marked to market with resulting gains or losses recorded in
trading account and foreign exchange gains.
Earnings per common share
Basic earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding and common shares issuable under deferred compensation arrangements
during the period. Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in earnings. Proceeds assumed to have been received on
such exercise or conversion are assumed to be used to purchase shares of M&T
common stock at the average market price during the period, as required by the
"treasury stock method" of accounting.
Treasury stock
Repurchases of shares of M&T common stock are recorded at cost as a reduction of
stockholders' equity. Reissuances of shares of treasury stock are recorded at
average cost.
2. ACQUISITIONS
On September 24, 1999, Manufacturers and Traders Trust Company ("M&T Bank"),
M&T's principal banking subsidiary, acquired 29 upstate New York branches from
The Chase Manhattan Bank ("Chase") in a cash transaction. The branches had
approximately $634 million of deposits and approximately $44 million of
-73-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. ACQUISITIONS, CONTINUED
retail installment and commercial loans at the closing. In addition, on
September 30, 1999 M&T Bank received from Chase investment management and
custody accounts having assets of approximately $286 million. Chase also agreed
to transfer up to approximately $195 million of other trust and fiduciary
account assets to M&T Bank following the receipt of required court approvals. It
is expected that this portion of the transaction will be completed in the first
quarter of 2000. In connection with the transaction, the Company recorded
approximately $55 million of intangible assets that are being amortized over
periods ranging from five to seven years.
On June 1, 1999, M&T consummated the merger of FNB Rochester
Corp.("FNB"), a bank holding company headquartered in Rochester, New York, with
and into Olympia Financial Corp. ("Olympia"), a wholly owned subsidiary of M&T.
Following the merger with FNB, First National Bank of Rochester, a wholly owned
subsidiary of FNB, was merged into M&T Bank. In accordance with the terms of the
merger agreements with FNB, M&T paid $76.3 million in cash and issued 122,516
shares of M&T common stock in exchange for FNB shares outstanding at the time of
the acquisition. The purchase price of the transaction was approximately $135
million based on the cash paid to FNB stockholders and the market price of M&T
common shares on December 8, 1998 before the terms of the merger were agreed to
and announced by M&T and FNB. Acquired assets, loans and deposits of FNB on June
1, 1999 totaled approximately $676 million, $393 million and $511 million,
respectively. The transaction was accounted for as a purchase and, accordingly,
operations acquired from FNB have been included in the Company's financial
results since the acquisition date. In connection with the acquisition, the
Company recorded approximately $86 million of goodwill and $12 million of core
deposit intangible. The goodwill is being amortized over twenty years using the
straight-line method and the core deposit intangible is being amortized over
eight years using an accelerated method.
On April 1, 1998, M&T consummated the merger of ONBANCorp, Inc.
("ONBANCorp") with and into Olympia. Following the merger, OnBank & Trust Co.,
Syracuse, New York, and Franklin First Savings Bank, Wilkes-Barre, Pennsylvania,
both wholly owned subsidiaries of ONBANCorp, were merged with and into M&T Bank.
After application of the election, allocation and proration procedures contained
in the merger agreement with ONBANCorp, M&T paid $266.3 million in cash and
issued 1,429,998 shares of common stock in exchange for the ONBANCorp common
shares outstanding at the time of acquisition. In addition, based on the merger
agreement and the exchange ratio provided for therein, M&T converted outstanding
and unexercised stock options granted by ONBANCorp into options to purchase
61,772 shares of M&T common stock. The purchase price of the transaction was
approximately $873 million based on the cash paid to ONBANCorp stockholders, the
market price of M&T common shares on October 28, 1997 before the terms of the
merger were agreed to and announced by M&T and ONBANCorp, and the estimated fair
value of ONBANCorp stock options converted into M&T stock options.
-74-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. ACQUISITIONS, CONTINUED
Acquired assets, loans and deposits of ONBANCorp on April 1, 1998
totaled approximately $5.5 billion, $3.0 billion and $3.8 billion, respectively.
The transaction was accounted for as a purchase and, accordingly, operations
acquired from ONBANCorp have been included in the Company's financial results
since the acquisition date. In connection with the acquisition, the Company
recorded approximately $501 million of goodwill and $61 million of core deposit
intangible. The goodwill is being amortized over twenty years using the
straight-line method and the core deposit intangible is being amortized over ten
years using an accelerated method.
In connection with the transactions described above, the Company
incurred expenses related to systems conversions and other costs of integrating
and conforming the acquired operations with and into the Company of
approximately $4.7 million ($3.0 million net of applicable income taxes) during
1999 and approximately $21.3 million ($14.0 million net of applicable income
taxes) during 1998. Expenses related to systems conversions and other costs of
integration are included in the consolidated statement of income for the years
ended December 31, 1999 and 1998 as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Salaries and employee benefits $ 188 2,141
Equipment and net occupancy 149 875
Printing, postage and supplies 685 1,079
Other costs of operations 3,654 17,250
------- ------
$ 4,676 21,345
------- ------
------- ------
</TABLE>
The expenses noted above consisted largely of professional services and
other temporary help fees associated with the conversion of systems and/or
integration of operations; recruiting and other incentive compensation; initial
marketing and promotion expenses to introduce the Company to customers of the
acquired operations; and printing, supplies and other costs. Since the systems
conversions and integration of operations is complete, the Company does not
expect to incur additional integration costs.
Presented below is certain unaudited pro forma information as if FNB
and ONBANCorp had been acquired on January 1, 1998. These results combine the
historical results of FNB and ONBANCorp into the Company's consolidated
statement of income and, while certain adjustments were made for the estimated
impact of purchase accounting adjustments and other acquisition-related
activity, they are not necessarily indicative of what would have occurred had
the acquisitions taken place at that time. In particular, expenses related to
systems conversions and other costs of integration associated with the
acquisition of FNB are included in the 1999 periods in which such costs were
incurred and, additionally, the Company expects to achieve further operating
cost savings as a result of the mergers which are
-75-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. ACQUISITIONS, CONTINUED
not reflected in the pro forma amounts presented below:
<TABLE>
<CAPTION>
Pro forma
Year ended December 31
1999 1998
---- ----
(in thousands, except per share)
--------------------------------
<S> <C> <C>
Interest income $1,495,877 1,480,391
Other income 285,052 274,337
Net income 265,455 200,328
Diluted earnings per common share 32.61 23.76
</TABLE>
3. INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities were as
follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
December 31, 1999
Investment securities
available for sale:
U.S. Treasury and
federal agencies $ 202,283 - 9,669 192,614
Mortgage-backed securities
Government issued
or guaranteed 557,058 860 12,946 544,972
Privately issued 640,368 6,123 18,475 628,016
Other debt securities 155,805 606 3,446 152,965
Equity securities 169,199 464 7,470 162,193
---------- ----- ------ ---------
1,724,713 8,053 52,006 1,680,760
---------- ----- ------ ---------
Investment securities held to maturity:
Obligations of states and
political subdivisions 79,189 - 361 78,828
Other debt securities 15,382 - 1,301 14,081
---------- ----- ------ ---------
94,571 - 1,662 92,909
---------- ----- ------ ---------
Other securities 125,191 - - 125,191
---------- ----- ------ ---------
Total $1,944,475 8,053 53,668 1,898,860
---------- ----- ------ ---------
---------- ----- ------ ---------
</TABLE>
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<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. INVESTMENT SECURITIES, CONTINUED
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
December 31, 1998
Investment securities
available for sale:
U.S. Treasury and
federal agencies $ 452,524 - 831 451,693
Mortgage-backed securities
Government issued
or guaranteed 867,065 8,121 5,879 869,307
Privately issued 952,298 3,445 1,620 954,123
Other debt securities 162,748 1,183 4,587 159,344
Equity securities 144,305 4,992 24 149,273
--------- ------ ------ ---------
2,578,940 17,741 12,941 2,583,740
--------- ------ ------ ---------
Investment securities held to maturity:
Obligations of states and
political subdivisions 73,789 811 - 74,600
Other debt securities 13,493 - 728 12,765
--------- ------ ------ ---------
87,282 811 728 87,365
--------- ------ ------ ---------
Other securities 114,542 - - 114,542
--------- ------ ------ ---------
Total $2,780,764 18,552 13,669 2,785,647
--------- ------ ------ ---------
--------- ------ ------ ---------
</TABLE>
No investment in securities of a single non-U.S. Government or
government agency issuer exceeded ten percent of stockholders' equity at
December 31, 1999.
As of December 31, 1999, the latest available investment ratings of all
privately issued mortgage-backed securities were A or better.
The amortized cost and estimated fair value of collateralized mortgage
obligations included in mortgage-backed securities were as follows:
<TABLE>
<CAPTION>
December 31
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Amortized cost $ 792,331 1,265,588
Estimated fair value 772,819 1,265,487
--------- ---------
--------- ---------
</TABLE>
Gross realized gains on the sale of investment securities were
$1,626,000 in 1999, $1,808,000 in 1998 and $1,179,000 in 1997. Gross realized
losses on the sale of investment securities were $51,000 in 1999, $47,000 in
1998 and $1,459,000 in 1997.
-77-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. INVESTMENT SECURITIES, CONTINUED
At December 31, 1999, the amortized cost and estimated fair
value of debt securities by contractual maturity were as follows:
<TABLE>
<CAPTION>
Estimated
Amortized fair
Cost Value
--------- ---------
(in thousands)
Debt securities available for sale:
<S> <C> <C>
Due in one year or less $ 14,162 14,119
Due after one year through five years 161,129 153,193
Due after five years through ten years 177,831 173,446
Due after ten years 4,966 4,821
--------- ---------
358,088 345,579
Mortgage-backed securities available
for sale 1,197,426 1,172,988
--------- ---------
$1,555,514 1,518,567
========= =========
Debt securities held to maturity:
Due in one year or less $ 60,036 59,906
Due after one year through five years 26,414 25,096
Due after five years through ten years 5,111 4,926
Due after ten years 3,010 2,981
--------- ---------
$ 94,571 92,909
========= =========
</TABLE>
At December 31, 1999, investment securities with a carrying value of
$601,366,000, including $541,438,000 of investment securities available for
sale, were pledged to secure demand notes issued to the U.S. Treasury,
borrowings from the Federal Home Loan Bank of New York and the Federal Home Loan
Bank of Pittsburgh (together, the "Federal Home Loan Banks"), repurchase
agreements, governmental deposits and interest rate swap agreements.
-78-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. LOANS AND LEASES
Total gross loans and leases outstanding were comprised of the following:
<TABLE>
<CAPTION>
December 31
1999 1998
--------- ---------
(in thousands)
<S> <C> <C>
Loans
Commercial, financial,
agricultural, etc. $ 3,564,470 3,101,016
Real estate:
Residential 4,011,436 4,163,818
Commercial 6,141,469 5,125,703
Construction 525,241 489,112
Consumer 2,797,537 2,569,726
---------- ----------
Total loans 17,040,153 15,449,375
---------- ----------
Leases
Commercial 132,588 110,411
Consumer 400,120 445,915
---------- ----------
Total leases 532,708 556,326
---------- ----------
Total loans and leases $17,572,861 16,005,701
========== ==========
</TABLE>
One-to-four family residential mortgage loans held for sale were $238.7
million at December 31, 1999 and $445.1 million at December 31, 1998. One-
to-four family residential mortgage loans serviced for others totaled
approximately $7.2 billion and $7.3 billion at December 31, 1999 and 1998,
respectively. As of December 31, 1999, approximately $23 million of one-to-four
family residential mortgage loans serviced for others have been sold with
recourse. The total credit loss exposure resulting from residential mortgage
loans sold with recourse was considered negligible.
Included in the preceding table are nonperforming loans (loans on which
interest was not being accrued, or which were ninety days or more past due or
had been renegotiated at below-market interest rates) of $103,186,000 at
December 31, 1999 and $117,045,000 at December 31, 1998. If nonaccrual and
renegotiated loans had been accruing interest at their originally contracted
terms, interest income on these loans would have amounted to $8,998,000 in 1999
and $7,806,000 in 1998. The actual amount included in interest income during
1999 and 1998 on these loans was $1,589,000 and $2,367,000, respectively.
The recorded investment in loans considered impaired was $45,124,000
and $47,248,000 at December 31, 1999 and 1998, respectively. The recorded
investment in loans for which there was a related valuation allowance for
impairment included in the allowance for credit losses and the amount of such
impairment allowance were $24,536,000 and $6,005,000, respectively, at
December 31, 1999 and $20,470,000 and $6,758,000, respectively, at December
31, 1998. The recorded investment in loans considered impaired for which
there was no related valuation allowance for
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<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. LOANS AND LEASES, CONTINUED
impairment was $20,588,000 and $26,778,000 at December 31, 1999 and 1998,
respectively. The average recorded investment in impaired loans during 1999,
1998 and 1997 was $43,858,000, $42,485,000 and $37,732,000, respectively.
Interest income recognized on impaired loans totaled $3,324,000, $2,351,000 and
$2,051,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
Borrowings by directors and certain officers of M&T and its banking
subsidiaries, and by associates of such persons, exclusive of loans aggregating
less than $60,000, amounted to $124,185,000 and $22,115,000 at December 31, 1999
and 1998, respectively. During 1999, new borrowings by such persons amounted to
$104,715,000 (including borrowings of new directors or officers that were
outstanding at the time of their election) and repayments and other reductions
were $2,645,000.
At December 31, 1999, approximately $2.9 billion of commercial mortgage
loans and one-to-four family residential mortgage loans were pledged to secure
outstanding borrowings.
5. ALLOWANCE FOR CREDIT LOSSES
Changes in the allowance for credit losses were as follows:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Beginning balance $306,347 274,656 270,466
Provision for credit losses 44,500 43,200 46,000
Allowance obtained
through acquisitions 5,636 27,905 -
Net charge-offs
Charge-offs (59,655) (56,301) (59,329)
Recoveries 19,337 16,887 17,519
------- ------- -------
Net charge-offs (40,318) (39,414) (41,810)
------- ------- -------
Ending balance $316,165 306,347 274,656
======= ======= =======
</TABLE>
-80-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. PREMISES AND EQUIPMENT
The detail of premises and equipment was as follows:
<TABLE>
<CAPTION>
December 31
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Land $ 16,649 15,467
Buildings-owned 126,670 118,132
Buildings-capital leases 1,773 1,773
Leasehold improvements 44,639 39,800
Furniture and equipment-owned 171,158 152,301
Furniture and equipment-capital leases 1,156 429
------- -------
362,045 327,902
Less: accumulated depreciation
and amortization
Owned assets 186,137 163,074
Capital leases 2,093 1,986
------- -------
188,230 165,060
------- -------
Premises and equipment, net $173,815 162,842
======= =======
</TABLE>
Net lease expense for all operating leases totaled $24,168,000 in 1999,
$20,607,000 in 1998 and $16,983,000 in 1997. The Company occupies certain
banking offices and uses certain equipment under noncancellable operating lease
agreements expiring at various dates over the next 21 years. Minimum lease
payments under noncancellable operating leases are summarized as follows:
<TABLE>
<CAPTION>
Year ending December 31: (in thousands)
<S> <C>
2000 $ 15,567
2001 14,516
2002 12,009
2003 11,101
2004 10,226
Later years 54,962
--------
Total minimum lease payments $118,381
--------
--------
</TABLE>
Payments required under capital leases are not material.
-81-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. CAPITALIZED SERVICING ASSETS
Changes in capitalized servicing assets were as follows:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-------- ------- -------
(in thousands)
<S> <C> <C> <C>
Beginning balance $ 63,995 61,877 38,890
Originations 17,240 12,276 7,819
Purchases 1,089 16,014 26,262
Amortization (19,773) (19,650) (14,366)
Sales (1,649) (6,522) -
Write-downs - - (802)
Reclassification of
excess servicing
receivables - - 4,074
-------- ------- -------
60,902 63,995 61,877
Valuation allowance (50) (1,798) (798)
-------- ------- -------
Ending balance, net $ 60,852 62,197 61,079
======== ======= =======
</TABLE>
As a result of impairment of certain strata of capitalized servicing
assets, additions to the valuation allowance totaling $1,000,000 and $500,000
were recorded during 1998 and 1997, respectively. During 1999, the valuation
allowance was reduced by $1,748,000 since for most strata the estimated fair
value of capitalized servicing assets exceeded carrying value. During 1997, the
valuation allowance was reduced by $802,000 to reflect the write-down of the
recorded value of certain capitalized servicing assets related to loans that had
been repaid by borrowers. The estimated fair value of capitalized servicing
assets was approximately $107 million at December 31, 1999 and $80 million at
December 31, 1998. Such amounts were estimated using discounted cash flows that
reflect current prepayment and discount rate assumptions as of each year-end.
The Company adopted SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities," on January 1,
1997. Among other things, SFAS No. 125 required that for each servicing contract
in existence before January 1, 1997 previously recognized servicing rights and
excess servicing receivables that did not exceed contractually specified
servicing fees be combined. The carrying value of such excess servicing
receivables at January 1, 1997 was $4,074,000. Retroactive application of the
provisions of SFAS No. 125 to years prior to 1997 was not permitted.
-82-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. BORROWINGS
The amounts and interest rates of short-term borrowings were as follows:
<TABLE>
<CAPTION>
Federal funds
purchased and Other
repurchase short-term
Agreements Borrowings Total
---------- ---------- -----
(dollars in thousands)
<S> <C> <C> <C>
At December 31, 1999
Amount outstanding $1,788,858 765,301 2,554,159
Weighted-average
interest rate 5.29% 5.36% 5.31%
For the year ended
December 31, 1999
Highest amount
at a month-end $1,809,403 765,301
Daily-average
amount outstanding 1,609,964 446,623 2,056,587
Weighted-average
interest rate 5.09% 5.15% 5.10%
========== ========== =========
At December 31, 1998
Amount outstanding $1,746,078 483,898 2,229,976
Weighted-average
interest rate 5.41% 5.55% 5.44%
For the year ended
December 31, 1998
Highest amount
at a month-end $2,177,388 509,457
Daily-average
amount outstanding 1,616,431 307,016 1,923,447
Weighted-average
interest rate 5.48% 5.56% 5.49%
========== ========== =========
At December 31, 1997
Amount outstanding $ 930,775 120,143 1,050,918
Weighted-average
interest rate 6.51% 5.41% 6.38%
For the year ended
December 31, 1997
Highest amount
at a month-end $ 930,775 344,363
Daily-average
amount outstanding 611,689 200,324 812,013
Weighted-average
interest rate 5.43% 5.55% 5.46%
========== ========== =========
</TABLE>
-83-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. BORROWINGS, CONTINUED
In general, Federal funds purchased and repurchase agreements
outstanding at December 31, 1999 mature within three days following year-end.
Other short-term borrowings included borrowings from the Federal Home Loan
Banks, the U.S. Treasury and others having original maturities of one year or
less.
At December 31, 1999, the Company had lines of credit under formal
agreements as follows:
<TABLE>
<CAPTION>
M&T M&T
M&T Bank Bank, N.A.
--- ---- ----------
(in thousands)
<S> <C> <C> <C>
Outstanding borrowings $29,000 1,836,549 -
Unused 1,000 4,092,714 367,088
======= ========= =======
</TABLE>
M&T has a revolving credit agreement with an unaffiliated commercial
bank whereby M&T may borrow up to $30,000,000 at its discretion through November
17, 2000. At December 31, 1999, M&T Bank had borrowing facilities available with
the Federal Home Loan Banks whereby M&T Bank could borrow up to $2,273,436,000.
Additionally, M&T Bank and M&T Bank, National Association ("M&T Bank, N.A."), a
wholly owned subsidiary of M&T, had available lines of credit with the Federal
Reserve Bank of New York totaling approximately $4 billion, under which there
were no borrowings outstanding at December 31, 1999 or 1998. M&T Bank and M&T
Bank, N.A. are required to pledge loans or investment securities as collateral
for these borrowing facilities.
Long-term borrowings were as follows:
<TABLE>
<CAPTION>
December 31
1999 1998
--------- -------
(in thousands)
<S> <C> <C>
Subordinated notes of
M&T Bank:
8 1/8% due 2002 $ 75,000 75,000
7% due 2005 100,000 100,000
Advances from Federal Home
Loan Banks:
- Variable rates 1,175,000 825,000
- Fixed rates 90,549 231,094
Preferred capital securities:
M&T Capital Trust I - 8.234% 150,000 150,000
M&T Capital Trust II - 8.277% 100,000 100,000
M&T Capital Trust III - 9.25% 68,803 69,128
Other 15,781 17,321
--------- ---------
$1,775,133 1,567,543
========= =========
</TABLE>
-84-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. BORROWINGS, CONTINUED
The subordinated notes of M&T Bank are unsecured and are subordinate to
the claims of depositors and other creditors of M&T Bank. Long-term variable
rate advances from the Federal Home Loan Banks had contractual rates that ranged
from 6.00% to 6.25% at December 31, 1999 and from 5.19% to 5.44% at December 31,
1998. The weighted-average contractual interest rates were 6.13% and 5.29% at
December 31, 1999 and 1998, respectively. Long-term fixed-rate advances from the
Federal Home Loan Banks had contractual rates of interest ranging from 4.05% to
8.45% at December 31, 1999 and 1998. The weighted-average contractual interest
rates payable were 5.93% and 6.23% at December 31, 1999 and 1998, respectively.
Advances from the Federal Home Loan Banks mature at various dates through 2006
and are secured by residential and commercial real estate loans.
In December 1999, the names of First Empire Capital Trust I, First
Empire Capital Trust II and OnBank Capital Trust I were changed to M&T Capital
Trust I, M&T Capital Trust II and M&T Capital Trust III, respectively. In
January 1997, M&T Capital Trust I ("Trust I") issued $150 million of 8.234%
preferred capital securities. In June 1997, M&T Capital Trust II ("Trust II")
issued $100 million of 8.277% preferred capital securities. In February 1997,
M&T Capital Trust III ("Trust III" and, together with Trust I and Trust II, the
"Trusts"), a business trust organized by ONBANCorp prior to its acquisition by
M&T, issued $60 million of 9.25% preferred capital securities. Including the
unamortized portion of a purchase accounting adjustment to reflect estimated
fair value at the April 1, 1998 acquisition of ONBANCorp, the preferred capital
securities of Trust III had a financial statement carrying value of
approximately $69 million at December 31, 1999 and 1998.
Other than the following payment terms (and the redemption terms
described below), the preferred capital securities issued by the Trusts
("Capital Securities") are identical in all material respects:
<TABLE>
<CAPTION>
Distribution Distribution
Trust Rate Dates
----- ---- -----
<S> <C> <C>
Trust I 8.234% February 1 and August 1
Trust II 8.277% June 1 and December 1
Trust III 9.25% February 1 and August 1
</TABLE>
The common securities of Trust I and II are wholly owned by M&T and the
common securities of Trust III are wholly owned by Olympia. The common
securities of each trust ("Common Securities") are the only class of each
trust's securities possessing general voting powers. The Capital Securities
represent preferred undivided interests in the assets of the corresponding trust
and are classified in the Company's consolidated balance sheet as long-term
borrowings with accumulated distributions on such securities included in
-85-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. BORROWINGS, CONTINUED
interest expense. Under the Federal Reserve Board's current risk-based capital
guidelines, the Capital Securities are includable in M&T's Tier 1 capital.
The proceeds from the issuances of the Capital Securities and Common
Securities were used by the Trusts to purchase the following amounts of junior
subordinated deferrable interest debentures ("Junior Subordinated Debentures")
of M&T in the case of Trust I and Trust II and Olympia in the case of Trust III:
<TABLE>
<CAPTION>
Capital Common Junior Subordinated
Trust Securities Securities Debentures
- ----- ---------- ---------- ----------
<S> <C> <C> <C>
Trust I $150 million $4.64 million $154.64 million aggregate
liquidation amount of 8.234%
Junior Subordinated Debentures
due February 1, 2027.
Trust II $100 million $3.09 million $103.09 million aggregate
liquidation amount of 8.277%
Junior Subordinated Debentures
due June 1, 2027.
Trust III $ 60 million $1.856 million $61.856 million aggregate
liquidation amount of 9.25%
Junior Subordinated Debentures
due February 1, 2027.
</TABLE>
The Junior Subordinated Debentures represent the sole assets of each
Trust and payments under the Junior Subordinated Debentures are the sole source
of cash flow for each Trust.
Holders of the Capital Securities receive preferential cumulative cash
distributions semi-annually on each distribution date at the stated distribution
rate unless M&T, in the case of Trust I or Trust II, or Olympia, in the case of
Trust III, exercise the right to extend the payment of interest on the Junior
Subordinated Debentures for up to ten semi-annual periods, in which case payment
of distributions on the Capital Securities will be deferred for a comparable
period. During an extended interest period, M&T and/or Olympia may not pay
dividends or distributions on, or repurchase, redeem or acquire any shares of
the respective company's capital stock. The agreements governing the Capital
Securities, in the aggregate, provide a full, irrevocable and unconditional
guarantee by M&T in the case of Trust I or Trust II, or Olympia, in the case of
Trust III, of the payment of distributions on, the redemption of, and any
liquidation distribution with respect to the Capital Securities. The obligations
under such guarantee and the Capital Securities are subordinate and junior in
right of payment to all senior indebtedness of M&T and Olympia.
-86-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. BORROWINGS, CONTINUED
The Capital Securities are mandatorily redeemable in whole, but not in
part, upon repayment at the stated maturity dates of the Junior Subordinated
Debentures or the earlier redemption of the Junior Subordinated Debentures in
whole upon the occurrence of one or more events ("Events") set forth in the
indentures relating to the Capital Securities, and in whole or in part at any
time after the stated optional redemption dates (February 1, 2007 in the case of
Trust I and Trust III, and June 1, 2007 in the case of Trust II)
contemporaneously with the Company's optional redemption of the related Junior
Subordinated Debentures in whole or in part. The Junior Subordinated Debentures
are redeemable prior to their stated maturity dates at M&T's option in the case
of Trust I and Trust II and Olympia's option in the case of Trust III (i) on or
after the stated optional redemption dates, in whole at any time or in part from
time to time, or (ii) in whole, but not in part, at any time within 90 days
following the occurrence and during the continuation of one or more of the
Events, in each case subject to possible regulatory approval. The redemption
price of the Capital Securities upon early redemption will be expressed as a
percentage of the liquidation amount plus accumulated but unpaid distributions.
In the case of Trust I, such percentage adjusts annually and ranges from
104.117% at February 1, 2007 to 100.412% for the annual period ending January
31, 2017, after which the percentage is 100%, subject to a make-whole amount if
the early redemption occurs prior to February 1, 2007. In the case of Trust II,
such percentage adjusts annually and ranges from 104.139% at June 1, 2007 to
100.414% for the annual period ending May 31, 2017, after which the percentage
is 100%, subject to a make-whole amount if the early redemption occurs prior to
June 1, 2007. In the case of Trust III, such percentage adjusts annually and
ranges from 104.625% at February 1, 2007 to 100.463% for the annual period
ending January 31, 2017, after which the percentage is 100%, subject to a
make-whole amount if the early redemption occurs prior to February 1, 2007.
Long-term borrowings at December 31, 1999 mature as follows:
<TABLE>
<CAPTION>
Year ending December 31: (in thousands)
<S> <C> <C>
2000 $ 31,222
2001 416,963
2002 189,275
2003 592,178
2004 1,180
Later years 544,315
----------
$1,775,133
----------
----------
</TABLE>
-87-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. STOCK-BASED COMPENSATION PLANS
Stock option plan
The stock option plan allows the grant of stock options and stock appreciation
rights (either in tandem with options or independently) at prices which may not
be less than the fair market value of the common stock on the date of grant.
Except as described below, awards granted under the stock option plan generally
vest over four years and are exercisable over terms not exceeding ten years and
one day from the date of grant. When exercisable, the stock appreciation rights
issued in tandem with stock options entitle grantees to receive cash, stock or a
combination equal to the amount of stock appreciation between the dates of grant
and exercise. Stock appreciation rights issued independently of stock options
contain similar terms as the stock options, although upon exercise the holder is
only entitled to receive cash instead of purchasing shares of M&T's common
stock.
In 1999, the Company granted options to substantially all employees who
had not previously received awards under the stock option plan. The options
granted under this award vest three years after the grant date and are
exercisable for a period of seven years thereafter.
-88-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. STOCK-BASED COMPENSATION PLANS, CONTINUED
Stock option plan, continued
A summary of stock option and stock appreciation rights activity
follows:
<TABLE>
<CAPTION>
Weighted-average
exercise price
Cash-only ------------------
Stock appreciation Cash-only
options rights Stock appreciation
outstanding outstanding options rights
----------- ----------- ------- ------------
<S> <C> <C> <C> <C>
1997
Beginning balance 769,215 54,950 $ 130.54 $ 60.34
Granted 151,077 - 297.37 -
Exercised (138,723) (8,500) 87.66 57.00
Cancelled (4,375) - 221.65 -
-------- -------- -------- --------
At year-end 777,194 46,450 170.11 60.95
1998
Granted 144,459 - 445.26 -
Acquired (note 2) 61,772 - 185.56 -
Exercised (148,467) (11,050) 105.57 59.52
Cancelled (25,045) - 250.86 -
-------- -------- -------- -------
At year-end 809,913 35,400 229.70 61.40
1999
Granted 213,140 - 497.81 -
Exercised (79,623) (16,500) 162.96 64.02
Cancelled (29,354) - 376.02 -
-------- -------- -------- --------
At year-end 914,076 18,900 $ 293.34 $ 59.11
======== ======== ======== ========
Exercisable at:
December 31, 1999 446,223 18,900 $ 170.03 $ 59.11
======== ======== ======== ========
December 31, 1998 384,494 35,400 144.97 61.40
======== ======== ======== ========
December 31, 1997 344,757 46,450 110.39 60.95
======== ======== ======== ========
</TABLE>
At December 31, 1999 and 1998, respectively, there were 305,516 and
489,302 shares available for future grant. During 1998, the number of shares
authorized for issuance under the stock option plan was increased to 2,500,000
shares from 2,000,000.
-89-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. STOCK-BASED COMPENSATION PLANS, CONTINUED
Stock option plan, continued
A summary of stock options at December 31, 1999 follows:
<TABLE>
<CAPTION>
Weighted-average Weighted-
Stock --------------------- Stock average
Range of options Exercise Life options exercise
exercise price outstanding price (in years) exercisable price
- ------------------ ----------- ------ --------- ----------- -------
<S> <C> <C> <C> <C> <C>
$ 53.00 to $121.12 77,179 $ 89.05 1.7 77,179 $ 89.05
133.88 to 198.76 223,287 141.10 4.3 223,287 141.10
211.00 to 290.00 262,450 246.35 6.4 126,886 233.32
310.00 to 554.13 351,160 470.15 8.7 18,871 417.91
------- ------ --------- ------- ------
914,076 $293.34 6.4 446,223 $170.03
======= ====== ========= ======= ======
</TABLE>
The Company used a binomial option pricing model to estimate the grant
date present value of stock options granted in 1999, 1998 and 1997. The
weighted-average estimated value per option was $115.80 in 1999, $114.60 in 1998
and $79.26 in 1997. The values were calculated using the following
weighted-average assumptions: an option term of 6.5 years (representing the
estimated period between grant date and exercise date based on historical data
since inception of the plan), a risk-free interest rate of 4.97% in 1999, 5.53%
in 1998 and 6.37% in 1997 (representing the yield on a U.S. Treasury security
with a remaining term equal to the expected option term), expected volatility of
19% in 1999 and 14% in 1998 and 1997, and estimated dividend yields of .85% in
1999, .72% in 1998 and .97% in 1997 (representing the approximate annualized
cash dividend rate paid with respect to a share of common stock at or near the
grant date). The Company reduced the estimated value per option to reflect an
estimate of the probability of forfeiture prior to vesting. Based on historical
data since inception of the plan and projected employee turnover rates, the
weighted-average estimated forfeiture rate was 21% in 1999 and 10% in prior
years.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for the stock option plan. Accordingly, no compensation expense was
recognized in 1999, 1998 and 1997 for stock option awards since the exercise
price of stock options granted under the stock option plan was not less than the
fair market value of the common stock at date of grant. Compensation expense
(benefit) recognized for cash-only stock appreciation rights was $(2,199,000) in
1999, $2,238,000 in 1998 and $8,510,000 in 1997. Had compensation expense for
stock option awards been determined consistent
-90-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. STOCK-BASED COMPENSATION PLANS, CONTINUED
Stock option plan, continued
with SFAS No. 123, net income and earnings per share would be reduced to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
------- ------- -------
(in thousands,
except per share)
<S> <C> <C> <C>
Net income:
As reported $265,626 207,974 176,241
Pro forma 252,401 198,323 169,432
Basic earnings per share:
As reported $34.05 27.30 26.60
Pro forma 32.36 26.03 25.57
Diluted earnings per share:
As reported $32.83 26.16 25.26
Pro forma 31.27 25.02 24.40
</TABLE>
The pro forma effects are presented in accordance with the requirements
of SFAS No. 123, however, such effects are not representative of the effects to
be reported in future years due to the fact that options vest over several years
and additional awards generally are made each year.
Deferred bonus plan
The Company provides a deferred bonus plan to eligible employees pursuant to
which employees may elect to defer all or a portion of their current annual
incentive compensation awards and allocate such awards to several investment
options, including M&T common stock. Participants may elect the timing of
distributions from the plan. Such distributions are payable in cash with the
exception of balances allocated to M&T common stock, which effective January 1,
1998, are distributable in the form of M&T common stock. Shares of M&T common
stock distributable pursuant to the terms of the deferred bonus plan were 8,397
and 8,028 at December 31, 1999 and 1998, respectively. In connection with the
deferred bonus plan, 15,000 shares of M&T common stock were authorized for
issuance, of which 1,295 shares have been issued.
Directors' stock plan
Effective January 1, 1998, the Company initiated a compensation plan for
non-employee directors that provides for annual compensation payable to such
directors to be paid fifty percent in cash and fifty percent in shares of M&T
common stock. In connection with the directors' stock plan, 5,000 shares of M&T
common stock were authorized for issuance, of which 1,068 shares have been
issued.
-91-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company provides defined benefit pension plan and other postretirement
benefits (including health care and life insurance benefits) to qualified
retired employees.
Net periodic pension expense consisted of the following:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Service cost $ 8,202 7,021 5,014
Interest cost on projected benefit
obligation 9,225 8,135 6,786
Expected return on plan assets (14,308) (12,396) (9,723)
Amortization of prior service cost 84 (24) (24)
Amortization of initial net asset - (344) (858)
Recognized net actuarial gain - (38) (47)
Settlements and curtailments 349 218 -
------ ------ ------
Net periodic pension expense $ 3,552 2,572 1,148
====== ====== ======
</TABLE>
Net postretirement benefits expense consisted of the following:
<TABLE>
Year ended December 31
1999 1998 1997
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Service cost $ 325 288 146
Interest cost on projected benefit
obligation 1,150 1,141 996
Expected return on plan assets (180) (226) (288)
Amortization of prior service cost 14 (18) (204)
Recognized net actuarial (gain) loss 39 25 (7)
------- ------ -------
Net postretirement benefits expense $ 1,348 1,210 643
======= ====== ======
</TABLE>
-92-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS, CONTINUED
Data relating to the funding position of the plans were as follows:
<TABLE>
<CAPTION>
Pension Postretirement
benefits benefits
-------------- ---------------
1999 1998 1999 1998
---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at
beginning of year $136,931 107,035 18,023 13,933
Service cost 8,202 7,021 325 288
Interest cost 9,225 8,135 1,150 1,141
Plan participants'contributions - - 202 119
Amendments 395 20 - 2,356
Actuarial (gain) loss (22,031) 5,864 (1,108) 1,119
Business combination 3,223 15,027 - 499
Benefits paid (9,256) (6,389) (1,830) (1,432)
Settlements and curtailments 349 218 - -
------- ------- ------ ------
Benefit obligation at
end of year $127,038 136,931 16,762 18,023
------- ------- ------ ------
Change in plan assets:
Fair value of plan assets at
beginning of year $167,469 144,894 4,276 5,147
Actual return on plan assets (1,547) 6,669 525 292
Plan participants'contributions - - 388 269
Business combination 2,430 22,441 - -
Benefits and other payments (6,480) (4,787) (1,830) (1,432)
Settlements (2,516) (1,748) - -
------- ------- ------ ------
Fair value of plan assets at
end of year $159,356 167,469 3,359 4,276
------- ------- ------ ------
Funded status $ 32,318 30,538 (13,403) (13,747)
Unrecognized net actuarial (gain)
loss (24,493) (18,318) 736 2,229
Unrecognized prior service cost (237) (259) 321 336
------- ------- ------ ------
Prepaid (accrued) benefit cost $ 7,588 11,961 (12,346) (11,182)
======= ======= ====== ======
Amounts recognized in the
consolidated balance sheet were:
Prepaid benefit cost (asset) $ 10,551 14,489 - -
Accrued benefit cost (liability) (2,963) (2,528) (12,346) (11,182)
------- ------- ------- ------
$ 7,588 11,961 (12,346) (11,182)
======= ======= ======= ======
</TABLE>
-93-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS, CONTINUED
The Company has an unfunded supplemental pension plan for certain key
executives. The projected benefit obligation and accumulated benefit obligation
included in the preceding data related to such plan were $2,479,000 and
$2,091,000, respectively, as of December 31, 1999 and $2,356,000 and $1,863,000,
respectively, as of December 31, 1998.
The assumed rates used in the actuarial computations were:
<TABLE>
<CAPTION>
Pension Postretirement
benefits benefits
--------------- ---------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Discount rate 7.75% 6.75% 7.75% 6.75%
Long-term rate of return on
plan assets 9.00% 9.00% 4.25% 5.00%
Rate of increase in future
compensation levels 5.01% 5.10% - -
</TABLE>
For measurement purposes, an 8.0% annual rate of increase in the cost
of covered health care benefits was assumed for 2000. The rate was assumed to
decrease gradually to 6% over 4 years. A one-percentage point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
+1% -1%
--- ---
(in thousands)
<S> <C> <C>
Increase (decrease) in:
Service and interest cost $ 54 (48)
Accumulated postretirement
benefit obligation 818 (745)
</TABLE>
Pension plan assets included common stock of M&T with a fair value of
$11,645,000 and $14,674,000 at December 31, 1999 and 1998, respectively.
The Company has a retirement savings plan ("Savings Plan") that is a
defined contribution plan in which eligible employees of the Company may defer
up to 15% of qualified compensation via contributions to the plan. The Company
makes an employer matching contribution in an amount equal to 75% of an
employee's contribution, up to 4.5% of the employee's qualified compensation.
Employees' accounts, including employee contributions, employer matching
contributions and accumulated earnings thereon, are at all times fully vested
and nonforfeitable. The Company's contributions to the Savings Plan totaled
$6,935,000, $6,085,000 and $5,221,000 in 1999, 1998 and 1997, respectively.
-94-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. INCOME TAXES
The components of income tax expense (benefit) were as follows:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Current
Federal $139,946 105,751 96,819
State and city 10,926 14,803 16,430
------- ------- -------
Total current 150,872 120,554 113,249
------- ------- -------
Deferred
Federal 1,508 (2,309) (5,334)
State and city 308 (656) (1,997)
------- ------- -------
Total deferred 1,816 (2,965) (7,331)
------- ------- -------
Total income taxes
applicable to pre-tax income $152,688 117,589 105,918
======= ======= =======
</TABLE>
The Company files a consolidated federal income tax return reflecting
taxable income earned by all subsidiaries. In prior years, applicable federal
tax law allowed certain financial institutions the option of deducting as bad
debt expense for tax purposes amounts in excess of actual losses. In accordance
with generally accepted accounting principles, such financial institutions were
not required to provide deferred income taxes on such excess. Recapture of the
excess tax bad debt reserve established under the previously allowed method will
result in taxable income if M&T Bank fails to maintain bank status as defined in
the Internal Revenue Code or charges are made to the reserve for other than bad
debt losses. At December 31, 1999 M&T Bank's tax bad debt reserve for which no
federal income taxes have been provided was $74,021,000. No actions are planned
that would cause this reserve to become wholly or partially taxable.
The portion of income taxes attributable to gains or losses on sales of
bank investment securities was an expense of $639,000 and $718,000 in 1999 and
1998, respectively, and a benefit of $114,000 in 1997. No alternative minimum
tax expense was recognized in 1999, 1998 or 1997.
-95-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. INCOME TAXES, CONTINUED
Total income taxes differed from the amount computed by applying the statutory
federal income tax rate to pre-tax income as follows:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Income taxes at statutory rate $146,410 113,947 98,756
Increase (decrease) in taxes:
Tax-exempt income (12,137) (15,266) (3,794)
State and city income taxes,
net of federal income
tax effect 7,302 9,196 9,381
Amortization of goodwill 11,117 8,158 1,571
Other (4) 1,554 4
------- ------- -------
$152,688 117,589 105,918
======= ======= =======
</TABLE>
Deferred tax assets (liabilities) were comprised of the following at
December 31:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Depreciation and amortization $ 11,090 10,489 8,130
Losses on loans and other assets 127,667 120,422 105,190
Postretirement and other
supplemental employee benefits 9,276 5,316 7,163
Incentive compensation plans 14,041 20,395 12,302
Unrealized investment losses 17,906 - -
Interest on loans - - 5,165
Other 7,217 3,140 11,140
------- ------- -------
Gross deferred tax assets 187,197 159,762 149,090
------- ------- -------
Interest on loans (5,495) (5,025) -
Retirement benefits (4,077) (1,969) (3,459)
Leasing transactions (115,586) (107,187) (83,347)
Restructured interest rate
swap agreements - (181) (3,999)
Capitalized servicing rights (10,150) (6,868) (7,448)
Unrealized investment gains - (1,931) (8,202)
Other (54) (504) (45)
------- ------- -------
Gross deferred tax liabilities (135,362) (123,665) (106,500)
------- ------- -------
Net deferred tax asset $ 51,835 36,097 42,590
======= ======= =======
</TABLE>
The Company believes that it is more likely than not that the net
deferred tax asset will be realized through taxable earnings or alternative tax
strategies.
-96-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. INCOME TAXES, CONTINUED
The income tax credits shown in the statement of income of M&T in note
21 arise principally from operating losses before dividends from subsidiaries.
12. EARNINGS PER SHARE
The computations of basic earnings per share follow:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
------- ------- -------
(in thousands, except per share)
<S> <C> <C> <C>
Income available to common
stockholders
Net income $265,626 207,974 176,241
Weighted-average shares
outstanding (including common
stock issuable) 7,800 7,619 6,625
Basic earnings per share $34.05 27.30 26.60
</TABLE>
The computations of diluted earnings per share follow:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
------- ------- -------
(in thousands, except per share)
<S> <C> <C> <C>
Income available to common
stockholders $265,626 207,974 176,241
Weighted-average shares
outstanding 7,800 7,619 6,625
Plus: incremental shares from
assumed conversion of stock
options 290 331 352
------- ------- -------
Adjusted weighted-average shares
outstanding 8,090 7,950 6,977
Diluted earnings per share $32.83 26.16 25.26
</TABLE>
-97-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
13. COMPREHENSIVE INCOME
The following table displays the components of other comprehensive income:
<TABLE>
<CAPTION>
Before-tax Income
amount taxes Net
------ ----- ---
(in thousands)
<S> <C> <C> <C>
For the year ended
December 31, 1999
Unrealized losses
on investment securities:
Unrealized holding
losses $(47,178) (19,198) (27,980)
Reclassification
adjustment for gains
realized in net income 1,575 639 936
-------- -------- --------
Net unrealized losses $(48,753) (19,837) (28,916)
-------- -------- --------
-------- -------- --------
For the year ended
December 31, 1998
Unrealized losses
on investment securities:
Unrealized holding
losses(a) $(13,657) (5,553) (8,104)
Reclassification
adjustment for gains
realized in net income 1,761 718 1,043
-------- -------- --------
Net unrealized losses $(15,418) (6,271) (9,147)
-------- -------- --------
-------- -------- --------
For the year ended
December 31, 1997
Unrealized gains
on investment securities:
Unrealized holding
gains $ 24,242 9,907 14,335
Reclassification
adjustment for losses
realized in net income (280) (114) (166)
-------- -------- --------
Net unrealized gains $ 24,522 10,021 14,501
-------- -------- --------
-------- -------- --------
</TABLE>
(a) Including the effect of the contribution of appreciated investment
securities described in note 14.
-98-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
14. OTHER INCOME AND OTHER EXPENSE
The following items, which exceeded 1% of total interest income and other income
in the respective period, were included in either other revenues from operations
or other costs of operations in the consolidated statement of income:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Other income:
Mutual fund and annuity sales $24,480 17,974 15,336
Bank owned life insurance 22,487 17,629
Other expense:
Professional services 31,527 30,537 22,845
Non-cash charitable contribution(a) 24,585
</TABLE>
(a) In January 1998, M&T contributed appreciated investment securities with
a fair value of $24.6 million to an affiliated, tax-exempt private
charitable foundation. As a result of this transfer, the Company
recognized tax-exempt other income of $15.3 million and incurred
charitable contributions expense of $24.6 million. These amounts are
included in the consolidated statement of income in "Other revenues
from operations" and "Other costs of operations," respectively. The
transfer provided an income tax benefit of approximately $10.0 million
and, accordingly, resulted in an after-tax increase in net income of
$.7 million.
15. INTERNATIONAL ACTIVITIES
The Company engages in certain international activities consisting largely of
collecting Eurodollar deposits, engaging in foreign currency trading and
providing credit to support the international activities of domestic companies.
Net assets identified with international activities amounted to $27,203,000 and
$32,891,000 at December 31, 1999 and 1998, respectively. Deposits at M&T Bank's
offshore branch office were $242,691,000 and $303,270,000 at December 31, 1999
and 1998, respectively.
-99-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
16. DERIVATIVE FINANCIAL INSTRUMENTS
As part of managing interest rate risk, the Company has entered into several
interest rate swap agreements. The swaps modify the repricing characteristics of
certain portions of the Company's portfolios of earning assets and
interest-bearing liabilities. Interest rate swap agreements are generally
entered into with counterparties that meet established credit standards and most
contain collateral provisions protecting the at-risk party. The Company
considers the credit risk inherent in these contracts to be negligible.
Information about interest rate swaps entered into for interest rate
risk management purposes summarized by type of financial instrument the swaps
were intended to modify follows:
<TABLE>
<CAPTION>
Estimated
Notional Average Weighted-average Rate fair value-
---------------------
amount maturity fixed variable gain(loss)
---------- --------- -------- --------- -------------
(in thousands) (in years) (in thousands)
December 31, 1999
- -----------------
<S> <C> <C> <C> <C> <C>
Fixed rate available
for sale investment
securities:
Non-amortizing(a) $ 50,000 8.1 5.26% 6.46% $ 5,646
Variable rate
loans:
Non-amortizing 660,000 .3 6.29% 6.14% 540
Fixed rate
loans:
Amortizing(a) 49,279 8.5 6.81% 6.24% 1,244
Amortizing-forward-
starting(b) 372,800 7.5 5.94% 5.64% 23,863
Fixed rate time
deposits:
Non-amortizing 847,000 1.5 6.46% 6.09% (5,014)
Fixed rate
borrowings:
Non-amortizing 50,000 3.6 5.85% 6.07% (1,770)
---------- ---- ---- -------- -------------
$2,029,079 2.6 6.27% 6.04% $ 24,509
========== ==== ==== ======== =============
</TABLE>
-100-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
16. DERIVATIVE FINANCIAL INSTRUMENTS, CONTINUED
<TABLE>
<CAPTION>
Estimated
Notional Average Weighted-average rate fair value-
---------------------
Amount maturity fixed variable gain(loss)
------ -------- ----- -------- ----------
(in thousands) (in years) (in thousands)
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1998
Fixed rate available
for sale investment
securities:
Non-amortizing(a) $ 50,000 9.1 5.26% 5.55% $ 445
Variable rate
loans:
Non-amortizing 1,060,000 1.0 6.10% 5.28% 10,907
Fixed rate
loans:
Amortizing(a) 32,209 8.7 7.17% 5.55% (3,875)
Amortizing-forward-
starting(b) 390,800 8.6 5.95% 5.64% (8,380)
Fixed rate time
deposits:
Non-amortizing 1,154,000 2.0 6.59% 5.21% 22,533
Fixed rate
borrowings:
Non-amortizing 125,000 2.1 5.75% 5.28% 1,360
--------- ---- ---- ---- ------
$2,812,009 2.7 6.26% 5.31% $22,990
========= ==== ==== ==== ======
</TABLE>
Under all swap agreements, the Company receives settlement amounts at a
fixed rate and pays at a variable rate, except for:
(a) Under the terms of these swaps, the Company receives settlement amounts
at a variable rate and pays at a fixed rate.
(b) Under the terms of these forward-starting swaps the Company will
receive settlement amounts at a variable rate and pay at a fixed rate.
Forward-starting swaps entered into as of December 31, 1999 will begin
to accrue amounts receivable and payable beginning in the years indicated below:
<TABLE>
<CAPTION>
Notional amount
---------------
(in thousands)
<S> <C>
Year ending December 31:
2000 $186,044
2001 186,756
-------
$372,800
=========
</TABLE>
-101-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
16. DERIVATIVE FINANCIAL INSTRUMENTS, CONTINUED
The estimated fair value of interest rate swap agreements represents the
amount the Company would have expected to receive (pay) to terminate such
contracts. Since these swaps have been entered into for interest rate risk
management purposes, the estimated market appreciation or depreciation should be
considered in the context of the entire balance sheet of the Company. The
estimated fair value of interest rate swaps entered into for interest rate risk
management purposes is not recognized in the consolidated financial statements,
except for swaps that modify the repricing characteristics of investment
securities classified as available for sale. Changes in the fair value of such
swaps and investment securities are included in other comprehensive income, net
of applicable income taxes.
The notional amounts of amortizing swaps may vary over the term of a
swap agreement. The notional amount of the Company's amortizing swaps linked to
fixed rate loans declines by the amount of scheduled principal payments of the
loans. The notional amount of a non-amortizing swap does not change during the
term of an agreement. At December 31, 1999 the notional amount of interest rate
swaps outstanding mature as follows:
<TABLE>
AMORTIZING NON-AMORTIZING
(in thousands)
<S> <C> <C>
Year ending December 31:
2000 $ 1,868 1,040,000
2001 8,184 213,000
2002 8,908 159,000
2003 10,693 80,000
2004 11,542 35,000
Later years 380,884 80,000
------- ---------
$422,079 1,607,000
======= =========
</TABLE>
The net effect of interest rate swaps was to increase net interest
income by $26,100,000 in 1999, $16,156,000 in 1998 and $14,089,000 in 1997.
Excluding forward-starting swaps, the average notional amount of interest
rate swaps impacting net interest income which were entered into for interest
rate risk management purposes were $1,944,813,000 in 1999, $2,521,426,000 in
1998 and $2,691,638,000 in 1997.
During 1995 and 1994, the Company restructured several interest rate
swap agreements with notional amounts of $260 million and $500 million,
respectively, from amortizing to non-amortizing. The purpose of the
restructurings was to enhance the effectiveness of the swaps in managing the
Company's exposure to changing interest rates in future years. Losses
resulting from the early termination of the amortizing swaps and equal
amounts of purchase discount received on the restructured non-amortizing
swaps were recognized as a result of these transactions and included in the
carrying amount of loans which the swaps modified. The purchase discount is
being accreted to interest income over the remaining term of the restructured
-102-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
16. DERIVATIVE FINANCIAL INSTRUMENTS, CONTINUED
swap. Deferred losses, which became fully amortized in 1999, had been amortized
over the terms of the original swaps. The amortization of deferred losses and
accretion of purchase discounts were $.3 million and $6.3 million, respectively,
in 1999, $9.2 million and $9.1 million, respectively, in 1998 and $11.3 million
and $9.6 million, respectively, in 1997. Purchase discounts related to a
restructured swap remaining at December 31, 1999 were $403,000, all of which
will accrete to interest income in 2000.
Derivative financial instruments used for trading purposes
included foreign exchange and other option contracts, foreign exchange forward
and spot contracts, interest rate swap contracts and financial futures. The
following table includes information about the estimated fair value of
derivative financial instruments used for trading purposes:
<TABLE>
<CAPTION>
1999 1998
------ ------
December 31: (in thousands)
<S> <C> <C>
Gross unrealized gains $29,088 54,424
Gross unrealized losses 32,303 49,833
Year ended December 31:
Average gross unrealized gains $33,588 42,174
Average gross unrealized losses 32,622 39,083
====== ======
</TABLE>
Net losses arising from derivative financial instruments used for
trading purposes were $1,699,000 in 1999. Net gains of $2,648,000 and
$2,072,000 were realized in 1998 and 1997, respectively.
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure of the estimated "fair value" of financial instruments. "Fair value"
is generally defined as the price a willing buyer and a willing seller would
exchange for a financial instrument in other than a distressed sale situation.
Disclosures related to fair value presented herein are as of December 31, 1999
and 1998.
With the exception of marketable securities, certain off-balance
sheet financial instruments and one-to-four family residential mortgage loans
originated for sale, the Company's financial instruments are not readily
marketable and market prices do not exist. The Company, in attempting to comply
with the provisions of SFAS No. 107, has not attempted to market its financial
instruments to potential buyers, if any exist. Since negotiated prices in
illiquid markets depend greatly upon the then present motivations of the buyer
and seller, it is reasonable to assume that actual sales prices could vary
widely from any estimate of fair value made without the benefit of negotiations.
Additionally, changes in market interest rates can dramatically impact the value
of financial instruments in a short period of time.
-103-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
The estimated fair values of investments in readily marketable debt
and equity securities were based on quoted market prices at the respective
year-end. In arriving at estimated fair value of other financial instruments,
the Company generally used calculations based upon discounted cash flows of
the related financial instruments. In general, discount rates used for loan
products were based on the Company's pricing at the respective year-end. A
higher discount rate was assumed with respect to estimated cash flows
associated with nonaccrual loans.
As more fully described in note 3, the carrying value and estimated
fair value of investment securities were as follows:
<TABLE>
<CAPTION>
Carrying Estimated
Value Fair Value
-------- ----------
(in thousands)
December 31
<S> <C> <C>
1999 $1,900,522 1,898,860
1998 2,785,564 2,785,647
========= =========
</TABLE>
The following table presents the carrying value and calculated
estimates of fair value of loans and commitments related to loans originated
for sale:
<TABLE>
<CAPTION>
Carrying Calculated
Value Estimate
-------- ----------
(in thousands)
<S> <C> <C>
December 31, 1999
Commercial loans and leases $ 3,650,023 3,642,157
Commercial real estate loans 6,509,185 6,473,654
Residential real estate loans 4,128,831 4,051,351
Consumer loans and leases 3,118,732 3,134,102
---------- ----------
$17,406,771 17,301,264
========== ==========
December 31, 1998
Commercial loans and leases $ 3,174,778 3,181,096
Commercial real estate loans 5,458,876 5,520,305
Residential real estate loans 4,261,555 4,320,221
Consumer loans and leases 2,896,321 2,925,269
---------- ----------
$15,791,530 15,946,891
========== ==========
</TABLE>
The allowance for credit losses represented the Company's assessment
of the overall level of credit risk inherent in the portfolio and totaled
$316,165,000 and $306,347,000 at December 31, 1999 and 1998, respectively.
As described in note 18, in the normal course of business, various
commitments and contingent liabilities are outstanding, such as loan
commitments, credit guarantees and letters of credit. The Company's pricing
-104-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
of such financial instruments is based largely on credit quality and
relationship, probability of funding and other requirements. Commitments
generally have fixed expiration dates and contain termination and other clauses
which provide for relief from funding in the event of significant deterioration
in the credit quality of the customer. The rates and terms of the Company's loan
commitments, credit guarantees and letters of credit are competitive with other
financial institutions operating in markets served by the Company. The Company
believes that the carrying amounts are reasonable estimates of the fair value of
these financial instruments. Such carrying amounts, comprised principally of
unamortized fee income, are included in other liabilities and totaled $5,434,000
and $7,630,000 at December 31, 1999 and 1998, respectively.
SFAS No. 107 requires that the estimated fair value ascribed to
noninterest-bearing deposits, savings deposits and NOW accounts be
established at carrying value because of the customers' ability to withdraw
funds immediately. Additionally, time deposit accounts are required to be
revalued based upon prevailing market interest rates for similar maturity
instruments.
The following summarizes the results of these calculations:
<TABLE>
<CAPTION>
Carrying Calculated
Value Estimate
-------- ----------
(in thousands)
<S> <C> <C>
December 31, 1999
Noninterest-bearing deposits $2,260,432 2,260,432
Savings deposits and NOW accounts 5,782,152 5,782,152
Time deposits 7,088,345 7,085,462
Deposits at foreign office 242,691 242,691
========= ==========
December 31, 1998
Noninterest-bearing deposits $2,066,814 2,066,814
Savings deposits and NOW accounts 5,339,985 5,339,985
Time deposits 7,027,083 7,091,792
Deposits at foreign office 303,270 303,270
========= ==========
</TABLE>
The Company believes that deposit accounts have a value greater than
that prescribed by SFAS No. 107. The Company feels, however, that the value
associated with these deposits is greatly influenced by characteristics of
the buyer, such as the ability to reduce the costs of servicing the deposits
and the expected deposit attrition which is customary in acquisitions.
Accordingly, estimating the fair value of deposits with any degree of
certainty is not practical.
As more fully described in note 16, the Company had entered into
interest rate swap agreements for purposes of managing the Company's exposure
to changing interest rates. The estimated fair value of interest rate swap
-105-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
agreements represents the amount the Company would have expected to receive or
pay to terminate such swaps. The following table includes information about the
estimated fair value of interest rate swaps entered into for interest rate risk
management purposes:
<TABLE>
<CAPTION>
Gross Gross Estimated
Notional Unrealized Unrealized Fair Value -
Amount Gains Losses Gain
---------- ---------- ---------- ------------
(in thousands)
<S> <C> <C> <C> <C>
December 31
1999 $2,029,079 32,415 (7,906) 24,509
1998 2,812,009 35,640 (12,650) 22,990
========== ========== ========== ============
</TABLE>
As described in note 16, the Company also uses certain derivative
financial instruments as part of its trading activities. Interest rate contracts
entered into for trading purposes had notional values and estimated fair value
losses of $799 million and $515,000, respectively, at December 31, 1999 and
notional values and estimated fair value gains of $436 million and $723,000,
respectively, at December 31, 1998. The Company also entered into foreign
exchange and other option and futures contracts totaling approximately $573
million and $2.0 billion at December 31, 1999 and 1998, respectively. Such
contracts were valued at losses of $2,700,000 and at gains of $3,868,000 at
December 31, 1999 and 1998, respectively. All trading account assets and
liabilities are recorded in the consolidated balance sheet at estimated fair
value. The fair values of all trading account assets and liabilities were $641
million and $633 million, respectively, at December 31, 1999 and $173 million
and $51 million, respectively, at December 31, 1998. Included in trading account
assets at December 31, 1999 were mortgage-backed securities which M&T held as
collateral securing certain agreements to resell securities. The obligations to
return such collateral were recorded as noninterest-bearing trading account
liabilities and were included in accrued interest and other liabilities in the
Company's consolidated balance sheet. The fair value of such collateral (and the
related obligation to return collateral) was $600 million at December 31, 1999.
There was no similar collateral held at December 31, 1998.
Due to the near maturity of other money-market assets and short-term
borrowings, the Company estimates that the carrying value of such instruments
approximates estimated fair value. The carrying value and estimated fair
value of long-term borrowings were $1,775,133,000 and $1,753,612,000,
respectively, at December 31, 1999 and $1,567,543,000 and $1,613,040,000,
respectively, at December 31, 1998.
The Company does not believe that the estimated fair value
information presented herein is representative of the earnings power or value
of the Company. The preceding analysis, which is inherently limited in
depicting fair value, also does not consider any value associated with
existing
-106-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
customer relationships nor the ability of the Company to create value through
loan origination, deposit gathering or fee generating activities.
Many of the fair value estimates presented herein are based upon the
use of highly subjective information and assumptions and, accordingly, the
results may not be precise. Management believes that fair value estimates may
not be comparable between financial institutions due to the wide range of
permitted valuation techniques and numerous estimates which must be made.
Furthermore, since the disclosed fair value amounts were estimated
as of the balance sheet date, the amounts actually realized or paid upon
maturity or settlement of the various financial instruments could be
significantly different.
18. COMMITMENTS AND CONTINGENCIES
In the normal course of business, various commitments and contingent liabilities
are outstanding, such as commitments to extend credit guarantees and "standby"
letters of credit (approximately $522,356,000 and $410,357,000 at December 31,
1999 and 1998, respectively) which are not reflected in the consolidated
financial statements. No material losses are expected as a result of these
transactions. Additionally, the Company had outstanding commitments to originate
loans of approximately $4.1 billion and $3.5 billion at December 31, 1999 and
1998, respectively. Since many loan commitments, credit guarantees and "standby"
letters of credit expire without being funded in whole or part, the contract
amounts are not necessarily indicative of future cash flows. Commitments to sell
one-to-four family residential mortgage loans totaled $376,874,000 at December
31, 1999 and $695,444,000 at December 31, 1998.
M&T and its subsidiaries are subject in the normal course of
business to various pending and threatened legal proceedings in which claims
for monetary damages are asserted. Management, after consultation with legal
counsel, does not anticipate that the aggregate ultimate liability, if any,
arising out of litigation pending against M&T or its subsidiaries will be
material to the Company's consolidated financial position, but at the present
time is not in a position to determine whether such litigation will have a
material adverse effect on the Company's consolidated results of operations
in any future reporting period.
19. SEGMENT INFORMATION
In accordance with the provisions of SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information," reportable segments have been
determined based upon the Company's internal profitability reporting system,
which is organized by strategic business units. Certain strategic business units
have been combined for segment information reporting purposes where the nature
of the products and services, the type of customer and the distribution of those
products and services are similar. The reportable
-107-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
19. SEGMENT INFORMATION, CONTINUED
segments are Commercial Banking, Commercial Real Estate, Discretionary
Portfolio, Residential Mortgage Banking and Retail Banking.
The financial information of the Company's segments has been
compiled utilizing the accounting policies described in note 1 with certain
exceptions. The more significant of these exceptions are described herein.
The Company allocates interest income or interest expense using a methodology
that charges users of funds (assets) interest expense and credits providers
of funds (liabilities) with income based on the maturity, prepayment and/or
repricing characteristics of the assets and liabilities. The net effect of
this allocation is recorded in the "All Other" category. A provision for
credit losses is allocated to segments in an amount based largely on actual
net charge-offs incurred by the segment during the period plus or minus an
amount necessary to adjust the segment's allowance for credit losses due to
changes in loan balances. In contrast, the level of the consolidated
provision for credit losses is determined using the methodologies described
in note 1 to assess the overall adequacy of the allowance for credit losses.
Indirect fixed and variable expenses incurred by certain centralized support
areas are allocated to segments based on actual usage (for example, volume
measurements) and other criteria. Certain types of administrative expenses
and bankwide expense accruals (including amortization of goodwill and core
deposit intangible) are generally not allocated to segments. Income taxes are
allocated to segments based on the Company's marginal statutory tax rate
adjusted for any tax-exempt income or non-deductible expenses. Equity is
allocated to the segments based on regulatory capital requirements and in
proportion to an assessment of the inherent risks associated with the
business of the segment (including interest, credit and operating risk).
The management accounting policies and processes utilized in
compiling segment financial information are highly subjective and, unlike
financial accounting, are not based on authoritative guidance similar to
generally accepted accounting principles. As a result, reported segment
results are not necessarily comparable with similar information reported by
other financial institutions. Furthermore, changes in management structure or
allocation methodologies and procedures may result in changes in reported
segment financial data. Information about the Company's segments is presented
in the accompanying table.
The Commercial Banking segment provides a wide range of credit
products and banking services for middle-market and large commercial
customers, largely within the markets the Company serves. Among the services
provided by this segment are commercial lending and leasing, deposit products
and cash management services. The Commercial Real Estate segment provides
credit services which are secured by various types of multifamily residential
and commercial real estate and deposit services to its customers. The
Discretionary Portfolio segment includes securities, residential mortgage
loans and other assets; short-term and long-term borrowed funds; brokered
-108-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
19. SEGMENT INFORMATION, CONTINUED
certificates of deposit and interest rate swaps related thereto; and offshore
branch deposits. This segment also provides services to commercial customers and
consumers which include foreign exchange, securities trading and municipal bond
underwriting and sales. The Residential Mortgage Banking segment originates and
services residential mortgage loans for consumers and sells substantially all of
those loans in the secondary market to investors or to banking subsidiaries of
M&T. Residential mortgage loans held for sale are included in the Residential
Mortgage Banking segment. The Retail Banking segment offers a variety of
consumer and small business services through several delivery channels which
include traditional and "in-store" banking offices, automated teller machines,
telephone banking and personal computer banking. The "All Other" category
includes other operating activities of the Company that are not directly
attributable to the reported segments as determined in accordance with SFAS No.
131, the difference between the provision for credit losses and the calculated
provision allocated to the reportable segments, goodwill and core deposit
intangible resulting from acquisitions of financial institutions, the net impact
of the Company's internal funds transfer pricing methodology, eliminations of
transactions between reportable segments, certain nonrecurring transactions, the
residual effects of unallocated support systems and general and administrative
expenses, and the impact of interest rate risk management strategies. The amount
of intersegment activity eliminated in arriving at consolidated totals was
included in the "All Other" category as follows:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
------ ------ ------
(in thousands)
<S> <C> <C> <C>
Revenues $(41,829) (52,137) (31,023)
Expenses (29,353) (19,916) (14,302)
Income taxes (benefit) (5,076) (13,111) (6,804)
Net income (loss) (7,400) (19,110) (9,917)
</TABLE>
The Company conducts substantially all of its operations in the
United States. There are no transactions with a single customer that in the
aggregate result in revenues that exceed ten percent of consolidated total
revenues.
-109-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
19. SEGMENT INFORMATION, CONTINUED
<TABLE>
<CAPTION>
Commercial Commercial Discretionary
IN THOUSANDS, EXCEPT ASSET DATA Banking Real Estate Portfolio
- ------------------------------------------- ---------------- ---------------- ----------------
For the year ended
December 31, 1999
<S> <C> <C> <C>
Net interest income (a) $ 157,818 121,675 47,530
Noninterest income 30,177 4,351 22,766
- ------------------------------------------- ---------------- ---------------- ----------------
187,995 126,026 70,296
Provision for credit losses 11,316 (143) 3,833
Amortization of goodwill
and core deposit intangible - - -
Depreciation and other
amortization 442 333 153
Other noninterest expense (b) 44,145 14,402 17,183
- ------------------------------------------- ---------------- ---------------- ----------------
Income (loss) before taxes 132,092 111,434 49,127
Income tax expense (benefit) 54,457 47,190 10,898
- ------------------------------------------- ---------------- ---------------- ----------------
Net income (loss) $ 77,635 64,244 38,229
- ------------------------------------------- ================ ================ ================
Average total assets (in millions) $ 4,277 4,118 6,827
- ------------------------------------------- ================ ================ ================
Capital expenditures (in millions) $ - - -
================ ================ ================
For the year ended
December 31, 1998
Net interest income (a) $ 140,033 108,863 40,611
Noninterest income (b) 20,215 4,624 20,726
- ------------------------------------------- ---------------- ---------------- ----------------
160,248 113,487 61,337
Provision for credit losses 2,964 1,243 2,330
Amortization of goodwill
and core deposit intangible - - -
Depreciation and other
amortization 467 352 97
Other noninterest expense (b) 42,100 12,336 17,477
- ------------------------------------------- ---------------- ---------------- ----------------
Income (loss) before taxes 114,717 99,556 41,433
Income tax expense (benefit) (b) 47,276 42,240 9,749
- ------------------------------------------- ---------------- ---------------- ----------------
Net income (loss) $ 67,441 57,316 31,684
- ------------------------------------------- ================ ================ ================
Average total assets (in millions) $ 3,653 3,527 6,025
- ------------------------------------------- ================ ================ ================
Capital expenditures (in millions) $ - - -
================ ================ ================
</TABLE>
<TABLE>
<CAPTION>
Residential
Mortgage Retail All
IN THOUSANDS, EXCEPT ASSET DATA Banking Banking Other Total
- ------------------------------------------- ----------------- ---------------- ------------------ --------------------
For the year ended
December 31, 1999
<S> <C> <C> <C> <C>
Net interest income (a) 26,854 375,803 29,717 759,397
Noninterest income 104,164 86,493 34,424 282,375
- ------------------------------------------- ----------------- ---------------- ------------------ --------------------
131,018 462,296 64,141 1,041,772
Provision for credit losses 22 25,480 3,992 44,500
Amortization of goodwill
and core deposit intangible 810 - 48,905 49,715
Depreciation and other
amortization 20,587 12,462 13,284 47,261
Other noninterest expense (b) 78,836 235,767 91,649 481,982
- ------------------------------------------- ----------------- ---------------- ------------------ --------------------
Income (loss) before taxes 30,763 188,587 (93,689) 418,314
Income tax expense (benefit) 9,984 77,046 (46,887) 152,688
- ------------------------------------------- ----------------- ---------------- ------------------ --------------------
Net income (loss) 20,779 111,541 (46,802) 265,626
- ------------------------------------------- ================= ================ ================== ====================
Average total assets (in millions) 635 4,244 956 21,057
- ------------------------------------------- ================= ================ ================== ====================
Capital expenditures (in millions) - 12 11 23
================= ================ ================== ====================
For the year ended
December 31, 1998
Net interest income (a) 23,797 339,510 19,133 671,947
Noninterest income (b) 111,283 79,391 26,700 262,939
- ------------------------------------------- ----------------- ---------------- ------------------ --------------------
135,080 418,901 45,833 934,886
Provision for credit losses (3) 19,557 17,109 43,200
Amortization of goodwill
and core deposit intangible 810 - 33,677 34,487
Depreciation and other
amortization 21,400 11,007 11,759 45,082
Other noninterest expense (b) 84,237 219,050 111,354 486,554
- ------------------------------------------- ----------------- ---------------- ------------------ --------------------
Income (loss) before taxes 28,636 169,287 (128,066) 325,563
Income tax expense (benefit) (b) 9,089 69,142 (59,907) 117,589
- ------------------------------------------- ----------------- ---------------- ------------------ --------------------
Net income (loss) 19,547 100,145 (68,159) 207,974
- ------------------------------------------- ================= ================ ================== ====================
Average total assets (in millions) 581 3,781 742 18,309
- ------------------------------------------- ================= ================ ================== ====================
Capital expenditures (in millions) 1 7 9 17
================= ================ ================== ====================
</TABLE>
-110-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
19. SEGMENT INFORMATION, CONTINUED
<TABLE>
<CAPTION>
Commercial Commercial Discretionary
IN THOUSANDS, EXCEPT ASSET DATA Banking Real Estate Portfolio
- ------------------------------------------------------------ ---------------- ---------------- ----------------
<S> <C> <C> <C>
For the year ended
December 31, 1997
Net interest income (a) $ 113,193 101,413 43,898
Noninterest income 15,664 3,430 3,824
- ------------------------------------------------------------ ---------------- ---------------- ----------------
128,857 104,843 47,722
Provision for credit losses 549 116 2,939
Amortization of goodwill
and core deposit intangible - - -
Depreciation and other
amortization 410 407 107
Other noninterest expense 35,443 12,158 15,355
- ------------------------------------------------------------ ---------------- ---------------- ----------------
Income (loss) before taxes 92,455 92,162 29,321
Income tax expense (benefit) 38,194 39,204 10,856
- ------------------------------------------------------------ ---------------- ---------------- ----------------
Net income (loss) $ 54,261 52,958 18,465
- ------------------------------------------------------------ ================ ================ ================
Average total assets (in millions) $ 2,777 3,151 3,883
- ------------------------------------------------------------ ================ ================ ================
Capital expenditures (in millions) $ - - -
================ ================ ================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Residential
Mortgage Retail All
IN THOUSANDS, EXCEPT ASSET DATA Banking Banking Other Total
- ----------------------------------------- ---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
For the year ended
December 31, 1997
Net interest income (a) 17,847 279,928 3,127 559,406
Noninterest income 76,837 64,778 25,996 190,529
- ----------------------------------------- ---------------- ---------------- ---------------- -----------------
94,684 344,706 29,123 749,935
Provision for credit losses (19) 35,866 6,549 46,000
Amortization of goodwill
and core deposit intangible 810 - 6,481 7,291
Depreciation and other
amortization 16,357 7,231 10,599 35,111
Other noninterest expense 62,069 190,002 64,347 379,374
- ----------------------------------------- ---------------- ---------------- ---------------- -----------------
Income (loss) before taxes 15,467 111,607 (58,853) 282,159
Income tax expense (benefit) 4,453 45,876 (32,665) 105,918
- ----------------------------------------- ---------------- ---------------- ---------------- -----------------
Net income (loss) 11,014 65,731 (26,188) 176,241
- ----------------------------------------- ================ ================ ================ =================
Average total assets (in millions) 360 3,066 72 13,309
- ----------------------------------------- ================ ================ ================ =================
Capital expenditures (in millions) 1 5 7 13
================ ================ ================ =================
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Net interest income is the difference between actual taxable-equivalent
interest earned on assets and interest paid on liabilities owned by a
segment and a funding charge (credit) based on the Company's internal funds
transfer pricing methodology. Segments are charged a cost to fund any
assets (e.g. loans) and are paid a funding credit for any funds provided
(e.g. deposits). The taxable-equivalent adjustment aggregated $7,710,000 in
1999, $7,186,000 in 1998 and $5,840,000 in 1997 and is eliminated in "All
Other" net interest income and income tax expense (benefit).
(b) Including the impact in the "All Other" category of the nonrecurring
merger-related expenses described in note 2 and, in 1998, the contribution
of appreciated investment securities described in note 14.
-111-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
20. REGULATORY MATTERS
Payment of dividends by M&T's banking subsidiaries is restricted by various
legal and regulatory limitations. Dividends from any banking subsidiary to M&T
are limited by the amount of earnings of the banking subsidiary in the current
year and the preceding two years. For purposes of this test, at December 31,
1999, approximately $485,176,000 was available for payment of dividends to M&T
from banking subsidiaries without prior regulatory approval.
Banking regulations prohibit extensions of credit by the subsidiary
banks to M&T unless appropriately secured by assets. Securities of affiliates
are not eligible as collateral for this purpose.
The banking subsidiaries are required to maintain
noninterest-earning reserves against certain deposit liabilities. During the
maintenance periods that included December 31, 1999 and 1998, cash and due
from banks included a daily average of $180,666,000 and $158,696,000,
respectively, for such purpose.
Federal regulators have adopted capital adequacy guidelines for bank
holding companies and banks. Failure to meet minimum capital requirements can
result in certain mandatory, and possibly additional discretionary, actions
by regulators that, if undertaken, could have a material effect on the
Company's financial statements. Under the capital adequacy guidelines, the
so-called "Tier 1 capital" and "Total capital" as a percentage of risk-
weighted assets and certain off-balance sheet financial instruments must be
at least 4% and 8%, respectively. In addition to these risk-based measures,
regulators also require banking institutions that meet certain qualitative
criteria to maintain a minimum "leverage" ratio of "Tier 1 capital" to
average total assets, adjusted for goodwill and certain other items, of at
least 3% to be considered adequately capitalized. As of December 31, 1999,
M&T and each of its banking subsidiaries exceeded all applicable capital
adequacy requirements.
As of December 31, 1999 and 1998, the most recent notifications
from federal regulators categorized each of M&T's banking subsidiaries as well
capitalized under the regulatory framework for prompt corrective action. To be
considered well capitalized, a banking institution must maintain Tier 1
risk-based capital, total risk-based capital and leverage ratios of at least 6%,
10% and 5%, respectively. Management is unaware of any conditions or events
since the latest notifications from federal regulators that have changed the
capital adequacy category of M&T's banking subsidiaries.
-112-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
20. REGULATORY MATTERS, CONTINUED
The capital ratios and amounts of the Company and its banking
subsidiaries as of December 31, 1999 and 1998 are presented below:
<TABLE>
<CAPTION>
M&T M&T M&T
(Consolidated) Bank Bank, N.A.
-------------- ----- ----------
(dollars in thousands)
<S> <C> <C> <C>
December 31, 1999:
Tier 1 Capital
- --------------
Amount $1,489,676 1,436,204 50,334
Ratio(a) 8.27% 8.19% 10.74%
Minimum required amount(b) 720,343 701,351 18,740
Total Capital
- -------------
Amount 1,845,907 1,786,515 55,089
Ratio(a) 10.25% 10.19% 11.76%
Minimum required amount(b) 1,440,686 1,402,702 37,479
Leverage
- --------
Amount 1,489,676 1,436,204 50,334
Ratio(c) 6.92% 6.92% 6.18%
Minimum required amount(b) 645,631 622,845 24,419
December 31, 1998:
Tier 1 Capital
- --------------
Amount $1,372,333 1,292,611 46,089
Ratio(a) 8.40% 8.07% 14.54%
Minimum required amount(b) 653,408 640,897 12,680
Total Capital
- -------------
Amount 1,725,020 1,639,940 51,499
Ratio(a) 10.56% 10.24% 16.25%
Minimum required amount(b) 1,306,816 1,281,795 25,360
Leverage
- --------
Amount 1,372,333 1,292,611 46,089
Ratio(c) 7.02% 6.80% 7.81%
Minimum required amount(b) 586,468 570,226 17,704
</TABLE>
(a) The ratio of capital to risk-weighted assets, as defined by regulation.
(b) Minimum amount of capital to be considered adequately capitalized, as
defined by regulation.
(c) The ratio of capital to average assets, as defined by regulation.
-113-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
21. PARENT COMPANY FINANCIAL STATEMENTS
CONDENSED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
In thousands 1999 1998
ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash
In subsidiary bank $ 728 4,583
Other 20 20
- -----------------------------------------------------------------------------------------------------------------------------------
Total cash 748 4,603
Due from subsidiaries
Money-market assets 1,387 4,335
Current income tax receivable 2,451 4,757
===================================================================================================================================
Total due from subsidiaries 3,838 9,092
Investments in subsidiaries
Banks and bank holding company 2,062,694 1,830,222
Other 7,734 7,734
Other assets 15,215 14,817
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 2,090,229 1,866,468
===================================================================================================================================
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities $ 6,450 6,369
Short-term borrowings 29,000 -
Long-term borrowings 257,733 257,733
===================================================================================================================================
Total liabilities 293,183 264,102
- -----------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY 1,797,046 1,602,366
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 2,090,229 1,866,468
===================================================================================================================================
</TABLE>
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year ended December 31
In thousands, except per share 1999 1998 1997
<S> <C> <C> <C>
INCOME
Dividends from bank and bank holding
company subsidiaries $ 76,000 121,500 192
Other income 2,618 20,222 8,558
- -----------------------------------------------------------------------------------------------------------------------------------
Total income 78,618 141,722 8,750
===================================================================================================================================
EXPENSE
Interest on short-term borrowings 103 - -
Interest on long-term borrowings 21,516 21,516 16,762
Other expense 2,635 27,168 2,710
- -----------------------------------------------------------------------------------------------------------------------------------
Total expense 24,254 48,684 19,472
===================================================================================================================================
Income (loss) before income taxes and equity in
undistributed income of subsidiaries 54,364 93,038 (10,722)
Income tax credits 8,621 17,541 4,496
Income (loss) before equity in undistributed
income of subsidiaries 62,985 110,579 (6,226)
- -----------------------------------------------------------------------------------------------------------------------------------
EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES
Net income of subsidiaries 278,641 218,895 182,659
Less: dividends received (76,000) (121,500) (192)
- -----------------------------------------------------------------------------------------------------------------------------------
Equity in undistributed income of subsidiaries 202,641 97,395 182,467
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 265,626 207,974 176,241
===================================================================================================================================
Net income per common share
Basic $ 34.05 27.30 26.60
Diluted 32.83 26.16 25.26
</TABLE>
-114-
<PAGE>
M&T BANK CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS, CONTINUED
21. PARENT COMPANY FINANCIAL STATEMENTS, CONTINUED
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
In Thousands 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 265,626 207,974 176,241
Adjustments to reconcile net income to net cash
provided by operating activities
Equity in undistributed income of subsidiaries (202,641) (97,395) (182,467)
Dividend-in-kind from subsidiary - - (83)
Provision for deferred income taxes (209) 793 810
Net change in accrued income and expense (467) 3,558 (327)
Transfer of noncash assets to charitable foundation - 9,272 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 62,309 124,202 (5,826)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------------------------------------------------------------------------------------------------------
Investment in subsidiary - (60,000) (19,734)
Other , net (34) (808) (767)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (34) (60,808) (20,501)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------------------------------------------------------------------------------------------------------
Proceeds from issuance of junior subordinated debt
to subsidiaries - - 257,733
Net increase in short-term borrowings 29,000 - -
Purchases of treasury stock (79,784) (231,779) (67,771)
Dividends paid - common (35,128) (28,977) (21,207)
Other, net 16,834 33,029 12,334
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (69,078) (227,727) 181,089
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents $ (6,803) (164,333) 154,762
Cash and cash equivalents at beginning of year 8,938 173,271 18,509
Cash and cash equivalents at end of year $ 2,135 8,938 173,271
- ------------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
Interest received during the year $ 459 2,496 4,743
Interest paid during the year 21,266 21,516 10,550
Income taxes received during the year 16,965 40,208 2,027
</TABLE>
-115-
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE. None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The terms in
office of Roy M. Goodman and Russell A. King as directors of the
Registrant will end on April 18, 2000, and they will not be
nominees for reelection to the Board of Directors at the 2000
Annual Meeting of Stockholders.
The identification of the Registrant's directors is incorporated
by reference to the caption "NOMINEES FOR DIRECTOR" contained in
the Registrant's definitive Proxy Statement for its 2000 Annual
Meeting of Stockholders, which will be filed with the Securities
and Exchange Commission on or about March 10, 2000. The
identification of the Registrant's executive officers is
presented under the caption "Executive Officers of the
Registrant" contained in Part I of this Annual Report on Form
10-K.
Disclosure of compliance with Section 16(a) of the Securities
Exchange Act of 1934, as amended, by the Registrant's directors
and executive officers, and persons who are the beneficial owners
of more than 10% of the Registrant's common stock, is
incorporated by reference to the caption "Section 16(a)
Beneficial Ownership Reporting Compliance" contained in the
Registrant's definitive Proxy Statement for its 2000 Annual
Meeting of Stockholders which will be filed with the Securities
and Exchange Commission on or about March 10, 2000.
Item 11. EXECUTIVE COMPENSATION. Incorporated by reference to the
Registrant's definitive Proxy Statement for its 2000 Annual
Meeting of Stockholders, which will be filed with the Securities
and Exchange Commission on or about March 10, 2000.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference to the Registrant's definitive Proxy
Statement for its 2000 Annual Meeting of Stockholders, which will
be filed with the Securities and Exchange Commission on or about
March 10, 2000.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Incorporated by
reference to the Registrant's definitive Proxy Statement for its
2000 Annual Meeting of Stockholders, which will be filed with the
Securities and Exchange Commission on or about March 10, 2000.
-116-
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial statements and financial statement schedules filed
as part of this Annual Report on Form 10-K. See Part II, Item
8. "Financial Statements and Supplementary Data."
Financial statement schedules are not required or are
inapplicable, and therefore have been omitted.
(b) Reports on Form 8-K.
On December 28, 1999, the Registrant filed a Current Report on
Form 8-K dated December 21, 1999, reporting on its December
21, 1999 public announcement that M&T Bank had entered into an
agreement to acquire Matthews, Bartlett, Dedecker, Inc., a
property and casualty insurance agency based in Buffalo, New
York.
On November 24, 1999, the Registrant filed a Current Report on
Form 8-K dated November 24, 1999, reporting on its
announcement on that date that its Board of Directors had
authorized the Registrant to repurchase up to 190,465 shares
of its common stock and that a previously reported repurchase
program authorized in February 1999 had been completed on
November 22, 1999.
(c) Exhibits required by Item 601 of Regulation S-K.
The exhibits listed on the Exhibit Index on pages 121 through
124 of this Annual Report on Form 10-K have been previously
filed, are filed herewith or are incorporated herein by
reference to other filings.
(d) Additional financial statement schedules.
None.
-117-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 24th day of
February, 2000.
M&T BANK CORPORATION
By: /s/ Robert G. Wilmers
-------------------------------------
Robert G. Wilmers
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- -----
<S> <C> <C>
Principal Executive
Officer:
/s/ Robert G. Wilmers President and
- ------------------------------------- Chief Executive Officer February 24, 2000
Robert G. Wilmers -----------------
Principal Financial
Officer:
/s/ Michael P. Pinto Executive Vice President
- ------------------------------------- and Chief Financial Officer February 24, 2000
Michael P. Pinto -----------------
Principal Accounting
Officer:
/s/ Michael R. Spychala Senior Vice President
- ------------------------------------- and Controller February 24, 2000
Michael R. Spychala ------------------
</TABLE>
-118-
<PAGE>
A majority of the board of directors:
- ------------------------------------- ----------------------
William F. Allyn
/s/ Brent D. Baird February 24, 2000
- ------------------------------------- ----------------------
Brent D. Baird
/s/ John H. Benisch February 24, 2000
- ------------------------------------- ----------------------
John H. Benisch
/s/ Robert J. Bennett February 24, 2000
- ------------------------------------- ----------------------
Robert J. Bennett
/s/ C. Angela Bontempo February 24, 2000
- ------------------------------------- ----------------------
C. Angela Bontempo
- ------------------------------------- ----------------------
Robert T. Brady
/s/ Patrick J. Callan February 24, 2000
- ------------------------------------- ----------------------
Patrick J. Callan
/s/ R. Carlos Carballada February 24, 2000
- ------------------------------------- ----------------------
R. Carlos Carballada
/s/ Michael J. Falcone February 24, 2000
- ------------------------------------- ----------------------
Michael J. Falcone
- ------------------------------------- ----------------------
Richard E. Garman
/s/ James V. Glynn February 24, 2000
- ------------------------------------- ----------------------
James V. Glynn
- ------------------------------------- ----------------------
Roy M. Goodman
/s/ Patrick W.E. Hodgson February 24, 2000
- ------------------------------------- ----------------------
Patrick W.E. Hodgson
/s/ Samuel T. Hubbard, Jr. February 24, 2000
- ------------------------------------- ----------------------
Samuel T. Hubbard, Jr.
/s/ Russell A. King February 24, 2000
- ------------------------------------- ----------------------
Russell A. King
/s/ Reginald B. Newman, II February 24, 2000
- ------------------------------------- ----------------------
Reginald B. Newman, II
-119-
<PAGE>
/s/ Peter J. O'Donnell, Jr. February 24, 2000
- ------------------------------------- ----------------------
Peter J. O'Donnell, Jr.
/s/ Jorge G. Pereira February 24, 2000
- ------------------------------------- ----------------------
Jorge G. Pereira
/s/ Robert E. Sadler, Jr. February 24, 2000
- ------------------------------------- ----------------------
Robert E. Sadler, Jr.
/s/ John L. Vensel February 24, 2000
- ------------------------------------- ----------------------
John L. Vensel
/s/ Herbert L. Washington February 24, 2000
- ------------------------------------- ----------------------
Herbert L. Washington
- ------------------------------------- ----------------------
John L. Wehle, Jr.
/s/ Christine B. Whitman February 24, 2000
- ------------------------------------- ----------------------
Christine B. Whitman
/s/ Robert G. Wilmers February 24, 2000
- ------------------------------------- ----------------------
Robert G. Wilmers
-120-
<PAGE>
EXHIBIT INDEX
2.1 Agreement and Plan of Reorganization dated as of December 9,
1998, by and among M&T Bank Corporation, Olympia Financial
Corp. and FNB Rochester Corp. Incorporated by reference to
Exhibit No. 99.1 to the Form 8-K dated December 9, 1998 (File
No. 1-9861).
2.2 Stock Option Agreement dated as of December 9, 1998 by and
between M&T Bank Corporation and FNB Rochester Corp.
Incorporated by reference to Exhibit No. 99.2 to the Form 8-K
dated December 9, 1998 (File No. 1-9861).
2.3 Form of Voting Agreement between the directors of FNB
Rochester Corp. and M&T Bank Corporation, dated as of December
9, 1998. Incorporated by reference to Exhibit No. 99.3 to the
Form 8-K dated December 9, 1998 (File No. 1-9861).
3.1 Restated Certificate of Incorporation of M&T Bank Corporation
dated May 29, 1998. Incorporated by reference to Exhibit No.
3.1 to the Form 10-Q for the quarter ended June 30, 1998 (File
No. 1-9861).
3.2 Bylaws of M&T Bank Corporation as last amended on February 16,
1999. Incorporated by reference to Exhibit No. 3.2 to the Form
10-K for the year ended December 31, 1998 (File No. 1- 9861).
4.1 Instruments defining the rights of security holders, including
indentures. Incorporated by reference to Exhibit Nos. 3.1,
3.2, 10.1 and 10.2 hereof.
4.2 Amended and Restated Trust Agreement dated as of January 31,
1997 by and among M&T Bank Corporation, Bankers Trust Company,
Bankers Trust (Delaware), and the Administrators named
therein. Incorporated by reference to Exhibit No. 4.1 to the
Form 8-K dated January 31, 1997 (File No. 1-9861).
4.3 Amendment to Amended and Restated Trust Agreement dated as
of January 31, 1997 by and among M&T Bank Corporation, Bankers
Trust Company, Bankers Trust (Delaware), and the
Administrators named therein. Filed herewith.
4.4 Junior Subordinated Indenture dated as of January 31, 1997 by
and between M&T Bank Corporation and Bankers Trust Company.
Incorporated by reference to Exhibit No. 4.2 to the Form 8-K
dated January 31, 1997 (File No. 1-9861).
4.5 Supplemental Indenture dated December 23, 1999 by and between
M&T Bank Corporation and Bankers Trust Company. Filed
herewith.
4.6 Guarantee Agreement dated as of January 31, 1997 by and
between M&T Bank Corporation and Bankers Trust Company.
Incorporated by reference to Exhibit No. 4.3 to Form 8-K dated
January 31, 1997 (File No. 1-9861).
4.7 Amendment to Guarantee Agreement dated as of January 31,
1997 by and between M&T Bank Corporation and Bankers Trust
Company. Filed herewith.
-121-
<PAGE>
4.8 Amended and Restated Trust Agreement dated as of June 6, 1997
by and among M&T Bank Corporation, Bankers Trust Company,
Bankers Trust (Delaware), and the Administrators named
therein. Incorporated by reference to Exhibit No. 4.1 to the
Form 8-K dated June 6, 1997 (File No. 1-9861).
4.9 Amendment to Amended and Restated Trust Agreement dated as
of June 6, 1997 by and among M&T Bank Corporation, Bankers
Trust Company, Bankers Trust (Delaware), and the
Administrators named therein. Filed herewith.
4.10 Junior Subordinated Indenture dated as of June 6, 1997 by and
between M&T Bank Corporation and Bankers Trust Company.
Incorporated by reference to Exhibit No. 4.2 to the Form 8-K
dated June 6, 1997 (File No. 1-9861).
4.11 Supplemental Indenture dated December 23, 1999 by and between
M&T Bank Corporation and Bankers Trust Company. Filed
herewith.
4.12 Guarantee Agreement dated as of June 6, 1997 by and between
M&T Bank Corporation and Bankers Trust Company. Incorporated
by reference to Exhibit No. 4.3 to Form 8-K dated June 6, 1997
(File No. 1-9861).
4.13 Amendment to Guarantee Agreement dated as of June 6, 1997
by and between M&T Bank Corporation and Bankers Trust Company.
Filed herewith.
4.14 Amended and Restated Declaration of Trust dated as of February
4, 1997 by and among Olympia Financial Corp., The Bank of New
York, The Bank of New York (Delaware), and the administrative
trustees named therein. Filed herewith.
4.15 Amendment to Amended and Restated Declaration of Trust dated
as of February 4, 1997 by and among Olympia Financial Corp.,
The Bank of New York, The Bank of New York (Delaware), and the
administrative trustees named therein. Filed herewith.
4.16 Indenture dated as of February 4, 1997 by and between
Olympia Financial Corp. and The Bank of New York.
Filed herewith.
4.17 Supplemental Indenture dated as of December 17, 1999 by and
between Olympia Financial Corp. and The Bank of New York.
Filed herewith.
4.18 Common Securities Guarantee Agreement dated as of February 4,
1997 by and between Olympia Financial Corp. and The Bank of
New York. Filed herewith.
4.19 Amendment to Common Securities Guarantee Agreement as of
December 17, 1999 by and between Olympia Financial Corp. and
The Bank of New York. Filed herewith.
4.20 Series A Capital Securities Guarantee Agreement dated as of
February 4, 1997 by and between Olympia Financial Corp. and
The Bank of New York. Filed herewith.
4.21 Amendment to Series A Capital Securities Guarantee Agreement
dated as of December 17, 1999 by and between Olympia Financial
Corp. and The Bank of New York. Filed herewith.
-122-
<PAGE>
10.1 Credit Agreement, dated as of November 19, 1999, between M&T
Bank Corporation and CitiBank, N.A. Filed herewith.
10.2 M&T Bank Corporation 1983 Stock Option Plan as last amended on
April 20, 1999. Incorporated by reference to Exhibit 10.3 to
Form 10-Q for the quarter ended March 31, 1999 (File No. 1-
9861).
10.3 M&T Bank Corporation Annual Executive Incentive Plan.
Incorporated by reference to Exhibit No. 10.3 to the Form 10-Q
for the quarter ended June 30, 1998 (File No. 1 - 9861).
Supplemental Deferred Compensation Agreements between
Manufacturers and Traders Trust Company and:
10.4 Robert E. Sadler, Jr. dated as of March 7, 1985. Incorporated
by reference to Exhibit No. (10)(d)(A) to the Form 10-K for
the year ended December 31, 1984 (File No. 0-4561);
10.5 Brian E. Hickey dated as of July 21, 1994. Incorporated by
reference to Exhibit No. 10.8 to the Form 10-K for the year
ended December 31, 1995 (File No. 1-9861).
10.6 Supplemental Deferred Compensation Agreement, dated July 17,
1989, between The East New York Savings Bank and Atwood
Collins, III. Incorporated by reference to Exhibit No. 10.11
to the Form 10-K for the year ended December 31, 1991 (File
No. 1-9861).
10.7 M&T Bank Corporation Supplemental Pension Plan, as amended and
restated. Incorporated by reference to Exhibit No. 10.7 to the
Form 10-Q for the quarter ended June 30, 1998 (File No. 1-
9861).
10.8 M&T Bank Corporation Supplemental Retirement Savings Plan.
Incorporated by reference to Exhibit No. 10.8 to the Form 10-Q
for the quarter ended June 30, 1998 (File No. 1-9861).
10.9 M&T Bank Corporation Deferred Bonus Plan, as amended and
restated. Incorporated by reference to Exhibit No. 10.9 to the
Form 10-Q for the quarter ended June 30, 1998 (File No. 1-
9861).
10.10 M&T Bank Corporation Directors' Stock Plan, as amended and
restated. Incorporated by reference to Exhibit No. 10.11 to
Form 10-K for the year ended December 31, 1998 (File No. 1-
9861).
10.11 Restated 1987 Stock Option and Appreciation Rights Plan of
ONBANCorp, Inc. Incorporated by reference to Exhibit 10.11 to
the Form 10-Q for the quarter ended June 30, 1998 (File No. 1-
9861).
10.12 1992 ONBANCorp Directors' Stock Option Plan. Incorporated by
reference to Exhibit 10.12 of the Form 10-Q for the quarter
ended June 30, 1998 (File No. 1-9861).
10.13 Amended Franklin First Financial Corp. 1988 Stock Incentive
Plan. Incorporated by reference to Exhibit 10.13 to the Form
10-Q for the quarter ended June 30, 1998 (File No. 1-9861).
-123-
<PAGE>
10.14 Employment Agreement, dated April 1, 1998, between M&T Bank
Corporation and Robert J. Bennett. Incorporated by reference
to Exhibit 10.14 to the Form 10-Q for the quarter ended June
30, 1998 (File No. 1-9861).
10.15 SERP Assumption Agreement, dated as of January 15, 1993,
between Robert J. Bennett and ONBANCorp, Inc. Incorporated by
reference to Exhibit 10.15 to the Form 10-Q for the quarter
ended June 30, 1998 (File No. 1-9861).
11.1 Statement re: Computation of Earnings Per Common Share.
Incorporated by reference to note 12 of Notes to Financial
Statements filed herewith in Part II, Item 8, "Financial
Statements and Supplementary Data."
21.1 Subsidiaries of the Registrant. Incorporated by reference to
the caption "Subsidiaries" contained in Part I, Item 1 hereof.
23.1 Consent of PricewaterhouseCoopers LLP re: Registration
Statement Nos. 33-32044 and 333-16077. Filed herewith.
23.2 Consent of PricewaterhouseCoopers LLP re: Registration
Statement Nos. 33-12207, 33-58500, 33-63917, 333-43171,
333-43175 and 333-63985. Filed herewith.
27.1 Article 9 Financial Data Schedule for the year ended December
31, 1999. Filed herewith.
-124-
<PAGE>
EXHIBIT 4.3
AMENDMENT TO AMENDED AND RESTATED TRUST AGREEMENT
This Amendment to Amended and Restated Trust Agreement (the
"Amendment") is made as of December 23, 1999 by and between M&T Bank
Corporation, a New York corporation, and Bankers Trust Company, a New York
banking corporation.
WITNESSETH
WHEREAS, M&T Bank Corporation, formerly known as First Empire State
Corporation, (the "Depositor"), Bankers Trust Company, 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"), and Bankers Trust
(Delaware), a Delaware banking corporation, as Delaware trustee (the "Delaware
Trustee") previously entered into an Amended and Restated Trust Agreement dated
as of January 31, 1997 (the "Trust Agreement"); and
WHEREAS, the Depositor has changed its corporate name from "First
Empire State Corporation" to "M&T Bank Corporation;" and
WHEREAS, the Administrators of the Issuer Trust have changed the name
of the Issuer Trust from "First Empire Capital Trust I" to "M&T Capital Trust
I;" and
WHEREAS, the Depositor, as Holder of a Majority in Liquidation Amount
of the Common Securities, and the Property Trustee desire to further amend the
Trust Agreement to provide for the change of the name of the Depositor from
"First Empire State Corporation" to "M&T Bank Corporation," and the name of the
Issuer Trust from "First Empire Capital Trust I" to "M&T Capital Trust I."
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 to this Amendment, for
the benefit of the other parties and for the benefit of the Holders, hereby
amends the Trust Agreement, and agrees, intending to be legally bound, as
follows:
SECTION 1. DEFINITIONS.
1.1. For all purposes of this Amendment, except as otherwise expressly
provided, terms used but not defined in this Amendment shall have the meanings
assigned to them in the Trust Agreement.
1.2. The definition of "Depositor" in the preamble of the Trust
Agreement is amended to mean M&T Bank Corporation.
1.3. The definition of "Issuer Trust" in Section of 1.1 of the Trust
Agreement is amended to mean "M&T Capital Trust I."
<PAGE>
SECTION 2. MISCELLANEOUS.
2.1. CONTINUING AGREEMENT. The Trust Agreement shall not be amended by
this Amendment except as specifically provided in this Amendment and, amended as
so specifically provided, the Trust Agreement shall remain in full force and
effect. References in the Trust Agreement to "this Trust Agreement" shall be
deemed to be references to the Trust Agreement as amended by this Amendment.
2.2. CONFLICTS. In the event of a conflict between the terms and
conditions of the Trust Agreement and the terms and conditions of this
Amendment, the terms and conditions of this Amendment shall prevail.
2.3. COUNTERPART ORIGINALS. The parties may sign any number of copies
of this Amendment. Each signed copy shall be an original, but all of them
together represent the same agreement.
2.4. HEADINGS, ETC. The headings of the sections of this Amendment have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
IN WITNESS WHEREOF the parties have caused this Amendment to be
executed as of the day and year first above written.
M&T BANK CORPORATION,
as Holder of a Majority in Liquidation
Amount of the Common Securities
By: /s/ Michael P. Pinto
----------------------------------
Michael P. Pinto
Executive Vice President and Chief
Financial Officer
BANKERS TRUST COMPANY,
as Property Trustee,
and not in its individual capacity
By: /s/ Christopher D. Lew
----------------------------------
Christopher D. Lew
Assistant Treasurer
<PAGE>
EXHIBIT 4.5
SUPPLEMENTAL INDENTURE
This Supplemental Indenture is made as of December 23, 1999 by and
between M&T Bank Corporation, a New York corporation, and Bankers Trust Company,
a New York banking corporation.
WITNESSETH
WHEREAS, M&T Bank Corporation, formerly known as First Empire State
Corporation, and Bankers Trust Company, as trustee, (in such capacity, the
"Indenture Trustee") previously entered into a Junior Subordinated Indenture
dated as of January 31, 1997 (the "Indenture") to provide for the issuance from
time to time of unsecured junior subordinated debt securities in series; and
WHEREAS, First Empire State Corporation has changed its corporate name
to "M&T Bank Corporation;" and
WHEREAS, the Administrators of the Issuer Trust have changed the name
of the First Empire Capital Trust I to "M&T Capital Trust I;" and
WHEREAS, M&T Bank Corporation and the Indenture Trustee desire to amend
the Indenture to provide for the change of the name of First Empire State
Corporation to "M&T Bank Corporation."
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 to this Amendment, for
the benefit of the other parties and for the benefit of the Holders, hereby
amends the Indenture, and agrees, intending to be legally bound, as follows:
SECTION 1. DEFINITIONS.
1.1. For all purposes of this Amendment, except as otherwise expressly
provided, terms used but not defined in this Amendment shall have the meanings
assigned to them in the Indenture.
1.2. The words "First Empire State Corporation" are hereby amended to
read "M&T Bank Corporation" in each place they appear in the Indenture.
SECTION 2. MISCELLANEOUS.
2.1. CONTINUING AGREEMENT. The Indenture shall not be amended by this
Amendment except as specifically provided in this Amendment and, amended as so
specifically provided, the Indenture shall remain in full force and effect.
References in the Indenture to "this Indenture"
<PAGE>
shall be deemed to be references to the Indenture as amended by this Amendment.
2.2. CONFLICTS. In the event of a conflict between the terms and
conditions of the Indenture and the terms and conditions of this Amendment, the
terms and conditions of this Amendment shall prevail.
2.3. COUNTERPART ORIGINALS. The parties may sign any number of copies
of this Amendment. Each signed copy shall be an original, but all of them
together represent the same agreement.
2.4. HEADINGS, ETC. The headings of the sections of this Amendment have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
IN WITNESS WHEREOF the parties have caused this Amendment to be
executed as of the day and year first above written.
M&T BANK CORPORATION
By: /s/ Michael P. Pinto
--------------------------------
Michael P. Pinto
Executive Vice President and Chief
Financial Officer
BANKERS TRUST COMPANY,
as Trustee, and not in its
individual capacity
By: /s/ Christopher D. Lew
--------------------------------
Christopher D. Lew
Assistant Treasurer
<PAGE>
EXHIBIT 4.7
AMENDMENT TO GUARANTEE AGREEMENT
This Amendment to Guarantee Agreement (the "Amendment") is made as of
December 23, 1999 by and between M&T Bank Corporation, a New York corporation,
and Bankers Trust Company, a New York banking corporation.
WITNESSETH
WHEREAS, M&T Bank Corporation, formerly known as First Empire State
Corporation, (the "Guarantor"), and Bankers Trust Company, as trustee (in such
capacity, the "Guarantee Trustee") previously entered into a Guarantee Agreement
dated as of January 31, 1997 (the "Guarantee Agreement") by which the Guarantor
agreed to make certain payments to the Holders of Capital Securities issued
pursuant to an Amended and Restated Trust Agreement dated as of January 31, 1997
by and between Guarantor, in its capacity as Depositor, Bankers Trust Company,
as property trustee, and Bankers Trust (Delaware), a Delaware banking
corporation, as Delaware trustee; and
WHEREAS, the Guarantor has changed its corporate name from "First
Empire State Corporation" to "M&T Bank Corporation;" and
WHEREAS, the Administrators of the Issuer Trust have changed the name
of the Issuer Trust from "First Empire Capital Trust I" to "M&T Capital Trust
I;" and
WHEREAS, the Guarantor and the Guarantee Trustee desire to amend the
Guarantee Agreement to provide for the change of the name of the Guarantor from
"First Empire State Corporation" to "M&T Bank Corporation," and the name of the
Issuer Trust from "First Empire Capital Trust I" to "M&T Capital Trust I."
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 to this Amendment, for
the benefit of the other parties and for the benefit of the Holders, hereby
amends the Guarantee Agreement, and agrees, intending to be legally bound, as
follows:
SECTION 1. DEFINITIONS.
1.1. For all purposes of this Amendment, except as otherwise expressly
provided, terms used but not defined in this Amendment shall have the meanings
assigned to them in the Guarantee Agreement.
1.2. The definition of "Guarantor" in the preamble of the Guarantee
Agreement is amended to mean M&T Bank Corporation.
<PAGE>
1.3. The definition of "Issuer Trust" in the preamble of the Guarantee
Agreement is amended to mean "M&T Capital Trust I."
SECTION 2. MISCELLANEOUS.
2.1. CONTINUING AGREEMENT. The Guarantee Agreement shall not be amended
by this Amendment except as specifically provided in this Amendment and, amended
as so specifically provided, the Guarantee Agreement shall remain in full force
and effect. References in the Guarantee Agreement to "this Guarantee Agreement"
shall be deemed to be references to the Guarantee Agreement as amended by this
Amendment.
2.2. CONFLICTS. In the event of a conflict between the terms and
conditions of the Guarantee Agreement and the terms and conditions of this
Amendment, the terms and conditions of this Amendment shall prevail.
2.3. COUNTERPART ORIGINALS. The parties may sign any number of copies
of this Amendment. Each signed copy shall be an original, but all of them
together represent the same agreement.
2.4. HEADINGS, ETC. The headings of the sections of this Amendment have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
IN WITNESS WHEREOF the parties have caused this Amendment to be
executed as of the day and year first above written.
M&T BANK CORPORATION,
as Guarantor
By: /s/ Michael P. Pinto
--------------------------------
Michael P. Pinto
Executive Vice President and
Chief Financial Officer
BANKERS TRUST COMPANY,
as Guarantee Trustee,
and not in its individual capacity
By: /s/ Christopher D. Lew
--------------------------------
Christopher D. Lew
Assistant Treasurer
<PAGE>
EXHIBIT 4.9
AMENDMENT TO AMENDED AND RESTATED TRUST AGREEMENT
This Amendment to Amended and Restated Trust Agreement (the
"Amendment") is made as of December 23, 1999 by and between M&T Bank
Corporation, a New York corporation, and Bankers Trust Company, a New York
banking corporation.
WITNESSETH
WHEREAS, M&T Bank Corporation, formerly known as First Empire State
Corporation, (the "Depositor"), Bankers Trust Company, 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"), and Bankers Trust
(Delaware), a Delaware banking corporation, as Delaware trustee (the "Delaware
Trustee") previously entered into an Amended and Restated Trust Agreement dated
as of June 6, 1997 (the "Trust Agreement"); and
WHEREAS, the Depositor has changed its corporate name from "First
Empire State Corporation" to "M&T Bank Corporation;" and
WHEREAS, the Administrators of the Issuer Trust have changed the name
of the Issuer Trust from "First Empire Capital Trust II" to "M&T Capital Trust
II;" and
WHEREAS, the Depositor, as Holder of a Majority in Liquidation Amount
of the Common Securities, and the Property Trustee desire to further amend the
Trust Agreement to provide for the change of the name of the Depositor from
"First Empire State Corporation" to "M&T Bank Corporation," and the name of the
Issuer Trust from "First Empire Capital Trust II" to "M&T Capital Trust II."
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 to this Amendment, for
the benefit of the other parties and for the benefit of the Holders, hereby
amends the Trust Agreement, and agrees, intending to be legally bound, as
follows:
SECTION 1. DEFINITIONS.
1.1. For all purposes of this Amendment, except as otherwise expressly
provided, terms used but not defined in this Amendment shall have the meanings
assigned to them in the Trust Agreement.
1.2. The definition of "Depositor" in the preamble of the Trust
Agreement is amended to mean M&T Bank Corporation.
1.3. The definition of "Issuer Trust" in Section of 1.1 of the Trust
Agreement is amended to mean "M&T Capital Trust II."
<PAGE>
SECTION 2. MISCELLANEOUS.
2.1. CONTINUING AGREEMENT. The Trust Agreement shall not be amended by
this Amendment except as specifically provided in this Amendment and, amended as
so specifically provided, the Trust Agreement shall remain in full force and
effect. References in the Trust Agreement to "this Trust Agreement" shall be
deemed to be references to the Trust Agreement as amended by this Amendment.
2.2. CONFLICTS. In the event of a conflict between the terms and
conditions of the Trust Agreement and the terms and conditions of this
Amendment, the terms and conditions of this Amendment shall prevail.
2.3. COUNTERPART ORIGINALS. The parties may sign any number of copies
of this Amendment. Each signed copy shall be an original, but all of them
together represent the same agreement.
2.4. HEADINGS, ETC. The headings of the sections of this Amendment have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
IN WITNESS WHEREOF the parties have caused this Amendment to be
executed as of the day and year first above written.
M&T BANK CORPORATION,
as Holder of a Majority in Liquidation
Amount of the Common Securities
By: /s/ Michael P. Pinto
----------------------------------
Michael P. Pinto
Executive Vice President and Chief
Financial Officer
BANKERS TRUST COMPANY,
as Property Trustee,
and not in its individual capacity
By: /s/ Christopher D. Lew
------------------------------------
Christopher D. Lew
Assistant Treasurer
<PAGE>
EXHIBIT 4.11
SUPPLEMENTAL INDENTURE
This Supplemental Indenture is made as of December 23, 1999 by and
between M&T Bank Corporation, a New York corporation, and Bankers Trust Company,
a New York banking corporation.
WITNESSETH
WHEREAS, M&T Bank Corporation, formerly known as First Empire State
Corporation, and Bankers Trust Company, as trustee, (in such capacity, the
"Indenture Trustee") previously entered into a Junior Subordinated Indenture
dated as of June 6, 1997 (the "Indenture") to provide for the issuance from time
to time of unsecured junior subordinated debt securities in series; and
WHEREAS, First Empire State Corporation has changed its corporate name
to "M&T Bank Corporation;" and
WHEREAS, the Administrators of the First Empire Capital Trust II have
changed the name of that trust to "M&T Capital Trust II" (the "Issuer Trust");
and
WHEREAS, M&T Bank Corporation and the Indenture Trustee desire to amend
the Indenture to provide for the change of the name of First Empire State
Corporation to "M&T Bank Corporation" and for the change of the name of the
Issuer Trust.
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 to this Amendment, for
the benefit of the other parties and for the benefit of the Holders, hereby
amends the Indenture, and agrees, intending to be legally bound, as follows:
SECTION 1. DEFINITIONS.
1.1. For all purposes of this Amendment, except as otherwise expressly
provided, terms used but not defined in this Amendment shall have the meanings
assigned to them in the Indenture.
1.2. The words "First Empire State Corporation" are hereby amended to
read "M&T Bank Corporation" in each place they appear in the Indenture.
1.3. The words "First Empire Capital Trust" are hereby amended to read
"M&T Capital Trust" in each place they appear in the Indenture.
<PAGE>
SECTION 2. MISCELLANEOUS.
2.1. CONTINUING AGREEMENT. The Indenture shall not be amended by this
Amendment except as specifically provided in this Amendment and, amended as so
specifically provided, the Indenture shall remain in full force and effect.
References in the Indenture to "this Indenture" shall be deemed to be references
to the Indenture as amended by this Amendment.
2.2. CONFLICTS. In the event of a conflict between the terms and
conditions of the Indenture and the terms and conditions of this Amendment, the
terms and conditions of this Amendment shall prevail.
2.3. COUNTERPART ORIGINALS. The parties may sign any number of copies
of this Amendment. Each signed copy shall be an original, but all of them
together represent the same agreement.
2.4. HEADINGS, ETC. The headings of the sections of this Amendment have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
IN WITNESS WHEREOF the parties have caused this Amendment to be
executed as of the day and year first above written.
M&T BANK CORPORATION
By: /s/ Michael P. Pinto
-----------------------
Michael P. Pinto
Executive Vice President and Chief Financial Officer
BANKERS TRUST COMPANY,
as Trustee, and not in its individual capacity
By: /s/ Christopher D. Lew
------------------------
Christopher D. Lew
Assistant Treasurer
<PAGE>
EXHIBIT 4.13
AMENDMENT TO GUARANTEE AGREEMENT
This Amendment to Guarantee Agreement (the "Amendment") is
made as of December 23, 1999 by and between M&T Bank Corporation, a New York
corporation, and Bankers Trust Company, a New York banking corporation.
WITNESSETH
WHEREAS, M&T Bank Corporation, formerly known as First Empire
State Corporation, (the "Guarantor"), and Bankers Trust Company, as trustee (in
such capacity, the "Guarantee Trustee") previously entered into a Guarantee
Agreement dated as of June 6, 1997 (the "Guarantee Agreement") by which the
Guarantor agreed to make certain payments to the Holders of Capital Securities
issued pursuant to an Amended and Restated Trust Agreement dated as of June 6,
1997 by and between Guarantor, in its capacity as Depositor, Bankers Trust
Company, as property trustee, and Bankers Trust (Delaware), a Delaware banking
corporation, as Delaware trustee; and
WHEREAS, the Guarantor has changed its corporate name from
"First Empire State Corporation" to "M&T Bank Corporation;" and
WHEREAS, the Administrators of the Issuer Trust have changed
the name of the Issuer Trust from "First Empire Capital Trust II" to "M&T
Capital Trust II;" and
WHEREAS, the Guarantor and the Guarantee Trustee desire to
amend the Guarantee Agreement to provide for the change of the name of the
Guarantor from "First Empire State Corporation" to "M&T Bank Corporation," and
the name of the Issuer Trust from "First Empire Capital Trust II" to "M&T
Capital Trust II."
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 to this
Amendment, for the benefit of the other parties and for the benefit of the
Holders, hereby amends the Guarantee Agreement, and agrees, intending to be
legally bound, as follows:
SECTION 1. DEFINITIONS.
1.1. For all purposes of this Amendment, except as otherwise
expressly provided, terms used but not defined in this Amendment shall have the
meanings assigned to them in the Guarantee Agreement.
1.2. The definition of "Guarantor" in the preamble of the
Guarantee Agreement is amended to mean M&T Bank Corporation.
<PAGE>
1.3. The definition of "Issuer Trust" in the preamble of the
Guarantee Agreement is amended to mean "M&T Capital Trust II."
SECTION 2. MISCELLANEOUS.
2.1. CONTINUING AGREEMENT. The Guarantee Agreement shall not
be amended by this Amendment except as specifically provided in this Amendment
and, amended as so specifically provided, the Guarantee Agreement shall remain
in full force and effect. References in the Guarantee Agreement to "this
Guarantee Agreement" shall be deemed to be references to the Guarantee Agreement
as amended by this Amendment.
2.2. CONFLICTS. In the event of a conflict between the terms
and conditions of the Guarantee Agreement and the terms and conditions of this
Amendment, the terms and conditions of this Amendment shall prevail.
2.3. COUNTERPART ORIGINALS. The parties may sign any number of
copies of this Amendment. Each signed copy shall be an original, but all of them
together represent the same agreement.
2.4. HEADINGS, ETC. The headings of the sections of this
Amendment have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
IN WITNESS WHEREOF the parties have caused this Amendment to
be executed as of the day and year first above written.
M&T BANK CORPORATION,
as Guarantor
By: /S/ MICHAEL P. PINTO
-------------------------------
Michael P. Pinto
Executive Vice President
and Chief Financial Officer
BANKERS TRUST COMPANY,
as Guarantee Trustee,
and not in its individual capacity
By: /S/ CHRISTOPHER D. LEW
-------------------------------
Christopher D. Lew
Assistant Treasurer
-2-
<PAGE>
Exhibit 4.14
================================================================================
AMENDED AND RESTATED DECLARATION
OF TRUST
ONBANK CAPITAL TRUST I
Dated as of February 4, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions................................................ 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.......................... 11
SECTION 2.2 Lists of Holders of Securities............................ 11
SECTION 2.3 Reports by the Property Trustee............................ 12
SECTION 2.4 Periodic Reports to Property Trustee....................... 12
SECTION 2.5 Evidence of Compliance with Conditions Precedent............12
SECTION 2.6 Events of Default; Waiver.................................. 12
SECTION 2.7 Event of Default; Notice................................... 14
ARTICLE III
ORGANIZATION
SECTION 3.1 Name....................................................... 15
SECTION 3.2 Office..................................................... 15
SECTION 3.3 Purpose................................................ ... 15
SECTION 3.4 Authority.................................................. 15
SECTION 3.5 Title to Property of the Trust............................. 16
SECTION 3.6 Powers and Duties of the Administrative
Trustees....................................................16
SECTION 3.7 Prohibition of Actions by the Trust and the
Trustees................................................... 19
SECTION 3.8 Powers and Duties of the Property Trustee.................. 20
SECTION 3.9 Certain Duties and Responsibilities of the
Property Trustee........................................... 23
SECTION 3.10 Certain Rights of Property Trustee......................... 25
SECTION 3.11 Delaware Trustee........................................... 27
SECTION 3.12 Execution of Documents..................................... 27
SECTION 3.13 Not Responsible for Recitals or Issuance of
Securities................................................. 28
SECTION 3.14 Duration of Trust.......................................... 28
SECTION 3.15 Mergers.................................................... 28
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.................... 30
SECTION 4.2 Responsibilities of the Sponsor............................ 30
SECTION 4.3 Right to Proceed........................................... 31
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees: Appointment of
Co-Trustee..................................................31
SECTION 5.2 Delaware Trustee........................................... 32
SECTION 5.3 Property Trustee; Eligibility.............................. 32
SECTION 5.4 Certain Qualifications of Administrative
Trustees and Delaware Trustee Generally.................... 33
SECTION 5.5 Administrative Trustees.................................... 33
SECTION 5.6 Delaware Trustee........................................... 34
SECTION 5.7 Appointment, Removal and Resignation of
Trustees................................................... 34
SECTION 5.8 Vacancies among Trustees................................... 36
SECTION 5.9 Effect of Vacancies........................................ 36
SECTION 5.10 Meetings................................................... 36
SECTION 5.11 Delegation of Power........................................ 37
Section 5.12 Merger, Conversion, Consolidation or Succession
to Business................................................ 37
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.............................................. 38
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.................... 38
SECTION 7.2 Execution and Authentication............................... 39
SECTION 7.3 Form and Dating............................................ 40
SECTION 7.4 Registrar, Paying Agent and Exchange Agent................. 42
SECTION 7.5 Paying Agent to Hold Money in Trust........................ 42
SECTION 7.6 Replacement Securities..................................... 43
SECTION 7.7 Outstanding Capital Securities............................. 43
SECTION 7.8 Capital Securities in Treasury............................. 44
SECTION 7.9 Temporary Securities....................................... 44
SECTION 7.10 Cancellation............................................... 45
SECTION 7.11 CUSIP Numbers.............................................. 45
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust....................................... 46
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities..................................... 47
SECTION 9.2 Transfer Procedures and Restrictions....................... 48
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 9.3 Deemed Security Holders.................................... 56
SECTION 9.4 Book Entry Interests....................................... 57
SECTION 9.5 Notices to Clearing Agency................................. 57
SECTION 9.6 Appointment of Successor Clearing Agency................... 58
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.................................................. 58
SECTION 10.2 Exculpation................................................ 58
SECTION 10.3 Fiduciary Duty............................................. 59
SECTION 10.4 Indemnification............................................ 60
SECTION 10.5 Outside Businesses......................................... 63
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year................................................ 64
SECTION 11.2 Certain Accounting Matters................................. 64
SECTION 11.3 Banking.................................................... 66
SECTION 11.4 Withholding................................................ 66
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments................................................. 67
SECTION 12.2 Meetings of the Holders; Action by Written
Consent.................................................... 68
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property
Trustee.................................................... 70
SECTION 13.2 Representations and Warranties of Delaware
Trustee.................................................... 71
ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights Agreement; Liquidated
Damages.................................................... 72
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices.................................................... 72
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 15.2 Governing Law.............................................. 73
SECTION 15.3 Intention of the Parties................................... 73
SECTION 15.4 Headings................................................... 73
SECTION 15.5 Successors and Assigns..................................... 74
SECTION 15.6 Partial Enforceability..................................... 74
SECTION 15.7 Counterparts............................................... 74
ANNEX I TERMS OF SECURITIES....................................... I-1
EXHIBIT A-1 FORM OF CAPITAL SECURITY CERTIFICATE..................... A1-1
EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE...................... A2-1
EXHIBIT B SPECIMEN OF DEBENTURE.................................... B-1
EXHIBIT C PURCHASE AGREEMENT....................................... C-1
</TABLE>
iv
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
- ------------------- -----------
<S> <C>
310(a)..............................................................
310(c)..............................................................
311(c)..............................................................
312(a)..............................................................
312(b)..............................................................
313.................................................................
314(a)..............................................................
314(b)..............................................................
314(c)..............................................................
314(d)..............................................................
314(f)..............................................................
315(a)..............................................................
315(c)..............................................................
315(d)..............................................................
316(a)..............................................................
316(c)..............................................................
</TABLE>
- ----------
* This Cross-Reference Table does not constitute part of the Declaration and
shall not affect the interpretation of any of its terms or provisions.
v
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
ONBANK CAPITAL TRUST I
February 4, 1997
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of February 4, 1997, by the Trustees (as defined herein), the
Sponsor (as defined herein) and by the holders, from time to time, of undivided
beneficial interests in the Trust to be issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor established OnBank Capital
Trust I (the "Trust"), a trust formed under the Delaware Business Trust Act
pursuant to a Declaration of Trust dated as of January 24, 1997 (the "Original
Declaration"), and a Certificate of Trust filed with the Secretary of State of
the State of Delaware on January 24, 1997, for the sole purpose of issuing and
selling certain securities representing undivided beneficial interests in the
assets of the Trust and investing the proceeds thereof in certain Debentures of
the Debenture Issuer (each as hereinafter defined);
WHEREAS, as of the date hereof, no interests in the Trust have been
issued;
WHEREAS, all of the Trustees and the Sponsor, by this Declaration,
amend and restate each and every term and provision of the Original Declaration;
and
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a statutory business trust under the Business Trust Act
and that this Declaration constitute the governing instrument of such business
trust, the Trustees declare that all assets contributed to the Trust will be
held in trust for the benefit of the holders, from time to time, of the
securities representing undivided beneficial interests in the assets of the
Trust issued hereunder, subject to the provisions of this Declaration.
<PAGE>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in
the preamble above have the respective meanings assigned to them in this
Section 1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to
this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections of and Annexes and
Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Declaration unless otherwise defined in this Declaration
or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"ADMINISTRATIVE TRUSTEE" has the meaning set forth in Section 5.1.
"AFFILIATE" has the same meaning as given to that term in Rule 405
under the Securities Act or any successor rule thereunder.
"AGENT" means any Paying Agent, Registrar or Exchange Agent.
"AUTHORIZED OFFICER" of a Person means any other Person that is
authorized to legally bind such former Person.
"BOOK ENTRY INTEREST" means a beneficial interest in a Global
Certificate registered in the name of a Clearing Agency or its nominee,
ownership and transfers of which shall be maintained and made through book
entries by a Clearing Agency as described in Section 9.4.
"BUSINESS DAY" means any day other than a Saturday or a Sunday or a
day on which banking institutions in the City of New
2
<PAGE>
York or Syracuse, New York are authorized or required by law or executive order
to close.
"BUSINESS TRUST ACT" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss.3801 et seq., as it may be amended from time to time, or
any successor legislation.
"CAPITAL SECURITY BENEFICIAL OWNER" means, with respect to a Book
Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).
"CAPITAL SECURITIES" means, collectively, the Series A Capital
Securities and the Series B Capital Securities.
"CAPITAL SECURITIES GUARANTEE" means, collectively, the Series A
Capital Securities Guarantee and the Series B Capital
Securities Guarantee.
"CLEARING AGENCY" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Capital Securities and in whose name or in the name of a nominee of that
organization shall be registered a Global Certificate and which shall undertake
to effect book entry transfers and pledges of the Capital Securities.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"CLOSING TIME" means the "Closing Time" under the Purchase
Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor legislation.
"COMMISSION" means the United States Securities and Exchange
Commission as from time to time constituted, or if any time after the execution
of this Declaration such Commission is not existing and performing the duties
now assigned to it under applicable Federal securities laws, then the body
performing such duties at such time.
"COMMON SECURITIES" has the meaning specified in Section 7.1(a).
3
<PAGE>
"COMMON SECURITIES GUARANTEE" means the guarantee agreement dated as
of February 4, 1997 of the Sponsor in respect of the Common Securities.
"COMPANY INDEMNIFIED PERSON" means (a) any Administrative Trustee;
(b) any Affiliate of any Administrative Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Administrative Trustee; or (d) any officer, employee or agent of the Trust or
its Affiliates.
"CORPORATE TRUST OFFICE" means the office of the Property Trustee at
which the corporate trust business of the Property Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Agreement is located at 101 Barclay Street, 21 West, New York,
New York 10286.
"COVERED PERSON" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"DEBENTURE ISSUER" means ONBANCorp, Inc., a Delaware corporation, or
any successor entity resulting from any consolidation, amalgamation, merger or
other business combination, in its capacity as issuer of the Debentures under
the Indenture.
"DEBENTURE TRUSTEE" means The Bank of New York, a New York banking
corporation, as trustee under the Indenture until a successor is appointed
thereunder, and thereafter means such successor trustee.
"DEBENTURES" means, collectively, the Series A Debentures and the
Series B Debentures.
"DEFAULT" means an event, act or condition that with notice of lapse
of time, or both, would constitute an Event of Default.
"DEFINITIVE CAPITAL SECURITIES" shall have the meaning set forth in
Section 7.3(c).
"DELAWARE TRUSTEE" has the meaning set forth in Section 5.2.
"DIRECT ACTION" shall have the meaning set forth in Section 3.8(e).
"DISTRIBUTION" means a distribution payable to Holders in accordance
with Section 6.1.
4
<PAGE>
"DTC" means The Depository Trust Company, the initial Clearing
Agency.
"EVENT OF DEFAULT" in respect of the Securities means an Event of
Default (as defined in the Indenture) that has occurred and is continuing in
respect of the Debentures.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.
"EXCHANGE AGENT" has the meaning set forth in Section 7.4.
"EXCHANGE OFFER" means the offer that may be made pursuant to the
Registration Rights Agreement (i) by the Trust to exchange Series B Capital
Securities for Series A Capital Securities and (ii) by the Debenture Issuer to
exchange Series B Debentures for Series A Debentures and the Series B Capital
Securities Guarantee for the Series A Capital Securities Guarantee.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System.
"FIDUCIARY INDEMNIFIED PERSON" has the meaning set forth in
Section 10.4(b).
"GLOBAL CAPITAL SECURITY" has the meaning set forth in
Section 7.3(a).
"HOLDER" means a Person in whose name a Security is registered, such
Person being a beneficial owner within the meaning of the Business Trust Act.
"INDEMNIFIED PERSON" means a Company Indemnified Person or a
Fiduciary Indemnified Person.
"INDENTURE" means the Indenture dated as of February 4, 1997, among
the Debenture Issuer and the Debenture Trustee, as amended from time to time.
"INVESTMENT COMPANY" means an investment company as defined in the
Investment Company Act.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940,
as amended from time to time, or any successor legislation.
"LEGAL ACTION" has the meaning set forth in Section 3.6(g).
5
<PAGE>
"MAJORITY IN LIQUIDATION AMOUNT" means, with respect to the Trust
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together
as a single class or, as the context may require, Holders of outstanding Capital
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of more than 50% of the aggregate 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 outstanding Securities of
the relevant class.
"OFFERING MEMORANDUM" has the meaning set forth in Section 3.6(b).
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by the Chairman, a Vice Chairman, the Chief Executive
Officer, the President, a Vice President, the Comptroller, the Secretary or an
Assistant Secretary, or the Secretary or an Assistant Secretary of such Person.
Any Officers' Certificate delivered with respect to compliance with a condition
or covenant provided for in this Declaration shall include:
(a) a statement that each officer signing the 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 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 a written opinion of counsel, who may be
an employee of the Sponsor, and who shall be acceptable to the Property Trustee.
"PAYING AGENT" has the meaning specified in Section 7.4.
"PERSON" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association,
6
<PAGE>
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.
"PORTAL" has the meaning set forth in Section 3.6(b)(iii).
"PROPERTY TRUSTEE" has the meaning set forth in Section 5.3(a).
"PROPERTY TRUSTEE ACCOUNT" has the meaning set forth in
Section 3.8(c).
"PURCHASE AGREEMENT" means the Purchase Agreement for the initial
offering and sale of Capital Securities in the form of Exhibit C.
"QIBs" shall mean qualified institutional buyers as defined in
Rule 144A.
"QUORUM" means a majority of the Administrative Trustees or, if
there are only two Administrative Trustees, both of them.
"REGISTRAR" has the meaning set forth in Section 7.4.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated as of February 4, 1997, by and among the Trust, the Debenture
Issuer and the Initial Purchasers named therein, as amended from time to time.
"REGISTRATION STATEMENT" has the meaning set forth in the
Registration Rights Agreement.
"RELATED PARTY" means, with respect to the Sponsor, any direct or
indirect wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"RESPONSIBLE OFFICER" means any officer within the Corporate Trust
Office of the Property Trustee, including any vice-president, any assistant
vice-president, any assistant secretary, the treasurer, any assistant treasurer
or other officer of the Corporate Trust Office of the Property Trustee
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
officer's knowledge of and familiarity with the particular subject.
7
<PAGE>
"RESTRICTED DEFINITIVE CAPITAL SECURITIES" has the meaning set forth
in Section 7.3(c).
"RESTRICTED CAPITAL SECURITY" means a Capital Security required by
Section 9.2 to contain a Restricted Securities Legend.
"RESTRICTED SECURITIES LEGEND" has the meaning set forth in
Section 9.2.
"RULE 3a-5" means Rule 3a-5 under the Investment Company Act, or any
successor rule or regulation.
"RULE 144" means Rule 144 under the Securities Act, as such rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"RULE 144A" means Rule 144A under the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"SECURITIES" OR "TRUST SECURITIES" means the Common Securities and
the outstanding Capital Securities.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, or any successor legislation.
"SECURITIES GUARANTEES" means the Common Securities Guarantee and
the Capital Securities Guarantee.
"SERIES A CAPITAL SECURITIES" has the meaning specified in
Section 7.1(a).
"SERIES B CAPITAL SECURITIES" has the meaning specified in
Section 7.1(a).
"SERIES A CAPITAL SECURITIES GUARANTEE" means the guarantee
agreement dated as of February 4, 1997, by the Sponsor in respect of the Series
A Capital Securities.
"SERIES B CAPITAL SECURITIES GUARANTEE" means the guarantee
agreement to be entered in connection with the Exchange Offer by the Sponsor in
respect of the Series B Capital Securities.
"SERIES A DEBENTURES" means the Series A 9.25% Junior Subordinated
Deferrable Interest Debentures due February 1, 2027 of the Debenture Issuer
issued pursuant to the Indenture.
"SERIES B DEBENTURES" means the Series B 9.25% Junior Subordinated
Deferrable Interest Debentures due February 1, 2027
8
<PAGE>
of the Debenture Issuer issued pursuant to the Indenture in the event of the
Exchange Offer.
"SPECIAL EVENT" has the meaning set forth in Annex I hereto.
"SPONSOR" means ONBANCorp, Inc., a Delaware corporation, or any
successor entity resulting from any merger, consolidation, amalgamation or other
business combination, in its capacity as sponsor of the Trust.
"SUPER MAJORITY" has the meaning set forth in Section 2.6(a)(ii).
"10% IN LIQUIDATION AMOUNT" means, with respect to the Trust
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together
as a single class or, as the context may require, Holders of outstanding Capital
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of 10% or more of the aggregate 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 outstanding Securities of
the relevant class.
"TREASURY REGULATIONS" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"TRUSTEE" or "TRUSTEES" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.
9
<PAGE>
"UNRESTRICTED GLOBAL CAPITAL SECURITY" has the meaning set forth in
Section 9.2(b).
10
<PAGE>
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration in order for this
Declaration to be qualified under the Trust Indenture Act 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 and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by Section.Section. 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
(d) The application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) Each of the Sponsor and the Administrative Trustees on behalf of
the Trust shall provide the Property Trustee, unless the Property Trustee is
Registrar for the Securities (i) within 14 days after each record date for
payment of Distributions, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Holders ("List of
Holders") as of such record date, PROVIDED THAT neither the Sponsor nor the
Administrative Trustees on behalf of the Trust shall 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 Property Trustee by the Sponsor and the
Administrative Trustees on behalf of the Trust, and (ii) at any other time,
within 30 days of receipt by the Trust of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Property Trustee. The Property Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in Lists of Holders
given to it or which it receives in the capacity as Paying Agent (if acting in
such capacity), PROVIDED THAT the Property Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under
Section.Section. 311(a), 311(b) and 312(b) of the Trust Indenture Act.
11
<PAGE>
SECTION 2.3 REPORTS BY THE PROPERTY TRUSTEE.
Within 60 days after December 15 of each year, commencing December
15, 1997, the Property Trustee shall provide to the Holders of the Capital
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 Section. 313 of the Trust
Indenture Act. The Property Trustee shall also comply with the requirements of
Section. 313(d) of the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO PROPERTY TRUSTEE.
Each of the Sponsor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such documents, reports and
information as are required by Section. 314 (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.
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Sponsor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent provided for in this Declaration that relate to any of the
matters set forth in Section. 314(c) of the Trust Indenture Act. Any certificate
or opinion required to be given by an officer pursuant to Section. 314(c)(1) of
the Trust Indenture Act may be given in the form of an Officers' Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER.
(a) The Holders of a Majority in liquidation amount of Capital
Securities may, by vote, on behalf of the Holders of all of the Capital
Securities, waive any past Event of Default in respect of the Capital Securities
and its consequences, PROVIDED THAT, if the underlying Event of Default under
the Indenture:
(i) is not waivable under the Indenture, the Event of Default under
the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority in
aggregate principal amount of the holders of the Debentures (a "Super
Majority") to be waived under the Indenture, the Event of Default under
the Declaration may only be waived by the vote of the Holders of at least
the proportion in aggregate liquidation amount of the Capital Securities
that the relevant Super Majority represents of the aggregate principal
amount of the Debentures outstanding.
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The foregoing provisions of this Section 2.6(a) shall be in lieu of Section.
316(a)(1)(B) of the Trust Indenture Act and such Section. 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Capital Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the Capital
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Capital Securities of an Event of Default with respect to the Capital
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, PROVIDED THAT, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except where the Holders of
the Common Securities are deemed to have waived such Event of Default
under the Declaration as provided below in this Section 2.6(b), the Event
of Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of a Super Majority to be waived,
except where the Holders of the Common Securities are deemed to have
waived such Event of Default under the Declaration as provided below in
this Section 2.6(b), the Event of Default under the Declaration may only
be waived by the vote of the Holders of at least the proportion in
aggregate liquidation amount of the Common Securities that the relevant
Super Majority represents of the aggregate principal amount of the
Debentures outstanding;
PROVIDED FURTHER, the Holders of Common Securities will be deemed to have waived
any such Event of Default and all Events of Default with respect to the Common
Securities and its consequences if all Events of Default with respect to the
Capital Securities have been cured, waived or otherwise eliminated, and until
such Events of Default have been so cured, waived or otherwise eliminated, the
Property Trustee will be deemed to be acting solely on behalf of the Holders of
the Capital Securities and only the Holders of the Capital Securities will have
the right to direct the Property Trustee in accordance with the terms of the
Securities. The foregoing provisions of this Section 2.6(b)
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shall be in lieu of Section.Section. 316(a)(1)(A) and 316(a)(1)(B) of the Trust
Indenture Act and such Section.Section. 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act are hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Subject to the foregoing
provisions of this Section 2.6(b), upon such waiver, any such default shall
cease to exist and any Event of Default with respect to the Common Securities
arising therefrom shall be deemed to have been cured for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or Event of Default with respect to the Common Securities or impair any right
consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Property Trustee, at the direction of the Holders of the Capital Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of
ss. 316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Property Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
Holders, notices of all defaults with respect to the Securities actually known
to a Responsible Officer, unless such defaults have been cured before the giving
of such notice (the term "defaults" for the purposes of this Section 2.7(a)
being hereby defined to be an Event of Default as defined in the Indenture, not
including any periods of grace provided for therein and irrespective of the
giving of any notice provided therein); PROVIDED THAT, except for a default in
the payment of principal of (or premium, if any) or interest on any of the
Debentures, the Property Trustee shall be protected in withholding such notice
if and so long as a Responsible Officer in good faith determines that the
withholding of such notice is in the interests of the Holders.
(b) The Property Trustee shall not be deemed to have knowledge of
any default except:
(i) a default under Sections 5.01(a) and 5.01(b) of the Indenture;
or
(ii) any default as to which the Property Trustee shall have
received written notice or of which a Responsible Officer charged with the
administration of the Declaration shall have actual knowledge.
(c) Within ten Business Days after the occurrence of any Event of
Default actually known to the Property Trustee, the
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Property Trustee shall transmit notice of such Event of Default to the Holders
of the Capital Securities, the Administrative Trustees and the Sponsor, unless
such Event of Default shall have been cured or waived. The Sponsor and the
Administrative Trustees shall file annually with the Property Trustee a
certification as to whether or not they are in compliance with all the
conditions and covenants applicable to them under this Declaration.
ARTICLE III
ORGANIZATION
SECTION 3.1 NAME.
The Trust is named "OnBank Capital Trust I" as such name may be
modified from time to time by the Administrative Trustees following written
notice to the Holders. The Trust's activities may be conducted under the name of
the Trust or any other name deemed advisable by the Administrative Trustees.
SECTION 3.2 OFFICE.
The address of the principal office of the Trust is c/o ONBANCorp,
Inc., 101 South Salina Street, P.O. Box 4983, Syracuse, New York 13221-4983. On
ten Business Days written notice to the Holders of Securities, the
Administrative Trustees may designate another principal office.
SECTION 3.3 PURPOSE.
The exclusive purposes and functions of the Trust are (a) to issue
and sell the Series A Securities, (b) use the proceeds from the sale of the
Securities to acquire the Series A Debentures, (c) in the event of an Exchange
Offer, to exchange the Series B Capital Securities for the Series A Capital
Securities and (d) except as otherwise limited herein, to engage in only those
other activities necessary, advisable or incidental thereto. The Trust shall not
borrow money, issue debt or reinvest proceeds derived from investments, mortgage
or pledge any of its assets, or otherwise undertake (or permit to be undertaken)
any activity that would cause the Trust not to be classified for United States
federal income tax purposes as a grantor trust.
SECTION 3.4 AUTHORITY.
Subject to the limitations provided in this Declaration and to the
specific duties of the Property Trustee, the Administrative Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Administrative Trustees in accordance with their powers
shall constitute the act of and serve to bind the Trust and an action taken by
the Property Trustee on behalf of the Trust in accordance
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with its powers shall constitute the act of and serve to bind the Trust. In
dealing with the Trustees acting on behalf of the Trust, no person shall be
required to inquire into the authority of the Trustees to bind the Trust.
Persons dealing with the Trust are entitled to rely conclusively on the power
and authority of the Trustees as set forth in this Declaration.
SECTION 3.5 TITLE TO PROPERTY OF THE TRUST.
Except as provided in Section 3.8 with respect to the Debentures and
the Property Trustee Account or as otherwise provided in this Declaration, legal
title to all assets of the Trust shall be vested in the Trust. The Holders shall
not have legal title to any part of the assets of the Trust, but shall have an
undivided beneficial interest in the assets of the Trust.
SECTION 3.6 POWERS AND DUTIES OF THE ADMINISTRATIVE TRUSTEES.
The Administrative Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Securities in accordance with this
Declaration; provided, however, that except as contemplated in Section 7.1(a),
(i) the Trust may issue no more than the Capital Securities and no more than one
series of Common Securities, (ii) there shall be no interests in the Trust other
than the Securities, and (iii) the issuance of Securities shall be limited to a
simultaneous issuance of both the Series A Capital Securities and Common
Securities at the Closing Time and the exchange of the Series B Capital
Securities for the Series A Capital Securities in the event of an Exchange
Offer;
(b) in connection with the issue and sale of the Capital Securities,
the consummation of the Exchange Offer, or the filing of a shelf registration
statement pursuant to the Registration Rights Agreement, at the direction of the
Sponsor, to:
(i) prepare and execute, if necessary, an offering memorandum (the
"Offering Memorandum") in preliminary and final form prepared by the
Sponsor, in relation to the offering and sale of Series A Capital
Securities to qualified institutional buyers in reliance on Rule 144A
under the Securities Act and to institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), and
to execute and file with the Commission, at such time as determined by the
Sponsor, any Registration Statement, including any amendments thereto, as
contemplated by the Registration Rights Agreement;
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(ii) execute and file any documents prepared by the Sponsor, or take
any acts as determined by the Sponsor to be necessary in order to qualify
or register all or part of the Capital Securities in any State in which
the Sponsor has determined to qualify or register such Capital Securities
for sale;
(iii) execute and file an application, prepared by the Sponsor, to
permit the Capital Securities to trade or be quoted or listed in or on the
Private Offerings, Resales and Trading through Automated Linkages
("PORTAL") Market or any other securities exchange, quotation system or
the Nasdaq Stock Market's National Market;
(iv) execute and deliver letters, documents, or instruments with DTC
and other Clearing Agencies relating to the Capital Securities;
(v) if required, execute and file with the Commission a registration
statement on Form 8-A, including any amendments thereto, prepared by the
Sponsor, relating to the registration of the Capital Securities under
Section 12(b) of the Exchange Act; and
(vi) execute and enter into the Purchase Agreement and the
Registration Rights Agreement providing for, among other things, the sale
and exchange of the Capital Securities;
(c) to acquire the Series A Debentures with the proceeds of the sale
of the Series A Capital Securities and the Common Securities and to exchange the
Series A Debentures for a like principal amount of Series B Debentures, pursuant
to the Exchange Offer; PROVIDED, HOWEVER, that the Administrative Trustees shall
cause legal title to the Debentures to be held of record in the name of the
Property Trustee for the benefit of the Holders;
(d) to give the Sponsor and the Property Trustee prompt written
notice of the occurrence of a Special Event;
(e) to establish a record date with respect to all actions to be
taken hereunder that require a record date be established, including and with
respect to, for the purposes of Section.316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Capital Securities and Holders of Common Securities as
to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be required
of the Administrative Trustees pursuant to the terms of the Securities;
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(g) to bring or defend, pay, collect, compromise, arbitrate, resort
to legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has
the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
(j) to give the certificate required by Section. 314(a)(4) of the
Trust Indenture Act to the Property Trustee, which certificate may be executed
by any Administrative Trustee;
(k) to incur expenses that are necessary or incidental to carry out
any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, Registrar and
Exchange Agent for the Securities or to appoint a Paying Agent for the
Securities as provided in Section 7.4 except for such time as such power to
appoint a Paying Agent is vested in the Property Trustee;
(m) to give prompt written notice to the Property Trustee and to
Holders of any notice received from the Debenture Issuer of its election to
defer payments of interest on the Debentures by extending the interest payment
period under the Indenture;
(n) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing;
(o) 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 or to enable the Trust
to effect the purposes for which the Trust was created;
(p) to take any action, not inconsistent with this Declaration or
with applicable law, that the Administrative Trustees determine in their
discretion to be necessary or desirable in carrying out the activities of the
Trust as set out in this Section 3.6, including, but not limited to:
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(i) causing the Trust not to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States federal
income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture Issuer for
United States federal income tax purposes;
(q) to take all action necessary to consummate the Exchange Offer or
otherwise cause the Capital Securities to be registered pursuant to an effective
registration statement in accordance with the provisions of the Registration
Rights Agreement; and
(r) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Administrative Trustees, on behalf of
the Trust.
The Administrative Trustees must exercise the powers set forth in
this Section 3.6 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.3, and the Administrative Trustees shall not
take any action that is inconsistent with the purposes and functions of the
Trust set forth in Section 3.3.
Subject to this Section 3.6, the Administrative Trustees shall have
none of the powers or the authority of the Property Trustee set forth in Section
3.8.
Any expenses incurred by the Administrative Trustees pursuant to
this Section 3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES.
(a) The Trust shall not, and the Trustees (including the Property
Trustee and the Delaware Trustee) shall not, engage in any activity other than
as required or authorized by this Declaration. The Trust shall not:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders pursuant to
the terms of this Declaration and of the Securities;
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(ii) acquire any assets other than as expressly provided herein;
(iii) possess Trust property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(v) possess any power or otherwise act in such a way as to vary the
Trust assets or the terms of the Securities in any way whatsoever;
(vi) issue any securities or other evidences of beneficial ownership
of, or beneficial interest in, the Trust other than the Securities;
(vii) other than as provided in this Declaration or Annex I, (A)
direct the time, method and place of conducting any proceeding with
respect to any remedy available to the Debenture Trustee, or exercising
any trust or power conferred upon the Debenture Trustee with respect to
the Debentures, (B) waive any past default that is waivable under the
Indenture, or (C) exercise any right to rescind or annul any declaration
that the principal of all the Debentures shall be due and payable; or
(viii) consent to any amendment, modification or termination of the
Indenture or the Debentures where such consent shall be required unless
the Trust shall have received an opinion of a nationally recognized
independent tax counsel experienced in such matters to the effect that
such amendment, modification or termination will not cause more than an
insubstantial risk that for United States federal income tax purposes the
Trust will not be classified as a grantor trust.
SECTION 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Property Trustee in trust for the benefit of the
Holders. The right, title and interest of the Property Trustee to the Debentures
shall vest automatically in each Person who may hereafter be appointed as
Property Trustee in accordance with Section 5.7. Such vesting and cessation of
title shall be effective whether or not conveyancing documents with regard to
the Debentures have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and
interest in the Debentures to the Administrative
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Trustees or to the Delaware Trustee (if the Property Trustee does not also act
as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing trust
account (the "Property Trustee Account") in the name of and under the
exclusive control of the Property Trustee on behalf of the Holders and,
upon the receipt of payments of funds made in respect of the Debentures
held by the Property Trustee, deposit such funds into the Property Trustee
Account and make payments or cause the Paying Agent to make payments to
the Holders from the Property Trustee Account in accordance with Section
6.1. Funds in the Property Trustee Account shall be held uninvested until
disbursed in accordance with this Declaration. The Property Trustee
Account shall be an account that is maintained with a banking institution
the rating on whose long-term unsecured indebtedness is at least equal to
the rating assigned to the Capital Securities or, if the Debentures are so
rated, the Debentures, by a "nationally recognized statistical rating
organization", as that term is defined for purposes of Rule 436(g)(2)
under the Securities Act;
(ii) engage in such ministerial activities as shall be necessary or
appropriate to effect the redemption of the Trust Securities to the extent
the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by the
Administrative Trustees in accordance with the terms of the Securities,
engage in such ministerial activities as shall be necessary or appropriate
to effect the distribution of the Debentures to Holders upon the
occurrence of certain events.
(d) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to the
terms of the Securities.
(e) Subject to Section 3.9(a), the Property Trustee shall take any
Legal Action which arises out of or in connection with an Event of Default of
which a Responsible Officer has actual knowledge or the Property Trustee's
duties and obligations under this Declaration or the Trust Indenture Act and if
such Property Trustee shall have failed to take such Legal Action, the Holders
of the Capital Securities may take such Legal Action, to the same extent as if
such Holders of Capital Securities held an aggregate principal amount of
Debentures equal to the aggregate liquidation amount of such Capital Securities,
without first proceeding against the Property Trustee or the Trust; provided
however, that if an Event of Default has occurred and is
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continuing and such event is attributable to the failure of the Debenture
Issuer to pay the principal of or premium, if any, or interest on the
Debentures on the date such principal, premium, if any, or interest is
otherwise payable (or in the case of redemption, on the redemption date),
then a Holder of Capital Securities may directly institute a proceeding for
enforcement of payment to such Holder of the principal of or premium, if any,
or interest on the Debentures having a principal amount equal to the
aggregate liquidation amount of the Capital Securities of such Holder (a
"Direct Action") on or after the respective due date specified in the
Debentures. In connection with such Direct Action, the rights of the Holders
of the Common Securities will be subrogated to the rights of such Holder of
Capital Securities to the extent of any payment made by the Debenture Issuer
to such Holder of Capital Securities in such Direct Action. Except as
provided in the preceding sentences, the Holders of Capital Securities will
not be able to exercise directly any other remedy available to the holders of
the Debentures.
(f) The Property Trustee shall not resign as a Trustee unless
either:
(i) the Trust has been completely liquidated and the proceeds of the
liquidation distributed to the Holders pursuant to the terms of the
Securities; or
(ii) a successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 5.7 (a "Successor
Property Trustee").
(g) The Property Trustee shall have the legal power to exercise all
of the rights, powers and privileges of a holder of Debentures under the
Indenture and, if an Event of Default actually known to a Responsible Officer
occurs and is continuing, the Property Trustee shall, for the benefit of
Holders, enforce its rights as holder of the Debentures subject to the rights of
the Holders pursuant to the terms of such Securities.
(h) The Property Trustee shall be authorized to undertake any
actions set forth in Section. 317(a) of the Trust Indenture Act.
(i) For such time as the Property Trustee is the Paying Agent, the
Property Trustee may authorize one or more Persons to act as additional Paying
Agents and to pay Distributions, redemption payments or liquidation payments on
behalf of the Trust with respect to all Securities and any such Paying Agent
shall comply with Section. 317(b) of the Trust Indenture Act. Any such
additional Paying Agent may be removed by the Property Trustee at any time the
Property Trustee remains as Paying Agent and a successor Paying Agent or
additional Paying Agents may be (but
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are not required to be) appointed at any time by the Property Trustee while the
Property Trustee is so acting as Paying Agent.
(j) Subject to this Section 3.8, the Property Trustee shall have
none of the duties, liabilities, powers or the authority of the Administrative
Trustees set forth in Section 3.6.
Notwithstanding anything expressed or implied to the contrary in
this Declaration or any Annex or Exhibit hereto, (i) the Property Trustee must
exercise the powers set forth in this Section 3.8 in a manner that is consistent
with the purposes and functions of the Trust set out in Section 3.3, and (ii)
the Property Trustee shall not take any action that is inconsistent with the
purposes and functions of the Trust set out in Section 3.3.
SECTION 3.9 CERTAIN DUTIES AND RESPONSIBILITIES OF THE PROPERTY TRUSTEE.
(a) The Property 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 Declaration and in the Securities and no implied covenants shall be read
into this Declaration against the Property Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6) of
which a Responsible Officer has actual knowledge, the Property Trustee shall
exercise such of the rights and powers vested in it by this Declaration, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) No provision of this Declaration 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) prior to the occurrence of an 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 Property Trustee shall
be determined solely by the express provisions of this Declaration
and in the Securities and the Property Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Declaration and in the Securities,
and no implied covenants or obligations shall be read into this
Declaration against the Property Trustee; and
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(B) in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may 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 Property
Trustee and conforming to the requirements of this Declaration;
PROVIDED, HOWEVER, that in the case of any such certificates or
opinions that by any provision hereof are specifically required to
be furnished to the Property Trustee, the Property Trustee shall be
under a duty to examine the same to determine whether or not they
conform to the requirements of this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it shall be
proved that the Property Trustee was negligent in ascertaining the
pertinent facts;
(iii) 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 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 Declaration;
(iv) no provision of this Declaration shall require the Property
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 it 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 Declaration or indemnity
reasonably satisfactory to the Property Trustee against such risk or
liability is not reasonably assured to it;
(v) the Property Trustee's sole duty with respect to the custody,
safe keeping and physical preservation of the Debentures and the Property
Trustee 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 Declaration and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability for or
with respect to the value, genuineness, existence or sufficiency of the
Debentures or the payment of any taxes or assessments levied thereon or in
connection therewith;
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(vii) 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 Sponsor. Money held by the Property Trustee need not be segregated
from other funds held by it except in relation to the Property Trustee
Account maintained by the Property Trustee pursuant to Section 3.8(c)(i)
and except to the extent otherwise required by law; and
(viii) the Property Trustee shall not be responsible for monitoring
the compliance by the Administrative Trustees or the Sponsor with their
respective duties under this Declaration, nor shall the Property Trustee
be liable for any default or misconduct of the Administrative Trustees or
the Sponsor.
SECTION 3.10 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and
to have been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Sponsor or the Administrative Trustees
contemplated by this Declaration may be sufficiently evidenced by an
Officers' Certificate;
(iii) whenever in the administration of this Declaration, the
Property Trustee shall deem it desirable that a matter be proved or
established before taking, 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 Sponsor or the Administrative Trustees;
(iv) the Property Trustee shall have no duty 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 rerecording, refiling or registration thereof;
(v) the Property Trustee may consult with counsel or other experts
of its selection and the advice or opinion of such counsel and experts
with respect to legal matters or
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advice within the scope of such experts' area of expertise 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 Sponsor or any
of its Affiliates, and may include any of its employees. The Property
Trustee shall have the right at any time to seek instructions concerning
the administration of this Declaration from any court of competent
jurisdiction;
(vi) the Property Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Declaration at the
request or direction of any Holder, unless such Holder shall have provided
to the Property Trustee security and indemnity, reasonably satisfactory to
the Property Trustee, against the costs, expenses (including reasonable
attorneys' fees and expenses and the expenses of the Property 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 Property Trustee provided, that,
nothing contained in this Section 3.10(a)(vi) shall be taken to relieve
the Property Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this
Declaration;
(vii) 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,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Property Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit;
(viii) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, custodians, nominees or attorneys and the Property 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 Property Trustee or its agents
hereunder shall bind the Trust and the Holders, and the signature of the
Property Trustee or its agents alone shall be sufficient and effective to
perform any such action and no third party shall be required to inquire as
to the authority of the Property Trustee to so act or as to its compliance
with any of the terms and provisions of this Declaration, both of which
shall be conclusively evidenced by the Property Trustee's or its agent's
taking such action;
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(x) whenever in the administration of this Declaration 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 instructions from the Holders which
instructions may only be given by the Holders of the same proportion in
liquidation amount of the Securities as would be entitled to direct the
Property Trustee under the terms of the 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 conclusively relying on or acting in or
accordance with such instructions;
(xi) except as otherwise expressly provided by this Declaration, the
Property Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Declaration; and
(xii) the Property Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith, without negligence,
and reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration 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 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other than
Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers,
nor shall the Delaware Trustee have any of the duties and responsibilities of
the Administrative Trustees or the Property Trustee described in this
Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of
Section. 3807 of the Business Trust Act.
SECTION 3.12 Execution of Documents.
Unless otherwise determined by the Administrative Trustees, and
except as otherwise required by the Business Trust Act, a majority of the
Administrative Trustees or, if there are
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only two, any Administrative Trustee or, if there is only one, such
Administrative Trustee is authorized to execute on behalf of the Trust any
documents that the Administrative Trustees have the power and authority to
execute pursuant to Section 3.6; provided that, the Registration Statements
contemplated by the Registration Rights Agreement and referred to in Section
3.6(b)(i), including any amendments thereto, shall be signed by all of the
Administrative Trustees.
SECTION 3.13 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained in this Declaration and the Securities shall
be taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as to
the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.14 DURATION OF TRUST.
The Trust, unless terminated pursuant to the provisions of Article
VIII hereof, shall have existence up to February 1, 2028.
SECTION 3.15 MERGERS.
(a) 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 as described in Section
3.15(b) and (c).
(b) The Trust may, at the request of the Sponsor, with the consent
of the Administrative Trustees or, if there are more than two, a majority of the
Administrative Trustees and without the consent of the Holders, the Delaware
Trustee or the Property Trustee, merge with or into, consolidate, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to, a trust organized as such under the
laws of any State; PROVIDED THAT:
(i) such successor entity (the "Successor Entity")
either:
(A) expressly assumes all of the obligations of the Trust
under the Securities; or
(B) substitutes for the Securities other securities having
substantially the same terms as the Securities (the "Successor
Securities") so long as the Successor Securities rank the same as
the Securities
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rank with respect to Distributions and payments upon liquidation,
redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the Successor
Entity that possesses the same powers and duties as the Property Trustee
as the holder of the Debentures;
(iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or with another organization on which the Capital
Securities are then listed or quoted;
(iv) if the Capital Securities (including any Successor Securities)
are rated by any nationally recognized statistical rating organization
prior to such transaction, such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Capital
Securities (including any Successor Securities), or if the Debentures are
so rated, the Debentures, 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 (including the holders of any
Successor Securities) in any material respect (other than with respect to
any dilution of such Holders' interests in the new entity);
(vi) such Successor Entity has a purpose identical to that of the
Trust;
(vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Sponsor has received an
opinion of an independent counsel to the Trust experienced in such matters
to the effect that:
(A) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the Holders (including the holders of
any Successor Securities) in any material respect (other than with
respect to any dilution of the Holders' interest in the new entity);
and
(B) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor
the Successor Entity will be required to register as an Investment
Company; and
(viii) the Sponsor or any permitted successor or assignee owns all
of the common securities of such Successor
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Entity and guarantees the obligations of such Successor Entity under the
Successor Securities at least to the extent provided by the Capital
Securities Guarantee and the Common Securities Guarantee.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except
with the consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety to, any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or the Successor Entity not to be classified as a grantor trust for United
States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 SPONSOR'S PURCHASE OF COMMON SECURITIES.
At the Closing Time, the Sponsor will purchase all of the Common
Securities then issued by the Trust, in an amount at least equal to
approximately, but not less than, 3% of the capital of the Trust, at the same
time as the Series A Capital Securities are issued and sold.
SECTION 4.2 RESPONSIBILITIES OF THE SPONSOR.
In connection with the issue and sale of the Capital Securities, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities:
(a) to prepare the Offering Memorandum and to prepare for filing by
the Trust with the Commission any Registration Statement, including any
amendments thereto as contemplated by the Registration Rights Agreement;
(b) to determine the States in which to take appropriate action to
qualify or register for sale all or part of the Capital Securities and to do any
and all such acts, other than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and prepare for execution and filing
any documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
States;
(c) if deemed necessary or advisable by the Sponsor, to prepare for
filing by the Trust an application to permit the Capital Securities to trade or
be quoted or listed in or on the
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Private Offerings, Resales and Trading through Automated Linkages ("PORTAL")
market, or any other securities exchange, quotation system or the Nasdaq Stock
Market's National Market for listing or quotation of the Capital Securities;
(d) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the Capital
Securities under Section 12(b) of the Exchange Act, including any amendments
thereto; and
(e) to negotiate the terms of the Purchase Agreement and the
Registration Rights Agreement providing for the sale and registration of the
Capital Securities.
SECTION 4.3 RIGHT TO PROCEED.
The Sponsor acknowledges the rights of the Holders of Capital
Securities, in the event that a failure of the Trust to pay Distributions on the
Capital Securities is attributable to the failure of the Company to pay interest
or principal on the Debentures, to institute a proceeding directly against the
Debenture Issuer for enforcement of its payment obligations on the Debentures.
ARTICLE V
TRUSTEES
SECTION 5.1 NUMBER OF TRUSTEES: APPOINTMENT OF CO-TRUSTEE.
The number of Trustees initially shall be five (5), and:
(a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holders of a Majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holders of
the Common Securities;
PROVIDED, HOWEVER, that, the number of Trustees shall in no event be less than
two (2); PROVIDED FURTHER that (1) one Trustee, in the case of a natural person,
shall be a person who is a resident of the State of Delaware or that, if not a
natural person, is an entity which has its principal place of business in the
State of Delaware (the "Delaware Trustee"); (2) there shall be at least one
Trustee who is an employee or officer of, or is affiliated with the Sponsor (an
"Administrative Trustee"); and (3) one Trustee shall be the Property Trustee for
so long as this Decla-
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ration is required to qualify as an indenture under the Trust Indenture Act, and
such Trustee may also serve as Delaware Trustee if it meets the applicable
requirements. Notwithstanding the above, 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's property may at the time be located, the Holders of a
Majority in liquidation amount of the Common Securities acting as a class at a
meeting of the Holders of the Common Securities, and the Administrative Trustees
shall have power to appoint one or more persons either to act as a co-trustee,
jointly with the Property Trustee, of all or any part of the Trust's property,
or to act as separate trustee of any such property, in either case with such
powers as may be provided in the instrument of appointment, and to vest in such
person or persons in such capacity any property, title, right or power deemed
necessary or desirable, subject to the provisions of this Declaration. In case
an Event of Default has occurred and is continuing, the Property Trustee alone
shall have power to make any such appointment of a co-trustee.
SECTION 5.2 DELAWARE TRUSTEE.
If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place
of business in the State of Delaware, and otherwise meets the requirements of
applicable law,
PROVIDED THAT, if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application.
SECTION 5.3 PROPERTY TRUSTEE; ELIGIBILITY.
(a) There shall at all times be one Trustee (the "Property Trustee")
which shall act as Property Trustee which shall:
(i) not be an Affiliate of the Sponsor; 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
Commission to act as an institutional trustee under the Trust Indenture
Act,
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authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least 50 million U.S. dollars
($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 5.3(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 Property Trustee shall cease to be eligible
to so act under Section 5.3(a), the Property Trustee shall immediately resign in
the manner and with the effect set forth in Section 5.7(c).
(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of ss. 310(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in ss. 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of ss. 310(b) of the Trust Indenture Act.
(d) The Capital Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be:
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Trustee
Administration
SECTION 5.4 CERTAIN QUALIFICATIONS OF ADMINISTRATIVE TRUSTEES AND DELAWARE
TRUSTEE GENERALLY.
Each Administrative Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware 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 Authorized Officers.
SECTION 5.5 ADMINISTRATIVE TRUSTEES.
The initial Administrative Trustees shall be:
Donald G. Cook
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William LeBeau
Randy J. Wiley
(a) Except as expressly set forth in this Declaration and except if
a meeting of the Administrative Trustees is called with respect to any matter
over which the Administrative Trustees have power to act, any power of the
Administrative Trustees may be exercised by, or with the consent of, any one
such Administrative Trustee.
(b) Unless otherwise determined by the Administrative Trustees, and
except as otherwise required by the Business Trust Act or applicable law, any
Administrative Trustee is authorized to execute on behalf of the Trust any
documents which the Administrative Trustees have the power and authority to
cause the Trust to execute pursuant to Section 3.6, PROVIDED, THAT, the
registration statement referred to in Section 3.6, including any amendments
thereto, shall be signed by all of the Administrative Trustees; and
(c) An 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 purposes of signing any documents which the Administrative
Trustees have power and authority to cause the Trust to execute pursuant to
Section 3.6.
SECTION 5.6 DELAWARE TRUSTEE.
The initial Delaware Trustee shall be:
The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
SECTION 5.7 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES.
(a) Subject to Section 5.7(b) and to Section 6(b) of Annex I hereto,
Trustees may be appointed or removed without cause at any time:
(i) until the issuance of any Securities, by written instrument
executed by the Sponsor;
(ii) unless an Event of Default shall have occurred and be
continuing after the issuance of any Securities, by vote of the Holders of
a Majority in liquidation amount of the Common Securities voting as a
class at a meeting of the Holders of the Common Securities; and
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(iii) if an Event of Default shall have occurred and be continuing
after the issuance of the Securities, with respect to the Property Trustee
or the Delaware Trustee, by vote of Holders of a Majority in liquidation
amount of the Capital Securities voting as a class at a meeting of Holders
of the Capital Securities.
(b) (i) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.7(a) until a Successor Property Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Property Trustee and delivered to the Administrative Trustees
and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not be removed
in accordance with this Section 5.7(a) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under Sections
5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has
accepted such appointment by written instrument executed by such Successor
Delaware Trustee and delivered to the Administrative Trustees and the
Sponsor.
(c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; PROVIDED, HOWEVER,
that:
(i) No such resignation of the Trustee that acts as the Property
Trustee shall be effective:
(A) until a Successor Property Trustee has been appointed
and has accepted such appointment by instrument executed by such
Successor Property Trustee and delivered to the Trust, the Sponsor
and the resigning Property Trustee; or
(B) until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the Holders; and
(ii) no such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Trust, the Sponsor and the
resigning Delaware Trustee.
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(d) The Holders of the Common Securities shall use their best
efforts to promptly appoint a Successor Delaware Trustee or Successor Property
Trustee, as the case may be, if the Property Trustee or the Delaware Trustee
delivers an instrument of resignation in accordance with this Section 5.7.
(e) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.7 within 60 days after delivery of an instrument of resignation or removal,
the Property Trustee or Delaware Trustee resigning or being removed, as
applicable, may petition any court of competent jurisdiction for appointment of
a Successor Property Trustee or Successor Delaware Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper and
prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee,
as the case may be.
(f) No Property Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Property Trustee or successor Delaware
Trustee, as the case may be.
SECTION 5.8 VACANCIES AMONG TRUSTEES.
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is
increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Administrative Trustees or, if
there are more than two, a majority of the Administrative Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.7.
SECTION 5.9 EFFECT OF VACANCIES.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, 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 5.7, the Administrative Trustees in office, regardless of their number,
shall have all the powers granted to the Administrative Trustees and shall
discharge all the duties imposed upon the Administrative Trustees by this
Declaration.
SECTION 5.10 MEETINGS.
If there is more than one Administrative Trustee,
meetings of the Administrative Trustees shall be held from time
to time upon the call of any Administrative Trustee. Regular
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meetings of the Administrative Trustees may be held at a time and place fixed by
resolution of the Administrative Trustees. Notice of any in-person meetings of
the Administrative Trustees shall be hand delivered or otherwise delivered in
writing (including by facsimile, with a hard copy by overnight courier) not less
than 24 hours before such meeting. Notice of any telephonic meetings of the
Administrative Trustees or any committee thereof shall be hand delivered or
otherwise delivered in writing (including by facsimile, with a hard copy by
overnight courier) not less than 24 hours before a meeting. Notices shall
contain a brief statement of the time, place and anticipated purposes of the
meeting. The presence (whether in person or by telephone) of an Administrative
Trustee at a meeting shall constitute a waiver of notice of such meeting except
where an Administrative Trustee attends a meeting for the express purpose of
objecting to the transaction of any activity on the ground that the meeting has
not been lawfully called or convened. Unless provided otherwise in this
Declaration, any action of the Administrative Trustees may be taken at a meeting
by vote of a majority of the Administrative Trustees present (whether in person
or by telephone) and eligible to vote with respect to such matter, provided that
a Quorum is present, or without a meeting by the unanimous written consent of
the Administrative Trustees. In the event there is only one Administrative
Trustee, any and all action of such Administrative Trustee shall be evidenced by
a written consent of such Administrative Trustee.
SECTION 5.11 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
3.6, including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
(b) the Administrative Trustees shall have power to delegate from
time to time to such of their number or to officers of the Trust 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 5.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS.
Any corporation into which the Property Trustee or the Delaware
Trustee or any Administrative Trustee that is not a natural person, as the case
may be, may be merged or converted or
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with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Property Trustee or the Delaware
Trustee, as the case may be, shall be a party, or any corporation succeeding to
all or substantially all the corporate trust business of the Property Trustee or
the Delaware Trustee, as the case may be, shall be the successor of the Property
Trustee or the Delaware Trustee, as the case may be, hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 DISTRIBUTIONS.
Holders shall receive Distributions in accordance with the
applicable terms of the relevant Holder's Securities. If and to the extent that
the Debenture Issuer makes a payment of interest (including Compounded Interest
(as defined in the Indenture) and Additional Interest (as defined in the
Indenture)), premium and/or principal on the Debentures held by the Property
Trustee or Liquidated Damages (as defined in the Registration Rights Agreement)
or any other payments pursuant to the Registration Rights Agreement with respect
to the Debentures held by the Property Trustee (the amount of any such payment
being a "Payment Amount"), the Property Trustee shall and is directed, to the
extent funds are available for that purpose, to make a distribution (a
"Distribution") of the Payment Amount to Holders.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 GENERAL PROVISIONS REGARDING SECURITIES.
(a) The Administrative Trustees shall on behalf of the Trust issue
one class of capital securities representing undivided beneficial interests in
the assets of the Trust having such terms as are set forth in Annex I (the "
Series A Capital Securities") and one class of common securities representing
undivided beneficial interests in the assets of the Trust having such terms as
are set forth in Annex I (the "Common Securities"). In the event of an Exchange
Offer, the Administrative Trustees shall on behalf of the Trust issue one class
of capital securities representing undivided beneficial interests in the Trust
having such terms as set forth in Annex I (the "Series B Capital Securities") in
exchange for the Series A Capital Securities accepted for exchange in the
Exchange Offer, which Series B Capital Securities shall not bear the legends
required by Section
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9.2(i) unless the Holder of such Series A Capital Securities is either (A) a
broker-dealer who purchased such Series A Capital Securities directly from the
Trust for resale pursuant to Rule 144A or any other available exemption under
the Securities Act, (B) a Person participating in the distribution of the Series
A Capital Securities or (C) a Person who is an affiliate (as defined in Rule
144A) of the Trust. The Trust shall issue no securities or other interests in
the assets of the Trust other than the Capital Securities and the Common
Securities.
(b) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable.
(d) Every Person, by virtue of having become a Holder or a Capital
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Declaration.
SECTION 7.2 EXECUTION AND AUTHENTICATION.
(a) The Securities shall be signed on behalf of the Trust by an
Administrative Trustee by manual or facsimile signature. In case any
Administrative Trustee of the Trust who shall have signed any of the Securities
shall cease to be such Administrative Trustee before the Securities so signed
shall be delivered by the Trust, such Securities nevertheless may be delivered
as though the person who signed such Securities had not ceased to be such
Administrative Trustee; and any Securities may be signed on behalf of the Trust
by such persons who, at the actual date of execution of such Security, shall be
the Administrative Trustees of the Trust, although at the date of the execution
and delivery of the Declaration any such person was not such a Administrative
Trustee.
(b) One Administrative Trustee shall sign the Capital Securities for
the Trust by manual or facsimile signature. Unless otherwise determined by the
Trust, such signature shall, in the case of Common Securities, be a manual
signature.
A Capital Security shall not be valid until authenticated by the
manual signature of an authorized signatory of the Property Trustee. The
signature shall be conclusive evidence that the Capital Security has been
authenticated under this Declaration.
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Upon a written order of the Trust signed by one Administrative
Trustee, the Property Trustee shall authenticate the Capital Securities for
original issue. The aggregate number of Capital Securities outstanding at any
time shall not exceed the number set forth in the Terms in Annex I hereto except
as provided in Section 7.6.
The Property Trustee may appoint an authenticating agent acceptable
to the Trust to authenticate Capital Securities. An authenticating agent may
authenticate Capital Securities whenever the Property Trustee may do so. Each
reference in this Declaration to authentication by the Property Trustee includes
authentication by such agent. An authenticating agent has the same rights as the
Property Trustee to deal with the Sponsor or an Affiliate.
SECTION 7.3 FORM AND DATING.
The Capital Securities and the Property Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1 and the Common
Securities shall be substantially in the form of Exhibit A-2, each of which is
hereby incorporated in and expressly made a part of this Declaration.
Certificates representing the Securities may be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrative Trustees, as evidenced by their execution thereof. The
Securities may have letters, CUSIP or other numbers, notations or other marks of
identification or designation and such legends or endorsements required by law,
stock exchange rule, agreements to which the Trust is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Trust). The Trust at the direction of the Sponsor shall furnish any such
legend not contained in Exhibit A-1 to the Property Trustee in writing. Each
Capital Security shall be dated the date of its authentication. The terms and
provisions of the Securities set forth in Annex I and the forms of Securities
set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and
to the extent applicable, the Property Trustee and the Sponsor, by their
execution and delivery of this Declaration, expressly agree to such terms and
provisions and to be bound thereby.
(a) GLOBAL SECURITIES. Securities offered and sold to QIBs in
reliance on Rule 144A, as provided in the Purchase Agreement, shall be issued in
the form of one or more, permanent global Securities in definitive, fully
registered form without distribution coupons with the appropriate global legends
and Restricted Securities Legend set forth in Exhibit A-1 hereto (a "Global
Capital Security"), which shall be deposited on behalf of the purchasers of the
Capital Securities represented thereby with the Property Trustee, at its New
York office, as custodian for the Clearing Agency, and registered in the name of
the Clearing
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Agency or a nominee of the Clearing Agency, duly executed by the Trust and
authenticated by the Property Trustee as hereinafter provided. The number of
Capital Securities represented by a Global Capital Security may from time to
time be increased or decreased by adjustments made on the records of the
Property Trustee and the Clearing Agency or its nominee as hereinafter provided.
(b) BOOK-ENTRY PROVISIONS. This Section 7.3(b) shall apply only to
the Global Capital Securities and such other Capital Securities in global form
as may be authorized by the Trust to be deposited with or on behalf of the
Clearing Agency.
The Trust shall execute and the Property Trustee shall, in
accordance with this Section 7.3, authenticate and make available for delivery
initially one or more Global Capital Securities that (i) shall be registered in
the name of Cede & Co. or other nominee of such Clearing Agency and (ii) shall
be delivered by the Trustee to such Clearing Agency or pursuant to such Clearing
Agency's written instructions or held by the Property Trustee as custodian for
the Clearing Agency.
Members of, or participants in, the Clearing Agency ("Participants")
shall have no rights under this Declaration with respect to any Global Capital
Security held on their behalf by the Clearing Agency or by the Property Trustee
as the custodian of the Clearing Agency or under such Global Capital Security,
and the Clearing Agency may be treated by the Trust, the Property Trustee and
any agent of the Trust or the Property Trustee as the absolute owner of such
Global Capital Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Trust, the Property Trustee or any
agent of the Trust or the Property Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Clearing Agency or
impair, as between the Clearing Agency and its Participants, the operation of
customary practices of such Clearing Agency governing the exercise of the rights
of a holder of a beneficial interest in any Global Capital Security.
(c) DEFINITIVE CAPITAL SECURITIES. Except as provided in Section
7.9, owners of beneficial interests in a Global Capital Security will not be
entitled to receive physical delivery of certificated Capital Securities
("Definitive Capital Securities"). Purchasers of Securities (other than QIBs)
who are "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act) will receive Capital Securities in the form of
individual certificates in definitive, fully registered form without
distribution coupons and with the Restricted Securities Legend set forth in
Exhibit A-1 hereto ("Restricted Definitive Capital Securities"); PROVIDED,
HOWEVER, that upon transfer of such Restricted Definitive Capital Securities to
a QIB, such Restricted Definitive Capital Securities will, unless
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the Global Capital Security has previously been exchanged, be exchanged for an
interest in a Global Capital Security pursuant to the provisions of Section 9.2.
Restricted Definitive Capital Securities will bear the Restricted Securities
Legend set forth on Exhibit A-1 unless removed in accordance with this Section
7.3 or Section 9.2.
(d) AUTHORIZED DENOMINATIONS. The Capital Securities are issuable
only in denominations of $1,000 and any integral multiple thereof.
SECTION 7.4 REGISTRAR, PAYING AGENT AND EXCHANGE AGENT.
The Trust shall maintain in the Borough of Manhattan, The City of
New York, (i) an office or agency where Capital Securities may be presented for
registration of transfer ("Registrar"), (ii) an office or agency where Capital
Securities may be presented for payment ("Paying Agent") and (iii) an office or
agency where Securities may be presented for exchange ("Exchange Agent"). The
Registrar shall keep a register of the Capital Securities and of their transfer.
The Trust may appoint the Registrar, the Paying Agent and the Exchange Agent and
may appoint one or more co-registrars, one or more additional paying agents and
one or more additional exchange agents in such other locations as it shall
determine. The term "Registrar" includes any additional registrar, "Paying
Agent" includes any additional paying agent and the term "Exchange Agent"
includes any additional exchange agent. The Trust may change any Paying Agent,
Registrar, co-registrar or Exchange Agent without prior notice to any Holder.
The Paying Agent shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Administrative Trustees. The Trust shall notify the
Property Trustee of the name and address of any Agent not a party to this
Declaration. If the Trust fails to appoint or maintain another entity as
Registrar, Paying Agent or Exchange Agent, the Property Trustee shall act as
such. The Trust or any of its Affiliates may act as Paying Agent, Registrar, or
Exchange Agent. The Trust shall act as Paying Agent, Registrar, co-registrar,
and Exchange Agent for the Common Securities.
The Trust initially appoints the Property Trustee as Registrar,
Paying Agent, and Exchange Agent for the Capital Securities.
SECTION 7.5 PAYING AGENT TO HOLD MONEY IN TRUST.
The Trust shall require each Paying Agent other than the Property
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Property Trustee all money held by the Paying Agent
for the payment of liquidation amounts or Distributions, and will notify the
Property Trustee if there are insufficient funds for such purpose.
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While any such insufficiency continues, the Property Trustee may require a
Paying Agent to pay all money held by it to the Property Trustee. The Trust at
any time may require a Paying Agent to pay all money held by it to the Property
Trustee and to account for any money disbursed by it. Upon payment over to the
Property Trustee, the Paying Agent (if other than the Trust or an Affiliate of
the Trust) shall have no further liability for the money. If the Trust or the
Sponsor or an Affiliate of the Trust or the Sponsor acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent.
SECTION 7.6 REPLACEMENT SECURITIES.
If a Holder claims that a Security owned by it has been lost,
destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Capital Securities to the
Property Trustee, the Trust shall issue and the Property Trustee shall
authenticate a replacement Security if the Property Trustee's and the Trust's
requirements, as the case may be, are met. An indemnity bond must be provided by
the Holder which, in the judgment of the Property Trustee, is sufficient to
protect the Trustees, the Sponsor or any authenticating agent from any loss
which any of them may suffer if a Security is replaced. The Trust may charge
such Holder for its expenses in replacing a Security.
Every replacement Security is an additional beneficial interest in
the Trust.
SECTION 7.7 OUTSTANDING CAPITAL SECURITIES.
The Capital Securities outstanding at any time are all the Capital
Securities authenticated by the Property Trustee except for those cancelled by
it, those delivered to it for cancellation, and those described in this Section
as not outstanding.
If a Capital Security is replaced, paid or purchased pursuant to
Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Capital
Security is held by a bona fide purchaser.
If Capital Securities are considered paid in accordance with the
terms of this Declaration, they cease to be outstanding and Distributions on
them shall cease to accumulate.
A Capital Security does not cease to be outstanding because one of
the Trust, the Sponsor or an Affiliate of the Sponsor holds the Security.
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SECTION 7.8 CAPITAL SECURITIES IN TREASURY.
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Capital
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Property Trustee shall be fully
protected in relying on any such direction, waiver or consent, only Securities
which the Property Trustee actually knows are so owned shall be so disregarded.
SECTION 7.9 TEMPORARY SECURITIES.
(a) Until Definitive Securities are ready for delivery, the Trust
may prepare and, in the case of the Capital Securities, the Property Trustee
shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of Definitive Securities but may have variations that
the Trust considers appropriate for temporary Securities. Without unreasonable
delay, the Trust shall prepare and, in the case of the Capital Securities, the
Property Trustee shall authenticate Definitive Securities in exchange for
temporary Securities.
(b) A Global Capital Security deposited with the Clearing Agency or
with the Property Trustee as custodian for the Clearing Agency pursuant to
Section 7.3 shall be transferred to the beneficial owners thereof in the form of
certificated Capital Securities only if such transfer complies with Section 9.2
and (i) the Clearing Agency notifies the Company that it is unwilling or unable
to continue as Clearing Agency for such Global Capital Security or if at any
time such Clearing Agency ceases to be a "clearing agency" registered under the
Exchange Act and a clearing agency is not appointed by the Sponsor within 90
days of such notice, (ii) a Default or an Event of Default has occurred and is
continuing or (iii) the Trust at its sole discretion elects to cause the
issuance of certificated Capital Securities.
(c) Any Global Capital Security that is transferable to the
beneficial owners thereof in the form of certificated Capital Securities
pursuant to this Section 7.9 shall be surrendered by the Clearing Agency to the
Property Trustee located in the Borough of Manhattan, The City of New York, to
be so transferred, in whole or from time to time in part, without charge, and
the Property Trustee shall authenticate and make available for delivery, upon
such transfer of each portion of such Global Capital Security, an equal
aggregate liquidation amount of Securities of authorized denominations in the
form of certificated Capital Securities. Any portion of a Global Capital
Security transferred pursuant to this Section shall be registered in such names
as the Clearing Agency shall direct. Any Capital Security in the form of
certificated Capital Securities delivered in
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exchange for an interest in the Restricted Global Capital Security shall, except
as otherwise provided by Sections 7.3 and 9.1, bear the Restricted Securities
Legend set forth in Exhibit A-1 hereto.
(d) Subject to the provisions of Section 7.9(c), the Holder of a
Global Capital Security may grant proxies and otherwise authorize any person,
including Participants and persons that may hold interests through Participants,
to take any action which such Holder is entitled to take under this Declaration
or the Securities.
(e) In the event of the occurrence of any of the events specified in
Section 7.9(b), the Trust will promptly make available to the Property Trustee a
reasonable supply of certificated Capital Securities in fully registered form
without distribution coupons.
SECTION 7.10 CANCELLATION.
The Trust at any time may deliver Capital Securities to the Property
Trustee for cancellation. The Registrar, Paying Agent and Exchange Agent shall
forward to the Property Trustee any Capital Securities surrendered to them for
registration of transfer, redemption, exchange or payment. The Property Trustee
shall promptly cancel all Capital Securities, surrendered for registration of
transfer, redemption, exchange, payment, replacement or cancellation and shall
dispose of cancelled Capital Securities as the Trust directs, provided that the
Property Trustee shall not be obligated to destroy Capital Securities. The Trust
may not issue new Capital Securities to replace Capital Securities that it has
paid or that have been delivered to the Property Trustee for cancellation or
that any holder has exchanged.
SECTION 7.11 CUSIP NUMBERS.
The Trust in issuing the Capital Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Property Trustee shall use "CUSIP"
numbers in notices of redemption as a convenience to Holders of Capital
Securities; PROVIDED that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Capital
Securities or as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the Capital
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Sponsor will promptly notify the Property Trustee
of any change in the CUSIP numbers.
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ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 TERMINATION OF TRUST.
(a) The Trust shall automatically terminate:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or liquidation
or its equivalent with respect to the Sponsor; or the revocation of the
Sponsor's charter and the expiration of 90 days after the date of
revocation without a reinstatement thereof;
(iii) following the distribution of a Like Amount of the Debentures
to the Holders, PROVIDED THAT, the Property Trustee has received written
notice from the Sponsor directing the Property Trustee to terminate the
Trust (which direction is optional, and except as otherwise expressly
provided below, within the discretion of the Sponsor) and PROVIDED,
FURTHER, that such direction and such distribution is conditioned on (i)
the prior approval of the Federal Reserve Board if such approval is then
required under applicable capital guidelines or policies of the Federal
Reserve Board, (ii) the Administrative Trustees' receipt of an opinion of
an independent tax counsel experienced in such matters, which opinion may
rely on published rulings of the Internal Revenue Service, to the effect
that the Holders will not recognize any gain or loss for United States
federal income tax purposes as a result of the dissolution of the Trust
and the distribution of Debentures;
(iv) upon the entry of a decree of judicial dissolution of the Trust
by a court of competent jurisdiction;
(v) when all of the Securities shall have been called for redemption
and the amounts necessary for redemption thereof shall have been paid to
the Holders in accordance with the terms of the Securities;
(vi) upon the repayment of the Debentures or at such time as no
Debentures are outstanding; or
(vii) the expiration of the term of the Trust provided in Section
3.14.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 8.1(a), the Administrative Trustees shall file a
certificate of cancellation with the Secretary of State of the State of
Delaware.
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(c) The provisions of Section 3.9 and Article X shall survive the
termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 TRANSFER OF SECURITIES.
(a) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. Any transfer or purported transfer of any Security
not made in accordance with this Declaration shall be null and void.
(b) Subject to this Article IX, Capital Securities may only be
transferred, in whole or in part, in accordance with the terms and conditions
set forth in this Declaration. Any transfer or purported transfer of any
security not made in accordance with this Declaration shall be null and void.
(c) For so long as the Trust Securities remain outstanding, the
Sponsor will covenant (i) to directly or indirectly maintain 100% direct or
indirect ownership of the Common Securities of the Trust; provided, however,
that any permitted successor of the Sponsor under the Indenture may succeed to
the Sponsor's ownership of such Common Securities, (ii) not to cause, as sponsor
of the Trust, or to permit, as holder of the Common Securities, the dissolution,
winding-up or termination of the Trust, except in connection with a distribution
of the Debentures as provided in the Declaration and in connection with certain
mergers, consolidations or amalgamations and (iii) to use its reasonable efforts
to cause the Trust (a) to remain a business trust, except in connection with the
distribution of Debentures to the holders of Trust Securities in liquidation of
the Trust, the redemption of all of the Trust Securities, or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, and (b)
to otherwise continue to be classified as a grantor trust for United States
federal income tax purposes.
(d) The Administrative Trustees shall provide for the registration
of Securities and of the transfer of Securities, which will be effected without
charge but only upon payment (with such indemnity as the Administrative Trustees
may require) in respect of any tax or other governmental charges that may be
imposed in relation to it. Upon surrender for registration of transfer of any
Securities, the Administrative Trustees shall cause one or more new Securities
to be issued in the name of the designated transferee or transferees. Every
Security surrendered for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to the Administrative
Trustees duly executed by the Holder or such Holder's attorney
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duly authorized in writing. Each Security surrendered for registration of
transfer shall be canceled by the Property Trustee (in the case of Capital
Securities) or the Trust (in the case of Common Securities). A transferee of a
Security shall be entitled to the rights and subject to the obligations of a
Holder hereunder upon the receipt by such transferee of a Security. By
acceptance of a Security, each transferee shall be deemed to have agreed to be
bound by this Declaration.
SECTION 9.2 TRANSFER PROCEDURES AND RESTRICTIONS
(a) GENERAL. Except as otherwise provided in Section 9.2(b), if
Capital Securities are issued upon the transfer, exchange or replacement of
Capital Securities bearing the Restricted Securities Legend set forth in Exhibit
A-1 hereto, or if a request is made to remove such Restricted Securities Legend
on Capital Securities, the Capital Securities so issued shall bear the
Restricted Securities Legend, or the Restricted Securities Legend shall not be
removed, as the case may be, unless there is delivered to the Trust and the
Property Trustee such satisfactory evidence, which shall include an Opinion of
Counsel licensed to practice law in the State of New York, as may be reasonably
required by the Sponsor and the Property Trustee, that neither the legend nor
the restrictions on transfer set forth therein are required to ensure that
transfers thereof are made pursuant to an exception from the registration
requirements of the Securities Act or, with respect to Restricted Securities,
that such Securities are not "restricted" within the meaning of Rule 144. Upon
provision of such satisfactory evidence, the Property Trustee, at the written
direction of the Trust, shall authenticate and deliver Capital Securities that
do not bear the legend.
(b) TRANSFERS AFTER EFFECTIVENESS OF A REGISTRATION STATEMENT. After
the effectiveness of a Registration Statement with respect to any Capital
Securities, all requirements pertaining to legends on such Capital Securities
will cease to apply, except for the requirements pertaining to the minimum
transfer requirements of $100,000, and beneficial interests in a Capital
Security in global form without legends will be available to transferees of such
Capital Securities, upon exchange of the transferring holder's Restricted
Definitive Capital Security or directions to transfer such Holder's beneficial
interest in the Global Capital Security as the case may be. No such transfer or
exchange of a Restricted Definitive Capital Security or of an interest in the
Global Capital Security shall be effective unless the transferor delivers to the
Trust a certificate in a form substantially similar to that attached hereto as
the form of "Assignment" in Exhibit A-1. Except as otherwise provided in Section
9.2(m), after the effectiveness of a Registration Statement, the Trust shall
issue and the Property Trustee, upon a written order of the Trust signed by one
Administrative Trustee, shall authenticate a Capital Security in global form
without the
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Restricted Securities Legend (the "Unrestricted Global Capital Security") to
deposit with the Clearing Agency to evidence transfers of beneficial interests
from the (i) Global Capital Security and (ii) Restricted Definitive Capital
Securities.
(c) TRANSFER AND EXCHANGE OF DEFINITIVE CAPITAL SECURITIES. When
Definitive Capital Securities are presented to the Registrar or co-Registrar
(x) to register the transfer of such Definitive Capital Securities;
or
(y) to exchange such Definitive Capital Securities which became
mutilated, destroyed, defaced, stolen or lost, for an equal number of
Definitive Capital Securities,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
PROVIDED, HOWEVER, that the Definitive Capital Securities surrendered for
transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Trust and the Registrar or
co-registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) in the case of Definitive Capital Securities that are
Restricted Definitive Capital Securities:
(A) if such Restricted Capital Securities are being
delivered to the Registrar by a Holder for registration in the name
of such Holder, without transfer, a certification from such Holder
to that effect; or
(B) if such Restricted Capital Securities are being
transferred: (i) a certification from the transferor in a form
substantially similar to that attached hereto as the form of
"Assignment" in Exhibit A-1, and (ii) if the Trust or Registrar so
requests, evidence reasonably satisfactory to them as to the
compliance with the restrictions set forth in the Restricted
Securities Legend.
(d) RESTRICTIONS ON TRANSFER OF A DEFINITIVE CAPITAL SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL CAPITAL SECURITY. A Definitive Capital Security
may not be exchanged for a beneficial interest in a Global Capital Security
except upon satisfaction of the requirements set forth below. Upon receipt by
the Property Trustee of a Definitive Capital Security, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to the
Property Trustee, together with:
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(i) if such Definitive Capital Security is a Restricted Capital
Security, certification (in a form substantially similar to that attached
hereto as the form of "Assignment" in Exhibit A-1); and
(ii) whether or not such Definitive Capital Security is a Restricted
Capital Security, written instructions directing the Property Trustee to
make, or to direct the Clearing Agency to make, an adjustment on its books
and records with respect to the appropriate Global Capital Security to
reflect an increase in the number of the Capital Securities represented by
such Global Capital Security,
then the Property Trustee shall cancel such Definitive Capital Security and
cause, or direct the Clearing Agency to cause, the aggregate number of Capital
Securities represented by the appropriate Global Capital Security to be
increased accordingly. If no Global Capital Securities are then outstanding, the
Trust shall issue and the Property Trustee shall authenticate, upon written
order of any Administrative Trustee, an appropriate number of Capital Securities
in global form.
(e) TRANSFER AND EXCHANGE OF GLOBAL CAPITAL SECURITIES. Subject to
Section 9.02(f), the transfer and exchange of Global Capital Securities or
beneficial interests therein shall be effected through the Clearing Agency, in
accordance with this Declaration (including applicable restrictions on transfer
set forth herein, if any) and the procedures of the Clearing Agency therefor.
(f) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL CAPITAL SECURITY
FOR A DEFINITIVE CAPITAL SECURITY.
(i) Any Person having a beneficial interest in a Global Capital
Security may upon request, but only upon 20 days prior notice to the
Property Trustee, and if accompanied by the information specified below,
exchange such beneficial interest for a Definitive Capital Security
representing the same number of Capital Securities. Upon receipt by the
Property Trustee from the Clearing Agency or its nominee on behalf of any
Person having a beneficial interest in a Global Capital Security of
written instructions or such other form of instructions as is customary
for the Clearing Agency or the Person designated by the Clearing Agency as
having such a beneficial interest in a Restricted Capital Security and a
certification from the transferor (in a form substantially similar to that
attached hereto as the form of "Assignment" in Exhibit A-1), which may be
submitted by facsimile, then the Property Trustee will cause the aggregate
number of Capital Securities represented by Global Capital Securities to
be reduced on its books and records and, following such reduction, the
Trust will execute and the
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Property Trustee will authenticate and make available for delivery to the
transferee a Definitive Capital Security.
(ii) Definitive Capital Securities issued in exchange for a
beneficial interest in a Global Capital Security pursuant to this Section
9.2(f) shall be registered in such names and in such authorized
denominations as the Clearing Agency, pursuant to instructions from its
Participants or Indirect Participants or otherwise, shall instruct the
Property Trustee in writing. The Property Trustee shall deliver such
Capital Securities to the persons in whose names such Capital Securities
are so registered in accordance with such instructions of the Clearing
Agency.
(g) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL CAPITAL
SECURITIES. Notwithstanding any other provisions of this Declaration (other than
the provisions set forth in subsection (h) of this Section 9.2), a Global
Capital Security may not be transferred as a whole except by the Clearing Agency
to a nominee of the Clearing Agency or another nominee of the Clearing Agency or
by the Clearing Agency or any such nominee to a successor Clearing Agency or a
nominee of such successor Clearing Agency.
(h) AUTHENTICATION OF DEFINITIVE CAPITAL SECURITIES. If at any time:
(i) there occurs a Default or an Event of Default which is
continuing, or
(ii) the Trust, in its sole discretion, notifies the Property
Trustee in writing that it elects to cause the issuance of Definitive
Capital Securities under this Declaration,
then the Trust will execute, and the Property Trustee, upon receipt of a written
order of the Trust signed by one Administrative Trustee requesting the
authentication and delivery of Definitive Capital Securities to the Persons
designated by the Trust, will authenticate and make available for delivery
Definitive Capital Securities, equal in number to the number of Capital
Securities represented by the Global Capital Securities, in exchange for such
Global Capital Securities.
(i) LEGEND.
(i) Except as permitted by the following paragraph (ii), each
Capital Security certificate evidencing the Global Capital Securities and
the Definitive Capital Securities (and all Capital Securities issued in
exchange therefor
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or substitution thereof) shall bear a legend (the "Restricted Securities
Legend") in substantially the following form:
THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS
CAPITAL SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO
THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE
YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE
LAST DATE ON WHICH THE CORPORATION OR ANY "AFFILIATE" OF THE
CORPORATION WAS THE OWNER OF THIS CAPITAL SECURITY (OR ANY
PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A) TO THE CORPORATION,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS CAPITAL
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO
AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT
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TO THE RIGHT OF THE TRUST AND THE CORPORATION PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO
CLAUSE (E), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE REVERSE OF THIS CAPITAL SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEREE TO THE TRUST. SUCH HOLDER FURTHER AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CAPITAL SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
(ii) Upon any sale or transfer of a Restricted Capital Security
(including any Restricted Capital Security represented by a Global Capital
Security) pursuant to an effective registration statement under the
Securities Act or pursuant to Rule 144 under the Securities Act after such
registration statement ceases to be effective:
(A) in the case of any Restricted Capital Security that is a
Definitive Capital Security, the Registrar shall permit the Holder
thereof to exchange such Restricted Capital Security for a
Definitive Capital Security that does not bear the Restricted
Securities Legend and rescind any restriction on the transfer of
such Restricted Capital Security; and
(B) in the case of any Restricted Capital Security that is
represented by a Global Capital Security, the Registrar shall permit
the Holder of such Global Capital Security to exchange such Global
Capital Security for another Global Capital Security that does not
bear the Restricted Securities Legend.
(j) CANCELLATION OR ADJUSTMENT OF GLOBAL CAPITAL SECURITY. At such
time as all beneficial interests in a Global Capital Security have either been
exchanged for Definitive Capital Securities to the extent permitted by this
Declaration or redeemed, repurchased or canceled in accordance with the terms of
this Declaration, such Global Capital Security shall be returned to the Clearing
Agency for cancellation or retained and canceled by the Property Trustee. At any
time prior to such cancellation, if any beneficial interest in a Global Capital
Security is exchanged for Definitive Capital Securities, Capital Securities
represented by such Global Capital Security shall be reduced and an adjustment
shall be made on the books and records of the Property Trustee (if it is then
the custodian for such Global Capital Security) with respect to such Global
Capital Security, by the
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Property Trustee or the Securities Custodian, to reflect such reduction.
(k) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF CAPITAL
SECURITIES.
(i) To permit registrations of transfers and exchanges, the Trust
shall execute and the Property Trustee shall authenticate Definitive
Capital Securities and Global Capital Securities at the Registrar's or
co-Registrar's request in accordance with the terms of this Declaration.
(ii) Registrations of transfers or exchanges will be effected
without charge, but only upon payment (with such indemnity as the Trust or
the Sponsor may require) in respect of any tax or other governmental
charge that may be imposed in relation to it.
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) Capital Securities during a
period beginning at the opening of business 15 days before the day of
mailing of a notice of redemption or any notice of selection of Capital
Securities for redemption and ending at the close of business on the day
of such mailing; or (b) any Capital Security so selected for redemption in
whole or in part, except the unredeemed portion of any Capital Security
being redeemed in part.
(iv) Prior to the due presentation for registrations of transfer of
any Capital Security, the Trust, the Property Trustee, the Paying Agent,
the Registrar or any co-registrar may deem and treat the person in whose
name a Capital Security is registered as the absolute owner of such
Capital Security for the purpose of receiving Distributions on such
Capital Security and for all other purposes whatsoever, and none of the
Trust, the Property Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
(v) All Capital Securities issued upon any transfer or exchange
pursuant to the terms of this Declaration shall evidence the same security
and shall be entitled to the same benefits under this Declaration as the
Capital Securities surrendered upon such transfer or exchange.
(l) NO OBLIGATION OF THE PROPERTY TRUSTEE.
(i) The Property Trustee shall have no responsibility or obligation
to any beneficial owner of a Global Capital Security, a Participant in the
Clearing Agency or other Person with respect to the accuracy of the
records of the Clearing Agency or its nominee or of any Participant
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thereof, with respect to any ownership interest in the Capital Securities
or with respect to the delivery to any Participant, beneficial owner or
other Person (other than the Clearing Agency) of any notice (including any
notice of redemption) or the payment of any amount, under or with respect
to such Capital Securities. All notices and communications to be given to
the Holders and all payments to be made to Holders under the Capital
Securities shall be given or made only to or upon the order of the
registered Holders (which shall be the Clearing Agency or its nominee in
the case of a Global Capital Security). The rights of beneficial owners in
any Global Capital Security shall be exercised only through the Clearing
Agency subject to the applicable rules and procedures of the Clearing
Agency. The Property Trustee may conclusively rely and shall be fully
protected in relying upon information furnished by the Clearing Agency or
any agent thereof with respect to its Participants and any beneficial
owners.
(ii) The Property Trustee and Registrar shall have no obligation or
duty to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Declaration or under
applicable law with respect to any transfer of any interest in any Capital
Security (including any transfers between or among Clearing Agency
Participants or beneficial owners in any Global Capital Security) other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by, the terms of this Declaration, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
(m) EXCHANGE OF SERIES A CAPITAL SECURITIES FOR SERIES B CAPITAL
SECURITIES. The Series A Capital Securities may be exchanged for Series B
Securities pursuant to the terms of the Exchange Offer. The Trustee shall make
the exchange as follows:
The Sponsor shall present the Property Trustee with an Officers'
Certificate certifying the following:
(A) upon issuance of the Series B Capital Securities, the
transactions contemplated by the Exchange Offer have
been consummated; and
(B) the number of Series A Capital Securities properly
tendered in the Exchange Offer that are represented by a
Global Capital Security and the number of Series A
Capital Securities properly tendered in the Exchange
Offer that are represented by
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Definitive Capital Securities, the name of each Holder
of such Definitive Capital Securities, the liquidation
amount of Capital Securities properly tendered in the
Exchange Offer by each such Holder and the name and
address to which Definitive Capital Securities for
Series B Capital Securities shall be registered and sent
for each such Holder.
The Property Trustee, upon receipt of (i) such Officers'
Certificate, (ii) an Opinion of Counsel (x) to the effect that the Series B
Capital Securities have been registered under Section 5 of the Securities Act
and the Indenture has been qualified under the Trust Indenture Act and (y) with
respect to the matters set forth in Section 3(p) of the Registration Rights
Agreement and (iii) a Company Order, shall authenticate (A) a Global Capital
Security for Series B Capital Securities in aggregate liquidation amount equal
to the aggregate liquidation amount of Series A Capital Securities represented
by a Global Capital Security indicated in such Officers' Certificate as having
been properly tendered and (B) Definitive Capital Securities representing Series
B Capital Securities registered in the names of, and in the liquidation amounts
indicated in such Officers' Certificate.
If, upon consummation of the Exchange Offer, less than all the
outstanding Series A Capital Securities shall have been properly tendered and
not withdrawn, the Property Trustee shall make an endorsement on the Global
Capital Security for Series A Capital Securities indicating the reduction in the
number and aggregate liquidation amount represented thereby as a result of the
Exchange Offer.
The Trust shall deliver such Definitive Capital Securities for
Series B Capital Securities to the Holders thereof as indicated in such
Officers' Certificate.
(n) MINIMUM TRANSFERS. Series A Capital Securities and, when issued,
Series B Capital Securities may only be transferred in minimum blocks of
$100,000 aggregate liquidation amount. Any transfer of Series A Capital
Securities or Series B Capital Securities in a block having an aggregate
liquidation amount of less than $100,000 shall be deemed to be voided and of no
legal effect whatsoever. Any such transferee shall be deemed not to be a holder
of such Series A or Series B Capital Securities for any purpose, including, but
not limited to, the receipt of payments on such Capital Securities, and such
transferee shall be deemed to have no interest whatsoever in such Capital
Securities.
SECTION 9.3 DEEMED SECURITY HOLDERS.
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The Trustees may treat the Person in whose name any Security shall
be registered on the books and records of the Trust as the sole owner of such
Security for purposes of receiving Distributions and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Security on the part of any Person, whether
or not the Trust shall have actual or other notice thereof.
SECTION 9.4 BOOK ENTRY INTERESTS.
Global Capital Securities shall initially be registered on the books
and records of the Trust in the name of Cede & Co., the nominee of the Clearing
Agency, and no Capital Security Beneficial Owner will receive a definitive
Capital Security Certificate representing such Capital Security Beneficial
Owner's interests in such Global Capital Securities, except as provided in
Section 9.2 and Section 7.9. Unless and until definitive, fully registered
Capital Securities certificates have been issued to the Capital Security
Beneficial Owners pursuant to Section 9.2 and Section 7.9:
(a) the provisions of this Section 9.4 shall be in full force and
effect;
(b) the Trust and the Trustees shall be entitled to deal with the
Clearing Agency for all purposes of this Declaration (including the
payment of Distributions on the Global Capital Securities and receiving
approvals, votes or consents hereunder) as the Holder of the Capital
Securities and the sole holder of the Global Certificates and shall have
no obligation to the Capital Security Beneficial Owners;
(c) to the extent that the provisions of this Section 9.4 conflict
with any other provisions of this Declaration, the provisions of this
Section 9.4 shall control; and
(d) the rights of the Capital Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Capital Security Beneficial
Owners and the Clearing Agency and/or the Clearing Agency Participants and
receive and transmit payments of Distributions on the Global Certificates
to such Clearing Agency Participants. DTC will make book entry transfers
among the Clearing Agency Participants.
SECTION 9.5 NOTICES TO CLEARING AGENCY.
Whenever a notice or other communication to the Capital Security
Holders is required under this Declaration, the Trustees
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shall give all such notices and communications specified herein to be given to
the Holders of Global Capital Securities to the Clearing Agency, and shall have
no notice obligations to the Capital Security Beneficial Owners.
SECTION 9.6 APPOINTMENT OF SUCCESSOR CLEARING AGENCY.
If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the Capital Securities, the Administrative
Trustees may, in their sole discretion, appoint a successor Clearing Agency with
respect to such Capital Securities.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 LIABILITY.
(a) Except as expressly set forth in this Declaration, the
Securities Guarantees and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the capital
contributions (or any return thereon) of the Holders which shall be made
solely from assets of the Trust; and
(ii) required to pay to the Trust or to any Holder any deficit upon
dissolution of the Trust or otherwise.
(b) The Debenture Issuer shall be liable for all of the debts and
obligations of the Trust (other than in respect of the Securities) to the extent
not satisfied out of the Trust's assets.
(c) Pursuant to Section. 3803(a) of the Business Trust Act, the
Holders 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.
SECTION 10.2 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust 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 on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this
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Declaration 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 gross
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 Trust and upon such information, opinions,
reports or statements presented to the Trust 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 Trust, 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 might properly be paid.
SECTION 10.3 FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the Property Trustee under the Trust Indenture Act), are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between any
Covered Persons; or
(ii) whenever this Declaration or any other agreement contemplated
herein or therein provides that an Indemnified Person shall act in a
manner that is, or provides terms that are, fair and reasonable to the
Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not
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constitute a breach of this Declaration or any other agreement contemplated
herein or of any duty or obligation of the Indemnified Person at law or in
equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted
or required to make a decision:
(i) in its "discretion" or under a grant of similar authority, the
Indemnified Person shall be entitled to consider such interests and
factors as it desires, including its own interests, and shall have no duty
or obligation to give any consideration to any interest of or factors
affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or
by applicable law.
SECTION 10.4 INDEMNIFICATION.
(a) (i) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Company Indemnified Person against
expenses (including attorneys' fees and expenses), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the Company
Indemnified Person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Trust to procure a judgment in
its favor by reason of the fact that he is or was a Company Indemnified
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Person against expenses (including attorneys' fees and expenses) actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Trust and except that no such indemnification shall be
made in respect of any claim, issue or matter as to which such Company
Indemnified Person shall have been adjudged to be liable to the Trust
unless and only to the extent that the Court of Chancery of Delaware or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or
such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action
without prejudice or the settlement of an action without admission of
liability) in defense of any action, suit or proceeding referred to in
paragraphs (i) and (ii) of this Section 10.4(a), or in defense of any
claim, issue or matter therein, he shall be indemnified, to the full
extent permitted by law, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(a) (unless ordered by a court) shall be made by the Debenture
Issuer only as authorized in the specific case upon a determination that
indemnification of the Company Indemnified Person is proper in the
circumstances because he has met the applicable standard of conduct set
forth in paragraphs (i) and (ii). Such determination shall be made (1) by
the Administrative Trustees by a majority vote of a Quorum consisting of
such Administrative Trustees who were not parties to such action, suit or
proceeding, (2) if such a Quorum is not obtainable, or, even if
obtainable, if a Quorum of disinterested Administrative Trustees so
directs, by independent legal counsel in a written opinion, or (3) by the
Common Security Holder of the Trust.
(v) Expenses (including attorneys' fees and expenses) incurred by a
Company Indemnified Person in defending a civil, criminal, administrative
or investigative action, suit or proceeding referred to in paragraphs (i)
and (ii) of this Section 10.4(a) shall be paid by the Debenture Issuer in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such Company Indemnified
Person to repay such amount if it
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shall ultimately be determined that he is not entitled to be indemnified
by the Debenture Issuer as authorized in this Section 10.4(a).
Notwithstanding the foregoing, no advance shall be made by the Debenture
Issuer if a determination is reasonably and promptly made (i) by the
Administrative Trustees by a majority vote of a quorum of disinterested
Administrative Trustees, (ii) if such a quorum is not obtainable, or, even
if obtainable, if a quorum of disinterested Administrative Trustees so
directs, by independent legal counsel in a written opinion or (iii) the
Common Security Holder of the Trust, that, based upon the facts known to
the Administrative Trustees, counsel or the Common Security Holder at the
time such determination is made, such Company Indemnified Person acted in
bad faith or in a manner that such person did not believe to be in or not
opposed to the best interests of the Trust, or, with respect to any
criminal proceeding, that such Company Indemnified Person believed or had
reasonable cause to believe his conduct was unlawful. In no event shall
any advance be made in instances where the Administrative Trustees,
independent legal counsel or Common Security Holder reasonably determine
that such person deliberately breached his duty to the Trust or its Common
or Capital Security Holders.
(vi) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 10.4(a) shall
not be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any
agreement, vote of stockholders or disinterested directors of the
Debenture Issuer or Capital Security Holders of the Trust or otherwise,
both as to action in his official capacity and as to action in another
capacity while holding such office. All rights to indemnification under
this Section 10.4(a) shall be deemed to be provided by a contract between
the Debenture Issuer and each Company Indemnified Person who serves in
such capacity at any time while this Section 10.4(a) is in effect. Any
repeal or modification of this Section 10.4(a) shall not affect any rights
or obligations then existing.
(vii) The Debenture Issuer or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company Indemnified
Person against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not
the Debenture Issuer would have the power to indemnify him against such
liability under the provisions of this Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to "the
Trust" shall include, in addition to the resulting or surviving entity,
any constituent entity
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(including any constituent of a constituent) absorbed in a consolidation
or merger, so that any person who is or was a director, trustee, officer
or employee of such constituent entity, or is or was serving at the
request of such constituent entity as a director, trustee, officer,
employee or agent of another entity, shall stand in the same position
under the provisions of this Section 10.4(a) with respect to the resulting
or surviving entity as he would have with respect to such constituent
entity if its separate existence had continued.
(ix) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 10.4(a) shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be
a Company Indemnified Person and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(b) The Debenture Issuer agrees to indemnify the (i) Property
Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee
and the Delaware Trustee, and (iv) any officers, directors, shareholders,
members, partners, employees, representatives, custodians, nominees or agents of
the Property Trustee and the Delaware Trustee (each of the Persons in (i)
through (iv) being referred to as a "Fiduciary Indemnified Person") for, and to
hold each Fiduciary Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense including taxes (other than taxes based on
the income of such Fiduciary Indemnified Person) incurred without negligence or
bad faith on its part, 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 10.4(b) shall survive the satisfaction
and discharge of this Declaration.
SECTION 10.5 OUTSIDE BUSINESSES.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Property Trustee may engage in or possess an interest in other business ventures
of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders shall
have no rights by virtue of this Declaration in and to such independent ventures
or the income or profits derived therefrom, and the pursuit of any such venture,
even if competitive with the business of the Trust, shall not be deemed wrongful
or improper. No Covered Person, the Sponsor, the Delaware Trustee, or the
Property Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character
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that, if presented to the Trust, could be taken by the Trust, and any Covered
Person, the Sponsor, the Delaware Trustee and the Property Trustee shall have
the right to take for its own account (individually or as a partner or
fiduciary) or to recommend to others any such particular investment or other
opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee
may engage or be interested in any financial or other transaction with the
Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee
or agent for, or act on any committee or body of holders of, securities or other
obligations of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 FISCAL YEAR.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar
year, or such other year as is required by the Code.
SECTION 11.2 CERTAIN ACCOUNTING MATTERS.
(a) At all times during the existence of the Trust, the
Administrative Trustees shall keep, or cause to be kept, full books of account,
records and supporting documents, which shall reflect in reasonable detail, each
transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The books of account and the records of the
Trust shall be examined by and reported upon as of the end of each Fiscal Year
of the Trust by a firm of independent certified public accountants selected by
the Administrative Trustees.
(b) The Administrative Trustees shall cause to be duly prepared and
delivered to each of the Holders, any annual United States federal income tax
information statement, required by the Code, containing such information with
regard to the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Administrative Trustees shall endeavor to
deliver all such information statements within 30 days after the end of each
Fiscal Year of the Trust.
(c) The Administrative Trustees shall cause to be duly prepared and
filed with the appropriate taxing authority, an annual United States federal
income tax return, on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to be
filed by
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the Administrative Trustees on behalf of the Trust with any state or local
taxing authority.
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SECTION 11.3 Banking.
The Trust shall maintain one or more bank accounts in the name and
for the sole benefit of the Trust; PROVIDED, HOWEVER, that all payments of funds
in respect of the Debentures held by the Property Trustee shall be made directly
to the Property Trustee Account and no other funds of the Trust shall be
deposited in the Property Trustee Account. The sole signatories for such
accounts shall be designated by the Administrative Trustees; PROVIDED, HOWEVER,
that the Property Trustee shall designate the signatories for the Property
Trustee Account.
SECTION 11.4 WITHHOLDING.
The Trust and the Administrative Trustees shall comply with all
withholding requirements under United States federal, state and local law. The
Trust shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably be
requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Administrative Trustees shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Trust is required to withhold and pay over any amounts to any authority with
respect to Distributions or allocations to any Holder, the amount withheld shall
be deemed to be a Distribution in the amount of the withholding to the Holder.
In the event of any claimed over withholding, Holders shall be limited to an
action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Trust may reduce
subsequent Distributions by the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 AMENDMENTS.
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed by:
(i) the Administrative Trustees (or if there are more than two
Administrative Trustees a majority of the Administrative Trustees);
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(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, the Property Trustee;
and
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware Trustee.
(b) No amendment shall be made, and any such purported amendment
shall be void and ineffective:
(i) unless, in the case of any proposed amendment, the Property
Trustee shall have first received an Officers' Certificate from each of
the Trust and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the terms of the
Securities);
(ii) unless, in the case of any proposed amendment which affects the
rights, powers, duties, obligations or immunities of the Property Trustee,
the Property Trustee shall have first received:
(A) an Officers' Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and conforms to, the
terms of this Declaration (including the terms of the Securities);
and
(B) an opinion of counsel (who may be counsel to the Sponsor
or the Trust) that such amendment is permitted by, and conforms to,
the terms of this Declaration (including the terms of the
Securities),
PROVIDED, HOWEVER, that the Property Trustee shall not be required to sign
any such amendment; and
(iii) to the extent the result of such amendment would be to:
(A) cause the Trust to fail to continue to be classified for
purposes of United States federal income taxation as a grantor
trust;
(B) reduce or otherwise adversely affect the powers of the
Property Trustee in contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(c) At such time after the Trust has issued any Securities that
remain outstanding, any amendment that would
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adversely affect the rights, privileges or preferences of any Holder may be
effected only with such additional requirements as may be set forth in the terms
of such Securities;
(d) Section 9.1(c) and this Section 12.1 shall not be amended
without the consent of all of the Holders;
(e) Article Four shall not be amended without the consent of the
Holders of a Majority in liquidation amount of the Common Securities and;
(f) The rights of the holders of the Common Securities under Article
Five to increase or decrease the number of, and appoint and remove Trustees
shall not be amended without the consent of the Holders of a Majority in
liquidation amount of the Common Securities; and
(g) Notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders to:
(i) cure any ambiguity, correct or supplement any provision in this
Declaration that may be inconsistent with any other provision of this
Declaration or to make any other provisions with respect to matters or
questions arising under this Declaration which shall not be inconsistent
with the other provisions of the Declaration; and
(ii) to modify, eliminate or add to any provisions of the
Declaration to such extent as shall be necessary to ensure that the Trust
will be classified for United States federal income tax purposes as a
grantor trust at all times that any Securities are outstanding or to
ensure that the Trust will not be required to register as an Investment
Company under the Investment Company Act.
PROVIDED, HOWEVER, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of the Holders, and any
amendments of this Declaration shall become effective when notice thereof is
given to the Holders.
SECTION 12.2 MEETINGS OF THE HOLDERS; ACTION BY WRITTEN CONSENT.
(a) Meetings of the Holders of any class of Securities may be called
at any time by the Administrative Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms of
the Securities or the rules of any stock exchange on which the Capital
Securities are listed or admitted for trading. The Administrative Trustees shall
call a meeting of the Holders of such class if directed to do so by the Holders
of at least 10%
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in liquidation amount of such class of Securities. Such direction shall be given
by delivering to the Administrative Trustees one or more notice in a writing
stating that the signing Holders wish to call a meeting and indicating the
general or specific purpose for which the meeting is to be called. Any Holders
calling a meeting shall specify in writing the Security Certificates held by the
Holders exercising the right to call a meeting and only those Securities
specified shall be counted for purposes of determining whether the required
percentage set forth in the second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders:
(i) notice of any such meeting shall be given to all the Holders
having a right to vote thereat at least seven days and not more than 60
days before the date of such meeting. Whenever a vote, consent or approval
of the Holders is permitted or required under this Declaration or the
rules of any stock exchange on which the Capital Securities are listed or
admitted for trading, such vote, consent or approval may be given at a
meeting of the Holders. Any action that may be taken at a meeting of the
Holders may be taken without a meeting if a consent in writing setting
forth the action so taken is signed by the Holders owning not less than
the minimum amount of Securities in liquidation amount that would be
necessary to authorize or take such action at a meeting at which all
Holders having a right to vote thereon were present and voting. Prompt
notice of the taking of action without a meeting shall be given to the
Holders entitled to vote who have not consented in writing. The
Administrative Trustees may specify that any written ballot submitted to
the Security Holder for the purpose of taking any action without a meeting
shall be returned to the Trust within the time specified by the
Administrative Trustees;
(ii) each Holder may authorize any Person to act for it by proxy on
all matters in which a Holder is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting. No
proxy shall be valid after the expiration of 11 months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Holder executing it. Except as otherwise
provided herein, all matters relating to the giving, voting or validity of
proxies shall be governed by the General Corporation Law of the State of
Delaware relating to proxies, and judicial interpretations thereunder, as
if the Trust were a Delaware corporation and the Holders were stockholders
of a Delaware corporation;
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(iii) each meeting of the Holders shall be conducted by the
Administrative Trustees or by such other Person that the Administrative
Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration, the terms of
the Securities, the Trust Indenture Act or the listing rules of any stock
exchange on which the Capital Securities are then listed or trading,
otherwise provides, the Administrative Trustees, in their sole discretion,
shall establish all other provisions relating to meetings of Holders,
including notice of the time, place or purpose of any meeting at which any
matter is to be voted on by any Holders, waiver of any such notice, action
by consent without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 REPRESENTATIONS AND WARRANTIES OF PROPERTY TRUSTEE.
The Trustee that acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(a) The Property Trustee is a New York banking corporation with
trust powers and authority to execute and deliver, and to carry out and perform
its obligations under the terms of, this Declaration;
(b) The execution, delivery and performance by the Property Trustee
of the Declaration has been duly authorized by all necessary corporate action on
the part of the Property Trustee. The Declaration has been duly executed and
delivered by the Property Trustee and constitutes a legal, valid and binding
obligation of the Property Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in equity
or at law);
(c) The execution, delivery and performance of this Declaration by
the Property Trustee does not conflict with or
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constitute a breach of the charter or by-laws of the Property Trustee; and
(d) No consent, approval or authorization of, or registration with
or notice to, any New York State or federal banking authority is required for
the execution, delivery or performance by the Property Trustee of this
Declaration.
SECTION 13.2 REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE.
The Trustee that acts as initial Delaware Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) The Delaware Trustee is duly organized, validly existing and in
good standing under the laws of the State of Delaware, with trust power and
authority to execute and deliver, and to carry out and perform its obligations
under the terms of, this Declaration;
(b) The execution, delivery and performance by the Delaware Trustee
of this Declaration has been duly authorized by all necessary corporate action
on the part of the Delaware Trustee. This Declaration has been duly executed and
delivered by the Delaware Trustee and constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in equity
or at law);
(c) No consent, approval or authorization of, or registration with
or notice to, any federal banking authority is required for the execution,
delivery or performance by the Delaware Trustee of this Declaration; and
(d) The Delaware Trustee is a natural person who is a resident of
the State of Delaware or, if not a natural person, an entity which has its
principal place of business in the State of Delaware.
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ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 REGISTRATION RIGHTS AGREEMENT.
The Holders of the Capital Securities, the Debentures and the
Capital Securities Guarantee (collectively, the "Registrable Securities") are
entitled to the benefits of a Registration Rights Agreement.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 NOTICES.
All notices provided for in this Declaration 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 Trust, in care of the Administrative Trustees at
the Trust's mailing address set forth below (or such other address as the Trust
may give notice of to the Holders):
OnBank Capital Trust I
101 South Salina Street
P.O. Box 4983
Syracuse, New York 13221-4983
Attention: William M. LeBeau,
Administrative Trustee
(b) if given to the Delaware Trustee, at the mailing address set
forth below (or such other address as Delaware Trustee may give notice of to the
Holders):
The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
(c) if given to the Property Trustee, at the Property Trustee's
mailing address set forth below (or such other address as the Property Trustee
may give notice of to the Holders):
The Bank of New York
101 Barclay Street, 21 West
New York, New York 10283
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Attention: Corporate Trust
Trustee Administration
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice to the Trust):
ONBANCorp, Inc.
101 South Salina Street
Syracuse, New York 13221-4983
Attention: Robert J. Berger,
Senior Vice President,
Treasurer and Chief Financial
Officer
(e) if given to any other Holder, 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 15.2 GOVERNING LAW.
This Declaration and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the laws of the State of Delaware
and all rights and remedies shall be governed by such laws without regard to
principles of conflict of laws.
SECTION 15.3 INTENTION OF THE PARTIES.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust. The
provisions of this Declaration shall be interpreted to further this intention of
the parties.
SECTION 15.4 HEADINGS.
Headings contained in this Declaration are inserted for convenience
of reference only and do not affect the interpretation of this Declaration or
any provision hereof.
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SECTION 15.5 SUCCESSORS AND ASSIGNS
Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
SECTION 15.6 PARTIAL ENFORCEABILITY.
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Declaration, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 15.7 COUNTERPARTS.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
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IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
/s/ Donald G. Cook
----------------------------------
Donald G. Cook, as Administrative
Trustee
/s/ William LeBeau
----------------------------------
William LeBeau, as Administrative
Trustee
/s/ Randy J. Wiley
----------------------------------
Randy J. Wiley, as Administrative
Trustee
THE BANK OF NEW YORK (Delaware)
as Delaware Trustee
By: /s/ Walter Gitlin
-------------------------------
Name: Walter Gitlin
Title: Authorized Signatory
THE BANK OF NEW YORK
as Property Trustee
By: /s/ Vivian Georges
-------------------------------
Name: Vivian Georges
Title: Assistance Vice President
ONBANCorp, Inc.
as Sponsor
By: /s/ Robert J. Berger
-------------------------------
Name: Robert J. Berger
Title: Chief Financial Officer
<PAGE>
ANNEX I
TERMS OF
9.25% SERIES A/SERIES B CAPITAL SECURITIES
9.25% COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration of
Trust, dated as of February 4, 1997 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Securities are set out below (each
capitalized term used but not defined herein has the meaning set forth in the
Declaration or, if not defined in such Declaration, as defined in the Offering
Memorandum referred to below in Section 2(c) of this Annex I):
1. DESIGNATION AND NUMBER.
(a) CAPITAL SECURITIES. 60,000 Series A Capital Securities of the
Trust and 60,000 Series B Capital Securities of the Trust, each series with an
aggregate liquidation amount with respect to the assets of the Trust of sixty
million dollars ($60,000,000), and each with a liquidation amount with respect
to the assets of the Trust of $1,000 per security, are hereby designated for the
purposes of identification only as "9.25% Series A Capital Securities" and
"9.25% Series B Capital Securities", respectively (collectively, the "Capital
Securities"). The certificates evidencing the Capital Securities shall be
substantially in the form of Exhibit A-1 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice or to conform to the rules of any exchange or
quotation system on or in which the Capital Securities are listed, traded or
quoted.
(b) COMMON SECURITIES. 1,856 Common Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust of one
million eight hundred fifty-six thousand dollars ($1,856,000) and a liquidation
amount with respect to the assets of the Trust of $1,000 per security, are
hereby designated for the purposes of identification only as "9.25% Common
Securities" (collectively, the "Common Securities"). The certificates evidencing
the Common Securities shall be substantially in the form of Exhibit A-2 to the
Declaration, with such changes and additions thereto or deletions therefrom as
may be required by ordinary usage, custom or practice.
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2. DISTRIBUTIONS.
(a) Distributions payable on each Security will be fixed at a rate
per annum of 9.25% (the "Coupon Rate") of the liquidation amount of $1,000 per
Security (the "Liquidation Amount"), such rate being the rate of interest
payable on the Debentures to be held by the Property Trustee. Distributions in
arrears for more than one semi-annual period will bear additional distributions
thereon compounded semi-annually at the Coupon Rate (to the extent permitted by
applicable law). Pursuant to the Registration Rights Agreement, in certain
limited circumstances the Debenture Issuer will be required to pay Liquidated
Damages (as defined in the Registration Rights Agreement) with respect to the
Debentures. The term "Distributions", as used herein, includes distributions of
any such interest and Liquidated Damages payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the extent the Property
Trustee has funds on hand legally available therefor.
(b) Distributions on the Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from February 4, 1997, and will be payable
semi-annually in arrears on February 1 and August 1 of each year, commencing on
August 1, 1997 (each, a "Distribution Date"), except as otherwise described
below. Distributions will be computed on the basis of a 360-day year consisting
of twelve 30-day months and for any period less than a full calendar month on
the basis of the actual number of days elapsed in such month. As long as no
Event of Default has occurred and is continuing under the Indenture, the
Debenture Issuer has the right under the Indenture to defer payments of interest
by extending the interest payment period at any time and from time to time on
the Debentures for a period not exceeding 10 consecutive semi-annual periods,
including the first such semi-annual period during such period (each an
"Extension Period"), during which Extension Period no interest shall be due and
payable on the Debentures, PROVIDED THAT no Extension Period shall end on a date
other than an Interest Payment Date for the Debentures or extend beyond the
Maturity Date of the Debentures. As a consequence of such deferral,
Distributions will also be deferred. Despite such deferral, Distributions will
continue to accumulate with additional Distributions thereon (to the extent
permitted by applicable law but not at a rate greater than the rate at which
interest is then accruing on the Debentures) at the Coupon Rate compounded
semi-annually during any such Extension Period. Prior to the termination of any
such Extension Period, the Debenture Issuer may further defer payments of
interest by further extending such Extension Period; PROVIDED THAT such
Extension Period, together with all such previous and further extensions within
such Extension Period, may not exceed 10 consecutive semi-annual periods,
including the first semi-annual
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period during such Extension Period, or extend beyond the Maturity Date of the
Debentures. Upon the termination of any Extension Period and the payment of all
amounts then due, the Debenture Issuer may commence a new Extension Period,
subject to the above requirements.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the fifteenth
day of the month immediately preceding the month in which the relevant
Distribution Date occurs, which Distribution Dates correspond to the interest
payment dates on the Debentures. Subject to any applicable laws and regulations
and the provisions of the Declaration, each such payment in respect of the
Capital Securities will be made as described under the heading "Description of
Capital Securities -- Form, Denomination, Book-Entry Procedures and Transfer" in
the Offering Memorandum dated January 30, 1997, of the Debenture Issuer and the
Trust relating to the Securities and the Debentures. The relevant record dates
for the Common Securities shall be the same as the record dates for the Capital
Securities. Distributions payable on any Securities that are not punctually paid
on any Distribution Date, as a result of the Debenture Issuer having failed to
make a payment under the Debentures, will cease to be payable to the Holder on
the relevant record date, and such defaulted Distribution will instead be
payable to the Person in whose name such Securities are registered on the
special record date or other specified date determined in accordance with the
Indenture. If any date on which Distributions are payable on the Securities is
not a Business Day, then payment of the Distribution payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except that if such
next succeeding Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day with the same
force and effect as if made on such date.
(d) In the event that there is any money or other property held by
or for the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders.
3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION.
In the event of any termination of the Trust or the Sponsor
otherwise gives notice of its election to liquidate the Trust pursuant to
Section 8.1(a)(iii) of the Declaration, the Trust shall be liquidated by the
Administrative Trustees as expeditiously as the Administrative Trustees
determine to be possible by distributing, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, to the Holders a Like
Amount (as defined below) of the Debentures, unless such distribution is
determined by the Property Trustee
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not to be practicable, in which event such Holders will be entitled to receive
Pro Rata out of the assets of the Trust legally available for distribution to
Holders, after satisfaction of liabilities to creditors of the Trust as provided
by applicable law, an amount equal to the aggregate of the liquidation amount of
$1,000 per Security plus accumulated and unpaid Distributions thereon to the
date of payment (such amount being the "Liquidation Distribution").
"Like Amount" means (i) with respect to a redemption of the
Securities, Securities having a Liquidation Amount equal to the principal amount
of Debentures to be paid in accordance with their terms and (ii) with respect to
a distribution of Debentures upon the liquidation of the Trust, Debentures
having a principal amount equal to the Liquidation Amount of the Securities of
the Holder to whom such Debentures are distributed.
If, upon any such liquidation, the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets on hand legally
available to pay in full the aggregate Liquidation Distribution, then the
amounts payable directly by the Trust on the Securities shall be paid on a Pro
Rata basis.
4. REDEMPTION AND DISTRIBUTION.
(a) Upon the repayment of the Debentures in whole or in part, at
maturity or upon early redemption (either at the option of the Debenture Issuer
or pursuant to a Special Event, as described below), the proceeds from such
repayment shall be simultaneously applied by the Property Trustee (subject to
the Property Trustee having received notice no later than 45 days prior to such
repayment) to redeem a Like Amount of the Securities at a redemption price equal
to (i) in the case of the repayment of the Debentures at maturity, the Maturity
Redemption Price (as defined below), (ii) in the case of the optional redemption
of the Debentures upon the occurrence and continuation of a Special Event, the
Special Event Redemption Price (as defined below) and (iii) in the case of the
optional redemption of the Debentures on or after February 1, 2007, the Optional
Redemption Price (as defined below). The Maturity Redemption Price, the Special
Event Redemption Price and the Optional Redemption Price are referred to
collectively as the "Redemption Price". Holders will be given not less than 30
nor more than 60 days notice of such redemption.
(b) (i) The "Maturity Redemption Price", with respect to a redemption
of Securities, shall mean an amount equal to the principal of and accrued and
unpaid interest on the Debentures as of the maturity date thereof.
(ii) In the case of an optional redemption, if fewer than all the
outstanding Securities are to be so redeemed, the
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Securities will be redeemed Pro Rata and the Capital Securities to be redeemed
will be determined as described in Section 4(f)(ii) below. Upon the entry of an
order for the dissolution of the Trust by a court of competent jurisdiction, the
Debentures thereafter will be subject to optional repayment, in whole, but not
in part, on or after February 1, 2007 (the "Initial Optional Redemption Date").
The Debenture Issuer shall have the right (subject to the conditions
in the Indenture) to elect to redeem the Debentures in whole or in part at any
time on or after the Initial Optional Redemption Date, upon not less than 30
days and not more than 60 days notice, at the Optional Redemption Price and,
simultaneous with such redemption, to cause a Like Amount of the Securities to
be redeemed by the Trust at the Optional Redemption Price on a Pro Rata basis.
"Optional Redemption Price" shall mean a price equal to the percentage of the
liquidation amount of Securities to be redeemed plus accumulated and unpaid
Distributions thereon, if any, to the date of such redemption if redeemed during
the 12-month period beginning February 1, of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C> <C>
2007 104.625%
2008 104.163%
2009 103.700%
2010 103.238%
2011 102.775%
2012 102.313%
2013 101.850%
2014 101.388%
2015 100.925%
2016 100.463%
2017 and thereafter 100.000%
</TABLE>
(c) If at any time a Tax Event or a Regulatory Capital Event (each
as defined below, and each a "Special Event") occurs, the Debenture Issuer shall
have the right (subject to the conditions set forth in the Indenture) at any
time prior to the Initial Optional Redemption Date, upon not less than 30 nor
more than 60 days notice, to redeem the Debentures in whole, but not in part,
within the 90 days following the occurrence of such Special Event (the "90 Day
Period"), and, simultaneous with such redemption, to cause a Like Amount of the
Securities to be redeemed by the Trust at the Special Event Redemption Price on
a Pro Rata basis.
"Tax Event" shall occur upon receipt by the Debenture Issuer and the
Trust of an Opinion of Counsel experienced in such matters to the effect that,
as a result of any amendment to, or change (including any announced prospective
change) in, the laws
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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 February 4, 1997, there is
more than an insubstantial risk that (i) the Trust is, or will be within 90 days
of the date of such opinion, subject to United States federal income tax with
respect to income received or accrued on the Debentures, (ii) interest payable
by the Debenture Issuer on the Debentures is not, or within 90 days of the date
of such opinion, will not be, deductible by the Debenture Issuer, in whole or in
part, for United States federal income tax purposes, or (iii) the Trust is, or
will be within 90 days of the date of such opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.
"Regulatory Capital Event" shall mean that the Debenture Issuer
shall have received an opinion of independent bank regulatory counsel
experienced in such matters to the effect that, as a result of (a) any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any rules, guidelines or
policies of the Federal Reserve Board or (b) any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such pronouncement or
decision is announced on or after February 4, 1997, the Capital Securities do
not constitute, or within 90 days of the date thereof, will not constitute, Tier
1 Capital (or its then equivalent); PROVIDED, HOWEVER, that the distribution of
the Debentures in connection with the liquidation of the Trust by the Debenture
Issuer shall not in and of itself constitute a Regulatory Capital Event unless
such liquidation shall have occurred in connection with a Tax Event.
"Special Event Redemption Price" shall mean, with respect to a
redemption of Securities, a price equal to the greater of (i) 100% of the
principal of a Like Amount of Debentures to be redeemed or (ii) the sum, as
determined by a Quotation Agent (as defined in the Indenture), of the present
values of the principal amount and premium payable as part of the prepayment
price with respect to an optional redemption of a Like Amount of the Debentures
on the Initial Optional Redemption Date, together with scheduled payments of
interest on the Debentures from the redemption date to and including the Initial
Optional Redemption Date, discounted to the redemption date on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate (as defined in the Indenture), plus, in the case of each
of clauses (i) and (ii), accumulated but unpaid Distributions thereon, if any,
to the date of such redemption.
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(d) On and from the date fixed by the Administrative Trustees for
any distribution of Debentures and liquidation of the Trust: (i) the Securities
will no longer be deemed to be outstanding, (ii) the Clearing Agency or its
nominee (or any successor Clearing Agency or its nominee), as the Holder of the
Capital Securities, will receive a registered global certificate or certificates
representing the Debentures to be delivered upon such distribution and any
certificates representing Securities not held by the Clearing Agency or its
nominee (or any successor Clearing Agency or its nominee) will be deemed to
represent beneficial interests in a Like Amount of Debentures until such
certificates are presented to the Debenture Issuer or its agent for transfer or
reissue.
(e) The Trust may not redeem fewer than all the outstanding
Securities unless all accumulated and unpaid Distributions have been paid on all
Securities for all semi-annual Distribution periods terminating on or before the
date of redemption.
(f) The procedure with respect to redemptions or distributions of
Securities shall be as follows:
(i) Notice of any redemption of, or notice of distribution of
Debentures in exchange for, the Securities (a "Redemption/Distribution
Notice") will be given by the Trust by mail to each Holder to be redeemed
or exchanged not fewer than 30 nor more than 60 days before the date fixed
for redemption or exchange thereof which, in the case of a redemption,
will be the date fixed for redemption of the Debentures. For purposes of
the calculation of the date of redemption or exchange and the dates on
which notices are given pursuant to this Section 4(f)(i), a Redemption/
Distribution Notice shall be deemed to be given on the day such notice is
first mailed by first-class mail, postage prepaid, to Holders. Each
Redemption/Distribution Notice shall be addressed to the Holders at the
address of each such Holder appearing in the books and records of the
Trust. No defect in the Redemption/Distribution Notice or in the mailing
of either thereof with respect to any Holder shall affect the validity of
the redemption or exchange proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Securities are
to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata
from each Holder, it being understood that, in respect of Capital
Securities registered in the name of and held of record by the Clearing
Agency or its nominee (or any successor Clearing Agency or its nominee) or
any nominee, the distribution of the proceeds of such redemption will be
made to the Clearing Agency and
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disbursed by such Clearing Agency in accordance with the procedures
applied by such agency or nominee.
(iii) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, (which notice will be irrevocable), then
(A) with respect to Capital Securities issued in book-entry form, by 12:00
noon, New York City time, on the redemption date, provided that the
Debenture Issuer has paid the Property Trustee a sufficient amount of cash
in connection with the related redemption or maturity of the Debentures by
10:00 a.m., New York City time, on the maturity date or the date of
redemption, as the case requires, the Property Trustee will deposit
irrevocably with the Clearing Agency or its nominee (or successor Clearing
Agency or its nominee) funds sufficient to pay the applicable Redemption
Price with respect to such Capital Securities and will give the Clearing
Agency irrevocable instructions and authority to pay the Redemption Price
to the relevant Clearing Agency Participants, and (B) with respect to
Capital Securities issued in certificated form and Common Securities,
provided that the Debenture Issuer has paid the Property Trustee a
sufficient amount of cash in connection with the related redemption or
maturity of the Debentures, the Property Trustee will pay the relevant
Redemption Price to the Holders by check mailed to the address of the
relevant Holder appearing on the books and records of the Trust on the
redemption date. If a Redemption/Distribution Notice shall have been given
and funds deposited as required, if applicable, then immediately prior to
the close of business on the date of such deposit, or on the redemption
date, as applicable, Distributions will cease to accumulate on the
Securities so called for redemption and all rights of Holders so called
for redemption will cease, except the right of the Holders of such
Securities to receive the Redemption Price, but without interest on such
Redemption Price, and such Securities shall cease to be outstanding.
(iv) Payment of accumulated and unpaid Distributions on the
Redemption Date of the Securities will be subject to the rights of Holders
on the close of business on a regular record date in respect of a
Distribution Date occurring on or prior to such Redemption Date.
Neither the Administrative Trustees nor the Trust shall be required
to register or cause to be registered the transfer of (i) any Securities
beginning on the opening of business 15 days before the day of mailing of a
notice of redemption or any notice of selection of Securities for redemption or
(ii) any Securities selected for redemption except the unredeemed portion of any
Security being redeemed. If any date fixed for redemption of Securities is not a
Business Day, then payment of the Redemption Price payable on such date will be
made on the next succeeding
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day that is a Business Day (and without any interest or other payment in respect
of any such delay), with the same force and effect as if made on such date fixed
for redemption. If payment of the Redemption Price in respect of any Securities
is improperly withheld or refused and not paid either by the Property Trustee or
by the Sponsor as guarantor pursuant to the relevant Securities Guarantee,
Distributions on such Securities will continue to accumulate from the original
redemption date to the actual date of payment, in which case the actual payment
date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
(v) Redemption/Distribution Notices shall be sent by the Property
Trustee on behalf of the Trust to (A) in respect of the Capital
Securities, the Clearing Agency or its nominee (or any successor Clearing
Agency or its nominee) if the Global Certificates have been issued or, if
Definitive Capital Security Certificates have been issued, to the Holder
thereof, and (B) in respect of the Common Securities to the Holder
thereof.
(vi) Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws and banking laws),
provided the acquiror is not the Holder of the Common Securities or the
obligor under the Indenture, the Sponsor or any of its subsidiaries may at
any time and from time to time purchase outstanding Capital Securities by
tender, in the open market or by private agreement.
5. VOTING RIGHTS - CAPITAL SECURITIES.
(a) Except as provided under Sections 5(b) and 7 and as otherwise
required by law and the Declaration, the Holders of the Capital Securities will
have no voting rights.
(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 such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07 of
the Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Debentures 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 a majority in liquidation amount
of all outstanding Capital Securities; PROVIDED, HOWEVER, that where a consent
under the Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of
I-9
<PAGE>
each Holder of the Capital Securities. The Trustees shall not revoke any action
previously authorized or approved by a vote of the Holders of the Capital
Securities except by subsequent vote of such Holders. The Property Trustee shall
notify each Holder of Capital Securities of any notice of default with respect
to the Debentures. In addition to obtaining the foregoing approvals of such
Holders of the Capital Securities, prior to taking any of the foregoing actions,
the Trustees shall 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.
If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or premium, if any, or interest on the Debentures on the due
date (or in the case of redemption, on the redemption date), then a Holder of
Capital Securities may directly institute a proceeding for enforcement of
payment to such Holder of the principal of or premium, if any, or interest on a
Like Amount of Debentures (a "Direct Action") on or after the respective due
date specified in the Debentures. In connection with such Direct Action, the
rights of the Common Securities Holder will be subrogated to the rights of such
Holder of Capital Securities to the extent of any payment made by the Debenture
Issuer to such Holder of Capital Securities in such Direct Action. Except as
provided in the second preceding sentence, the Holders of Capital Securities
will not be able to exercise directly any other remedy available to the holders
of the Debentures.
Any approval or direction of Holders of Capital Securities may be
given at a separate meeting of Holders of Capital Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Property Trustees will cause a notice of any
meeting at which Holders of Capital Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of Capital Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the Holders of the Capital Securities will be
required for the Trust to redeem and cancel Capital Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
I-10
<PAGE>
Notwithstanding that Holders of Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor
shall not be entitled to vote or consent and shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
6. VOTING RIGHTS - COMMON SECURITIES.
(a) Except as provided under Sections 6(b), 6(c), and 7 as otherwise
required by law and the Declaration, the Holders of the Common Securities will
have no voting rights.
(b) Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a Majority in liquidation amount of the outstanding Capital
Securities. In no event will the holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Sponsor as the holder of the Common
Securities. No resignation or removal of a Trustee and no appointment of a
successor trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Declaration.
(c) 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 such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07 of
the Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Debentures 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 a Majority in liquidation amount
of all outstanding Common Securities; PROVIDED, HOWEVER, that where a consent
under the Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of each Holder of the Common Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Common Securities except by subsequent vote of such Holders. The Property
Trustee shall notify each Holder of Common Securities of any notice of default
with respect to the Debentures. In addition to obtaining the foregoing approvals
of such Holders of the Common Securities, prior to taking any of the foregoing
actions, the Trustees shall obtain an opinion of
I-11
<PAGE>
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.
If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or premium, if any, or interest on the Debentures on the due
date (or in the case of redemption, on the redemption date), then a Holder of
Common Securities may institute a Direct Action for enforcement of payment to
such Holder of the principal of or premium, if any, or interest on a Like Amount
of Debentures on or after the respective due date specified in the Debentures.
In connection with Direct Action, the rights of the Common Securities Holder
will be subordinated to the rights of such Holder of Capital Securities to the
extent of any payment made by the Debenture Issuer to such Holder of Common
Securities in such Direct Action. Except as provided in the second preceding
sentence, the Holders of Common Securities will not be able to exercise directly
any other remedy available to the holders of the Debentures.
Any approval or direction of Holders of Common Securities may be
given at a separate meeting of Holders of Common Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Administrative Trustees will cause a notice of
any meeting at which Holders of Common Securities are entitled to vote, or of
any matter upon which action by written consent of such Holders is to be taken,
to be mailed to each Holder of record of Common Securities. Each such notice
will include a statement setting forth (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought and (iii) instructions
for the delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
7. AMENDMENTS TO DECLARATION AND INDENTURE.
In addition to the requirements set out in Section 12.1 of the
Declaration, the Declaration may be amended from time to time by the Sponsor,
the Property Trustee and the Administrative Trustees, without the consent of the
Holders (i) to cure any ambiguity, correct or supplement any provisions in the
Declaration that may be inconsistent with any other provisions, or to make any
other provisions with respect to matters or questions
I-12
<PAGE>
arising under the Declaration which shall not be inconsistent with the other
provisions of the Declaration, or (ii) to modify, eliminate or add to any
provisions of the Declaration to such extent as shall be necessary to ensure
that the Trust will be classified for United States federal income tax purposes
as a grantor trust at all times that any Securities are outstanding or to ensure
that the Trust will not be required to register as an "Investment Company" under
the Investment Company Act; PROVIDED, HOWEVER, that in the case of clause (i),
such action shall not adversely affect in any material respect the interests of
any Holder, any amendments of the Declaration shall become effective when notice
thereof is given to the Holders. The Declaration may be amended by the Trustees
and the Sponsor with (i) the consent of Holders representing a Majority in
liquidation amount of all outstanding Securities, and (ii) 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
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, PROVIDED THAT, without the consent of
each Holder of Trust Securities, the Declaration 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 holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date.
8. PRO RATA.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
according to the aggregate liquidation amount of the Securities held by the
relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the Capital
Securities pro rata according to the aggregate liquidation amount of Capital
Securities held by the relevant Holder relative to the aggregate liquidation
amount of all Capital Securities outstanding, and only after satisfaction of all
amounts owed to the Holders of the Capital Securities, to each Holder of Common
Securities pro rata according to the aggregate liquidation amount of Common
Securities held by the relevant Holder relative to the aggregate liquidation
amount of all Common Securities outstanding.
I-13
<PAGE>
9. RANKING.
The Capital Securities rank PARI PASSU with the Common Securities
and payment thereon shall be made Pro Rata with the Common Securities, except
that, if an Event of Default under the Declaration occurs and is continuing, no
payments in respect of Distributions on, or payments upon liquidation,
redemption or otherwise with respect to, the Common Securities shall be made
until the Holders of the Capital Securities shall be paid in full the
Distributions, Redemption Price, Liquidation Distribution and other payments to
which they are entitled at such time.
10. ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE.
Each Holder of Capital Securities and Common Securities, by the
acceptance thereof, agrees to the provisions of the Capital Securities Guarantee
and the Common Securities Guarantee, respectively, including the subordination
provisions therein and to the provisions of the Indenture.
11. NO PREEMPTIVE RIGHTS.
The Holders shall have no preemptive rights to subscribe for any
additional securities.
12. MISCELLANEOUS.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the Capital
Securities Guarantee or the Common Securities Guarantee (as may be appropriate),
the Indenture (including any supplemental indenture) to a Holder without charge
on written request to the Sponsor at its principal place of business.
I-14
<PAGE>
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
[IF THIS GLOBAL SECURITY IS A GLOBAL CAPITAL SECURITY, INSERT: THIS
CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF THE
DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING
AGENCY. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS
CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A WHOLE BY
THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE
CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING
AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.]
[IF THIS GLOBAL SECURITY IS A RULE 144A GLOBAL SECURITY, INSERT:
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE TRUST OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR
ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS CAPITAL SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER
OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR
ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS CAPITAL SECURITY (OR ANY
PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) SO LONG AS THIS CAPITAL SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE
A1-1
<PAGE>
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
(D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE
TRUST AND THE COMPANY PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii)
PURSUANT TO CLAUSE (E), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE REVERSE OF THIS CAPITAL SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEREE TO THE TRUST. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS CAPITAL SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND.
THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100 CAPITAL
SECURITIES). ANY SUCH TRANSFER OF CAPITAL SECURITIES IN A BLOCK HAVING A
LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO
LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE THE
HOLDER OF SUCH CAPITAL SECURITIES FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO
THE RECEIPT OF DISTRIBUTIONS OF SUCH CAPITAL SECURITIES, AND SUCH TRANSFEREE
SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH CAPITAL SECURITIES.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF ALSO
AGREES, REPRESENTS AND WARRANTS THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT
PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA") OR (ii) THE ACQUISITION AND HOLDING OF THIS CAPITAL SECURITY BY IT IS
NOT PROHIBITED BY EITHER SECTION OF 406 OF ERISA OR SECTION 4975 OF THE U.S.
INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR EXEMPT FROM ANY SUCH PROHIBITION.
A1-2
<PAGE>
Certificate Number Number of Capital Securities
- ------------------ ----------------------------
Amount of Capital Securities
CUSIP NO. __________
Certificate Evidencing Capital Securities
of
OnBank Capital Trust I
[ ]% Capital Securities
(liquidation amount $1,000 per Capital Security)
OnBank Capital Trust I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that
______________ (the "Holder") is the registered owner of [$_________ in
aggregate liquidation amount of Capital Securities of the Trust](1) [the
aggregate liquidation amount of Capital Securities of the Trust specified in
Schedule A hereto](2) representing undivided beneficial interests in the assets
of the Trust designated the [ ]% Series __ Capital Securities (liquidation
amount $1,000 per Capital Security) (the "Capital Securities"). The Capital
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. The designation, rights,
privileges, restrictions, preferences and other terms and provisions of the
Capital Securities represented hereby are issued and shall in all respects be
subject to the provisions of the Amended and Restated Declaration of Trust of
the Trust dated as of February __, 1997, as the same may be amended from time
to time (the "Declaration"), including the designation of the terms of the
Capital Securities as set forth in Annex I to the Declaration. Capitalized
terms used but not defined herein shall have the meaning given them in the
Declaration. The Sponsor will provide a copy of the Declaration, the Capital
Securities Guarantee and the Indenture to a Holder without charge upon
written request to the Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound
by the Declaration and is entitled to the benefits thereunder and
--------
(1) Insert in Definitive Capital Securities only.
(2) Insert in Global Capital Securities only.
A1-3
<PAGE>
to the benefits of the Capital Securities Guarantee to the extent
provided therein.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Capital Securities
as evidence of indirect beneficial ownership in the Debentures.
A1-4
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate this
____ day of __________, ____.
ONBANK CAPITAL TRUST I
By:
----------------------------------
Name:
Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the
within-mentioned Declaration.
Dated: _________________, ____
THE BANK OF NEW YORK,
as Property Trustee
By:
----------------------------
Authorized Signatory
A1-5
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Capital Security will be fixed at a
rate per annum of [ ]% (the "Coupon Rate") of the liquidation amount of $1,000
per Capital Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one semi-annual period will bear interest thereon compounded semi-annually
at the Coupon Rate (to the extent permitted by applicable law). Pursuant to the
Registration Rights Agreement, in certain limited circumstances the Debenture
Issuer will be required to pay Liquidated Damages (as defined in the
Registration Rights Agreement) with respect to the Debentures. The term
"Distributions", as used herein, includes such cash distributions and any such
interest and such Liquidated Damages payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the extent the Property
Trustee has funds on hand legally available therefor.
Distributions on the Capital Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from January __, 1997 and will be payable
semi-annually in arrears, on [ ] and [ ] of each year, commencing on [ ], 1997,
to the holders of record on the relevant record dates except as otherwise
described below. The record dates will be ____________. Distributions will be
computed on the basis of a 360-day year consisting of twelve 30-day months and,
for any period less than a full calendar month, the number of days elapsed in
such month. As long as no Event of Default has occurred and is continuing under
the Indenture, the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period at any time and
from time to time on the Debentures for a period not exceeding 10 consecutive
calendar semi-annual periods, including the first such semi-annual period during
such extension period (each an "Extension Period"), PROVIDED THAT no Extension
Period shall end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred. Despite such
deferral, semi-annual Distributions will continue to accumulate with interest
thereon (to the extent permitted by applicable law, but not at a rate exceeding
the rate of interest then accruing on the Debentures) at the Coupon Rate
compounded semi-annually during any such Extension Period. Prior to the
termination of any such Extension Period, the Debenture Issuer may further defer
payments of interest by further extending such Extension Period; PROVIDED THAT
such Extension Period, together with all such previous and further extensions
within such Extension Period, may not exceed 10 consecutive semi-annual periods,
including the first semi-annual period during such
A1-6
<PAGE>
Extension Period, end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. Payments of
accumulated Distributions will be payable to Holders as they appear on the books
and records of the Trust on the first record date after the end of the Extension
Period. Upon the termination of any Extension Period and the payment of all
amounts then due, the Debenture Issuer may commence a new Extension Period,
subject to the above requirements.
Subject to the prior approval of the Federal Reserve Board if such
approval is then required under applicable law or capital guidelines or policies
of the Federal Reserve Board and to certain other conditions set forth in the
Declaration and the Indenture, the Property Trustee may, at the direction of the
Sponsor, at any time liquidate the Trust and cause the Debentures to be
distributed to the holders of the Securities in liquidation of the Trust or,
simultaneous with any redemption of the Debentures, cause a Like Amount of the
Securities to be redeemed by the Trust.
The Capital Securities shall be redeemable as provided in the
Declaration.
A1-7
<PAGE>
---------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security
Certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
___________________________________________________________ agent to transfer
this Capital Security 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 Capital Security
Certificate)
Signature Guarantee***:
--------------------------------------
- --------
*** 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.
A2-1
<PAGE>
[Include the following if the Capital Security bears a Restricted
Capital Securities Legend --
In connection with any transfer of any of the Capital Securities evidenced by
this certificate, the undersigned confirms that such Capital Securities are
being:
CHECK ONE BOX BELOW
(1) |_| exchanged for the undersigned's own account without
transfer; or
(2) |_| transferred pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
(3) |_| transferred pursuant to and in compliance with Regulation S
under the Securities Act of 1933; or
(4) |_| transferred to an institutional "accredited investor" within
the meaning of subparagraph (a)(1), (2), (3) or (7) of
Rule 501 under the Securities Act of 1933 that is acquiring
the Capital Securities for its own account, or for the account
of such an institutional "accredited investor," for investment
purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the
Securities Act of 1933; or
(5) |_| transferred pursuant to another available exemption from
the registration requirements of the Securities Act of 1933;
or
(6) |_| transferred pursuant to an effective registration statement.
Unless one of the boxes is checked, the Exchange Agent will refuse to register
any of the Capital Securities evidenced by this certificate in the name of any
person other than the registered Holder thereof; PROVIDED, HOWEVER, that if box
(3), (4) or (5) is checked, the Registrar may require, prior to registering any
such transfer of the Capital Securities such legal opinions, certifications and
other information as the Trust has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, such as
the exemption provided by Rule 144 under such Act; PROVIDED, FURTHER, that (i)
if box 2 is checked, the transferee must also certify that it is a qualified
institutional buyer as defined in Rule 144A or (ii) if box (4) is checked, the
transferee must also provide to the Registrar a Transferee Letter of
Representation in
A2-2
<PAGE>
the form attached to the Offering Memorandum of the Trust dated January , 1997;
provided, further, that after the date that a Registration Statement has been
filed and so long as such Registration Statement continues to be effective, the
Registrar may only permit transfers for which box (5) has been checked.
------------------------------------
Signature
A2-3
<PAGE>
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR
ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS COMMON SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS COMMON SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER THIS COMMON SECURITY, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER
OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR
ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS CAPITAL SECURITY (OR ANY
PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) SO LONG AS THIS COMMON SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
(D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THIS COMMON SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE
TRUST AND THE COMPANY PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii)
PURSUANT TO CLAUSE (E), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE REVERSE OF THIS COMMON SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEREE TO THE TRUST. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS COMMON SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND.
A2-4
<PAGE>
Certificate Evidencing Common Securities
of
OnBank Capital Trust I
[ ]% Common Securities
(liquidation amount $1,000 per Common Security)
OnBank Capital Trust I, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that ONBANCorp,
Inc. (the "Holder") is the registered owner of __________ common securities of
the Trust representing undivided beneficial interests in the assets of the Trust
designated the [ ]% Common Securities (liquidation amount $1,000 per Common
Security) (the "Common Securities"). The Common 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. The designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Common Securities represented hereby are
issued and shall in all respects be subject to the provisions of the Amended and
Restated Declaration of Trust of the Trust dated as of February __, 1997, as the
same may be amended from time to time (the "Declaration"), including the
designation of the terms of the Common Securities as set forth in Annex I to the
Declaration. Capitalized terms used but not defined herein shall have the
meaning given them in the Declaration. The Sponsor will provide a copy of the
Declaration, the Common Securities Guarantee and the Indenture (including any
supplemental indenture) to a Holder without charge upon written request to the
Sponsor at its principal place of business.
Upon receipt of this certificate, the Sponsor is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Common Securities Guarantee to the extent provided therein.
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.
A2-5
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate this 4th
day of February, 1997.
OnBank Capital Trust I
By:
-------------------------------------
Name:
Administrative Trustee
A2-6
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a
rate per annum of [ ]% (the "Coupon Rate") of the liquidation amount of $1,000
per Common Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one semi-annual period will bear interest thereon compounded semi-annually
at the Coupon Rate (to the extent permitted by applicable law). Pursuant to the
Registration Rights Agreement, in certain limited circumstances the Debenture
Issuer will be required to pay Liquidated Damages (as defined in the
Registration Rights Agreement) with respect to the Debentures. The term
"Distributions", as used herein, includes such cash distributions and any such
interest and such Liquidated Damages payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the extent the Property
Trustee has funds available therefor.
Distributions on the Common Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from January __, 1997 and will be payable
semi-annually in arrears, on [ ] and [ ] of each year, commencing on [ ], 1997,
to the holders of record or the relevant record dates except as otherwise
described below. The record dates will be the __________. Distributions will be
computed on the basis of a 360-day year consisting of twelve 30-day months and,
for any period less than a full calendar month, the number of days elapsed in
such month. As long as no Event of Default has occurred and is continuing under
the Indenture, the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period at any time and
from time to time on the Debentures for a period not exceeding 10 consecutive
calendar semi-annual periods, including the first such semi-annual period during
such extension period (each an "Extension Period"), PROVIDED THAT no Extension
Period shall end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred. Despite such
deferral, Distributions will continue to accumulate with interest thereon (to
the extent permitted by applicable law, but not at a rate exceeding the rate of
interest then accruing on the Debentures) at the Coupon Rate compounded
semi-annually during any such Extension Period. Prior to the termination of any
such Extension Period, the Debenture Issuer may further defer payments of
interest by further extending such Extension Period; PROVIDED THAT such
Extension Period, together with all such previous and further extensions within
such Extension Period, may not exceed 10 consecutive semi-annual periods,
including the first semi-annual period during such Extension Period, or end on a
date other than an Interest Payment Date for the Debentures or extend beyond the
Maturity Date of the Debentures. Payments of accrued Distributions will be
payable to Holders as they appear on the
A2-7
<PAGE>
books and records of the Trust on the first record date after the end of the
Extension Period. Upon the termination of any Extension Period and the payment
of all amounts then due, the Debenture Issuer may commence a new Extension
Period, subject to the above requirements.
Subject to the prior approval of the Federal Reserve Board if such
approval is then required under applicable law or capital guidelines or policies
of the Federal Reserve Board and to certain other conditions set forth in the
Declaration and the Indenture, the Property Trustee may, at the direction of the
Sponsor, at any time liquidate the Trust and cause the Debentures to be
distributed to the holders to the Securities in liquidation of the Trust or,
simultaneous with any redemption of the Debentures, cause a Like Amount of the
Securities to be redeemed by the Trust.
The Common Securities shall be redeemable as provided in the
Declaration.
A2-8
<PAGE>
EXHIBIT 4.15
AMENDMENT TO AMENDED AND RESTATED TRUST AGREEMENT
This Amendment to Amended and Restated Trust Agreement (the
"Amendment") is made as of December 17, 1999 by the Administrative Trustees of
the trust created under that certain Amended and Restated Declaration of Trust
described below.
WITNESSETH
WHEREAS, Olympia Financial Corp., formerly known as ONBANCorp,
Inc. (the "Sponsor"), The Bank of New York, 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"), and The Bank of New York
(Delaware), a Delaware banking corporation, as Delaware trustee (the "Delaware
Trustee") previously entered into an Amended and Restated Declaration of Trust
of OnBank Capital Trust I dated as of February 4, 1997 (the "Trust
Declaration"); and
WHEREAS, ONBANCorp, Inc. has been merged with and into Olympia
Financial Corp., a wholly owned subsidiary of M&T Bank Corporation, a New York
corporation; and
WHEREAS, the Administrative Trustees of the Trust have changed
the name of the Trust from "OnBank Capital Trust I" to "M&T Capital Trust III;"
and
WHEREAS, the Administrative Trustees of the Trust desire to
further amend the Trust Declaration to provide for the change of the the Sponsor
from "ONBANCorp, Inc." to "Olympia Financial Corp.," and the name of the Trust
from "OnBank Capital Trust I" to "M&T Capital Trust III."
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 to this
Amendment, for the benefit of the other parties and for the benefit of the
Holders, hereby amends the Trust Declaration, and agrees, intending to be
legally bound, as follows:
SECTION 1. DEFINITIONS.
1.1. For all purposes of this Amendment, except as otherwise
expressly provided, terms used but not defined in this Amendment shall have the
meanings assigned to them in the Trust Declaration.
1.2. The definition of "Trust" in the preamble of the Trust
Declaration is amended to mean M&T Capital Trust III.
1.3. The definition of "Debenture Issuer" in section 1.1 of
the Trust Declaration is amended to read as follows:
<PAGE>
"DEBENTURE ISSUER" means Olympia Financial Corp., a Delaware
Corporation, or any successor entity resulting from any
consolidation, amalgamation, merger or other business
combination, in its capacity as issuer of the Debentures under
the Indenture.
1.4. The definition of "Sponsor" in Section of 1.1 of the
Trust Declaration is amended to read as follows:
"SPONSOR" means Olympia Financial Corp., a Delaware
Corporation, or any successor entity resulting from any
consolidation, amalgamation, merger or other business
combination, in its capacity as sponsor of the Trust.
SECTION 2. MISCELLANEOUS.
2.1. CONTINUING AGREEMENT. The Trust Declaration shall not be
amended by this Amendment except as specifically provided in this Amendment and,
amended as so specifically provided, the Trust Declaration shall remain in full
force and effect. References in the Trust Declaration to "this Declaration"
shall be deemed to be references to the Trust Declaration as amended by this
Amendment.
2.2. CONFLICTS. In the event of a conflict between the terms
and conditions of the Trust Declaration and the terms and conditions of this
Amendment, the terms and conditions of this Amendment shall prevail.
2.3. COUNTERPART ORIGINALS. The parties may sign any number of
copies of this Amendment. Each signed copy shall be an original, but all of them
together represent the same agreement.
2.4. HEADINGS, ETC. The headings of the sections of this
Amendment have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
IN WITNESS WHEREOF the parties have caused this Amendment to
be executed as of the day and year first above written.
/S/ DARLENE A. SPYCHALA /S/ TIMOTHY G. MCEVOY
- --------------------------- --------------------------
Darlene A. Spychala Timothy G. McEvoy
Administrative Trustee Administrative Trustee
-2-
<PAGE>
EXHIBIT 4.16
================================================================================
ONBANCorp, Inc.
------------------------------
------------------------------
INDENTURE
Dated as of February 4, 1997
------------------------------
THE BANK OF NEW YORK
as Trustee
------------------------------
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
================================================================================
<PAGE>
TIE-SHEET
of provisions of Trust Indenture Act of 1939 with Indenture
dated as of February 4, 1997 between ONBANCorp, Inc. and The Bank
of New York, Trustee:
<TABLE>
<CAPTION>
ACT SECTION INDENTURE SECTION
<S> <C>
310(a)(1).................................................................6.09
(a)(2) ................................................................6.09
310(a)(3)..................................................................N/A
(a)(4)..................................................................N/A
310(a)(5)...........................................................6.10, 6.11
310(b) ...................................................................N/A
310(c) ..................................................................6.13
311(a) and (b).............................................................N/A
311(c) .........................................................4.01, 4.02(a)
312(a) ..................................................................4.02
312(b) and (c)............................................................4.04
313(a) ..................................................................4.04
313(b)(1).................................................................4.04
313(b)(2).................................................................4.04
313(c) ..................................................................4.04
313(d) ..................................................................4.04
314(a) ..................................................................4.03
314(b) ...................................................................N/A
314(c)(1) and (2).........................................................6.07
314(c)(3)..................................................................N/A
314(d) ...................................................................N/A
314(e) ..................................................................6.07
314(f) ...................................................................N/A
315(a)(c) and (d).........................................................6.01
315(b) ..................................................................5.08
315(e) ..................................................................5.09
316(a)(1) ................................................................5.07
316(a)(2) .................................................................N/A
316(a) last sentence .....................................................2.09
316(b) ..................................................................9.02
317(a) ..................................................................5.05
317(b) ..................................................................6.05
318(a) .................................................................13.08
</TABLE>
- ------------------------------
THIS TIE-SHEET IS NOT PART OF THE INDENTURE AS EXECUTED.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS*
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS.............................. 1
SECTION 1.01. Definitions..................................... 1
Additional Interest............................................ 2
Adjusted Treasury Rate......................................... 2
Affiliate...................................................... 2
Authenticating Agent........................................... 2
Bankruptcy Law................................................. 2
Board of Directors............................................. 2
Board Resolution............................................... 2
Business Day................................................... 2
Capital Securities............................................. 2
Capital Securities Guarantee................................... 3
Commission..................................................... 3
Common Securities.............................................. 3
Common Securities Guarantee.................................... 3
Common Stock................................................... 3
Company........................................................ 3
Company Request................................................ 3
Comparable Treasury Issue...................................... 4
Comparable Treasury Price...................................... 4
Compounded Interest............................................ 4
Custodian...................................................... 4
Declaration.................................................... 4
Default........................................................ 4
Deferred Interest.............................................. 4
Definitive Securities.......................................... 4
Depositary..................................................... 4
Dissolution Event.............................................. 5
Event of Default............................................... 5
Exchange Act................................................... 5
Exchange Offer................................................. 5
Extended Interest Payment Period............................... 5
Federal Reserve................................................ 5
Global Security................................................ 5
Indebtedness for Money Borrowed................................ 5
Indebtedness Ranking on a Parity with the Securities........... 5
Indebtedness Ranking Junior to the Securities.................. 6
Indenture...................................................... 6
Initial Optional Prepayment Date............................... 6
Interest Payment Date.......................................... 6
Liquidated Damages............................................. 6
Maturity Date.................................................. 6
Mortgage....................................................... 6
</TABLE>
- ------------------------------
* THIS TABLE OF CONTENTS SHALL NOT, FOR ANY PURPOSE, BE
DEEMED TO BE A PART OF THE INDENTURE.
i
<PAGE>
<TABLE>
<S> <C>
Non Book-Entry Capital Securities.............................. 6
Officers....................................................... 6
Officers' Certificate.......................................... 6
OnBank Capital Trust........................................... 7
Opinion of Counsel............................................. 7
Optional Prepayment Price...................................... 7
Other Debentures............................................... 7
Other Guarantees............................................... 7
outstanding.................................................... 7
Person......................................................... 8
Predecessor Security........................................... 8
Principal Office of the Trustee................................ 8
Purchase Agreement............................................. 8
Property Trustee............................................... 8
Quotation Agent................................................ 8
Prepayment Price............................................... 8
Reference Treasury Dealer...................................... 8
Reference Treasury Dealer Quotations........................... 8
Registration Rights Agreement.................................. 8
Regulatory Capital Event....................................... 9
Responsible Officer............................................ 9
Restricted Security............................................ 9
Rule 144A...................................................... 9
Securities..................................................... 9
Securities Act................................................. 9
Securityholder................................................. 9
holder of Securities........................................... 9
Security Register.............................................. 10
Senior Indebtedness............................................ 10
Series A Securities............................................ 10
Series B Securities............................................ 10
Special Event.................................................. 10
Special Event Prepayment Price................................. 10
Subsidiary..................................................... 10
Tax Event...................................................... 11
Trustee........................................................ 11
Trust Indenture Act of 1939.................................... 11
Trust Securities............................................... 11
U.S. Government Obligations.................................... 11
ARTICLE II
SECURITIES............................... 12
SECTION 2.01. Forms Generally................................. 12
SECTION 2.02. Execution and Authentication.................... 12
SECTION 2.03. Form and Payment................................ 13
SECTION 2.04. Legends......................................... 13
SECTION 2.05. Global Security................................. 13
SECTION 2.06 Interest........................................ 15
SECTION 2.07. Transfer and Exchange........................... 16
SECTION 2.08. Replacement Securities.......................... 18
SECTION 2.09. Temporary Securities............................ 19
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 2.10. Cancellation.................................... 19
SECTION 2.11. Defaulted Interest.............................. 19
SECTION 2.12. CUSIP Numbers................................... 21
ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY.................. 21
SECTION 3.01. Payment of Principal, Premium and
Interest........................................ 21
SECTION 3.02. Offices for Notices and Payments, etc........... 21
SECTION 3.03. Appointments to Fill Vacancies in
Trustee's Office................................ 22
SECTION 3.04. Provision as to Paying Agent.................... 22
SECTION 3.05. Certificate to Trustee.......................... 23
SECTION 3.06. Compliance with Consolidation
Provisions...................................... 23
SECTION 3.07. Limitation on Dividends......................... 24
SECTION 3.08. Covenants as to OnBank Capital Trust............ 24
SECTION 3.09. Payment of Expenses............................. 25
SECTION 3.10. Payment Upon Resignation or Removal............. 26
ARTICLE IV
SECURITYHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE........................ 26
SECTION 4.01. Securityholders' Lists.......................... 26
SECTION 4.02. Preservation and Disclosure of Lists............ 27
SECTION 4.03. Reports by Company.............................. 28
SECTION 4.04. Reports by the Trustee.......................... 30
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT.......................... 30
SECTION 5.01. Events of Default............................... 30
SECTION 5.02. Payment of Securities on Default; Suit
Therefor........................................ 32
SECTION 5.03. Application of Moneys Collected by
Trustee......................................... 34
SECTION 5.04. Proceedings by Securityholders.................. 34
SECTION 5.05. Proceedings by Trustee.......................... 36
SECTION 5.06. Remedies Cumulative and Continuing.............. 36
SECTION 5.07. Direction of Proceedings and Waiver of
Defaults by Majority of Securityholders......... 36
SECTION 5.08. Notice of Defaults.............................. 37
SECTION 5.09. Undertaking to Pay Costs........................ 38
ARTICLE VI
CONCERNING THE TRUSTEE......................... 38
SECTION 6.01. Duties and Responsibilities of Trustee.......... 38
SECTION 6.02. Reliance on Documents, Opinions, etc............ 40
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6.03. No Responsibility for Recitals, etc............. 41
SECTION 6.04. Trustee, Authenticating Agent, Paying
Agents, Transfer Agents or Registrar May
Own Securities.................................. 41
SECTION 6.05. Moneys to be Held in Trust...................... 41
SECTION 6.06. Compensation and Expenses of Trustee............ 42
SECTION 6.07. Officers' Certificate as Evidence............... 43
SECTION 6.08. Conflicting Interest of Trustee................. 43
SECTION 6.09. Eligibility of Trustee.......................... 43
SECTION 6.10. Resignation or Removal of Trustee............... 44
SECTION 6.11. Acceptance by Successor Trustee................. 45
SECTION 6.12. Succession by Merger, etc....................... 46
SECTION 6.13. Limitation on Rights of Trustee as a
Creditor........................................ 46
SECTION 6.14. Authenticating Agents........................... 47
ARTICLE VII
CONCERNING THE SECURITYHOLDERS..................... 48
SECTION 7.01. Action by Securityholders....................... 48
SECTION 7.02. Proof of Execution by Securityholders........... 49
SECTION 7.03. Who Are Deemed Absolute Owners.................. 49
SECTION 7.04. Securities Owned by Company Deemed Not
Outstanding..................................... 49
SECTION 7.05. Revocation of Consents; Future Holders
Bound........................................... 50
ARTICLE VIII
SECURITYHOLDERS' MEETINGS....................... 50
SECTION 8.01. Purposes of Meetings............................ 50
SECTION 8.02. Call of Meetings by Trustee..................... 51
SECTION 8.03. Call of Meetings by Company or
Securityholders................................. 51
SECTION 8.04. Qualifications for Voting....................... 51
SECTION 8.05. Regulations..................................... 52
SECTION 8.06. Voting.......................................... 52
ARTICLE IX
AMENDMENTS............................... 53
SECTION 9.01. Without Consent of Securityholders.............. 53
SECTION 9.02. With Consent of Securityholders................. 54
SECTION 9.03. Compliance with Trust Indenture Act;
Effect of Supplemental Indentures............... 55
SECTION 9.04. Notation on Securities.......................... 56
SECTION 9.05. Evidence of Compliance of Supplemental
Indenture to be Furnished Trustee............... 56
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE X
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE........... 56
SECTION 10.01. Company May Consolidate, etc., on Cer-
tain Terms...................................... 56
SECTION 10.02. Successor Corporation to be Substituted
for Company..................................... 57
SECTION 10.03. Opinion of Counsel to be Given Trustee.......... 58
ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE................ 58
SECTION 11.01. Discharge of Indenture.......................... 58
SECTION 11.02. Deposited Moneys and U.S. Government
Obligations to be Held in Trust by
Trustee......................................... 59
SECTION 11.03. Paying Agent to Repay Moneys Held............... 59
SECTION 11.04. Return of Unclaimed Moneys...................... 59
SECTION 11.05. Defeasance Upon Deposit of Moneys or
U.S. Government Obligations..................... 59
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS......................... 61
SECTION 12.01. Indenture and Securities Solely Corporate
Obligations..................................... 61
ARTICLE XIII
MISCELLANEOUS PROVISIONS........................ 62
SECTION 13.01. Successors...................................... 62
SECTION 13.02. Official Acts by Successor Corporation.......... 62
SECTION 13.03. Surrender of Company Powers..................... 62
SECTION 13.04. Addresses for Notices, etc...................... 62
SECTION 13.05. Governing Law................................... 62
SECTION 13.06. Evidence of Compliance with Conditions
Precedent....................................... 63
SECTION 13.07. Business Days................................... 63
SECTION 13.08. Trust Indenture Act to Control.................. 63
SECTION 13.09. Table of Contents, Headings, etc................ 64
SECTION 13.10. Execution in Counterparts....................... 64
SECTION 13.11. Separability.................................... 64
SECTION 13.12. Assignment...................................... 64
SECTION 13.13. Acknowledgement of Rights....................... 64
ARTICLE XIV
Prepayment OF SECURITIES --
MANDATORY AND OPTIONAL SINKING FUND.................. 65
SECTION 14.01. Special Event Prepayment........................ 65
SECTION 14.02. Optional Prepayment by Company.................. 65
</TABLE>
v
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 14.03. No Sinking Fund................................. 66
SECTION 14.04. Notice of Prepayment; Selection of Secu-
rities.......................................... 66
SECTION 14.05. Payment of Securities Called for Prepay-
ment............................................ 67
ARTICLE XV
SUBORDINATION OF SECURITIES...................... 69
SECTION 15.01. Agreement to Subordinate........................ 69
SECTION 15.02. Default on Senior Indebtedness.................. 69
SECTION 15.03. Liquidation; Dissolution; Bankruptcy............ 70
SECTION 15.04. Subrogation..................................... 71
SECTION 15.05. Trustee to Effectuate Subordination............. 72
SECTION 15.06. Notice by the Company........................... 72
SECTION 15.07. Rights of the Trustee; Holders of Senior
Indebtedness.................................... 74
SECTION 15.08. Subordination May Not Be Impaired............... 74
ARTICLE XVI
EXTENSION OF INTEREST PAYMENT PERIOD.................. 75
SECTION 16.01. Extension of Interest Payment Period............ 75
SECTION 16.02. Notice of Extension............................. 76
EXHIBIT A..................................................................A-1
</TABLE>
Testimonium
Signatures
Acknowledgements
vi
<PAGE>
THIS INDENTURE, dated as of February 4, 1997, between ONBANCorp,
Inc., a Delaware corporation (hereinafter sometimes called the "Company"), and
The Bank of New York, a New York banking corporation, as trustee (hereinafter
sometimes called the "Trustee"),
W I T N E S S E T H :
In consideration of the premises, and the purchase of the Securities
by the holders thereof, the Company covenants and agrees with the Trustee for
the equal and proportionate benefit of the respective holders from time to time
of the Securities, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.
The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture shall have the respective meanings specified in this Section
1.01. All other terms used in this Indenture which are defined in the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), or which are by
reference therein defined in the Securities Act, shall (except as herein
otherwise expressly provided or unless the context otherwise requires) have the
meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of this Indenture as originally executed.
The following terms have the meanings given to them in the Declaration: (i)
Clearing Agency; (ii) Delaware Trustee; (iii) Capital Security Certificate; (iv)
Property Trustee; (v) Administrative Trustees; (vi) Series A Capital Securities;
(vii) Series B Capital Securities; (viii) Direct Action; and (ix) Distributions.
All accounting terms used herein and not expressly defined shall have the
meanings assigned to such terms in accordance with generally accepted accounting
principles and the term "generally accepted accounting principles" means such
accounting principles as are generally accepted at the time of any computation.
The words "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. Headings are used for convenience of reference only and do
not affect interpretation. The singular includes the plural and vice versa.
"Additional Interest" shall have the meaning set forth in Section
2.06(c).
<PAGE>
"Adjusted Treasury Rate" means, with respect to any redemption date
pursuant to Section 14.01, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue, assuming a price
for the Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for such redemption date plus (i)
1.85% if such redemption date occurs on or prior to January 31, 1998 and (ii)
1.25% in all other cases.
"Affiliate" means, with respect to a specified Person, (a) any
Person directly or indirectly owning, controlling or holding the 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 officer, director or general partner.
"Authenticating Agent" shall mean any agent or agents of the Trustee
which at the time shall be appointed and acting pursuant to Section 6.14.
"Bankruptcy Law" shall mean Title 11, U.S. Code, or any similar
federal or state law for the relief of debtors.
"Board of Directors" shall mean either the Board of Directors of the
Company or any duly authorized committee of that board.
"Board Resolution" shall mean a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" shall mean, with respect to any series of Securities,
any day other than a Saturday or a Sunday or a day on which banking institutions
in The City of New York or Syracuse, New York are authorized or required by law
or executive order to close.
"Capital Securities" shall mean undivided beneficial interests in
the assets of OnBank Capital Trust which rank PARI PASSU with the Common
Securities issued by OnBank Capital Trust; PROVIDED, HOWEVER, that if an Event
of Default has occurred and is continuing, no payments in respect of
Distributions on, or payments upon liquidation, redemption or otherwise with
respect
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to, the Common Securities shall be made until the holders of the Capital
Securities shall be paid in full the Distributions and the liquidation,
redemption and other payments to which they are entitled. References to "Capital
Securities" shall include collectively any Series A Capital Securities and
Series B Capital Securities.
"Capital Securities Guarantee" shall mean any guarantee that the
Company may enter into with The Bank of New York or other Persons that operates
directly or indirectly for the benefit of holders of Capital Securities of
OnBank Capital Trust and shall include a Series A Capital Securities Guarantee
and a Series B Capital Securities Guarantee with respect to the Series A Capital
Securities and the Series B Capital Securities, respectively.
"Commission" shall mean 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 Indenture 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" shall mean undivided beneficial interests in the
assets of OnBank Capital Trust which rank PARI PASSU with Capital Securities
issued by OnBank Capital Trust; PROVIDED, HOWEVER, that if an Event of Default
has occurred and is continuing, no payments in respect of Distributions on, or
payments upon liquidation, redemption or otherwise with respect to, the Common
Securities shall be made until the holders of the Capital Securities shall be
paid in full the Distributions and the liquidation, redemption and other
payments to which they are entitled.
"Common Securities Guarantee" shall mean any guarantee that the
Company may enter into with any Person or Persons that operates directly or
indirectly for the benefit of holders of Common Securities of OnBank Capital
Trust.
"Common Stock" shall mean the Common Stock, par value $1.00 per
share, of the Company or any other class of stock resulting from changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
"Company" shall mean ONBANCorp, Inc., a Delaware corporation, and,
subject to the provisions of Article X, shall include its successors and
assigns.
"Company Request" or "Company Order" shall mean a written request or
order signed in the name of the Company by the Chairman, the Chief Executive
Officer, the President, a Vice
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Chairman, a Vice President, the Comptroller, the Secretary or an Assistant
Secretary of the Company, and delivered to the Trustee.
"Comparable Treasury Issue" means the United States Treasury
security selected by the Quotation Agent as having a maturity comparable to the
remaining term of the Securities to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Securities.
"Comparable Treasury Price" means, with respect to any redemption
date pursuant to Section 14.01, (i) the average of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) on the third Business Day preceding such redemption date, as
set forth in the daily statistical release (or any successor release) published
by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m.
Quotations for U.S. Government Securities" or (ii) if such release (or any
successor release) is not published or does not contain such prices on such
Business Day, (A) the average of the Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such Quotations.
"Compounded Interest" shall have the meaning set forth in Section
16.01.
"Custodian" shall mean any receiver, trustee, assignee, liquidator,
or similar official under any Bankruptcy Law.
"Declaration" means the Amended and Restated Declaration of Trust of
OnBank Capital Trust, dated as of February 4, 1997.
"Default" means any event, act or condition that with notice or
lapse of time, or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in Section
16.01.
"Definitive Securities" shall mean those securities issued in fully
registered certificated form not otherwise in global form.
"Depositary" shall mean, with respect to Securities of any series,
for which the Company shall determine that such Securities will be issued as a
Global Security, The Depository Trust Company, New York, New York, another
clearing agency, or
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any successor registered as a clearing agency under the Exchange Act or other
applicable statute or regulation, which, in each case, shall be designated by
the Company pursuant to Section 2.05(d).
"Dissolution Event" means the liquidation of OnBank Capital Trust
pursuant to the Declaration, and the distribution of the Securities held by the
Property Trustee to the holders of the Trust Securities issued by OnBank Capital
Trust PRO RATA in accordance with the Declaration.
"Event of Default" shall mean any event specified in Section 5.01,
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the offer that may be made pursuant to the
Registration Rights Agreement (i) by the Company to exchange Series B Securities
for Series A Securities and to exchange a Series B Capital Securities Guarantee
for a Series A Capital Securities Guarantee and (ii) by OnBank Capital Trust to
exchange Series B Capital Securities for Series A Capital Securities.
"Extended Interest Payment Period" shall have the meaning set forth
in Section 16.01.
"Federal Reserve" shall mean the Board of Governors of the Federal
Reserve System.
"Global Security" means, with respect to the Securities, a Security
executed by the Company and delivered by the Trustee to the Depositary or
pursuant to the Depositary's instruction, all in accordance with the Indenture,
which shall be registered in the name of the Depositary or its nominee.
"Indebtedness for Money Borrowed" shall mean any obligation of, or
any obligation guaranteed by, the Company for the repayment of borrowed money,
whether or not evidenced by bonds, debentures, notes or other written
instruments.
"Indebtedness Ranking on a Parity with the Securities" shall mean
(i) Indebtedness for Money Borrowed, whether outstanding on the date of
execution of this Indenture or hereafter created, assumed or incurred, to the
extent such indebtedness specifically by its terms ranks equally with and not
prior to the Securities in the right of payment upon the happening of any
dissolution or winding up or liquidation or reorganization of the Company, (ii)
all other debt securities, and guarantees in respect of those debt securities,
issued to any trust other than OnBank Capital Trust, or a trustee of such trust,
partnership or
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other entity affiliated with the Company that is a financing vehicle of the
Company (a "financing entity") in connection with the issuance by such financing
entity of equity securities or other securities guaranteed by the Company
pursuant to an instrument that ranks pari passu with or junior in right of
payment to the Capital Securities Guarantee.
"Indebtedness Ranking Junior to the Securities" shall mean any
Indebtedness for Money Borrowed, whether outstanding on the date of execution of
this Indenture or hereafter created, assumed or incurred, to the extent such
indebtedness specifically by its terms ranks junior to and not equally with or
prior to the Securities (and any other Indebtedness Ranking on a Parity with the
Securities) in right of payment upon the happening of any dissolution or winding
up or liquidation or reorganization of the Company. The securing of any
Indebtedness for Money Borrowed of the Company, otherwise constituting
Indebtedness Ranking on a Parity with the Securities or Indebtedness Ranking
Junior to the Securities, as the case may be, shall not be deemed to prevent
such Indebtedness for Money Borrowed from constituting Indebtedness Ranking on a
Parity with the Securities or Indebtedness Ranking Junior to the Securities, as
the case may be.
"Indenture" shall mean this instrument as originally executed or, if
amended as herein provided, as so amended.
"Initial Optional Prepayment Date" means February 1, 2007.
"Interest Payment Date" shall have the meaning set forth in Section
2.06.
"Liquidated Damages" shall have the meaning set forth in the
Registration Rights Agreement.
"Maturity Date" shall mean February 1, 2027.
"Mortgage" shall mean and include any mortgage, pledge, lien,
security interest, conditional sale or other title retention agreement or other
similar encumbrance.
"Non Book-Entry Capital Securities" shall have the meaning set forth
in Section 2.05.
"Officers" shall mean any of the Chairman, a Vice Chairman, the
Chief Executive Officer, the President, a Vice President, the Comptroller, the
Group Director, the Secretary or an Assistant Secretary of the Company.
"Officers' Certificate" shall mean a certificate signed by two
Officers and delivered to the Trustee.
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"OnBank Capital Trust" or the "Trust" shall mean OnBank Capital
Trust I, a Delaware business trust created for the purpose of issuing its
undivided beneficial interests in connection with the issuance of Securities
under this Indenture.
"Opinion of Counsel" shall mean a written opinion of counsel, who
may be an employee of the Company, and who shall be acceptable to the Trustee.
"Optional Prepayment Price" shall have the meaning set forth in
Section 14.02.
"Other Debentures" means all junior subordinated debentures issued
by the Company from time to time and sold to trusts to be established by the
Company (if any), in each case similar to the Trust.
"Other Guarantees" means all guarantees to be issued by the Company
with respect to capital securities (if any) and issued to other trusts to be
established by the Company (if any), in each case similar to the Trust.
The term "outstanding" when used with reference to Securities,
shall, subject to the provisions of Section 7.04, mean, as of any particular
time, all Securities authenticated and delivered by the Trustee or the
Authenticating Agent under this Indenture, except
(a) Securities theretofore cancelled by the Trustee or the
Authenticating Agent or delivered to the Trustee for
cancellation;
(b) Securities, or portions thereof, for the payment or redemption
of which moneys in the necessary amount shall have been
deposited in trust with the Trustee or with any paying agent
(other than the Company) or shall have been set aside and
segregated in trust by the Company (if the Company shall act
as its own paying agent); provided that, if such Securities,
or portions thereof, are to be redeemed prior to maturity
thereof, notice of such redemption shall have been given as in
Article XIV provided or provision satisfactory to the Trustee
shall have been made for giving such notice; and
(c) Securities in lieu of or in substitution for which other
Securities shall have been authenticated and delivered
pursuant to the terms of Section 2.08 unless proof
satisfactory to the Company and the Trustee is presented that
any such Securities are held by bona fide holders in due
course.
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"Person" shall mean any individual, corporation, estate,
partnership, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt and as that
evidenced by such particular Security; and, for the purposes of this definition,
any Security authenticated and delivered under Section 2.08 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
lost, destroyed or stolen Security.
"Principal Office of the Trustee", or other similar term, shall mean
the office of the Trustee, at which at any particular time its corporate trust
business shall be administered.
"Purchase Agreement" shall mean the Purchase Agreement dated January
30, 1997 among the Company, OnBank Capital Trust and the initial purchasers
named therein.
"Property Trustee" shall have the same meaning as set forth in the
Declaration.
"Quotation Agent" means the Reference Treasury Dealer appointed by
the Company.
"Prepayment Price" means the Special Event Prepayment Price or the
Optional Prepayment Price, as the context requires.
"Reference Treasury Dealer" means a nationally recognized U.S.
Government securities dealer in New York City selected by the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date pursuant to Section 14.01, the
average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m. New York City time on the third Business Day preceding such
redemption date.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of February 4, 1997, by and among the Company, the Trust and
the Initial Purchasers named therein as such agreement may be amended, modified
or supplemented from time to time.
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"Regulatory Capital Event" means that the Company shall have
received an opinion of independent bank regulatory counsel experienced in such
matters to the effect that, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any rules, guidelines or policies of the
Federal Reserve or (b) any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such pronouncement or decision is announced on or after
the date of original issuance of the Securities, the Capital Securities do not
constitute, or within 90 days of the date thereof, will not constitute, Tier I
Capital (or its then equivalent); provided, however, that the distribution of
the Securities in connection with the liquidation of OnBank Capital Trust by the
Company, as sponsor, shall not in and of itself constitute a Regulatory Capital
Event unless such liquidation shall have occurred in connection with a Tax
Event.
"Responsible Officer" shall mean the chairman or any vice chairman
of the board of directors, the chairman or any vice chairman of the executive
committee of the board of directors, the chairman of the trust committee, the
president, any vice president, the cashier, any assistant cashier, the
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer, the controller or any assistant controller or any other
officer or assistant officer of the Trustee 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 his knowledge of and familiarity with
the particular subject.
"Restricted Security" shall mean Securities that bear or are
required to bear the legends set forth in Exhibit A hereto.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule
may be amended from time to time, or under any similar rule or regulation
hereafter adopted by the Commission.
"Securities" means, collectively, the Series A Securities and the
Series B Securities.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securityholder", "holder of Securities", or other similar terms,
shall mean any person in whose name at the time a particular Security is
registered on the register kept by the Company or the Trustee for that purpose
in accordance with the terms hereof.
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"Security Register" shall mean (i) prior to a Dissolution Event, the
list of holders provided to the Trustee pursuant to Section 4.01, and (ii)
following a Dissolution Event, any security register maintained by a security
registrar for the Securities appointed by the Company following the execution of
a supplemental indenture providing for transfer procedures as provided for in
Section 2.07(a).
"Senior Indebtedness" shall mean all Indebtedness for Money
Borrowed, whether outstanding on the date of execution of this Indenture or
hereafter created, assumed or incurred, except Indebtedness Ranking on a Parity
with the Securities or Indebtedness Ranking Junior to the Securities, and any
deferrals, renewals or extensions of such Senior Indebtedness.
"Series A Securities" means the Company's 9.25% Series A Junior
Subordinated Deferrable Interest Debentures due February 1, 2027, as
authenticated and issued under this Indenture.
"Series B Securities" means the Company's Series B 9.25% Junior
Subordinated Deferrable Interest Debentures due February 1, 2027, as
authenticated and issued under this Indenture.
"Special Event" means either a Regulatory Capital Event or a Tax
Event.
"Special Event Prepayment Price" shall mean, with respect to any
redemption of the Securities pursuant to Section 14.01 hereof, an amount in cash
equal to the greater of (i) 100% of the principal amount to be redeemed or (ii)
as determined by a Quotation Agent, the sum of the present values of the
principal amount and premium payable with respect to an Optional Prepayment of
the Securities on the Initial Optional Prepayment Date, together with scheduled
payments of interest on the Securities from the prepayment date to and including
the Initial Optional Prepayment Date, discounted to the prepayment date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate, plus, in the case of each of clauses (i) and
(ii), accumulated but unpaid interest thereon, including Compounded Interest and
Additional Interest, if any, to the date of such redemption.
"Subsidiary" shall mean with respect to any Person, (i) any
corporation at least a majority of the outstanding voting stock of which is
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 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
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partnership of which such Person or any of its Subsidiaries is a general
partner. For the purposes of this definition, "voting stock" 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.
"Tax Event" shall mean the receipt by OnBank Capital Trust and the
Company of an opinion of counsel experienced in such matters 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 February 4, 1997, there
is more than an insubstantial risk that (i) OnBank Capital Trust is, or will be
within 90 days of the date of such opinion, subject to United States Federal
income tax with respect to income received or accrued on the Securities, (ii)
interest payable by the Company on the Securities is not, or within 90 days of
the date of such opinion, will not be, deductible by the Company, in whole or in
part, for United States Federal income tax purposes, or (iii) OnBank Capital
Trust is, or will be within 90 days of the date of such opinion, subject to more
than a DE MINIMIS amount of other taxes, duties or other governmental charges.
"Trustee" shall mean the Person identified as "Trustee" in the first
paragraph hereof, and, subject to the provisions of Article VI hereof, shall
also include its successors and assigns as Trustee hereunder. The term "Trustee"
as used with respect to a particular series of the Securities shall mean the
trustee with respect to that series.
"Trust Indenture Act of 1939" shall mean the Trust Indenture Act of
1939 as in force at the date of execution of this Indenture, except as provided
in Section 9.03.
"Trust Securities" shall mean the Capital Securities and the Common
Securities, collectively.
"U.S. Government Obligations" shall mean 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,
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which, in either case under clauses (i) or (ii) are not callable or redeemable
at the option of the issuer thereof, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
ARTICLE II
SECURITIES
SECTION 2.01. Forms Generally.
The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A, the terms of which are incorporated
in and made a part of this Indenture. The Securities may have notations, legends
or endorsements required by law, stock exchange rule, agreements to which the
Company is subject or usage. Each Security shall be dated the date of its
authentication. The Securities shall be issued in denominations of $1,000 and
integral multiples thereof.
SECTION 2.02. Execution and Authentication.
Two Officers shall sign the Securities for the Company by manual or
facsimile signature. If an Officer whose signature is on a Security no longer
holds that office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that the Security has been authenticated under this Indenture. The form
of Trustee's certificate of authentication to be borne by the Securities shall
be substantially as set forth in Exhibit A hereto.
The Trustee shall, upon a Company Order, authenticate for original
issue up to, and the aggregate principal amount of Securities outstanding at any
time may not exceed $61,856,000 aggregate principal amount of the Securities,
except as provided in Sections 2.07, 2.08, 2.09 and 14.05. The series of
Securities to be initially issued hereunder shall be the Series A Securities.
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SECTION 2.03. Form and Payment.
Except as provided in Section 2.05, the Securities shall be issued
in fully registered certificated form without interest coupons. Principal of,
premium, if any, and interest on the Securities issued in certificated form will
be payable, the transfer of such Securities will be registrable and such
Securities will be exchangeable for Securities bearing identical terms and
provisions at the office or agency of the Company maintained for such purpose
under Section 3.02; PROVIDED, HOWEVER, that payment of interest with respect to
Securities (other than a Global Security) may be made at the option of the
Company (i) by check mailed to the holder at such address as shall appear in the
Security Register or (ii) by transfer to an account maintained by the Person
entitled thereto, provided that proper transfer instructions have been received
in writing by the relevant record date. Notwithstanding the foregoing, so long
as the holder of any Securities is the Property Trustee, the payment of the
principal of, premium, if any, and interest (including Compounded Interest and
Additional Interest, if any) on such Securities held by the Property Trustee
will be made at such place and to such account as may be designated by the
Property Trustee.
SECTION 2.04. Legends.
(a) Except as permitted by subsection (b) of this Section 2.04 or as
otherwise determined by the Company in accordance with applicable law, each
Security shall bear the applicable legends relating to restrictions on transfer
pursuant to the securities laws in substantially the form set forth on Exhibit A
hereto.
(b) In the event of an Exchange Offer, the Company shall issue and
the Trustee shall authenticate Series B Securities in exchange for Series A
Securities accepted for exchange in the Exchange Offer, which Series B
Securities shall not bear the legends required by subsection (a) above, in each
case unless the holder of such Series A Securities is either (A) a broker dealer
who purchased such Series A Securities directly from the Company for resale
pursuant to Rule 144A or any other available exemption under the Securities Act,
(B) a Person participating in the distribution of the Series A Securities or (C)
a Person who is an affiliate (as defined in Rule 144 under the Securities Act)
of the Company.
SECTION 2.05. Global Security.
(a) In connection with a Dissolution Event,
(i) if any Capital Securities are held in book-entry form, the
related Definitive Securities shall be presented to the Trustee (if an
arrangement with the Depositary
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has been maintained) by the Property Trustee in exchange for one or more
Global Securities (as may be required pursuant to Section 2.07) in an
aggregate principal amount equal to the aggregate principal amount of all
outstanding Securities, to be registered in the name of the Depositary, or
its nominee, and delivered by the Trustee to the Depositary for crediting
to the accounts of its participants pursuant to the instructions of the
Administrative Trustees; the Company upon any such presentation shall
execute one or more Global Securities in such aggregate principal amount
and deliver the same to the Trustee for authentication and delivery in
accordance with this Indenture; and payments on the Securities issued as a
Global Security will be made to the Depositary; and
(ii) if any Capital Securities are held in certificated form,
the related Definitive Securities may be presented to the Trustee by the
Property Trustee and any Capital Security certificate which represents
Capital Securities other than Capital Securities in book-entry form ("Non
Book-Entry Capital Securities") will be deemed to represent beneficial
interests in Securities presented to the Trustee by the Property Trustee
having an aggregate principal amount equal to the aggregate liquidation
amount of the Non Book-Entry Capital Securities until such Capital
Security certificates are presented to the Security Registrar for transfer
or reissuance, at which time such Capital Security certificates will be
cancelled and a Security, registered in the name of the holder of the
Capital Security certificate or the transferee of the holder of such
Capital Security certificate, as the case may be, with an aggregate
principal amount equal to the aggregate liquidation amount of the Capital
Security certificate cancelled, will be executed by the Company and
delivered to the Trustee for authentication and delivery in accordance
with the Indenture. Upon the issuance of such Securities, Securities with
an equivalent aggregate principal amount that were presented by the
Property Trustee to the Trustee will be deemed to have been cancelled.
(b) The Global Securities shall represent the aggregate amount of
outstanding Securities from time to time endorsed thereon; PROVIDED, that the
aggregate amount of outstanding Securities represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Security to reflect the amount of any
increase or decrease in the amount of outstanding Securities represented thereby
shall be made by the Trustee, in accordance with instructions given by the
Company as required by this Section 2.05.
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(c) The Global Securities may be transferred, in whole but not in
part, only to the Depositary, another nominee of the Depositary, or to a
successor Depositary selected or approved by the Company or to a nominee of such
successor Depositary.
(d) If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or the Depositary has ceased to be
a clearing agency registered under the Exchange Act, and a successor Depositary
is not appointed by the Company within 90 days after the Company receives such
notice or becomes aware of such condition, as the case may be, the Company will
execute, and the Trustee, upon written notice from the Company, will
authenticate and make available for delivery the Definitive Securities, in
authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Security in exchange for such Global Security. If
there is an Event of Default, the Depositary shall have the right to exchange
the Global Securities for Definitive Securities. In addition, the Company may at
any time determine that the Securities shall no longer be represented by a
Global Security. In the event of such an Event of Default or such a
determination, the Company shall execute, and subject to Section 2.07, the
Trustee, upon receipt of an Officers' Certificate evidencing such determination
by the Company, will authenticate and make available for delivery the Definitive
Securities, in authorized denominations, and in an aggregate principal amount
equal to the principal amount of the Global Security in exchange for such Global
Security. Upon the exchange of the Global Security for such Definitive
Securities, in authorized denominations, the Global Security shall be cancelled
by the Trustee. Such Definitive Securities issued in exchange for the Global
Security shall be registered in such names and in such authorized denominations
as the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall deliver
such Definitive Securities to the Depositary for delivery to the Persons in
whose names such Definitive Securities are so registered.
SECTION 2.06 Interest.
(a) Each outstanding Security will bear interest at the rate of
9.25% per annum (the "Coupon Rate") from the most recent date to which interest
has been paid or duly provided for or, if no interest has been paid or duly
provided for, from February 4, 1997, until the principal thereof becomes due and
payable, and at the Coupon Rate on any overdue principal (and premium, if any)
and (to the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest, compounded semi-annually, payable
(subject to the provisions of Article XVI) semi-annually in arrears on February
1 and August 1 of each year (each, an "Interest Payment Date") commencing on
August 1, 1997, to the Person in whose name such
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Security or any predecessor Security is registered, at the close of business on
the regular record date for such interest installment, which shall be the
fifteenth day of the month immediately preceding the month in which the relevant
Interest Payment Date falls.
(b) Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. In the event that any Interest Payment Date
falls on a day that is not a Business Day, then payment of interest payable on
such date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), with the
same force and effect as if made on such date.
(c) During such time as the Property Trustee is the holder of any
Securities, the Company shall pay any additional amounts on the Securities as
may be necessary in order that the amount of Distributions then due and payable
by the OnBank Capital Trust on the outstanding Trust Securities shall not be
reduced as a result of any additional taxes, duties and other governmental
charges to which OnBank Capital Trust has become subject as a result of a Tax
Event ("Additional Interest").
SECTION 2.07. Transfer and Exchange.
(a) TRANSFER RESTRICTIONS. (i) The Series A Securities, and those
Series B Securities with respect to which any Person described in Section
2.04(b)(A), (B) or (C) is the beneficial owner, may not be transferred except in
compliance with the legend contained in Exhibit A unless otherwise determined by
the Company in accordance with applicable law. Upon any distribution of the
Securities following a Dissolution Event, the Company and the Trustee shall
enter into a supplemental indenture pursuant to Section 9.01 to provide for the
transfer restrictions and procedures with respect to the Securities
substantially similar to those contained in the Declaration to the extent
applicable in the circumstances existing at such time.
(ii) The Securities will be issued and may be transferred only
in blocks having an aggregate principal amount of not less than $100,000. Any
such transfer of the Securities in a block having an aggregate principal amount
of less than $100,000 shall be deemed to be voided and of no legal effect
whatsoever. Any such transferee shall be deemed not to be a holder of such
Securities for any purpose, including, but not limited to the receipt of
payments on such Securities, and such transferee shall be deemed to have no
interest whatsoever in such Securities.
(b) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Definitive
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Securities and Global Securities at the Trustee's request. All Definitive
Securities and Global Securities issued upon any registration of transfer or
exchange of Definitive Securities or Global Securities shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Definitive Securities or Global
Securities surrendered upon such registration of transfer or exchange.
No service charge shall be made to a holder for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith.
The Company shall not be required to (i) issue, register the
transfer of or exchange Securities during a period beginning at the opening of
business 15 days before the day of mailing of a notice of redemption or any
notice of selection of Securities for redemption under Article XIV hereof and
ending at the close of business on the day of such mailing; or (ii) register the
transfer of or exchange any Security so selected for redemption in whole or in
part, except the unredeemed portion of any Security being redeemed in part.
Prior to due presentment for the registration of a transfer of any
Security, the Trustee, any Agent and the Company may deem and treat the Person
in whose name any Security is registered as the absolute owner of such Security
for the purpose of receiving payment of principal of and premium, if any, and
interest on such Securities, and neither the Trustee, any Agent nor the Company
shall be affected by notice to the contrary.
(c) EXCHANGE OF SERIES A SECURITIES FOR SERIES B SECURITIES. The
Series A Securities may be exchanged for Series B Securities pursuant to the
terms of the Exchange Offer. The Trustee shall make the exchange as follows:
The Company shall present the Trustee with an Officers' Certificate
certifying the following:
(A) upon issuance of the Series B Securities, the transactions
contemplated by the Exchange Offer have been consummated; and
(B) the principal amount of Series A Securities properly
tendered in the Exchange Offer that are represented by a
Global Security and the principal amount of Series A
Securities properly tendered in the Exchange Offer that are
represented by Definitive Securities, the name of each
holder of such Definitive Securities, the principal amount
properly tendered in the Exchange Offer by each such holder
and the name and address to which Definitive
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Securities for Series B Securities shall be registered and
sent for each such holder.
The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
Opinion of Counsel (x) to the effect that the Series B Securities have been
registered under Section 5 of the Securities Act and the Indenture has been
qualified under the Trust Indenture Act and (y) with respect to the matters set
forth in Section 3(p) of the Registration Rights Agreement and (iii) a Company
Order, shall authenticate (A) a Global Security for Series B Securities in
aggregate principal amount equal to the aggregate principal amount of Series A
Securities represented by a Global Security indicated in such Officers'
Certificate as having been properly tendered and (B) Definitive Securities
representing Series B Securities registered in the names of, and in the
principal amounts indicated in, such Officers' Certificate.
If the principal amount of the Global Security for the Series B
Securities is less than the principal amount of the Global Security for the
Series A Securities, the Trustee shall make an endorsement on such Global
Security for Series A Securities indicating a reduction in the principal amount
represented thereby.
The Trustee shall deliver such Definitive Securities for Series B
Securities to the holders thereof as indicated in such Officers' Certificate.
SECTION 2.08. Replacement Securities.
If any mutilated Security is surrendered to the Trustee, or the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and the
Trustee shall authenticate a replacement Security if the Trustee's requirements
for replacements of Securities are met. An indemnity bond must be supplied by
the holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any agent thereof or any authenticating agent
from any loss that any of them may suffer if a Security is replaced. The Company
or the Trustee may charge for its expenses in replacing a Security.
Every replacement Security is an obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Securities duly issued hereunder.
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SECTION 2.09. Temporary Securities.
Pending the preparation of Definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Securities that are printed, lithographed,
typewritten, mimeographed or otherwise reproduced, in any authorized
denomination, substantially of the tenor of the Definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company shall cause
Definitive Securities to be prepared without unreasonable delay. The Definitive
Securities shall be printed, lithographed or engraved, or provided by any
combination thereof, or in any other manner permitted by the rules and
regulations of any applicable securities exchange, all as determined by the
officers executing such Definitive Securities. After the preparation of
Definitive Securities, the temporary Securities shall be exchangeable for
Definitive Securities upon surrender of the temporary Securities at the office
or agency maintained by the Company for such purpose pursuant to Section 3.02
hereof, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Company shall execute, and the Trustee shall
authenticate and make available for delivery, in exchange therefor the same
aggregate principal amount of Definitive Securities of authorized denominations.
Until so exchanged, the temporary Securities shall in all respects be entitled
to the same benefits under this Indenture as Definitive Securities.
SECTION 2.10. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Trustee and no one else shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall retain or destroy cancelled Securities in accordance with
its normal practices (subject to the record retention requirement of the
Exchange Act) unless the Company directs them to be returned to it. The Company
may not issue new Securities to replace Securities that have been redeemed or
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest.
Any interest on any Security that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall 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
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shall be paid by the Company, at its election, as provided in clause (a) or
clause (b) below:
(a) The Company may make payment of any Defaulted Interest on
Securities to the Persons in whose names such Securities (or their
respective Predecessor Securities) 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 Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each such Security and the date of the proposed payment, and at the
same time the Company 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 in this clause 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 Company of such special record date and, in the
name and at the expense of the Company, 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 Securityholder at his or
her address as it appears in the Security 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 Securities (or their respective Predecessor Securities)
are registered on such special record date and shall be no longer payable
pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest on any
Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed payment
pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
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SECTION 2.12. CUSIP Numbers.
The Company in issuing the Securities 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 Securityholders; PROVIDED that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Securities or as contained in any notice
of a redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the CUSIP numbers.
ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01. Payment of Principal, Premium and
Interest.
The Company covenants and agrees for the benefit of the holders of
the Securities that it will duly and punctually pay or cause to be paid the
principal of and premium, if any, and interest on the Securities at the place,
at the respective times and in the manner provided herein. Except as provided in
Section 2.03, each installment of interest on the Securities may be paid by
mailing checks for such interest payable to the order of the holder of Security
entitled thereto as they appear in the Security Register. The Company further
covenants to pay any and all amounts, including, without limitation, Additional
Interest, as may be required pursuant to Section 2.06(c), and Liquidated
Damages, if any, on the dates and in the manner required under the Registration
Rights Agreement.
SECTION 3.02. Offices for Notices and Payments, etc.
So long as any of the Securities remain outstanding, the Company
will maintain in the Borough of Manhattan, The City of New York, an office or
agency where the Securities may be presented for payment, an office or agency
where the Securities may be presented for registration of transfer and for
exchange as in this Indenture provided and an office or agency where notices and
demands to or upon the Company in respect of the Securities or of this Indenture
may be served. The Company will give to the Trustee written notice of the
location of any such office or agency and of any change of location thereof.
Until otherwise designated from time to time by the Company in a notice to the
Trustee, any such office or agency for all of the above purposes shall be the
Principal Office of the Trustee. In case the Company shall fail to maintain any
such office or agency in the
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Borough of Manhattan, The City of New York, or shall fail to give such notice of
the location or of any change in the location thereof, presentations and demands
may be made and notices may be served at the Principal Office of the Trustee.
In addition to any such office or agency, the Company may from time
to time designate one or more offices or agencies outside the Borough of
Manhattan, The City of New York, where the Securities may be presented for
payment, registration of transfer and for exchange in the manner provided in
this Indenture, and the Company may from time to time rescind such designation,
as the Company may deem desirable or expedient; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain any such office or agency in the Borough of Manhattan,
The City of New York, for the purposes above mentioned. The Company will give to
the Trustee prompt written notice of any such designation or rescission thereof.
SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office.
The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 6.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 3.04. Provision as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the
Trustee with respect to the Securities, it will cause such
paying agent to execute and deliver to the Trustee an
instrument in which such agent shall agree with the Trustee,
subject to the provision of this Section 3.04,
(1) that it will hold all sums held by it as such agent for
the payment of the principal of and premium, if any, or
interest on the Securities (whether such sums have been
paid to it by the Company or by any other obligor on the
Securities) in trust for the benefit of the holders of
the Securities; and
(2) that it will give the Trustee notice of any failure by
the Company (or by any other obligor on the Securities)
to make any payment of the principal of and premium or
interest on the Securities when the same shall be due
and payable.
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(b) If the Company shall act as its own paying agent, it will, on
or before each due date of the principal of and premium, if
any, or interest on the Securities, set aside, segregate and
hold in trust for the benefit of the holders of the Securities
a sum sufficient to pay such principal, premium or interest so
becoming due and will notify the Trustee of any failure to
take such action and of any failure by the Company (or by any
other obligor under the Securities) to make any payment of
the principal of and premium, if any, or interest on the
Securities when the same shall become due and payable.
(c) Anything in this Section 3.04 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a
satisfaction and discharge with respect to the Securities
hereunder, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust for such Securities by the
Trustee or any paying agent hereunder, as required by this
Section 3.04, such sums to be held by the Trustee upon the
trusts herein contained.
(d) Anything in this Section 3.04 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this
Section 3.04 is subject to Sections 11.03 and 11.04.
SECTION 3.05. Certificate to Trustee.
The Company will deliver to the Trustee on or before 120 days after
the end of each fiscal year in each year, commencing with the first fiscal year
ending after the date hereof, so long as Securities are outstanding hereunder,
an Officers' Certificate, one of the signers of which shall be the principal
executive, principal financial or principal accounting officer of the Company
stating that in the course of the performance by the signers of their duties as
officers of the Company they would normally have knowledge of any default by the
Company in the performance of any covenants contained herein, stating whether or
not they have knowledge of any such default and, if so, specifying each such
default of which the signers have knowledge and the nature thereof.
SECTION 3.06. Compliance with Consolidation
Provisions.
The Company will not, while any of the Securities remain
outstanding, consolidate with, or merge into, or merge into itself, or sell or
convey all or substantially all of its
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property to any other Person unless the provisions of Article X hereof are
complied with.
SECTION 3.07. Limitation on Dividends.
The Company will not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock) or (ii) make any payment of principal, interest or premium, if
any, on or repay or repurchase or redeem any debt securities of the Company
(including any Other Debentures) that rank PARI PASSU with or junior in right of
payment to the Securities or (iii) make any guarantee payments with respect to
any guarantee by the Company of the debt securities of any Subsidiary of the
Company (including any Other Guarantees) if such guarantee ranks PARI PASSU or
junior in right of payment to the Securities (other than (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, Common Stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholder's 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, (c) payments under the Capital
Securities Guarantee, (d) as a result of a reclassification of the Company's
capital stock or the exchange or the conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock; (e) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged; and (f) purchases of Common
Stock related to the issuance of Common Stock or rights under any of the
Company's benefit plans for its directors, officers or employees or any of the
Company's dividend reinvestment plans) if at such time (i) there shall have
occurred any event of which the Company has actual knowledge that (a) is or,
with the giving of notice or the lapse of time, or both, would constitute an
Event of Default and (b) in respect of which the Company shall not have taken
reasonable steps to cure, (ii) if such Securities are held by the Property
Trustee, the Company shall be in default with respect to its payment obligations
under the Capital Securities Guarantee or (iii) the Company shall have given
notice of its election of the exercise of its right to extend the interest
payment period pursuant to Section 16.01 and any such extension shall be
continuing.
SECTION 3.08. Covenants as to OnBank Capital Trust
In the event Securities are issued to OnBank Capital Trust or a
trustee of such trust in connection with the issuance of Trust Securities by
OnBank Capital Trust, for so long as such Trust Securities remain outstanding,
the Company (i) will maintain
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100% direct or indirect ownership of the Common Securities of OnBank Capital
Trust; PROVIDED, HOWEVER, that any successor of the Company, permitted
pursuant to Article X, may succeed to the Company's ownership of such Common
Securities, (ii) will not cause, as sponsor of OnBank Capital Trust, or
permit, as holder of the Common Securities, the dissolution, winding-up or
termination of the Trust, except in connection with a distribution of the
Securities as provided in the Declaration and in connection with certain
mergers, consolidations of amalgamations and (iii) will use its reasonable
best efforts to cause OnBank Capital Trust (a) to remain a business trust,
except in connection with a distribution of Securities to the holders of
Trust Securities in liquidation of the Trust, the redemption of all of the
Trust Securities of OnBank Capital Trust or certain mergers, consolidations
or amalgamations, each as permitted by the Declaration of OnBank Capital
Trust, and (b) to otherwise continue to be treated as a grantor trust and not
an association taxable as a corporation for United States federal income tax
purposes.
SECTION 3.09. Payment of Expenses.
In connection with the offering, sale and issuance of the Securities
to the OnBank Capital Trust and in connection with the sale of the Trust
Securities by the OnBank Capital Trust, the Company, in its capacity as borrower
with respect to the Securities, shall:
(a) pay all costs and expenses relating to the offering, sale and
issuance of the Securities, including commissions to the initial purchasers
payable pursuant to the Purchase Agreement, fees and expenses in connection with
any exchange offer, filing of a shelf registration statement or other action to
be taken pursuant to the Registration Rights Agreement and compensation of the
Trustee in accordance with the provisions of Section 6.06;
(b) pay all costs and expenses of the Trust (including, but not
limited to, costs and expenses relating to the organization of the OnBank
Capital Trust, the offering, sale and issuance of the Trust Securities
(including commissions to the initial purchasers in connection therewith), the
fees and expenses of the Property Trustee and the Delaware Trustee, the costs
and expenses relating to the operation of OnBank Capital Trust, including
without limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services, expenses for printing and engraving and computing or
accounting equipment, paying agent(s), registrar(s), transfer agent(s),
duplicating, travel and telephone and other telecommunications expenses and
costs and expenses incurred in connection with the acquisition, financing, and
disposition of assets of OnBank Capital Trust;
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(c) be primarily and fully liable for any indemnification
obligations arising with respect to the Declaration;
(d) pay any and all taxes (other than United States withholding
taxes attributable to OnBank Capital Trust or its assets) and all liabilities,
costs and expenses with respect to such taxes of the Trust; and
(e) pay all other fees, expenses, debts and obligations (other than
in respect of the Trust Securities) related to OnBank Capital Trust.
SECTION 3.10. Payment Upon Resignation or Removal.
Upon termination of this Indenture or the removal or resignation of
the Trustee, unless otherwise stated, the Company shall pay to the Trustee all
amounts accrued and owing to the date of such termination, removal or
resignation. Upon termination of the Declaration or the removal or resignation
of the Delaware Trustee or the Property Trustee, as the case may be, pursuant to
Section 5.7 of the Declaration, the Company shall pay to the Delaware Trustee or
the Property Trustee, as the case may be, all amounts accrued and owing to the
date of such termination, removal or resignation.
ARTICLE IV
SECURITYHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 4.01. Securityholders' Lists.
The Company covenants and agrees that it will furnish or cause to be
furnished to the Trustee:
(a) on a semiannual basis on each regular record date for the
Securities, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Securityholders as
of such record date; and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company, of any such
request, a list of similar form and content as of a date not
more than 15 days prior to the time such list is furnished,
except that, no such lists need be furnished so long as the Trustee
is in possession thereof by reason of its acting as Security
registrar.
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SECTION 4.02. Preservation and Disclosure of Lists.
(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 the Securities (1) contained in
the most recent list furnished to it as provided in Section
4.01 or (2) received by it in the capacity of Securities
registrar (if so acting) hereunder. The Trustee may destroy
any list furnished to it as provided in Section 4.01 upon
receipt of a new list so furnished.
(b) In case three or more holders of Securities (hereinafter
referred to as "applicants") apply in writing to the Trustee
and furnish to the Trustee reasonable proof that each such
applicant has owned a Security for a period of at least six
months preceding the date of such application, and such
application states that the applicants desire to communicate
with other holders of Securities or with holders of all
Securities with respect to their rights under this Indenture
and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit,
then the Trustee shall within 5 Business Days after the
receipt of such application, at its election, either:
(1) afford such applicants access to the information preserved at
the time by the Trustee in accordance with the provisions of
subsection (a) of this Section 4.02, or
(2) inform such applicants as to the approximate number of holders
of all Securities, whose names and addresses appear in the
information preserved at the time by the Trustee in accordance
with the provisions of subsection (a) of this Section 4.02,
and as to the approximate cost of mailing to such
Securityholders the form of proxy or other communication, if
any, specified in such application.
If the Trustee shall elect not to afford such applicants
access to such information, the Trustee shall, upon the
written request of such applicants, mail to each
Securityholder whose name and address appear in the
information preserved at the time by the Trustee in accordance
with the provisions of subsection (a) of this Section 4.02 a
copy of the form of proxy or other communication which is
specified in such request with reasonable promptness after a
tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable
expenses of
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mailing, unless within five days after such tender, the
Trustee shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed,
a written statement to the effect that, in the opinion of the
Trustee, such mailing would be contrary to the best interests
of the holders of Securities of such series or all Securities,
as the case may be, or would be in violation of applicable
law. Such written statement shall specify the basis of such
opinion. If the Commission, after opportunity for a hearing
upon the objections specified in the written statement so
filed, shall enter an order refusing to sustain any of such
objections or if, after the entry of an order sustaining one
or more of such objections, the Commission shall find, after
notice and opportunity for hearing, that all the objections so
sustained have been met and shall enter an order so declaring,
the Trustee shall mail copies of such material to all such
Securityholders with reasonable promptness after the entry of
such order and the renewal of such tender; otherwise the
Trustee shall be relieved of any obligation or duty to such
applicants respecting their application.
(c) Each and every holder of Securities, by receiving and holding
the same, agrees with the Company and the Trustee that neither
the Company nor the Trustee nor any paying agent shall be held
accountable by reason of the disclosure of any such
information as to the names and addresses of the holders of
Securities in accordance with the provisions of subsection
(b) of this Section 4.02, regardless of the source from which
such information was derived, and that the Trustee shall not
be held accountable by reason of mailing any material
pursuant to a request made under said subsection (b).
SECTION 4.03. Reports by Company.
(a) The Company covenants and agrees to file with the Trustee,
within 15 days after the date on which the Company 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 said
Commission may from time to time by rules and regulations
prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the
Exchange Act; or, if the Company is not required to file
information, documents or reports pursuant to either of such
sections, then to file with the Trustee and
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the Commission, in accordance with rules and regulations
prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports
which 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 Company covenants and agrees to file with the Trustee and
the Commission, in accordance with the rules and regulations
prescribed from time to time by said Commission, such
additional information, documents and reports with respect to
compliance by the Company 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 Company covenants and agrees to transmit by mail to all
holders of Securities, as the names and addresses of such
holders appear upon the Security Register, within 30 days
after the filing thereof with the Trustee, such summaries of
any information, documents and reports required to be filed by
the Company pursuant to subsections (a) and (b) of this
Section 4.03 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 Company's
compliance with any of its covenants hereunder (as to which
the Trustee is entitled to rely exclusively on Officers'
Certificates).
(e) So long as is required for an offer or sale of the Securities
to qualify for an exemption under Rule 144A under the
Securities Act, the Company shall, upon request, provide the
information required by clause (d)(4) thereunder to each
Securityholder and to each beneficial owner and prospective
purchaser of Securities identified by each Securityholder of
Restricted Securities, unless such information is furnished to
the Commission pursuant to Section 13 or 15(d) of the Exchange
Act.
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SECTION 4.04. Reports by the Trustee.
(a) The Trustee shall transmit to Securityholders such reports
concerning the Trustee and its actions under this Indenture as
may be required pursuant to 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 May 15 following the date
of this Indenture, commencing May 15, 1997, deliver to
Securityholders 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 shall, at the time of such
transmission to Securityholders, be filed by the Trustee with
each stock exchange, if any, upon which the Securities are
listed, with the Commission and with the Company. The Company
will promptly notify the Trustee when the Securities are
listed on any stock exchange.
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT
SECTION 5.01. Events of Default.
One or more of the following events of default shall constitute an
Event of Default hereunder:
(a) default in the payment of any interest upon any Security or
any Other Debentures when it becomes 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 Company in accordance with the terms hereof shall not
constitute a default in the payment of interest for this
purpose; or
(b) default in the payment of all or any part of the principal of
(or premium, if any, on) any Security or any Other Debentures
as and when the same shall become due and payable either at
maturity, upon redemption, by declaration or otherwise; or
(c) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a
covenant or warranty a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with),
and continuance of such default or breach for a period of 90
days after there has been given, by
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registered or certified mail, to the Company by the Trustee
or to the Company and the Trustee by the holders of at least
25% in aggregate principal amount of the outstanding
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
(d) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company in an
involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or appointing
a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or for any
substantial part of its property, or ordering the winding-up
or liquidation of its affairs and such decree or order shall
remain unstayed and in effect for a period of 90 consecutive
days; or
(e) the Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, shall consent to the entry of an order
for relief in an involuntary case under any such law, or shall
consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or
of any substantial part of its property, or shall make any
general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due.
If an Event of Default with respect to Securities at the time
outstanding occurs and is continuing, then in every such case the Trustee or the
holders of not less than 25% in aggregate principal amount of the Securities
then outstanding may declare the principal amount of all Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by the holders of the outstanding Securities), and upon any
such declaration the same shall become immediately due and payable.
The foregoing provisions, however, are subject to the condition that
if, at any time after the principal of the Securities 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, (i)
the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
(A) all matured installments of interest upon all the Securities and the
principal of and premium, if any, on any and all Securities which shall have
become due otherwise than by acceleration (with interest upon such principal and
premium, if any, and, to the extent that payment of such interest is enforceable
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under applicable law, on overdue installments of interest, at the same rate as
the rate of interest specified in the Securities to the date of such payment or
deposit) and (B) such amount as shall be sufficient to cover reasonable
compensation to the Trustee and each predecessor Trustee, their respective
agents, attorneys and counsel, and all other expenses and liabilities incurred,
and all advances made, by the Trustee and each predecessor Trustee except as a
result of negligence or bad faith, and (ii) any and all Events of Default under
the Indenture, other than the non-payment of the principal of the Securities
which shall have become due solely by such declaration of acceleration, shall
have been cured, waived or otherwise remedied as provided herein, then, in every
such case, the holders of a majority in aggregate principal amount of the
Securities then outstanding, by written notice to the Company and to the
Trustee, may rescind and annul such declaration and its consequences, but no
such waiver or rescission and annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right 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
Company, the Trustee and the holders of the Securities shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the holders of the
Securities shall continue as though no such proceeding had been taken.
SECTION 5.02. Payment of Securities on Default; Suit
Therefor.
The Company covenants that (a) in case default shall be made in the
payment of any installment of interest upon any of the Securities as and when
the same shall become due and payable, and such default shall have continued for
a period of 30 days, or (b) in case default shall be made in the payment of the
principal of or premium, if any, on any of the Securities as and when the same
shall have become due and payable, whether at maturity of the Securities or upon
redemption or by declaration or otherwise, then, upon demand of the Trustee, the
Company will pay to the Trustee, for the benefit of the holders of the
Securities, the whole amount that then shall have become due and payable on all
such Securities for principal and premium, if any, or interest, or both, as the
case may be, with interest upon the overdue principal and premium, if any, and
(to the extent that payment of such interest is enforceable under applicable law
and, if the Securities are held by OnBank Capital Trust or a trustee of such
trust, without duplication of any other amounts paid by OnBank Capital Trust or
trustee in respect thereof) upon the overdue installments of interest at the
rate borne by the Securities; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including a
reasonable compensation to the Trustee, its agents, attorneys and
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counsel, and any expenses or liabilities incurred by the Trustee hereunder other
than through its negligence or bad faith.
In case the Company shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any actions 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 Company or any other obligor on the
Securities and collect in the manner provided by law out of the property of the
Company or any other obligor on the Securities wherever situated the moneys
adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Securities under
Title 11, United States Code, or any other applicable law, or in case a receiver
or trustee shall have been appointed for the property of the Company or such
other obligor, or in the case of any other similar judicial proceedings relative
to the Company or other obligor upon the Securities, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 5.02,
shall be entitled and empowered, by intervention in such proceedings or
otherwise, to file and prove a claim or claims for the whole amount of principal
and interest owing and unpaid in respect of the Securities and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the Trustee and each
predecessor Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all advances made,
by the Trustee and each predecessor Trustee, except as a result of negligence or
bad faith) and of the Securityholders allowed in such judicial proceedings
relative to the Company or any other obligor on the Securities, or to the
creditors or property of the Company or such other obligor, unless prohibited by
applicable law and regulations, to vote on behalf of the holders of the
Securities in any election of a trustee or a standby trustee in arrangement,
reorganization, liquidation or other bankruptcy or insolvency proceedings or
person performing similar functions in comparable proceedings, and to collect
and receive any moneys or other property payable or deliverable on any such
claims, and to distribute the same after the deduction of its charges and
expenses; and any receiver, assignee or trustee in bankruptcy or reorganization
is hereby authorized by each of the Securityholders to make such payments to the
Trustee, and, in the event that the Trustee shall consent to the making of such
payments directly to the Securityholders, to pay to the Trustee such amounts as
shall be sufficient to
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cover reasonable compensation to the Trustee, each predecessor Trustee and their
respective agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor Trustee
except as a result of negligence or bad faith.
Nothing herein contained shall be construed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any holder thereof or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
All rights of action and of asserting claims under this Indenture,
or under any of the Securities, may be enforced by the Trustee without the
possession of any of the Securities, or the production thereof on any trial or
other proceeding relative 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 be for the ratable benefit of the holders of the
Securities.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Securities, and it shall not be necessary to make any holders of the
Securities parties to any such proceedings.
SECTION 5.03. Application of Moneys Collected by
Trustee.
Any moneys collected by the Trustee shall be applied in the order
following, at the date or dates fixed by the Trustee for the distribution of
such moneys, upon presentation of the Securities in respect of which moneys have
been collected, and stamping thereon the payment, if only partially paid, and
upon surrender thereof if fully paid:
First: To the payment of costs and expenses of collection applicable
to the Securities and reasonable compensation to the Trustee, its agents,
attorneys and counsel, and of all other expenses and liabilities incurred, and
all advances made, by the Trustee except as a result of its negligence or bad
faith;
Second: To the payment of all Senior Indebtedness of the Company if
and to the extent required by Article XV;
Third: In case the principal of the outstanding Securities in
respect of which moneys have been collected shall not have become due and be
unpaid, to the payment of the amounts then due and unpaid upon Securities for
principal of (and premium, if any) and interest on the Securities, in respect of
which or for the benefit of which money has been collected, ratably,
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without preference of priority of any kind, according to the amounts due on such
Securities for principal (and premium, if any) and interest, respectively; and
Fourth: To the Company.
SECTION 5.04. Proceedings by Securityholders.
No holder of any Security shall have any right by virtue of 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 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
Securities specifying such Event of Default, as hereinbefore provided, and
unless also the holders of not less than 25% in aggregate principal amount of
the Securities then outstanding shall have made written request upon the Trustee
to institute such action, suit or proceeding in its own name as Trustee
hereunder and 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 the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity shall have failed to institute any such action,
suit or proceeding, it being understood and intended, and being expressly
covenanted by the taker and holder of every Security with every other taker and
holder and the Trustee, that no one or more holders of Securities shall have any
right in any manner whatever by virtue of or by availing of any provision of
this Indenture to affect, disturb or prejudice the rights of any other holder of
Securities, 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 Securities.
Notwithstanding any other provisions in this Indenture, however, the
right of any holder of any Security to receive payment of the principal of
(premium, if any) and interest on such Security, on or after the same shall have
become due and payable, or to institute suit for the enforcement of any such
payment, shall not be impaired or affected without the consent of such holder
and by accepting a Security hereunder it is expressly understood, intended and
covenanted by the taker and holder of every Security with every other such taker
and holder and the Trustee, that no one or more holders of Securities 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 Securities, 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 Securities. For the protection and enforcement of the provisions of
this Section, each and every
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Securityholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
The Company and the Trustee acknowledge that pursuant to the
Declaration, the holders of Capital Securities are entitled, in the
circumstances and subject to the limitations set forth therein, to commence a
Direct Action with respect to any Event of Default under this Indenture and the
Securities.
SECTION 5.05. Proceedings by Trustee.
In case an Event of Default occurs with respect to Securities and is
continuing, 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 by suit in equity or by action at law or by proceeding 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.
SECTION 5.06. Remedies Cumulative and Continuing.
All powers and remedies given by this Article V to the Trustee or to
the Securityholders 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 Securities, 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 the Securities, and no delay
or omission of the Trustee or of any holder of any of the Securities 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 5.04, every power and remedy given by this Article V or by
law to the Trustee or to the Securityholders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the
Securityholders.
SECTION 5.07. Direction of Proceedings and Waiver of
Defaults by Majority of Securityholders.
The holders of a majority in aggregate principal amount of the
Securities at the time outstanding 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 (subject to the provisions of Section 6.01) the Trustee shall have
the right to decline to follow any such direction if the Trustee shall determine
that the action so directed would be unjustly prejudicial to the holders not
taking part in such
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direction or if the Trustee being advised by counsel determines that the action
or proceeding so directed may not lawfully be taken or if the Trustee in good
faith by its board of directors or trustees, executive committee, or a trust
committee of directors or trustees and/or Responsible Officers shall determine
that the action or proceedings so directed would involve the Trustee in personal
liability. Prior to any declaration accelerating the maturity of the Securities,
the holders of a majority in aggregate principal amount of the Securities at the
time outstanding may on behalf of the holders of all of the Securities waive any
past default or Event of Default and its consequences except a default (a) in
the payment of principal of or premium, if any, or interest on any of the
Securities or (b) in respect of covenants or provisions hereof which cannot be
modified or amended without the consent of the holder of each Security affected;
PROVIDED, HOWEVER, that if the Securities are held by the Property Trustee, such
waiver or modification to such waiver shall not be effective until the holders
of a majority in aggregate liquidation amount of Trust Securities shall have
consented to such waiver or modification to such waiver; PROVIDED FURTHER, that
if the consent of the holder of each outstanding Security is required, such
waiver shall not be effective until each holder of the Trust Securities 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 Company,
the Trustee and the holders of the Securities 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. Whenever
any default or Event of Default hereunder shall have been waived as permitted by
this Section 5.07, said default or Event of Default shall for all purposes of
the Securities and this Indenture be deemed to have been cured and to be not
continuing.
SECTION 5.08. Notice of Defaults.
The Trustee shall, within 90 days after the occurrence of a default
with respect to the Securities mail to all Securityholders, as the names and
addresses of such holders appear upon the Security Register, notice of all
defaults known to the Trustee, unless such defaults shall have been cured before
the giving of such notice (the term "defaults" for the purpose of this Section
5.08 being hereby defined to be the events specified in clauses (a), (b), (c),
(d) and (e) of Section 5.01, not including periods of grace, if any, provided
for therein, and irrespective of the giving of written notice specified in
clause (c) of Section 5.01); and provided that, except in the case of default in
the payment of the principal of or premium, if any, or interest on any of the
Securities, 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
directors and/or Responsible Officers of the Trustee in good faith determines
that the withholding of such notice is in the interests of the Securityholders;
and provided further, that in the case of any default of the character specified
in Section 5.01(c) no such
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notice to Securityholders shall be given until at least 60 days after the
occurrence thereof but shall be given within 90 days after such occurrence.
SECTION 5.09. Undertaking to Pay Costs.
All parties to this Indenture agree, and each holder of any Security
by his 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 5.09 shall not apply to any suit instituted by
the Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding in the aggregate more than 10% in aggregate principal
amount of the Securities outstanding, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of (or
premium, if any) or interest on any Security against the Company on or after the
same shall have become due and payable.
ARTICLE VI
CONCERNING THE TRUSTEE
SECTION 6.01. Duties and Responsibilities of Trustee.
With respect to the holders of the Securities issued hereunder, the
Trustee, prior to the occurrence of an Event of Default and after the curing or
waiving of all Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Indenture. In case an Event of Default has occurred (which 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.
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
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have
occurred
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(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this
Indenture, and the Trustee shall not be liable 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
(2) in the absence of bad faith on the part of the Trustee,
the Trustee may 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 which 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;
(b) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Officers, unless it
shall be proved that the Trustee was negligent in ascertaining
the pertinent facts; and
(c) 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 Securityholders pursuant
to Section 5.07, 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.
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.
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SECTION 6.02. Reliance on Documents, Opinions, etc.
Except as otherwise provided in Section 6.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request,
consent, order, bond, note, debenture 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 Company
mentioned herein may be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be
herein specifically prescribed); and any Board Resolution may
be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or
suffered omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
(d) 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 Securityholders,
pursuant to the provisions of this Indenture, unless such
Securityholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or
omitted 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; 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 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 bound to make any investigation into
the facts or matters stated in any resolution, certificate,
statement, instrument,
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opinion, report, notice, request, consent, order, approval,
bond, debenture, coupon or other paper or document, unless
requested in writing to do so by the holders of a majority in
aggregate principal amount of the outstanding Securities;
provided, however, that if the payment within a reasonable
time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to
it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expense or liability as a
condition to so proceeding; and
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or
through agents (including any Authenticating Agent) or
attorneys, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent or
attorney appointed by it with due care.
SECTION 6.03. No Responsibility for Recitals, etc.
The recitals contained herein and in the Securities (except in the
certificate of authentication of the Trustee or the Authenticating Agent) shall
be taken as the statements of the Company and the Trustee and the Authenticating
Agent assume no responsibility for the correctness of the same. The Trustee and
the Authenticating Agent make no representations as to the validity or
sufficiency of this Indenture or of the Securities. The Trustee and the
Authenticating Agent shall not be accountable for the use or application by the
Company of any Securities or the proceeds of any Securities authenticated and
delivered by the Trustee or the Authenticating Agent in conformity with the
provisions of this Indenture.
SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer
Agents or Registrar May Own Securities.
The Trustee or any Authenticating Agent or any paying agent or any
transfer agent or any Security registrar, in its individual or any other
capacity, may become the owner or pledgee of Securities with the same rights it
would have if it were not Trustee, Authenticating Agent, paying agent, transfer
agent or Security registrar.
SECTION 6.05. Moneys to be Held in Trust.
Subject to the provisions of Section 11.04, all moneys received by
the Trustee or any paying agent shall, until used or applied as herein provided,
be held in trust for the purpose for which they were received, but need not be
segregated from other
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funds except to the extent required by law. The Trustee and any paying agent
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed in writing with the Company. So long as no Event of
Default shall have occurred and be continuing, all interest allowed on any such
moneys shall be paid from time to time upon the written order of the Company,
signed by the Chairman of the Board of Directors, the President or a Vice
President or the Treasurer or an Assistant Treasurer of the Company.
SECTION 6.06. Compensation and Expenses of Trustee.
The Company, as issuer of Securities under this Indenture, covenants
and agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, such compensation as shall be agreed to in writing between the
Company and the Trustee (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and the Company
will pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advance as may
arise from its negligence or bad faith. The Company also covenants to indemnify
each of the Trustee or any predecessor Trustee (and its officers, agents,
directors and employees) for, and to hold it harmless against, any and all loss,
damage, claim, liability or expense including taxes (other than taxes based on
the income of the Trustee) incurred without negligence or bad faith on the part
of the Trustee and arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim of liability in the premises. The obligations of the
Company under this Section 6.06 to compensate and indemnify the Trustee and to
pay or reimburse the Trustee for expenses, disbursements and advances shall
constitute additional indebtedness hereunder. Such additional indebtedness shall
be secured by a lien prior to that of the Securities upon all property and funds
held or collected by the Trustee as such, except funds held in trust for the
benefit of the holders of particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.01(d) or Section 5.01(e), 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 federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
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SECTION 6.07. Officers' Certificate as Evidence.
Except as otherwise provided in Sections 6.01 and 6.02, 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
omitting any action hereunder, such matter (unless other evidence in respect
thereof is 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 or omitted by
it under the provisions of this Indenture upon the faith thereof.
SECTION 6.08. Conflicting Interest of Trustee.
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 Company shall in all respects comply with the provisions of Section 310(b)
of the Trust Indenture Act.
SECTION 6.09. Eligibility of Trustee.
The Trustee hereunder 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 million U.S. dollars ($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 6.09 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 Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.09, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.10.
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SECTION 6.10. Resignation or Removal of Trustee.
(a) The Trustee, or any trustee or trustees hereafter appointed,
may at any time resign by giving written notice of such
resignation to the Company and by mailing notice thereof to
the holders of the Securities at their addresses as they shall
appear on the Security register. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor
trustee or trustees by written instrument, in duplicate, 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 60 days after the mailing of such notice of
resignation to the affected Securityholders, the resigning
Trustee may petition any court of competent jurisdiction for
the appointment of a successor trustee, or any Securityholder
who has been a bona fide holder of a Security for at least six
months may, subject to the provisions of Section 5.09, 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 and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of
Section 6.08 after written request therefor by the
Company or by any Securityholder who has been a bona
fide holder of a Security or Securities for at least six
months, or
(2) the Trustee shall cease to be eligible in accordance
with the provisions of Section 6.09 and shall fail to
resign after written request therefor by the Company or
by any such Securityholder, or
(3) the Trustee shall become incapable of acting, or shall
be adjudged a bankrupt or insolvent, or a receiver of
the Trustee or of its property shall be appointed, 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 Company may remove the
Trustee and appoint a successor trustee by written
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instrument, in duplicate, 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
5.09, any Securityholder who has been a bona fide holder of a
Security for at least six months may, on behalf of himself 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
Securities at the time outstanding may at any time remove the
Trustee and nominate a successor trustee, which shall be
deemed appointed as successor trustee unless within 10 days
after such nomination the Company objects thereto or if no
successor trustee shall have been so appointed and shall have
accepted appointment within 30 days after such removal, in
which case the Trustee so removed or any Securityholder, upon
the terms and conditions and otherwise as in subsection (a) of
this Section 6.10 provided, may petition any court of
competent jurisdiction for an appointment of a successor
trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this
Section 6.10 shall become effective upon acceptance of
appointment by the successor trustee as provided in Section
6.11.
SECTION 6.11. Acceptance by Successor Trustee.
Any successor trustee appointed as provided in Section 6.10 shall
execute, acknowledge and deliver to the Company and to its predecessor trustee
an instrument accepting such appointment hereunder, and thereupon the
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, duties and obligations of its predecessor
hereunder, with like effect as if originally named as trustee herein; but,
nevertheless, on the written request of the Company or of the successor trustee,
the trustee ceasing to act shall, upon payment of any amounts then due it
pursuant to the provisions of Section 6.06, execute and deliver an instrument
transferring to such successor trustee all the rights and powers of the trustee
so ceasing to act and shall duly assign, transfer and deliver to such successor
trustee all property and money held by such retiring trustee thereunder. Upon
request of any such successor trustee, the Company shall execute any and all
instruments in writing for more fully and
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certainly vesting in and confirming to such successor trustee all such rights
and powers. Any trustee ceasing to act shall, nevertheless, retain a lien upon
all property or funds held or collected by such trustee to secure any amounts
then due it pursuant to the provisions of Section 6.06.
No successor trustee shall accept appointment as provided in this
Section 6.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 6.08 and eligible under the
provisions of Section 6.09.
Upon acceptance of appointment by a successor trustee as provided in
this Section 6.11, the Company shall mail notice of the succession of such
trustee hereunder to the holders of Securities at their addresses as they shall
appear on the Security register. If the Company fails to mail such notice within
10 days after the acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.
SECTION 6.12. Succession by Merger, etc.
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 of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto.
In case at the time such successor to the Trustee shall succeed to
the trusts created by this Indenture any Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Securities so authenticated; and in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor hereunder or in the name
of the successor trustee; and in all such cases such certificates shall have the
full force which the Securities or this Indenture elsewhere provides that the
certificate of the Trustee shall have; provided, however, that the right to
adopt the certificate of authentication of any predecessor Trustee or
authenticate Securities in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
SECTION 6.13. Limitation on Rights of Trustee as a Creditor.
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
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who has resigned or been removed shall be subject to Section 311(a) of the Trust
Indenture Act to the extent included therein.
SECTION 6.14. Authenticating Agents.
There may be one or more Authenticating Agents appointed by the
Trustee upon the request of the Company with power to act on its behalf and
subject to its direction in the authentication and delivery of Securities issued
upon exchange or transfer thereof as fully to all intents and purposes as though
any such Authenticating Agent had been expressly authorized to authenticate and
deliver Securities; provided, that the Trustee shall have no liability to the
Company for any acts or omissions of the Authenticating Agent with respect to
the authentication and delivery of Securities. Any such Authenticating Agent
shall at all times be a corporation organized and doing business under the laws
of the United States or of any state or territory thereof or of the District of
Columbia authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of at least $5,000,000 and being 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 the requirements of such authority, then for the
purposes of this Section 6.14 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. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of such Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section 6.14 without the execution or filing of any paper or any further act on
the part of the parties hereto or such Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any Authenticating Agent shall cease to be eligible under this Section 6.14, the
Trustee may, and upon the request of the Company shall, promptly appoint a
successor Authenticating Agent eligible under this Section 6.14, shall give
written notice of such appointment to the Company and shall mail notice of such
appointment to all Securityholders as the names and addresses of such holders
appear on the Security Register.
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Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all rights, powers, duties and responsibilities of its
predecessor hereunder, with like effect as if originally named as Authenticating
Agent herein.
The Company, as borrower, agrees to pay to any Authenticating Agent
from time to time reasonable compensation for its services. Any Authenticating
Agent shall have no responsibility or liability for any action taken by it as
such in accordance with the directions of the Trustee.
ARTICLE VII
CONCERNING THE SECURITYHOLDERS
SECTION 7.01. Action by Securityholders.
Whenever in this Indenture it is provided that the holders of a
specified percentage in aggregate principal amount of the Securities 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 specified percentage have
joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by such Securityholders in person or by
agent or proxy appointed in writing, or (b) by the record of such holders of
Securities voting in favor thereof at any meeting of such Securityholders duly
called and held in accordance with the provisions of Article VIII, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of such Securityholders.
If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action, the
Company may, at its option, as evidenced by an Officers' Certificate, fix in
advance a record date for the determination of Securityholders entitled to give
such request, demand, authorization, direction, notice, consent, waiver or other
action, but the Company 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 Securityholders of record at the close of business on the record date shall
be deemed to be Securityholders for the purposes of determining whether
Securityholders of the requisite proportion of outstanding Securities have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other action, and for that purpose the
outstanding Securities shall be computed as of the record date; PROVIDED,
HOWEVER, that no such authorization, agreement or consent by such
Securityholders on the record date shall be deemed effective unless it shall
become effective pursuant to the
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provisions of this Indenture not later than six months after the record date.
SECTION 7.02. Proof of Execution by Securityholders.
Subject to the provisions of Section 6.01, 6.02 and 8.05, proof of
the execution of any instrument by a Securityholder or his agent or proxy shall
be sufficient if made in accordance with such reasonable rules and regulations
as may be prescribed by the Trustee or in such manner as shall be satisfactory
to the Trustee. The ownership of Securities shall be proved by the Security
Register or by a certificate of the Security registrar. The Trustee may require
such additional proof of any matter referred to in this Section as it shall deem
necessary.
The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.06.
SECTION 7.03. Who Are Deemed Absolute Owners.
Prior to due presentment for registration of transfer of any
Security, the Company, the Trustee, any Authenticating Agent, any paying agent,
any transfer agent and any Security registrar may deem the person in whose name
such Security shall be registered upon the Security Register to be, and may
treat him as, the absolute owner of such Security (whether or not such Security
shall be overdue) for the purpose of receiving payment of or on account of the
principal of and premium, if any, and (subject to Section 2.06) interest on such
Security and for all other purposes; and neither the Company nor the Trustee nor
any Authenticating Agent nor any paying agent nor any transfer agent nor any
Security registrar shall be affected by any notice to the contrary. All such
payments so made to any holder for the time being or upon his order shall be
valid, and, to the extent of the sum or sums so paid, effectual to satisfy and
discharge the liability for moneys payable upon any such Security.
SECTION 7.04. Securities Owned by Company Deemed Not Outstanding.
In determining whether the holders of the requisite aggregate
principal amount of Securities have concurred in any direction, consent or
waiver under this Indenture, Securities which are owned by the Company or any
other obligor on the Securities or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the Securities shall be disregarded and deemed
not to be outstanding for the purpose of any such determination; provided that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, consent or waiver, only Securities which the
Trustee actually knows are so owned shall be so disregarded. Securities so owned
which have been pledged in good faith may be regarded as outstanding for the
purposes of this Section 7.04 if the pledgee
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shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Securities and that the pledgee is not the Company or any such other
obligor or person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor. In
the 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 7.05. Revocation of Consents; Future Holders Bound.
At any time prior to (but not after) the evidencing to the Trustee,
as provided in Section 7.01, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Securities specified in this
Indenture in connection with such action, any holder of a Security (or any
Security issued in whole or in part in exchange or substitution therefor),
subject to Section 7.01, the serial number of which is shown by the evidence to
be included in the Securities the holders of which have consented to such action
may, by filing written notice with the Trustee at its principal office and upon
proof of holding as provided in Section 7.02, revoke such action so far as
concerns such Security (or so far as concerns the principal amount represented
by any exchanged or substituted Security). Except as aforesaid any such action
taken by the holder of any Security shall be conclusive and binding upon such
holder and upon all future holders and owners of such Security, and of any
Security issued in exchange or substitution therefor, irrespective of whether or
not any notation in regard thereto is made upon such Security or any Security
issued in exchange or substitution therefor.
ARTICLE VIII
SECURITYHOLDERS' MEETINGS
SECTION 8.01. Purposes of Meetings.
A meeting of Securityholders may be called at any time and from time
to time pursuant to the provisions of this Article VIII for any of the following
purposes:
(a) to give any notice to the Company or to the Trustee, or to
give any directions to the Trustee, or to consent to the
waiving of any default hereunder and its consequences, or to
take any other action authorized to be taken by
Securityholders pursuant to any of the provisions of Article
V;
(b) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article VI;
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(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section
9.02; or
(d) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal
amount of such Securities under any other provision of this
Indenture or under applicable law.
SECTION 8.02. Call of Meetings by Trustee.
The Trustee may at any time call a meeting of Securityholders to
take any action specified in Section 8.01, to be held at such time and at such
place in the Borough of Manhattan, The City of New York, as the Trustee shall
determine. Notice of every meeting of the Securityholders, setting forth the
time and the place of such meeting and in general terms the action proposed to
be taken at such meeting, shall be mailed to holders of Securities at their
addresses as they shall appear on the Securities Register. Such notice shall be
mailed not less than 20 nor more than 180 days prior to the date fixed for the
meeting.
SECTION 8.03. Call of Meetings by Company or Securityholders.
In case at any time the Company pursuant to a resolution of the
Board of Directors, or the holders of at least 10% in aggregate principal amount
of the Securities then outstanding, shall have requested the Trustee to call a
meeting of Securityholders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within 20 days after receipt of such
request, then the Company or such Securityholders may determine the time and the
place in said Borough of Manhattan for such meeting and may call such meeting to
take any action authorized in Section 8.01, by mailing notice thereof as
provided in Section 8.02.
SECTION 8.04. Qualifications for Voting.
To be entitled to vote at any meeting of Securityholders a person
shall (a) be a holder of one or more Securities or (b) a person appointed by an
instrument in writing as proxy by a holder of one or more Securities. The only
persons who shall be entitled to be present or to speak at any meeting of
Securityholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
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SECTION 8.05. Regulations.
Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Securityholders, in regard to proof of the holding of Securities and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 8.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 8.04, at any meeting each
holder of Securities or proxy therefor shall be entitled to one vote for each
$1,000 principal amount of Securities held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Security challenged as not outstanding and ruled by the chairman of the meeting
to be not outstanding. The chairman of the meeting shall have no right to vote
other than by virtue of Securities held by him or instruments in writing as
aforesaid duly designating him as the person to vote on behalf of other
Securityholders. Any meeting of Securityholders duly called pursuant to the
provisions of Section 8.02 or 8.03 may be adjourned from time to time by a
majority of those present, and the meeting may be held as so adjourned without
further notice.
SECTION 8.06. Voting.
The vote upon any resolution submitted to any meeting of holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of such holders or of their representatives by proxy and the serial
number or numbers of the Securities held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
triplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 8.02. The record shall show the serial numbers of the
Securities voting in favor of or against any resolution. The
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record shall be signed and verified by the affidavits of the permanent chairman
and secretary of the meeting and one of the duplicates shall be delivered to the
Company and the other to the Trustee to be preserved by the Trustee, the latter
to have attached thereto the ballots voted at the meeting. The holders of the
Series A Capital Securities and the Series B Capital Securities shall vote for
all purposes as a single class.
Any record so signed and verified shall be conclusive evidence of
the matters therein stated.
ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Securityholders.
The Company and the Trustee may from time to time and at any time
amend the Indenture, without the consent of the Securityholders, for one or more
of the following purposes:
(a) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the
successor corporation of the covenants, agreements and
obligations of the Company pursuant to Article X hereof;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the
Securityholders as the Board of Directors and the Trustee
shall consider to be for the protection of the
Securityholders, and to make the occurrence, or the occurrence
and continuance, of a default in any of such additional
covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the
remedies provided in this Indenture as herein set forth;
provided, however, that in respect of any such additional
covenant, restriction or condition such amendment may provide
for a particular period of grace after default (which period
may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement
upon such default or may limit the remedies available to the
Trustee upon such default;
(c) to provide for the issuance under this Indenture of Securities
in coupon form (including Securities registrable as to
principal only) and to provide for exchangeability of such
Securities with the Securities issued hereunder in fully
registered form and to make all appropriate changes for such
purpose;
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(d) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture
which may be defective or inconsistent with any other
provision contained herein or in any supplemental indenture,
or to make such other provisions in regard to matters or
questions arising under this Indenture; provided that any such
action shall not materially adversely affect the interests of
the holders of the Securities;
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to the
Securities;
(f) to make provision for transfer procedures, certification,
book-entry provisions, the form of restricted securities
legends, if any, to be placed on Securities, and all other
matters required pursuant to Section 2.07 or otherwise
necessary, desirable or appropriate in connection with the
issuance of Securities to holders of Capital Securities in the
event of a distribution of Securities by OnBank Capital Trust
following a Dissolution Event;
(g) to qualify or maintain qualification of this Indenture under
the Trust Indenture Act; or
(h) to make any change that does not adversely affect the rights
of any Securityholder in any material respect.
The Trustee is hereby authorized to join with the Company in the
execution of any supplemental indenture to effect such amendment, to make any
further appropriate agreements and stipulations which may be therein contained
and to accept the conveyance, transfer and assignment of any property
thereunder, but the Trustee shall not be obligated to, but may in its
discretion, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any amendment to the Indenture authorized by the provisions of this
Section 9.01 may be executed by the Company and the Trustee without the consent
of the holders of any of the Securities at the time outstanding, notwithstanding
any of the provisions of Section 9.02.
SECTION 9.02. With Consent of Securityholders.
With the consent (evidenced as provided in Section 7.01) of the
holders of a majority in aggregate principal amount of the Securities at the
time outstanding, the Company, when authorized by a Board Resolution, and the
Trustee may from time to time and at any time amend the Indenture for the
purpose of
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adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
holders of the Securities; provided, however, that no such amendment shall
without the consent of the holders of each Security then outstanding and
affected thereby (i) extend the Maturity Date of any Security, or reduce the
rate or extend the time of payment of interest thereon (except as contemplated
by Article XVI), or reduce the principal amount thereof, or reduce any amount
payable on redemption thereof, or make the principal thereof or any interest or
premium thereon payable in any coin or currency other than that provided in the
Securities, or impair or affect the right of any Securityholder to institute
suit for payment thereof, or (ii) reduce the aforesaid percentage of Securities
the holders of which are required to consent to any such amendment to the
Indenture, PROVIDED, HOWEVER, that if the Securities are held by OnBank Capital
Trust, such amendment shall not be effective until the holders of a majority in
liquidation amount of Trust Securities shall have consented to such amendment;
PROVIDED, FURTHER, that if the consent of the holder of each outstanding
Security is required, such amendment shall not be effective until each holder of
the Trust Securities shall have consented to such amendment.
Upon the request of the Company accompanied by a copy of a
resolution of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any supplemental indenture affecting such
amendment, and upon the filing with the Trustee of evidence of the consent of
Securityholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
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.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, prepared by the
Company, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders as their names and addresses appear upon the
Security 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.
It shall not be necessary for the consent of the Securityholders
under this Section 9.02 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall approve
the substance thereof.
SECTION 9.03. Compliance with Trust Indenture Act;
Effect of Supplemental Indentures.
Any supplemental indenture executed pursuant to the provisions of
this Article IX shall comply with the Trust
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Indenture Act. Upon the execution of any supplemental indenture pursuant to
the provisions of this Article IX, 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 Company and the holders of Securities shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments and 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 9.04. Notation on Securities.
Securities authenticated and delivered after the execution of any
supplemental indenture affecting such series pursuant to the provisions of this
Article IX may bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company or the Trustee shall
so determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may be prepared and executed by the
Company, authenticated by the Trustee or the Authenticating Agent and delivered
in exchange for the Securities then outstanding.
SECTION 9.05. Evidence of Compliance of Supplemental
Indenture to be Furnished Trustee.
The Trustee, subject to the provisions of Sections 6.01 and 6.02,
may receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any supplemental indenture executed pursuant hereto complies with
the requirements of this Article IX.
ARTICLE X
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 10.01. Company May Consolidate, etc., on Certain Terms.
Nothing contained in this Indenture or in any of the Securities
shall prevent any consolidation or merger of the Company with or into any other
Person (whether or not affiliated with the Company, as the case may be), or
successive consolidations or mergers in which the Company or its successor or
successors, as the case may be, shall be a party or parties, or shall prevent
any sale, conveyance, transfer or lease of the property of the Company, or its
successor or successors as the case may be, as an entirety, or substantially as
an entirety, to any other Person (whether or not affiliated with the Company, or
its successor or successors, as the case may be authorized to acquire and
operate the same; PROVIDED, that (a) the Company is the
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surviving Person, or the Person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale, conveyance, transfer
or lease of property is made is a Person organized and existing under the laws
of the United States or any State thereof or the District of Columbia, and (b)
upon any such consolidation, merger, sale, conveyance, transfer or lease, the
due and punctual payment of the principal of (and premium, if any) and interest
on the Securities 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 Company 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 Person formed by such consolidation, or into which the
Company shall have been merged, or by the Person which shall have acquired such
property, as the case may be, and (c) after giving effect to such consolidation,
merger, sale, conveyance, transfer or lease, no Default or Event of Default
shall have occurred and be continuing.
SECTION 10.02. Successor Corporation to be Substituted for Company.
In case of any such consolidation, merger, conveyance or transfer
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 the due and punctual payment of the principal of and premium, if any, and
interest on all of the Securities and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture to be
performed or observed by the Company, such successor Person shall succeed to and
be substituted for the Company, with the same effect as if it had been named
herein as the party of the first part, and the Company thereupon shall be
relieved of any further liability or obligation hereunder or upon the
Securities. Such successor Person thereupon may cause to be signed, and may
issue either in its own name or in the name of ONBANCorp, Inc., any or all of
the Securities issuable hereunder which theretofore shall not have been signed
by the Company and delivered to the Trustee or the Authenticating Agent; and,
upon the order of such successor Person instead of the Company and subject to
all the terms, conditions and limitations in this Indenture prescribed, the
Trustee or the Authenticating Agent shall authenticate and deliver any
Securities which previously shall have been signed and delivered by the officers
of the Company to the Trustee or the Authenticating Agent for authentication,
and any Securities which such successor Person thereafter shall cause to be
signed and delivered to the Trustee or the Authenticating Agent for that
purpose. All the Securities so issued shall in all respects have the same legal
rank and benefit under this Indenture as the Securities theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Indentures had been issued at the date of the execution hereof.
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SECTION 10.03. Opinion of Counsel to be Given Trustee.
The Trustee, subject to the provisions of Sections 6.01 and 6.02,
may receive an Opinion of Counsel as conclusive evidence that any consolidation,
merger, sale, conveyance, transfer or lease, and any assumption, permitted or
required by the terms of this Article X complies with the provisions of this
Article X.
ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 11.01. Discharge of Indenture.
When (a) the Company shall deliver to the Trustee for cancellation
all Securities theretofore authenticated (other than any Securities which shall
have been destroyed, lost or stolen and which shall have been replaced as
provided in Section 2.08) and not theretofore cancelled, or (b) all the
Securities not theretofore cancelled or 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 Company shall deposit with the Trustee, in trust, funds
sufficient to pay on the Maturity Date or upon redemption all of the Securities
(other than any Securities which shall have been destroyed, lost or stolen and
which shall have been replaced as provided in Section 2.08) not theretofore
cancelled or delivered to the Trustee for cancellation, including principal and
premium, if any, and interest due or to become due to the Maturity Date or
redemption date, as the case may be, but excluding, however, the amount of any
moneys for the payment of principal of or premium, if any, or interest on the
Securities (1) theretofore repaid to the Company in accordance with the
provisions of Section 11.04, or (2) paid to any State or to the District of
Columbia pursuant to its unclaimed property or similar laws, and if in either
case the Company shall also pay or cause to be paid all other sums payable
hereunder by the Company, then this Indenture shall cease to be of further
effect except for the provisions of Sections 2.02, 2.07, 2.08, 3.01, 3.02, 3.04,
6.06, 6.10 and 11.04 hereof, which shall survive until such Securities shall
mature and be paid. Thereafter, Sections 6.06, 6.10 and 11.04 shall survive, and
the Trustee, on demand of the Company accompanied by any Officers' Certificate
and an Opinion of Counsel and at the cost and expense of the Company, shall
execute proper instruments acknowledging satisfaction of and discharging this
Indenture, the Company, however, hereby agreeing to reimburse the Trustee for
any costs or expenses thereafter reasonably and properly incurred by the Trustee
in connection with this Indenture or the Securities.
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SECTION 11.02. Deposited Moneys and U.S. Government
Obligations to be Held in Trust by
Trustee.
Subject to the provisions of Section 11.04, all moneys and U.S.
Government Obligations deposited with the Trustee pursuant to Sections 11.01 or
11.05 shall be held in trust and applied by it to the payment, either directly
or through any paying agent (including the Company if acting as its own paying
agent), to the holders of the particular Securities for the payment of which
such moneys or U.S. Government Obligations have been deposited with the Trustee,
of all sums due and to become due thereon for principal, premium, if any, and
interest.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 11.05 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 Securities.
SECTION 11.03. Paying Agent to Repay Moneys Held.
Upon the satisfaction and discharge of this Indenture all moneys
then held by any paying agent of the Securities (other than the Trustee) shall,
upon written demand of the Company, be repaid to it or paid to the Trustee, and
thereupon such paying agent shall be released from all further liability with
respect to such moneys.
SECTION 11.04. Return of Unclaimed Moneys.
Any moneys deposited with or paid to the Trustee or any paying agent
for payment of the principal of or premium, if any, or interest on Securities
and not applied but remaining unclaimed by the holders of Securities for two
years after the date upon which the principal of or premium, if any, or interest
on such Securities, as the case may be, shall have become due and payable, shall
be repaid to the Company by the Trustee or such paying agent on written demand;
and the holder of any of the Securities shall thereafter look only to the
Company for any payment which such holder may be entitled to collect and all
liability of the Trustee or such paying agent with respect to such moneys shall
thereupon cease.
SECTION 11.05. Defeasance Upon Deposit of Moneys or
U.S. Government Obligations.
The Company shall be deemed to have been Discharged (as defined
below) from its obligations with respect to the Securities on the 91st day after
the applicable conditions set forth below have been satisfied:
(1) the Company shall have deposited or caused to be deposited
irrevocably with the Trustee or the
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Defeasance Agent (as defined below) as trust funds in trust,
specifically pledged as security for, and dedicated solely to,
the benefit of the holders of the Securities (i) money in an
amount, or (ii) U.S. Government Obligations which through the
payment of interest and principal in respect thereof in
accordance with their terms will provide, not later than one
day before the due date of any payment, money in an amount, or
(iii) a combination of (i) and (ii), sufficient, in the
opinion (with respect to (ii) and (iii)) of a nationally
recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee and
the Defeasance Agent, if any, to pay and discharge each
installment of principal of and interest and premium, if any,
on the outstanding Securities on the dates such installments
of principal, interest or premium are due;
(2) if the Securities are then listed on any national securities
exchange, the Company shall have delivered to the Trustee and
the Defeasance Agent, if any, an Opinion of Counsel to the
effect that the exercise of the option under this Section
11.05 would not cause such Securities to be delisted from such
exchange;
(3) no Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such
deposit; and
(4) the Company shall have delivered to the Trustee and the
Defeasance Agent, if any, an Opinion of Counsel to the effect
that holders of the Securities will not recognize income, gain
or loss for United States federal income tax purposes as a
result of the exercise of the option under this Section 11.05
and will be subject to United States federal income tax on the
same amount and in the same manner and at the same times as
would have been the case if such option had not been
exercised, and such opinion shall be based on a statute so
providing or be accompanied by a private letter ruling to that
effect received from the United States Internal Revenue
Service or a revenue ruling pertaining to a comparable form of
transaction to that effect published by the United States
Internal Revenue Service.
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Securities and to have satisfied all the obligations under this Indenture
relating to the Securities (and the Trustee, at the expense of the Company,
shall execute
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proper instruments acknowledging the same), except (A) the rights of holders of
Securities to receive, from the trust fund described in clause (1) above,
payment of the principal of and the interest and premium, if any, on the
Securities when such payments are due; (B) the Company's obligations with
respect to the Securities under Sections 2.07, 2.08, 5.02 and 11.04; and (C) the
rights, powers, trusts, duties and immunities of the Trustee hereunder.
"Defeasance Agent" means another financial institution which is
eligible to act as Trustee hereunder and which assumes all of the obligations of
the Trustee necessary to enable the Trustee to act hereunder. In the event such
a Defeasance Agent is appointed pursuant to this Section, the following
conditions shall apply:
(1) The Trustee shall have approval rights over the document
appointing such Defeasance Agent and the document setting
forth such Defeasance Agent's rights and responsibilities;
(2) The Defeasance Agent shall provide verification to the Trustee
acknowledging receipt of sufficient money and/or U. S.
Government Obligations to meet the applicable conditions set
forth in this Section 11.05.
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01. Indenture and Securities Solely Corporate
Obligations.
No recourse for the payment of the principal of or premium, if any,
or interest on any Security, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in this Indenture, or in any Security, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor Person to the Company, either
directly or through the Company or any successor Person to the Company, 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 all
such liability is hereby expressly waived and released as a condition of, and as
a consideration for, the execution of this Indenture and the issue of the
Securities.
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01. Successors.
All the covenants, stipulations, promises and agreements in this
Indenture contained by the Company shall bind its successors and assigns whether
so expressed or not.
SECTION 13.02. Official Acts by Successor Corporation.
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
Company shall and may be done and performed with like force and effect by the
like board, committee or officer of any corporation that shall at the time be
the lawful sole successor of the Company.
SECTION 13.03. Surrender of Company Powers.
The Company by instrument in writing executed by authority of 2/3
(two-thirds) of its Board of Directors and delivered to the Trustee may
surrender any of the powers reserved to the Company, and thereupon such power so
surrendered shall terminate both as to the Company, as the case may be, and as
to any successor Person.
SECTION 13.04. Addresses for Notices, etc.
Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders of
Securities on the Company may be given or served by being deposited postage
prepaid by registered or certified mail in a post office letter box addressed
(until another address is filed by the Company with the Trustee for the purpose)
to the Company at 101 South Salina Street, Syracuse, New York 13202, Attention:
Robert J. Berger, Senior Vice President, Treasurer and Chief Financial Officer.
Any notice, direction, request or demand by any Securityholder 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 office of the Trustee, 101 Barclay
Street, 21 West, New York, New York 10286, Attention: Corporate Trust
Administration Department (unless another address is provided by the Trustee to
the Company for such purpose). Any notice or communication to a Securityholder
shall be mailed by first class mail to his or her address shown on the register
kept by the Security Registrar.
SECTION 13.05. Governing Law.
This Indenture and each Security shall be deemed to be a contract
made under the laws of the State of New York, and for all purposes shall be
governed by and construed in accordance
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with the laws of said State, without regard to conflicts of laws principles
thereof.
SECTION 13.06. Evidence of Compliance with Conditions
Precedent.
Upon any application or demand by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that in the opinion of
the signers all conditions precedent, if any, provided for in this Indenture
relating to the proposed action 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.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture (except certificates delivered pursuant to
Section 3.05) 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 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 13.07. Business Days.
In any case where the date of payment of principal of or premium, if
any, or interest on the Securities will not be a Business Day, the payment of
such principal of or premium, if any, or interest on the Securities need not be
made on such date but may be made on the next succeeding Business Day (and
without any interest or other payment in respect of such delay), except that if
such next succeeding Business Day falls in the next succeeding calendar year,
then such payment shall be made on the immediately preceeding Business Day, in
each case with the same force and effect as if made on the date of payment and
no interest shall accrue for the period from and after such date.
SECTION 13.08. Trust Indenture Act to Control.
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 of 1939, such imposed duties shall
control.
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SECTION 13.09. Table of Contents, Headings, etc.
The table of contents and the titles and headings of the articles
and sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
SECTION 13.10. Execution in 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 13.11. Separability.
In case any one or more of the provisions contained in this
Indenture or in the Securities 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 Securities, but this Indenture and the Securities shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.
SECTION 13.12. Assignment.
The Company will 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 Company, PROVIDED that, in the event of any such
assignment, the Company will remain liable for all such obligations. Subject to
the foregoing, the Indenture is binding upon and inures to the benefit of the
parties thereto and their respective successors and assigns. This Indenture may
not otherwise be assigned by the parties thereto.
SECTION 13.13. Acknowledgement of Rights.
The Company acknowledges that, with respect to any Securities held
by OnBank Capital Trust or a trustee of such trust, if the Property Trustee of
such Trust fails to enforce its rights under this Indenture as the holder of the
Securities held as the assets of OnBank Capital Trust any holder of Capital
Securities may institute legal proceedings directly against the Company 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
Company to pay principal of or premium, if any, or interest on the Securities
when due, the Company acknowledges that a holder of Capital Securities may
directly institute a proceeding for enforcement of payment to such holder of the
principal of or premium, if any, or interest on the Securities having a
principal
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amount equal to the aggregate liquidation amount of the Capital Securities of
such holder on or after the respective due date specified in the Securities.
ARTICLE XIV
Prepayment OF SECURITIES -- MANDATORY AND
OPTIONAL SINKING FUND
SECTION 14.01. Special Event Prepayment.
If, prior to the Initial Optional Prepayment Date, a Special Event
has occurred and is continuing then, notwithstanding Section 14.02(a) but
subject to Section 14.02(c), the Company shall have the right, at any time
within 90 days following the occurrence of such Special Event, upon (i) not less
than 45 days written notice to the Trustee and (ii) not less than 30 days nor
more than 60 days written notice to the Securityholders, to redeem the
Securities, in whole (but not in part), at the Special Event Prepayment Price.
Following a Special Event, the Company shall take such action as is necessary to
promptly determine the Special Event Prepayment Price, including without
limitation the appointment by the Company of a Quotation Agent. The Special
Event Prepayment Price shall be paid prior to 12:00 noon, New York time, on the
date of such redemption or such earlier time as the Company determines, PROVIDED
that the Company shall deposit with the Trustee an amount sufficient to pay the
Special Event Prepayment Price by 10:00 a.m., New York time, on the date such
Special Event Prepayment Price is to be paid.
SECTION 14.02. Optional Prepayment by Company.
(a) Subject to the provisions of this Article XIV, the Company shall
have the right to redeem the Securities, in whole or in part, from time to time,
on or after the Initial Optional Prepayment Date, at the redemption prices set
forth below (expressed as percentages of principal) plus, in each case, accrued
and unpaid interest thereon (including Additional Interest and Compounded
Interest, if any) to the applicable date of redemption (the "Optional Prepayment
Price") if redeemed during the 12-month period beginning February 1 of the years
indicated below.
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<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C> <C>
2007 104.625%
2008 104.163%
2009 103.700%
2010 103.238%
2011 102.775%
2012 102.313%
2013 101.850%
2014 101.388%
2015 100.925%
2016 100.463%
2017 and thereafter 100.000%
--------
</TABLE>
If the Securities are only partially redeemed pursuant to this
Section 14.02, the Securities will be redeemed PRO RATA or by lot or by any
other method utilized by the Trustee; PROVIDED, that if at the time of
redemption the Securities are registered as a Global Security, the Depositary
shall determine, in accordance with its procedures, the principal amount of such
Securities held by each holder of a Security to be redeemed. The Optional
Prepayment 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 Company determines, PROVIDED
that the Company shall deposit with the Trustee an amount sufficient to pay the
Optional Prepayment Price by 10:00 a.m., New York time, on the date such
Optional Prepayment Price is to be paid.
(b) Notwithstanding the first sentence of Section 14.02, upon the
entry of an order for dissolution of the OnBank Capital Trust by a court of
competent jurisdiction, the Securities thereafter will be subject to optional
redemption, in whole only, but not in part, on or after February 1, 2007, at the
optional redemption prices set forth in Section 14.02 and otherwise in
accordance with this Article XIV.
(c) Any redemption of Securities pursuant to Section 14.01 or
Section 14.02 shall be subject to the Company obtaining the prior approval of
the Federal Reserve, if such approval is then required under applicable capital
guidelines or policies of the Federal Reserve.
SECTION 14.03. No Sinking Fund.
The Securities are not entitled to the benefit of any sinking fund.
SECTION 14.04. Notice of Prepayment; Selection of Securities.
In case the Company shall desire to exercise the right to redeem
all, or, as the case may be, any part of the Securities in accordance with their
terms, it shall fix a date for redemption and shall mail a notice of such
redemption at least 30 and not more than 60 days prior to the date fixed for
redemption to
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the holders of Securities so to be redeemed as a whole or in part at their last
addresses as the same appear on the Security Register. Such mailing shall be by
first class mail. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
receives such notice. In any case, failure to give such notice by mail or any
defect in the notice to the holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
Each such notice of redemption shall specify the CUSIP number of the
Securities to be redeemed, the date fixed for redemption, the redemption price
at which the Securities are to be redeemed (or the method by which such
redemption price is to be calculated), the place or places of payment that
payment will be made upon presentation and surrender of the Securities, that
interest accrued to the date fixed for redemption will be paid as specified in
said notice, and that on and after said date interest thereon or on the portions
thereof to be redeemed will cease to accrue. If less than all the Securities are
to be redeemed the notice of redemption shall specify the numbers of the
Securities to be redeemed. In case any Security is to be redeemed in part only,
the notice of redemption shall state the portion of the principal amount thereof
to be redeemed and shall state that on and after the date fixed for redemption,
upon surrender of such Security, a new Security or Securities in principal
amount equal to the unredeemed portion thereof will be issued.
By 10:00 a.m. New York time on the redemption date specified in the
notice of redemption given as provided in this Section, the Company will deposit
with the Trustee or with one or more paying agents an amount of money sufficient
to redeem on the redemption date all the Securities so called for redemption at
the appropriate Prepayment Price, together with accrued interest to the date
fixed for redemption.
The Company will give the Trustee notice not less than 45 days prior
to the redemption date as to the aggregate principal amount of Securities to be
redeemed and the Trustee shall select, in such manner as in its sole discretion
it shall deem appropriate and fair, the Securities or portions thereof (in
integral multiples of $1,000, except as otherwise set forth in the applicable
form of Security) to be redeemed.
SECTION 14.05. Payment of Securities Called for Prepayment.
If notice of redemption has been given as provided in Section 14.04,
the Securities or portions of Securities with respect to which such notice has
been given shall become due and payable on the date and at the place or places
stated in such notice at the applicable Prepayment Price, together with interest
accrued to the date fixed for redemption (subject to the rights of holders of
Securities on the close of business on a regular
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record date in respect of an Interest Payment Date occurring on or prior to the
redemption date), and on and after said date (unless the Company shall default
in the payment of such Securities at the Prepayment Price, together with
interest accrued to said date) interest on the Securities or portions of
Securities so called for redemption shall cease to accrue. On presentation and
surrender of such Securities at a place of payment specified in said notice, the
said Securities or the specified portions thereof shall be paid and redeemed by
the Company at the applicable Prepayment Price, together with interest accrued
thereon to the date fixed for redemption (subject to the rights of holders of
Securities on the close of business on a regular record date in respect of an
Interest Payment Date occurring on or prior to the redemption date).
Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and make available for delivery
to the holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations, in principal amount equal to the
unredeemed portion of the Security so presented.
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ARTICLE XV
SUBORDINATION OF SECURITIES
SECTION 15.01. Agreement to Subordinate.
The Company covenants and agrees, and each holder of Securities
issued hereunder likewise covenants and agrees, that the Securities shall be
issued subject to the provisions of this Article XV; and each holder of a
Security, whether upon original issue or upon transfer or assignment thereof,
accepts and agrees to be bound by such provisions.
The payment by the Company of the principal of, premium, if any, and
interest on all Securities issued hereunder shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right of payment to
all Senior Indebtedness, whether outstanding at the date of this Indenture or
thereafter incurred.
No provision of this Article XV shall prevent the occurrence of any
Default or Event of Default hereunder.
SECTION 15.02. Default on Senior Indebtedness.
In the event and during the continuation of any default by the
Company in the payment of principal, premium, interest or any other payment due
on any Senior Indebtedness, or in the event that the maturity of any Senior
Indebtedness has been accelerated because of a default, then, in either case, no
payment shall be made by the Company with respect to the principal (including
redemption payments) of or premium, if any, or interest on the Securities.
In the event of the acceleration of the maturity of the Securities,
then no payment shall be made by the Company with respect to the principal
(including redemption payments) of or premium, if any, or interest on the
Securities until the holders of all Senior Indebtedness outstanding at the time
of such acceleration shall receive payment in full of such Senior Indebtedness
(including any amounts due upon acceleration).
In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee when such payment is prohibited by the preceding
paragraphs of this Section 15.02, 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 Trustee in writing, within 90 days of
such payment of the amounts then due and owing on such Senior
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Indebtedness and only the amounts specified in such notice to the Trustee
shall be paid to the holders of such Senior Indebtedness.
SECTION 15.03. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all Senior Indebtedness of the Company 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 Company on account of the
principal (and premium, if any) or interest on the Securities; and upon any such
dissolution or winding-up or liquidation or reorganization, any payment by the
Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Securityholders or the
Trustee would be entitled to receive from the Company, except for the provisions
of this Article XV, shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the Securityholders or by the Trustee under the Indenture if
received by them or it, directly to the holders of Senior Indebtedness of the
Company (PRO RATA to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders, as calculated by the Company) 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 all 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 Securityholders or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company 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 is paid in full, or provision is made for
such payment in money in accordance with its terms, such payment or distribution
shall be held in trust for the benefit of and shall be paid over or delivered to
the holders of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all 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.
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For purposes of this Article XV, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company 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 XV with respect
to the Securities to the payment of Senior Indebtedness 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 Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the sale,
conveyance, transfer or lease of its property as an entirety, or substantially
as an entirety, to another Person upon the terms and conditions provided for in
Article X of this Indenture shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 15.03 if such
other Person shall, as a part of such consolidation, merger, sale, conveyance,
transfer or lease, comply with the conditions stated in Article X of this
Indenture. Nothing in Section 15.02 or in this Section 15.03 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 6.05 of this
Indenture.
SECTION 15.04. Subrogation.
Subject to the payment in full of all Senior Indebtedness, the
rights of the Securityholders 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 Company, as the case may be, applicable to such
Senior Indebtedness until the principal of (and premium, if any) and interest on
the Securities 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 Securityholders or the Trustee would
be entitled except for the provisions of this Article XV, and no payment over
pursuant to the provisions of this Article XV to or for the benefit of the
holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as
between the Company, its creditors other than holders of Senior Indebtedness of
the Company, and the holders of the Securities, be deemed to be a payment by the
Company to or on account of such Senior Indebtedness. It is understood that the
provisions of this Article XV are and are intended solely for the purposes of
defining the relative rights of the holders of the Securities, on the one hand,
and the holders of such Senior Indebtedness on the other hand.
Nothing contained in this Article XV or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness of the Company, and the
holders of the Securities, the obligation of the Company, which is absolute
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and unconditional, to pay to the holders of the Securities the principal of (and
premium, if any) and interest on the Securities 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 Securities and creditors
of the Company, as the case may be, other than the holders of Senior
Indebtedness of the Company, as the case may be, nor shall anything herein or
therein prevent the Trustee or the holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under the Indenture,
subject to the rights, if any, under this Article XV of the holders of such
Senior Indebtedness in respect of cash, property or securities of the Company,
as the case may be, received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred
to in this Article XV, the Trustee, subject to the provisions of Article VI of
this Indenture, and the Securityholders 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 Securityholders, for the purposes of ascertaining the
Persons entitled to participate in such distribution, the holders of Senior
Indebtedness and other indebtedness of the Company, 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 XV.
SECTION 15.05. Trustee to Effectuate Subordination.
Each Securityholder by such Securityholder's acceptance thereof
authorizes and directs the Trustee on such Securityholder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article XV and appoints the Trustee such Securityholder's
attorney-in-fact for any and all such purposes.
SECTION 15.06. Notice by the Company.
The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company that would prohibit the
making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article XV. Notwithstanding the
provisions of this Article XV or any other provision 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 Securities pursuant to the provisions of this Article XV, unless
and until a Responsible Officer of the Trustee shall have received written
notice thereof from the Company or a holder or holders of Senior Indebtedness or
from any trustee therefor; and before the receipt of any such
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written notice, the Trustee, subject to the provisions of Article VI of this
Indenture, 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 15.06 at least two Business Days prior to the date
upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of (or premium, if
any) or interest on any Security), 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.
The Trustee, subject to the provisions of Article VI of this
Indenture, 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 Company (or a trustee on behalf of such holder), as the case
may be, 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 XV, 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 XV, 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.
Upon any payment or distribution of assets of the Company referred
to in this Article XV, the Trustee and the Securityholders shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, liquidating trustee, custodian,
receiver, assignee for the benefit of creditors, agent or other person making
such payment or distribution, delivered to the Trustee or to the
Securityholders, for the purpose of ascertaining the persons entitled to
participate in such payment or distribution, the holders of Senior Indebtedness
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XV.
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SECTION 15.07. Rights of the Trustee; Holders of Senior
Indebtedness.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XV 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.
With respect to the holders of Senior Indebtedness of the Company,
the Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article XV, 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 owe any fiduciary duty to the holders of such Senior Indebtedness and,
subject to the provisions of Article VI of this Indenture, the Trustee shall not
be liable to any holder of such Senior Indebtedness if it shall pay over or
deliver to Securityholders, the Company or any other Person money or assets to
which any holder of such Senior Indebtedness shall be entitled by virtue of this
Article XV or otherwise.
Nothing in this Article XV shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.06.
SECTION 15.08. Subordination May Not Be Impaired.
No right of any present or future holder of any Senior Indebtedness
of the Company 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 Company, as the case may be, or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company, as the case may be,
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof that any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Company may, at any time
and from time to time, without the consent of or notice to the Trustee or the
Securityholders, without incurring responsibility to the Securityholders and
without impairing or releasing the subordination provided in this Article XV or
the obligations hereunder of the holders of the Securities 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
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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 Company, as the case may be, and any other Person.
ARTICLE XVI
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 16.01. Extension of Interest Payment Period.
So long as no Event of Default has occurred and is continuing, the
Company shall have the right, at any time and from time to time during the term
of the Securities, to defer payments of interest by extending the interest
payment period of such Securities for a period not exceeding 10 consecutive
semi-annual periods, including the first such semi-annual period during such
extension period (the "Extended Interest Payment Period"), during which Extended
Interest Payment Period no interest shall be due and payable; PROVIDED THAT no
Extended Interest Payment Period shall end on a date other than an Interest
Payment Date or extend beyond the Maturity Date. To the extent permitted by
applicable law, interest, the payment of which has been deferred because of the
extension of the interest payment period pursuant to this Section 16.01, will
bear interest thereon at the Coupon Rate compounded semi-annually for each
semi-annual period of the Extended Interest Payment Period ("Compounded
Interest"). At the end of the Extended Interest Payment Period, the Company
shall pay all interest accrued and unpaid on the Securities, including any
Additional Interest and Compounded Interest (together, "Deferred Interest") that
shall be payable to the holders of the Securities in whose names the Securities
are registered in the Security Register on the first record date preceding the
end of the Extended Interest Payment Period. Before the termination of any
Extended Interest Payment Period, the Company may further defer payments of
interest by further extending such period, PROVIDED that such period, together
with all such previous and further extensions within such Extended Interest
Payment Period, shall not exceed 10 consecutive semi-annual periods, including
the first such semi-annual period during such Extended Interest Payment Period,
end on a date other than an Interest Payment Date or extend beyond the Maturity
Date of the Securities. Upon the termination of any Extended Interest Payment
Period and the payment of all Deferred Interest then due, the Company 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 Company may prepay at any
time all or any portion of the interest accrued during an Extended Interest
Payment Period.
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SECTION 16.02. Notice of Extension.
(a) If the Property Trustee is the only registered holder of the
Securities at the time the Company selects an Extended Interest Payment Period,
the Company shall give written notice to the Administrative Trustees, the
Property Trustee and the Trustee of its selection of such Extended Interest
Payment Period five Business Days before the earlier of (i) the next succeeding
date on which Distributions on the Trust Securities issued by OnBank Capital
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 any national
securities exchange or to holders of the Capital Securities issued by the Trust,
but in any event at least five Business Days before such record date.
(b) If the Property Trustee is not the only holder of the Securities
at the time the Company selects an Extended Interest Payment Period, the Company
shall give the holders of the Securities and the Trustee written notice of its
selection of such Extended Interest Payment Period at least 10 Business Days
before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the
date the Company is required to give notice of the record or payment date of
such interest payment to any national securities exchange.
(c) The semi-annual period in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 16.02 shall be counted as one of the 10
semi-annual periods permitted in the maximum Extended Interest Payment Period
permitted under Section 16.01.
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The Bank of New York hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed by their respective officers thereunto duly authorized, as of
the day and year first above written.
ONBANCORP, INC.
By /s/ Robert J. Berger
--------------------------
Name: Robert J. Berger
Title: Chief Financial Officer
THE BANK OF NEW YORK,
as Trustee
By /s/ Vivian Georges
--------------------------
Name: Vivian Georges
Title: Assistant Vice President
<PAGE>
EXHIBIT A
(FORM OF FACE OF SECURITY)
[IF THE SECURITY IS A GLOBAL SECURITY, INSERT: - 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 NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY 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) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
"AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7)
OF RULE
A-1
<PAGE>
501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE
SECURITIES ACT, SUBJECT TO THE RIGHT OF THE COMPANY PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY
TO THE COMPANY, AND (ii) PURSUANT TO CLAUSE (E), TO REQUIRE THAT A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THE REVERSE OF THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEREE TO THE COMPANY. SUCH HOLDER FURTHER AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
No. CUSIP No. ______________
A-2
<PAGE>
ONBANCORP, INC.
[ ]% SERIES ___ JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE _________, 2027
ONBANCorp, Inc., a Delaware corporation (the "Company", which
term includes any successor Person under the Indenture hereinafter referred
to), for value received, hereby promises to pay to ______________ or
registered assigns, the principal sum of _____________ Dollars on
________________, 2027 (the "Maturity Date"), unless previously redeemed, and
to pay interest on the outstanding principal amount hereof from
_______________, 1997, 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, semi-annually (subject to deferral as set forth herein) in
arrears on ____________ and ___________ of each year, commencing
_____________, 1997, at the rate of [ ]% per annum until the principal hereof
shall have become due and payable, and on any overdue principal and premium,
if any, and (without duplication and to the extent that payment of such
interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum compounded semi-annually. 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, for any period less than a
full calendar month, the number of days elapsed in such month. In the event
that any date on which the principal of (or premium, if any) or interest on
this Security is payable is not a Business Day, then the payment payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except
that if such next succeeding Business Day falls in the next calendar year,
then 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. Pursuant to
the Indenture, in certain circumstances the Company will be required to pay
Additional Interest (as defined in the Indenture) with respect to this
Security. Pursuant to the Registration Rights Agreement, in certain limited
circumstances the Company will be required to pay liquidated damages (as set
forth in the Registration Rights Agreement) with respect to this Security.
The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the person in whose name this Security (or one or more Predecessor
Securities, 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
first day of the month in which the relevant interest payment date falls. Any
such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the holders on such regular record date and may
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) 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 holders of Securities not less than
A-3
<PAGE>
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 Securities 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 premium, if any) and interest on this Security
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 Company by
(i) check mailed to the holder at such address as shall appear in the Security
Register or (ii) by transfer to an account maintained by the Person entitled
thereto, provided that proper written transfer instructions have been received
by the relevant record date. Notwithstanding the foregoing, so long as the
Holder of this Security is the Property Trustee, the payment of the principal of
(and premium, if any) and interest on this Security will be made at such place
and to such account as may be designated by the Property Trustee.
The indebtedness evidenced by this Security 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 Security is issued
subject to the provisions of the Indenture with respect thereto. Each holder of
this Security, 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 Security 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.
A-4
<PAGE>
The provisions of this Security are continued on the reverse side
hereof and such provisions shall for all purposes have the same effect as though
fully set forth at this place.
IN WITNESS WHEREOF, the Company has executed this certificate this
4th day of February, 1997.
OnBank Capital Trust I
By:
-------------------------------
Name:
Title:
Attest:
By:
-------------------------------
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: February 4, 1997
THE BANK OF NEW YORK,
as Trustee
By
---------------------
Authorized Signatory
A-5
<PAGE>
(FORM OF REVERSE OF SECURITY)
This Security is one of the Securities of the Company (herein
sometimes referred to as the "Securities"), specified in the Indenture, all
issued or to be issued under and pursuant to an Indenture, dated as of February
4, 1997 (the "Indenture"), duly executed and delivered between the Company and
The Bank of New York, 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 Company and
the holders of the Securities.
Upon the occurrence and continuation of a Special Event prior to
_________, 2007 (the "Initial Optional Prepayment Date"), the Company shall have
the right, at any time within 90 days following the occurrence of such Special
Event, to redeem this Security in whole (but not in part) at the Special Event
Prepayment Price. "Special Event Prepayment Price" shall mean, with respect to
any prepayment of the Securities following a Special Event, an amount in cash
equal to the greater of (i) 100% of the principal amount of the securities to be
redeemed or (ii) the sum, as determined by a Quotation Agent, of the present
values of the principal amount and premium payable with respect to an Optional
Prepayment (as defined below) of this Security on the Initial Optional
Prepayment Date, together with scheduled payments of interest on this Security
from the prepayment date to and including the Initial Optional Prepayment Date,
discounted to the prepayment date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in
the case of each of clauses (i) and (ii), any accrued but unpaid interest
thereon, including Compounded Interest and Additional Interest, if any, to the
date of such prepayment.
In addition, the Company shall have the right to redeem this
Security, in whole or in part, at any time on or after the Initial Optional
Prepayment Date (an "Optional Prepayment"), at the prepayment prices set forth
below (expressed as percentages of principal to be redeemed) plus, in each case,
accrued and unpaid interest thereon (including Additional Interest and
Compounded Interest, if any) to the applicable date of prepayment (the "Optional
Prepayment Price") if redeemed during the 12-month period beginning __________
of the years indicated below.
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C> <C>
2007 %
2008 %
2009 %
2010 %
2011 %
2012 %
2013 %
2014 %
</TABLE>
A-6
<PAGE>
<TABLE>
<S> <C> <C>
2015 %
2016 %
2017 and thereafter 100.000%
</TABLE>
The Optional Prepayment Price or the Special Event Prepayment Price,
as the case requires, shall be paid prior to 12:00 noon, New York time, on the
date of such prepayment or at such earlier time as the Company determines,
provided, that the Company shall deposit with the Trustee an amount sufficient
to pay the applicable Prepayment Price by 10:00 a.m., New York City time, on the
date such Prepayment Price is to be paid. Any redemption pursuant to this
paragraph will be made upon not less than 30 days nor more than 60 days notice.
If the Securities are only partially prepayment by the Company pursuant to an
Optional Prepayment, the Securities will be prepaid PRO RATA or by lot or by any
other method utilized by the Trustee; PROVIDED that if, at the time of
prepayment, the Securities are registered as a Global Security, the Depositary
shall determine the particular Securities to be redeemed in accordance with its
procedures.
In the event of prepayment of this Security in part only, a new
Security or Securities for the unrepaid portion hereof will be issued in the
name of the holder hereof upon the cancellation hereof.
Notwithstanding the foregoing, any prepayment of Securities by the
Company shall be subject to the prior approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve"), if such approval is then
required under capital guidelines or policies of the Federal Reserve.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Securities 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 Company and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the Securities at the time outstanding, as defined in the Indenture,
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 modifying in any manner the rights of the holders of the Securities;
provided, however, that no such supplemental indenture shall, without the
consent of each holder of Securities then outstanding and affected thereby, (i)
extend the Maturity Date of any Securities, or reduce the principal amount
thereof, or reduce any amount payable on prepayment thereof, or reduce the rate
or extend the time of payment of interest thereon (subject to Article XVI of the
Indenture), or make the principal of, or interest or premium on, the Securities
payable in any coin or currency other than U.S. dollars, or impair or affect the
right of any holder of Securities to institute suit for the payment thereof, or
(ii) reduce the aforesaid percentage of Securities, the holders of which
A-7
<PAGE>
are required to consent to any such supplemental indenture. The Indenture also
contains provisions permitting the holders of a majority in aggregate principal
amount of the Securities at the time outstanding affected thereby, on behalf of
all of the holders of the Securities, to waive any past default in the
performance of any of the covenants contained in the Indenture, or established
pursuant to the Indenture, and its consequences, except a default in the payment
of the principal of or premium, if any, or interest on any of the Securities or
a default in respect of any covenant or provision under which the Indenture
cannot be modified or amended without the consent of each holder of Securities
then outstanding. Any such consent or waiver by the holder of this Security
(unless revoked as provided in the Indenture) shall be conclusive and binding
upon such Holder and upon all future holders and owners of this Security and of
any Security issued in exchange herefor or in place hereof (whether by
registration of transfer or otherwise), irrespective of whether or not any
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Security at the time and place and at the
rate and in the money herein prescribed.
So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right, at any time and from time to time
during the term of the Securities, to defer payments of interest by extending
the interest payment period of such Securities for a period not exceeding 10
consecutive semi-annual periods, including the first such semi-annual period
during such extension period, and not extending beyond the Maturity Date of the
Securities (an "Extended Interest Payment Period"), or ending on a date other
than an Interest Payment Date, at the end of which period the Company shall pay
all interest then accrued and unpaid (together with interest thereon at the rate
specified for the Securities to the extent that payment of such interest is
enforceable under applicable law). Before the termination of any such Extended
Interest Payment Period, the Company may further defer payments of interest by
further extending such Extended Interest Payment Period, PROVIDED that such
Extended Interest Payment Period, together with all such previous and further
extensions within such Extended Interest Payment Period, (i) shall not exceed 10
consecutive semi-annual periods, including the first semi-annual period during
such Extended Interest Payment Period, (ii) shall not end on any date other than
an Interest Payment Date, and (iii) shall not extend beyond the Maturity Date of
the Securities. Upon the termination of any such Extended Interest Payment
Period and the payment of all accrued and unpaid interest and any additional
amounts then due, the Company may commence a new Extended Interest Payment
Period, subject to the foregoing requirements.
A-8
<PAGE>
The Company has agreed that it will not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) or (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Company that rank PARI PASSU with or junior in right of
payment to the Securities or (iii) make any guarantee payments with respect to
any guarantee by the Company of the debt securities or any Subsidiary of the
Company (including any other Guarantees) if such guarantee ranks PARI PASSU or
junior in right of payment to the Securities (other than (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, Common Stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholder's 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, (c) payments under the Series A
Capital Securities Guarantee, (d) as a result of a reclassification of the
Company's capital stock or the exchange or the conversion of one class or series
of the Company's capital stock, for another class or series of the Company's
capital stock, (e) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the exchange or conversion of such capital
stock or the security being exchanged or converted, and (f) purchases of Common
Stock related to the issuance of Common Stock or rights under any of the
Company's benefit plans for its directors, officers or employees or any of the
Company's dividend reinvestment plans) if at such time (i) there shall have
occurred any event of which the Company has actual knowledge that (a) is or,
with the giving of notice or the lapse of time, or both, would be, an Event of
Default and (b) in respect of which the Company shall not have taken reasonable
steps to cure, (ii) if the Securities are held by OnBank Capital Trust, the
Company shall be in default with respect to its payment obligations under the
Capital Securities Guarantee or (iii) the Company shall have given notice of its
election of the exercise of its right to extend the interest payment period and
any such extension shall be continuing.
Subject to (i) the prior approval of the Federal Reserve if such
approval is then required under capital guidelines or policies of the Federal
Reserve, and (ii) the receipt by the Company of an opinion of counsel to the
effect that such distribution will not be a taxable event to holders of Capital
Securities, the Company will have the right at any time to liquidate the OnBank
Capital Trust and cause the Securities to be distributed to the holders of the
Trust Securities in liquidation of the Trust.
The Securities are issuable only in registered form without coupons
in denominations of $1,000.00 and any integral multiple thereof. As provided in
the Indenture and subject to the transfer restrictions limitations as may be
contained herein and therein from time to time, this Security is transferable by
the holder hereof on the Security Register of the Company, upon surrender of
this Security for registration of transfer at the
A-9
<PAGE>
office or agency of the Company in the City and State of New York accompanied by
a written instrument or instruments of transfer in form satisfactory to the
Company or the Trustee duly executed by the holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of authorized
denominations and for the same aggregate principal amount and series will be
issued to the designated transferee or transferees. No service charge will be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this
Security, the Company, the Trustee, any authenticating agent, any paying agent,
any transfer agent and the registrar may deem and treat the holder hereof as the
absolute owner hereof (whether or not this Security shall be overdue and
notwithstanding any notice of ownership or writing hereon made by anyone other
than the Security Registrar) for the purpose of receiving payment of or on
account of the principal hereof and premium, if any, and (subject to the
Indenture) interest due hereon and for all other purposes, and neither the
Company nor the Trustee nor any authenticating agent nor any paying agent nor
any transfer agent nor any registrar shall be affected by any notice to the
contrary.
No recourse shall be had for the payment of the principal of or
premium, if any, or interest on this Security, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture, against
any incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor Person, 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.
All terms used in this Security that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT
OF LAW PROVISIONS THEREOF.
A-10
<PAGE>
EXHIBIT 4.17
SUPPLEMENTAL INDENTURE
This Supplemental Indenture is made as of December 17, 1999 by
and between Olympia Financial Corp., a Delaware corporation, and The Bank of New
York, a New York banking corporation.
WITNESSETH
WHEREAS, ONBANCorp, Inc., predecessor in interest to Olympia
Financial Corp., and The Bank of New York, as trustee, (in such capacity, the
"Indenture Trustee") previously entered into an Indenture dated as of February
4, 1997 (the "Indenture") to provide for the issuance from time to time of
unsecured junior subordinated debt securities in series; and
WHEREAS, ONBANCorp, Inc. has been merged with and into Olympia
Financial Corp.; and
WHEREAS, the Administrators of OnBank Capital Trust I have
changed the name of that trust to "M&T Capital Trust III;" and
WHEREAS, Olympia Financial Corp and the Indenture Trustee
desire to amend the Indenture to provide for the change of the name of
ONBANCorp, Inc. to "Olympia Financial Corp."
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 to this
Amendment, for the benefit of the other parties and for the benefit of the
Holders, hereby amends the Indenture, and agrees, intending to be legally bound,
as follows:
SECTION 1. DEFINITIONS.
1.1. For all purposes of this Amendment, except as otherwise
expressly provided, terms used but not defined in this Amendment shall have the
meanings assigned to them in the Indenture.
1.2. The words "ONBANCorp, Inc." are hereby amended to read
"Olympia Financial Corp." in each place they appear in the Indenture.
1.4. The words "OnBank Capital Trust I" are hereby amended to
read "M&T Capital Trust III" in each place they appear in the Indenture.
<PAGE>
SECTION 2. MISCELLANEOUS.
2.1. CONTINUING AGREEMENT. The Indenture shall not be amended
by this Amendment except as specifically provided in this Amendment and, amended
as so specifically provided, the Indenture shall remain in full force and
effect. References in the Indenture to "this Indenture" shall be deemed to be
references to the Indenture as amended by this Amendment.
2.2. CONFLICTS. In the event of a conflict between the terms
and conditions of the Indenture and the terms and conditions of this Amendment,
the terms and conditions of this Amendment shall prevail.
2.3. COUNTERPART ORIGINALS. The parties may sign any number of
copies of this Amendment. Each signed copy shall be an original, but all of them
together represent the same agreement.
2.4. HEADINGS, ETC. The headings of the sections of this
Amendment have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
IN WITNESS WHEREOF the parties have caused this Amendment to
be executed as of the day and year first above written.
OLYMPIA FINANCIAL CORP.
By: /S/ Michael P. Pinto
--------------------------------------
Michael P. Pinto
Chairman of the Board and President
THE BANK OF NEW YORK
as Trustee, and not in its individual capacity
By: /S/ Iliana A. Arciprete
--------------------------------------
Iliana A. Arciprete
Assistant Treasurer
-2-
<PAGE>
EXHIBIT 4.18
=================================================
COMMON SECURITIES GUARANTEE AGREEMENT
ONBANCorp, Inc.
Dated as of February 4, 1997
=================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions Interpretation . . . . . . . . . 2
ARTICLE II
GUARANTEE
SECTION 2.1. Guarantee . . . . . . . . . . . . . . . . . . 2
SECTION 2.2. Waiver of Notice and Demand . . . . . . . . . 2
SECTION 2.3. Obligations Not Affected . . . . . . . . . . 2
SECTION 2.4. Rights of Holders . . . . . . . . . . . . . . 4
SECTION 2.5. Guarantee of Payment . . . . . . . . . . . . 5
SECTION 2.6. Subrogation . . . . . . . . . . . . . . . . . 5
SECTION 2.7. Independent Obligations . . . . . . . . . . . 5
ARTICLE III
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 3.1. Limitation of Transactions . . . . . . . . . 5
SECTION 3.2. Ranking . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV
TERMINATION
SECTION 4.1. Termination . . . . . . . . . . . . . . . . . 6
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Successors and Assigns . . . . . . . . . . . 7
SECTION 5.2. Amendments . . . . . . . . . . . . . . . . . 7
SECTION 5.3. Notices . . . . . . . . . . . . . . . . . . . 7
SECTION 5.4. Benefit . . . . . . . . . . . . . . . . . . . 8
SECTION 5.5. Governing Law . . . . . . . . . . . . . . . . 8
<PAGE>
COMMON SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Common Securities Guarantee"), dated as
of February 4, 1997, is executed and delivered by ONBANCorp, Inc., a Delaware
corporation (the "Guarantor"), for the benefit of the Holders (as defined
herein) from time to time of the Common Securities (as defined herein) of OnBank
Capital Trust I, a Delaware business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of February 4, 1997, among the Trustees of the Issuer
named therein, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof 1,856 common securities designated the 9.25% Common
Securities (the "Common Securities"), having an aggregate stated liquidation
amount of $1,856,000;
WHEREAS, as incentive for the Holders to purchase the Common
Securities, the Guarantor desires to irrevocably and unconditionally agree, to
the extent set forth in this Common Securities Guarantee, to pay to the Holders
the Guarantee Payments (as defined herein) and to make certain other payments on
the terms and conditions set forth herein; and
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Series A Capital Securities Guarantee") for the benefit of the
holders of the Series A Capital Securities (as defined in the Declaration) and
upon consummation of the Exchange Offer (as defined in the Declaration) will
execute and deliver a guarantee agreement (the "Series B Capital Securities
Guarantee") for the benefit of the holders of the Series B Capital Securities
(as defined in the Declaration), each in substantially identical terms to this
Common Securities Guarantee, except that if an Event of Default (as defined in
the Declaration) has occurred and is continuing, the rights of Holders to
receive Guarantee Payments under this Common Securities Guarantee are
subordinated to the rights of holders of Capital Securities to receive Guarantee
Payments under the Series A Capital Securities Guarantee and the Series B
Capital Securities Guarantee, as the case may be.
NOW, THEREFORE, in consideration of the purchase by each Holder, which
purchase the Guarantor hereby acknowledges shall benefit the Guarantor, the
Guarantor executes and delivers this Common Securities Guarantee for the benefit
of the Holders.
<PAGE>
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. DEFINITIONS INTERPRETATION
In this Common Securities Guarantee, unless the context otherwise
requires:
(a) Capitalized terms used in this Common Securities Guarantee but not
defined in the preamble above have the respective meanings assigned to them
in this Section 1.1;
(b) Terms defined in the Declaration as at the date of execution of
this Common Securities Guarantee have the same meaning when used in this
Common Securities Guarantee unless otherwise defined in this Common
Securities Guarantee;
(c) a term defined anywhere in this Common Securities Guarantee has the
same meaning throughout;
(d) all references to "the Common Securities Guarantee" or "this Common
Securities Guarantee" are to this Common Securities Guarantee as modified,
supplemented or amended from time to time;
(e) all references in this Common Securities Guarantee to Articles and
Sections are to Articles and Sections of this Common Securities Guarantee
unless otherwise specified; and
(f) a reference to the singular includes the plural and vice versa.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Common Securities, to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions that are
required to be paid on such Common Securities to the extent the Issuer has funds
on hand legally available therefor at such time, (ii) the redemption price,
including all accrued and unpaid Distributions to the date of redemption (the
"Redemption Price") to the extent the Issuer has funds on hand legally available
therefor at such time, with respect to any Common Securities called for
redemption by the Issuer, and (iii) upon a voluntary or involuntary termination
and liquidation of the Issuer (other than in connection with the distribution of
Debentures to the Holders in exchange for Common Securities as provided in the
Declaration), the lesser of (a) the aggregate of the liquidation amount and all
accumulated and unpaid Distributions on the Common Securities to the date of
payment, to the extent the Issuer has funds on hand legally available therefor,
and (b) the amount of assets of the Issuer remaining available for distribution
to Holders in liquidation of the
2
<PAGE>
Issuer (in either case, the "Liquidation Distribution"). If an Event of Default
has occurred and is continuing, no Guarantee Payments with respect to the Common
Securities shall be made until holders of Capital Securities shall be paid in
full the Guarantee Payments to which they are entitled under the Series A
Capital Securities Guarantee and the Series B Capital Securities Guarantee.
"Holder" means any holder, as registered on the books and records
of the Issuer, of any Common Securities.
"Other Guarantees" means all guarantees to be issued by the Guarantor
with respect to common securities (if any) similar to the Common Securities
issued by other trusts to be established by the Guarantor (if any), in each case
similar to the Issuer.
ARTICLE II
GUARANTEE
SECTION 2.1. 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 Issuer), as and when due, regardless of any defense, right of
set-off or counter-claim which the Issuer 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 Issuer to pay
such amounts to the Holders.
SECTION 2.2. WAIVER OF NOTICE AND DEMAND
The Guarantor hereby waives notice of acceptance of this Common
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 Issuer or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 2.3. OBLIGATIONS NOT AFFECTED
The obligations, covenants, agreements and duties of the Guarantor
under this Common 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 Issuer of
3
<PAGE>
any express or implied agreement, covenant, term or condition relating to
the Common Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or
any other sums payable under the terms of the Common Securities or the
extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Common 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 Debentures permitted by the
Indenture);
(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 Common
Securities, or any action on the part of the Issuer 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 Issuer
or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Common
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) 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 2.3 that the obligations of the Guarantor with respect to
the Guarantee Payments shall be absolute and unconditional under any and
all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 2.4. RIGHTS OF HOLDERS
The Guarantor expressly acknowledges that any Holder may institute
a legal proceeding directly against the Guarantor to enforce its rights under
this Common Securities Guarantee,
4
<PAGE>
without first instituting a legal proceeding against the Issuer or any other
Person.
SECTION 2.5. GUARANTEE OF PAYMENT
This Common Securities Guarantee creates a guarantee of payment and not
of collection.
SECTION 2.6. SUBROGATION
The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Issuer in respect of any amounts paid to such Holders by the
Guarantor under this Common 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 rights which it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Common Securities Guarantee, if, at the time
of any such payment, any amounts are due and unpaid under this Common 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 2.7. INDEPENDENT OBLIGATIONS
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Common
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Common
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 2.3 hereof.
ARTICLE III
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 3.1. LIMITATION OF TRANSACTIONS
So long as any Common Securities remain outstanding, the Guarantor will
not (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Guarantor's
capital stock (which includes common stock and preferred stock) or (ii) make any
payment of principal of, or premium, if any, or interest on or repay, repurchase
or redeem any debt securities of the Guarantor (including Other Debentures) that
rank PARI PASSU with or junior in right of payment to the Debentures or (iii)
make any guarantee payments with respect to any guarantee by the Guarantor of
the debt securities of any subsidiary of the
5
<PAGE>
Guarantor (including under Other Guarantees) if such guarantee ranks PARI
PASSU with or junior in right of payment to the Debentures (other than (a)
dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Guarantor, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' 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, (c) payments under the Capital Securities Guarantee, (d) as a result
of a reclassification of the Guarantor's capital stock or the exchange or the
conversion of one class or series of the Guarantor's capital stock for
another class or series of the Guarantor's capital stock, (e) the purchase of
fractional interests in shares of the Guarantor's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, and (f) purchases of common stock related to
the issuance of common stock or rights under any of the Guarantor's benefit
plans for its directors, officers or employees or any of the Guarantor's
dividend reinvestment plans) if at such time (i) there shall have occurred
any event of which the Guarantor has actual knowledge that (a) is, or with
the giving of notice or the lapse of time, or both, would be, an Event of
Default and (b) in respect of which the Guarantor shall not have taken
reasonable steps to cure, (ii) if such Debentures are held by the Property
Trustee, the Guarantor shall be in default with respect to its payment of any
obligations under the Capital Securities Guarantee or (iii) the Guarantor
shall have given notice of its election of the exercise of its right to
extend the interest payment period pursuant to Section 16.01 of the Indenture
and any such extension shall be continuing.
SECTION 3.2. RANKING
This Common Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to Senior indebtedness (as defined in the Indenture), to the same extent
and in the same manner that the Debentures are subordinated to Senior
Indebtedness pursuant to the Indenture, (ii) PARI PASSU with the Debentures, the
Other Debentures and with any Other Guarantee, and (iii) senior to the
Guarantor's capital stock.
ARTICLE IV
TERMINATION
SECTION 4.1. TERMINATION
This Common Securities Guarantee shall terminate (i) upon full payment
of the Redemption Price of all Common Securities, (ii) upon the distribution of
all of the Debentures to all
6
<PAGE>
the Holders and the holders of the Capital Securities or (iii) upon full payment
of the amounts payable in accordance with the Declaration upon liquidation of
the Issuer. Notwithstanding the foregoing, this Common Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any Holder must restore payment of any sums paid under the Common
Securities or under this Common Securities Guarantee.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. SUCCESSORS AND ASSIGNS
All guarantees and agreements contained in this Common Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
then outstanding.
SECTION 5.2. AMENDMENTS
Except with respect to any changes which do not adversely affect the
rights of Holders (in which case no consent of Holders will be required), this
Common Securities Guarantee may only be amended with the prior approval of the
Holders of at least a majority in liquidation amount of all the outstanding
Common Securities. The provisions of Section 12.2 of the Declaration with
respect to meetings of holders of the Securities apply to the giving of such
approval.
SECTION 5.3. NOTICES
All notices provided for in this Common Securities Guarantee shall be
in writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Issuer, in care of the Administrative Trustee at
the Issuer's mailing address set forth below (or such other address as the
Issuer may give notice of to the Holders):
OnBank Capital Trust I
c/o ONBANCorp, Inc.
101 South Salina Street
P.O. Box 4983
Syracuse, New York 13221-4983
Attention: William M. LeBeau
Administrative Trustee
Telecopy: (315) 424-5951
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(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 to the
Holders):
ONBANCorp, Inc.
101 South Salina Street
Syracuse, New York 13221-4983
Attention: Robert J. Berger
Telecopy: (315) 424-5951
(c) if given to any Holder, at the address set forth on the books and
records of the Issuer.
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 5.4. BENEFIT
This Common Securities Guarantee is solely for the benefit of the
Holders and is not separately transferable from the Common Securities.
SECTION 5.5. GOVERNING LAW
THIS COMMON SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
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THIS COMMON SECURITIES GUARANTEE is executed as of the day and year
first above written.
ONBANCORP, INC.
By: /s/ ROBERT J. BERGER
-------------------------------
Name: Robert J. Berger
Title: Senior Vice President,
Treasurer & Chief
Financial Officer
<PAGE>
EXHIBIT 4.19
AMENDMENT TO COMMON SECURITIES GUARANTEE AGREEMENT
This Amendment to Common Securities Guarantee Agreement (the
"Amendment") is made as of December 17, 1999 by and between Olympia Financial
Corp., a Delaware corporation, and The Bank of New York, a New York banking
corporation.
WITNESSETH
WHEREAS, Olympia Financial Corp., successor by merger to ONBANCorp,
Inc., (the "Guarantor"), and The Bank of New York, as trustee (in such capacity,
the "Capital Securities Guarantee Trustee") previously entered into a Common
Securities Guarantee Agreement dated as of February 4, 1997 (the "Guarantee
Agreement") by which the Guarantor agreed to make certain payments to the
Holders of Common Securities issued pursuant to an Amended and Restated
Declaration of Trust dated as of February 4, 1997 by and between Guarantor, in
its capacity as Sponsor, The Bank of New York, as property trustee, and The Bank
of New York (Delaware), a Delaware banking corporation, as Delaware trustee; and
WHEREAS, ONBANCorp, Inc. has been merged with and into Olympia
Financial Corp., a wholly owned subsidiary of M&T Bank Corporation, a New York
corporation; and
WHEREAS, the Administrative Trustees of the Trust have changed the name
of the Trust from "OnBank Capital Trust I" to "M&T Capital Trust III;" and
WHEREAS, the Guarantor and the Guarantee Trustee desire to amend the
Guarantee Agreement to provide for the change of the Guarantor from "ONBANCorp,
Inc." to "Olympia Financial Corp.," and the name of the Trust from "OnBank
Capital Trust I" to "M&T Capital Trust III."
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 to this Amendment, for
the benefit of the other parties and for the benefit of the Holders, hereby
amends the Guarantee Agreement, and agrees, intending to be legally bound, as
follows:
SECTION 1. DEFINITIONS.
1.1. For all purposes of this Amendment, except as otherwise expressly
provided, terms used but not defined in this Amendment shall have the meanings
assigned to them in the Guarantee Agreement.
1.2. The definition of "Guarantor" in the preamble of the Guarantee
Agreement is amended to mean Olympia Financial Corp., a Delaware corporation.
<PAGE>
1.3. The definition of "Issuer" in the preamble of the Guarantee
Agreement is amended to read "M&T Capital Trust III."
SECTION 2. MISCELLANEOUS.
2.1. CONTINUING AGREEMENT. The Guarantee Agreement shall not be amended
by this Amendment except as specifically provided in this Amendment and, amended
as so specifically provided, the Guarantee Agreement shall remain in full force
and effect. References in the Guarantee Agreement to "this Guarantee Agreement"
shall be deemed to be references to the Guarantee Agreement as amended by this
Amendment.
2.2. CONFLICTS. In the event of a conflict between the terms and
conditions of the Guarantee Agreement and the terms and conditions of this
Amendment, the terms and conditions of this Amendment shall prevail.
2.3. COUNTERPART ORIGINALS. The parties may sign any number of copies
of this Amendment. Each signed copy shall be an original, but all of them
together represent the same agreement.
2.4. HEADINGS, ETC. The headings of the sections of this Amendment have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
IN WITNESS WHEREOF the parties have caused this Amendment to be
executed as of the day and year first above written.
OLYMPIA FINANCIAL CORP.
as Guarantor
By: /s/ Michael P. Pinto
-----------------------------------
Michael P. Pinto
Chairman of the Board and President
THE BANK OF NEW YORK
as Guarantee Trustee,
and not in its individual capacity
By: /s/ Iliana A. Arciprete
-----------------------------------
Iliana A. Arciprete
Assistant Treasurer
- 2 -
<PAGE>
EXHIBIT 4.20
==================================================
SERIES A CAPITAL SECURITIES GUARANTEE AGREEMENT
ONBANCorp, Inc.
Dated as of February 4, 1997
==================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATION
<S> <C> <C>
SECTION 1.1 Definitions and Interpretation . . . . . . . . 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application . . . . . . . 6
SECTION 2.2 Lists of Holders of Securities . . . . . . . 6
SECTION 2.3 Reports by the Capital Securities
Guarantee Trustee . . . . . . . . . . . 7
SECTION 2.4 Periodic Reports to Capital Securities
Guarantee Trustee . . . . . . . . . . . 7
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 . . . . . . . . . . . 8
SECTION 2.8 Conflicting Interests . . . . . . . . . . . 8
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Securities
Guarantee Trustee . . . . . . . . . . . 8
SECTION 3.2 Certain Rights of Capital Securities
Guarantee Trustee . . . . . . . . . . . 10
SECTION 3.3 Not Responsible for Recitals or Issuance
of Series A Capital Securities Guarantee 13
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 Capital Securities Guarantee Trustee;
Eligibility . . . . . . . . . . . . . 13
SECTION 4.2 Appointment, Removal and Resignation of
Capital Securities Guarantee Trustee . . 14
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee . . . . . . . . . . . . . . . . . 15
SECTION 5.2 Waiver of Notice and Demand . . . . . . . . . 15
SECTION 5.3 Obligations Not Affected . . . . . . . . . . 15
SECTION 5.4 Rights of Holders . . . . . . . . . . . . 16
SECTION 5.5 Guarantee of Payment . . . . . . . . . . . . 17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 5.6 Subrogation . . . . . . . . . . . . . . . . 17
SECTION 5.7 Independent Obligations . . . . . . . . . . . 17
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions . . . . . . . . 17
SECTION 6.2 Ranking . . . . . . . . . . . . . . . . . 18
ARTICLE VII
TERMINATION
SECTION 7.1 Termination . . . . . . . . . . . . . . . 19
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation . . . . . . . . . . . . . . . 19
SECTION 8.2 Indemnification . . . . . . . . . . . . . 20
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns . . . . . . . . . . 20
SECTION 9.2 Amendments . . . . . . . . . . . . . . . . 20
SECTION 9.3 Notices . . . . . . . . . . . . . . . . . 20
SECTION 9.4 Exchange Offer . . . . . . . . . . . . . . . 21
SECTION 9.5 Benefit . . . . . . . . . . . . . . . . . 22
SECTION 9.6 Governing Law . . . . . . . . . . . . . . 22
</TABLE>
<PAGE>
SERIES A CAPITAL SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Series A Capital Securities
Guarantee"), dated as of February 4, 1997, is executed and delivered by
ONBANCorp, Inc., a Delaware corporation (the "Guarantor"), and The Bank of New
York, a New York banking corporation, as trustee (the "Capital Securities
Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Series A Capital Securities (as defined herein) of OnBank
Capital Trust I, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of February 4, 1997, among the trustees of
the Issuer, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof 60,000 capital securities, having an aggregate
liquidation amount of $60,000,000, such capital securities being designated the
9.25% Series A Capital Securities (collectively the "Series A Capital
Securities") and, in connection with an Exchange Offer (as defined in the
Declaration) has agreed to execute and deliver the Series B Capital Securities
Guarantee (as defined in the Declaration) for the benefit of holders of the
Series B Capital Securities (as defined in the Declaration).
WHEREAS, as incentive for the Holders to purchase the Series A
Capital Securities, the Guarantor desires irrevocably and unconditionally to
agree, to the extent set forth in this Series A Capital Securities Guarantee, to
pay to the Holders the Guarantee Payments (as defined below). The Guarantor
agrees to make certain other payments on the terms and conditions set forth
herein.
WHEREAS, the Guarantor is executing and delivering a guarantee
agreement (the "Common Securities Guarantee"), with substantially identical
terms to this Series A Capital Securities Guarantee, for the benefit of the
holders of the Common Securities (as defined herein), except that if an Event of
Default (as defined in the Declaration) has occurred and is continuing, the
rights of holders of the Common Securities to receive Guarantee Payments under
the Common Securities Guarantee are subordinated, to the extent and in the
manner set forth in the Common Securities Guarantee, to the rights of holders of
Series A Capital Securities and the Series B Capital Securities to receive
Guarantee Payments under this Series A Capital Securities Guarantee and the
Series B Capital Securities Guarantee, as the case may be.
NOW, THEREFORE, in consideration of the purchase by each
Holder, which purchase the Guarantor hereby acknowledges shall benefit the
Guarantor, the Guarantor executes and delivers
<PAGE>
this Series A Capital Securities Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS AND INTERPRETATION
In this Series A Capital Securities Guarantee, unless the context
otherwise requires:
(a) Capitalized terms used in this Series A Capital
Securities Guarantee but not defined in the preamble
above have the respective meanings assigned to them in
this Section 1.1;
(b) Terms defined in the Declaration as at the date of
execution of this Series A Capital Securities Guarantee
have the same meaning when used in this Series A Capital
Securities Guarantee unless otherwise defined in this
Series A Capital Securities Guarantee;
(c) a term defined anywhere in this Series A Capital
Securities Guarantee has the same meaning throughout;
(d) all references to "the Series A Capital Securities
Guarantee" or "this Series A Capital Securities
Guarantee" are to this Series A Capital Securities
Guarantee as modified, supplemented or amended from time
to time;
(e) all references in this Series A Capital Securities
Guarantee to Articles and Sections are to Articles and
Sections of this Series A Capital Securities Guarantee,
unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same
meaning when used in this Series A Capital Securities
Guarantee, unless otherwise defined in this Series A
Capital 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
under the Securities Act of 1933, as amended, or any successor rule thereunder.
2
<PAGE>
"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 or
Syracuse, New York are authorized or required by law or executive order to
close.
"CAPITAL SECURITIES GUARANTEE TRUSTEE" means The Bank of New
York, a New York banking corporation, until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Series A Capital Securities Guarantee and thereafter means
each such Successor Capital Securities Guarantee Trustee.
"COMMON SECURITIES" means the securities representing common
undivided beneficial interests in the assets of the Issuer.
"CORPORATE TRUST OFFICE" means the office of the Capital
Securities Guarantee Trustee at which the corporate trust business of the
Capital Securities Guarantee Trustee shall, at any particular time, be
principally administered, which office at the date of execution of this
Agreement is located at 101 Barclay Street, 21 West, New York, New York 10286.
"COVERED PERSON" means any Holder or beneficial owner of
Series A Capital Securities.
"DEBENTURES" means the series of subordinated debt securities
of the Guarantor designated the 9.25% Series A Junior Subordinated Deferrable
Interest Debentures due February 1, 2027 held by the Property Trustee (as
defined in the Declaration) of the Issuer.
"EVENT OF DEFAULT" means a default by the Guarantor on any of
its payment or other obligations under this Series A Capital Securities
Guarantee.
"GUARANTEE PAYMENTS" means the following payments or
distributions, without duplication, with respect to the Series A Capital
Securities, to the extent not paid or made by the Issuer: (i) any accumulated
and unpaid Distributions (as defined in the Declaration) that are required to be
paid on such Series A Capital Securities to the extent the Issuer has funds on
hand legally available therefor at such time, (ii) the redemption price,
including all accumulated and unpaid Distributions to the date of redemption
(the "Redemption Price") to the extent the Issuer has funds on hand legally
available therefor at such time, with respect to any Series A Capital Securities
called for redemption by the Issuer, and (iii) upon a voluntary or involuntary
termination and liquidation of the Issuer (other than in connection with the
distribution of Debentures to the Holders in exchange for Series A Capital
Securities as provided in the Declaration), the lesser of (a) the aggregate of
the liquidation
3
<PAGE>
amount and all accumulated and unpaid Distributions on the Series A Capital
Securities to the date of payment, to the extent the Issuer has funds on hand
legally available therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer. If an Event
of Default has occurred and is continuing, no Guarantee Payments under the
Common Securities Guarantee with respect to the Common Securities or any
guarantee payment under any Other Common Securities Guarantees shall be made
until the Holders shall be paid in full the Guarantee Payments to which they are
entitled under this Series A Capital Securities Guarantee.
"HOLDER" shall mean any holder, as registered on the books and
records of the Issuer, of any Series A Capital Securities; provided, however,
that, in determining whether the holders of the requisite percentage of Series A
Capital 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 Capital Securities Guarantee
Trustee, any Affiliate of the Capital Securities Guarantee Trustee, or any
officers, directors, shareholders, members, partners, employees,
representatives, nominees, custodians or agents of the Capital Securities
Guarantee Trustee.
"INDENTURE" means the Indenture dated as of February 4, 1997,
among the Guarantor (the "Debenture Issuer") and The Bank of New York, as
trustee (the "Property Trustee"), pursuant to which the Debentures are to be
issued to the Property Trustee of the Issuer.
"INDENTURE EVENT OF DEFAULT" shall mean any event specified in
Section 5.01 of the Indenture.
"MAJORITY IN LIQUIDATION AMOUNT OF THE SERIES A CAPITAL
SECURITIES" means, except as provided by the Trust Indenture Act, a vote by
Holder(s) of more than 50% of the aggregate liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accumulated and unpaid Distributions to the date upon which the voting
percentages are determined) of all Series A Capital Securities.
"OFFICERS' CERTIFICATE" means, with respect to any person, a
certificate signed by the Chairman, a Vice Chairman, the Chief Executive
Officer, the President, a Vice President, the Comptroller, the Secretary or an
Assistant Secretary of the Guarantor. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this Series A
Capital Securities Guarantee (other than pursuant to Section 314(d)(4) of the
Trust Indenture Act) shall include:
4
<PAGE>
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) 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
(c) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"OTHER COMMON SECURITIES GUARANTEES" shall have the same
meaning as "Other Guarantees" as defined in the Common Securities Guarantee.
"OTHER DEBENTURES" means all junior subordinated debentures
issued by the Guarantor from time to time and sold to trusts to be established
by the Guarantor (if any), in each case similar to the Issuer.
"OTHER GUARANTEES" means all guarantees to be issued by the
Guarantor with respect to capital securities (if any) similar to the Series A
Capital Securities issued by other trusts to be established by the Guarantor (if
any), in each case similar to the Issuer.
"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.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of February 4, 1997, by and among the Guarantor, the Issuer
and the Initial Purchasers named therein as such agreement may be amended,
modified or supplemented from time to time.
"RESPONSIBLE OFFICER" means, with respect to the Capital
Securities Guarantee Trustee, any officer within the Corporate Trust Office of
the Capital Securities Guarantee Trustee, including any vice president, any
assistant vice president, any assistant secretary, the treasurer, any assistant
treasurer or other officer of the Corporate Trust office of the Capital
Securities Guarantee Trustee 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
5
<PAGE>
referred because of that officer's knowledge of and familiarity with the
particular subject.
"SUCCESSOR CAPITAL SECURITIES GUARANTEE TRUSTEE" means a
successor Capital Securities Guarantee Trustee possessing the qualifications to
act as Capital Securities Guarantee Trustee under Section 4.1.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939,
as amended.
"TRUST SECURITIES" means the Common Securities and the Series
A Capital Securities and Series B Capital Securities, collectively.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION
(a) This Series A Capital Securities Guarantee is subject to
the provisions of the Trust Indenture Act that are required to be part of this
Series A Capital Securities Guarantee and shall, to the extent applicable, be
governed by such provisions; and
(b) if and to the extent that any provision of this Series A
Capital 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.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES
(a) The Guarantor shall provide the Capital Securities
Guarantee Trustee (unless the Capital Securities Guarantee Trustee is otherwise
the registrar of the Capital Securities) with a list, in such form as the
Capital Securities Guarantee Trustee may reasonably require, of the names and
addresses of the Holders ("List of Holders") as of such date, (i) within one
Business Day after the fifteenth day of the month prior to the month in which a
relevant Distribution date falls, and (ii) at any other time within 30 days of
receipt by the Guarantor of a written request for a List of Holders as of a date
no more than 14 days before such List of Holders is given to the Capital
Securities Guarantee Trustee, 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 Capital Securities Guarantee
Trustee by the Guarantor. The Capital Securities Guarantee Trustee may destroy
any List of Holders previously given to it on receipt of a new List of Holders.
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<PAGE>
(b) The Capital Securities Guarantee Trustee shall comply with
its obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
SECTION 2.3 REPORTS BY THE CAPITAL SECURITIES GUARANTEE TRUSTEE
Within 60 days after May 15 of each year, commencing May 15,
1997, the Capital Securities Guarantee Trustee shall provide to the Holders such
reports as are required by Section 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
The Capital Securities Guarantee Trustee shall also comply with the other
requirements of Section 313 of the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO CAPITAL SECURITIES GUARANTEE TRUSTEE
The Guarantor shall provide to the Capital Securities
Guarantee Trustee such documents, reports and information as required by Section
314 (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 in Trust Indenture Act. Delivery of such reports, information and
documents to the Capital Securities Guarantee Trustee is for informational
purposes only and the Capital Securities Guarantee Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Guarantor's
compliance with any of its covenants hereunder (as to which the Capital
Securities Guarantee Trustee is entitled to rely exclusively on Officers,
Certificates).
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT
The Guarantor shall provide to the Capital Securities
Guarantee Trustee such evidence of compliance with any conditions precedent, if
any, provided for in this Series A Capital Securities Guarantee that relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) may 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 Series A
Capital Securities may, by vote, on behalf of all Holders, 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 Series A Capital Securities
Guarantee, but no such waiver shall extend to any subsequent or
7
<PAGE>
other default or Event of Default or impair any right consequent thereon.
SECTION 2.7 EVENT OF DEFAULT; NOTICE
(a) The Capital Securities Guarantee Trustee shall, within 90
days after the occurrence of a default with respect to this Capital Securities
Guarantee, mail by first class postage prepaid, to all Holders, notices of all
defaults actually known to a Responsible Officer, unless such defaults have been
cured before the giving of such notice, provided, that, except in the case of
default in the payment of any Guarantee Payment, the Capital Securities
Guarantee 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
directors and/or a Responsible officer in good faith determines that the
withholding of such notice is in the interests of the Holders.
(b) The Capital Securities Guarantee Trustee shall not be
deemed to have knowledge of any Event of Default unless the Capital Securities
Guarantee Trustee shall have received written notice from the Guarantor, or a
Responsible Officer charged with the administration of the Declaration shall
have obtained actual knowledge, of such Event of Default.
SECTION 2.8 CONFLICTING INTERESTS
The Declaration shall be deemed to be specifically described
in this Series A Capital Securities Guarantee for the purposes of clause (i) of
the first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 POWERS AND DUTIES OF THE CAPITAL SECURITIES GUARANTEE TRUSTEE
(a) This Series A Capital Securities Guarantee shall be held
by the Capital Securities Guarantee Trustee for the benefit of the Holders, and
the Capital Securities Guarantee Trustee shall not transfer this Series A
Capital Securities Guarantee to any Person except a Holder exercising his or her
rights pursuant to Section 5.4(b) or to a Successor Capital Securities Guarantee
Trustee on acceptance by such Successor Capital Securities Guarantee Trustee of
its appointment to act as Successor Capital Securities Guarantee Trustee. The
right, title and interest of the Capital Securities Guarantee Trustee shall
automatically vest in any Successor Capital Securities Guarantee Trustee, and
such vesting and succession of title shall be effective whether or not
8
<PAGE>
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Capital Securities Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible
officer has occurred and is continuing, the Capital Securities Guarantee Trustee
shall enforce this Series A Capital Securities Guarantee for the benefit of the
Holders.
(c) The Capital Securities 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 Series A Capital Securities Guarantee, and no
implied covenants shall be read into this Series A Capital Securities Guarantee
against the Series A Capital Securities Guarantee Trustee. In case an Event of
Default has occurred (that has not been cured or waived pursuant to Section 2.6)
and is actually known to a Responsible Officer, the Capital Securities Guarantee
Trustee shall exercise such of the rights and powers vested in it by this Series
A Capital 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 Series A Capital Securities Guarantee
shall be construed to relieve the Capital Securities 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 Capital Securities
Guarantee Trustee shall be determined solely by the express
provisions of this Series A Capital Securities Guarantee, and
the Capital Securities Guarantee Trustee shall not be liable
except for the performance of such duties and obligations as
are specifically set forth in this Series A Capital Securities
Guarantee, and no implied covenants or obligations shall be
read into this Series A Capital Securities Guarantee against
the Capital Securities Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Capital Securities Guarantee Trustee, the Capital Securities
Guarantee Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any certificates
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or opinions furnished to the Capital Securities Guarantee
Trustee and conforming to the requirements of this Series A
Capital Securities Guarantee; but in the case of any such
certificates or opinions that by any provision hereof are;
specifically required to be furnished to the Capital
Securities Guarantee Trustee, the Capital Securities Guarantee
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Series
A Capital Securities Guarantee;
(ii) the Capital Securities Guarantee Trustee shall not
be liable for any error of judgment made in good faith by a Responsible
Officer, unless it shall be proved that the Capital Securities
Guarantee Trustee was negligent in ascertaining the pertinent facts
upon which such judgment was made;
(iii) the Capital Securities 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 a
Majority in liquidation amount of the Series A Capital Securities
relating to the time, method and place of conducting any proceeding for
any remedy available to the Capital Securities Guarantee Trustee, or
exercising any trust or power conferred upon the Capital Securities
Guarantee Trustee under this Series A Capital Securities Guarantee; and
(iv) no provision of this Series A Capital Securities
Guarantee shall require the Capital Securities Guarantee Trustee to
extend 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 Capital Securities 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 Series A Capital Securities Guarantee or indemnity,
reasonably satisfactory to the Capital Securities Guarantee Trustee,
against such risk or liability is not reasonably assured to it.
SECTION 3.2 CERTAIN RIGHTS OF CAPITAL SECURITIES GUARANTEE TRUSTEE
(a) Subject to the provisions of Section 3.1:
(i) The Capital Securities 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
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evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this Series
A Capital Securities Guarantee may be sufficiently evidenced by an Officers'
Certificate.
(iii) Whenever, in the administration of this Series A Capital
Securities Guarantee, the Capital Securities Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking, suffering or
omitting any action hereunder, the Capital Securities 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 Capital Securities Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or any rerecording,
refiling or registration thereof).
(v) The Capital Securities 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
Capital Securities Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Series A Capital Securities
Guarantee from any court of competent jurisdiction.
(vi) The Capital Securities Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this Series A
Capital Securities Guarantee at the request or direction of any Holder, unless
such Holder shall have provided to the Capital Securities Guarantee Trustee such
security and indemnity, reasonably satisfactory to the Capital Securities
Guarantee Trustee, against the costs, expenses (including attorneys' fees and
expenses and the expenses of the Capital Securities 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 Capital Securities Guarantee Trustee; provided that,
nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the
Capital Securities Guarantee
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Trustee, upon the Occurrence of an Event Of Default, of its obligation to
exercise the rights and powers vested in it by this Series A Capital Securities
Guarantee.
(vii) The Capital Securities 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 Capital Securities Guarantee Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit.
(viii) The Capital Securities 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 Capital Securities
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 Capital Securities Guarantee Trustee or
its agents hereunder shall bind the Holders, and the signature of the Capital
Securities 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 Capital Securities Guarantee Trustee to so
act or as to its compliance with any of the terms and provisions of this Series
A Capital Securities Guarantee, both of which shall be conclusively evidenced by
the Capital Securities Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Series A Capital Securities
Guarantee the Capital Securities Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right or taking any
other action hereunder, the Capital Securities Guarantee Trustee (i) may request
instructions from the Holders of a Majority in liquidation amount of the Series
A Capital Securities (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 conclusively relying on or acting in accordance with such
instructions.
(xi) The Capital Securities Guarantee Trustee shall not be liable for
any action taken, suffered, or omitted to be taken by it in good faith, without
negligence, and reasonably believed by it to be authorized or within the
discretion or rights or powers, conferred upon it by this Series A Capital
Securities Guarantee.
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(b) No provision of this Series A Capital Securities Guarantee
shall be deemed to impose any duty or obligation on the Capital Securities
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 Capital Securities 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 Capital Securities Guarantee
Trustee shall be construed to be a duty.
SECTION 3.3. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SERIES A
CAPITAL SECURITIES GUARANTEE
The recitals contained in this Series A Capital Securities
Guarantee shall be taken as the statements of the Guarantor, and the Capital
Securities Guarantee Trustee does not assume any responsibility for their
correctness. The Capital Securities Guarantee Trustee makes no representation as
to the validity or sufficiency of this Series A Capital Securities Guarantee.
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 CAPITAL SECURITIES GUARANTEE TRUSTEE; ELIGIBILITY
(a) There shall at all times be a Capital Securities 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 million U.S. dollars ($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.
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(b) If at any time the Capital Securities Guarantee Trustee
shall cease to be eligible to so act under Section 4.1(a), the Capital
Securities Guarantee Trustee shall immediately resign in the manner and with the
effect set out in Section 4.2 (c).
(c) If the Capital Securities Guarantee Trustee has or shall
acquire any "conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Capital securities 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 CAPITAL SECURITIES
GUARANTEE TRUSTEE
(a) Subject to Section 4.2(b), the Capital Securities
Guarantee Trustee may be appointed or removed without cause at any time by the
Guarantor except during an Event of Default.
(b) The Capital Securities Guarantee Trustee shall not be
removed in accordance with Section 4.2(a) until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Capital Securities Guarantee
Trustee and delivered to the Guarantor.
(c) The Capital Securities Guarantee Trustee shall hold office
until a Successor Capital Securities Guarantee Trustee shall have been appointed
or until its removal or resignation. The Capital Securities Guarantee Trustee
may resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Capital Securities Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Capital Securities Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Capital Securities Guarantee Trustee and delivered to the Guarantor and the
resigning Capital Securities Guarantee Trustee.
(d) If no Successor Capital Securities 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 removal or resignation, the
Capital Securities Guarantee Trustee resigning or being removed may petition any
court of competent jurisdiction for appointment of a Successor Capital
Securities Guarantee Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a Successor Capital Securities
Guarantee Trustee.
(e) No Capital Securities Guarantee Trustee shall be liable
for the acts or omissions to act of any Successor Capital Securities Guarantee
Trustee.
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(f) Upon termination of this Series A Capital Securities
Guarantee or removal or resignation of the Capital Securities Guarantee Trustee
pursuant to this Section 4.2, the Guarantor shall pay to the Capital Securities
Guarantee Trustee all amounts due to the Capital Securities Guarantee Trustee
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 issuer), as and when due, regardless of any defense,
right of set-off or counter-claim that the Issuer 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 Issuer to pay such amounts to the Holders.
SECTION 5.2 WAIVER OF NOTICE AND DEMAND
The Guarantor hereby waives notice of acceptance of this
Series A Capital 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 Issuer or any other Person before proceeding against the
Guarantor, protests 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 Series A Capital 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 Issuer of any express or implied
agreement, covenant, term or condition relating to the Series A Capital
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all
or any portion of the Distributions, Redemption Price, Liquidation Distribution
or any other sums payable under the terms of the Series A Capital Securities or
the extension of time for the performance of any other obligation under, arising
out of, or in connection with, the Series A Capital Securities (other than an
extension of time for payment of Distributions,
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Redemption Price, Liquidation Distribution or other sum payable that results
from the extension of any interest payment period on the Debentures permitted by
the Indenture);
(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 Series A Capital
Securities, or any action on the part of the Issuer 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 Issuer or any of the
assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Series
A Capital Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred;
(g) the consummation of the Exchange offer; 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 with
respect to the Guarantee Payments shall be absolute and unconditional under any
and all circumstances.
There shall be no obligation of the Holders to give notice to,
or obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 RIGHTS OF HOLDERS
(a) The Holders of a Majority in liquidation amount of the
Series A Capital Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Capital Securities
Guarantee Trustee in respect of this Series A Capital Securities Guarantee or
exercising any trust or power conferred upon the Capital Securities Guarantee
Trustee under this Series A Capital Securities Guarantee.
(b) If the Capital Securities Guarantee Trustee fails to
enforce such Series A Capital Securities Guarantee, any Holder may institute a
legal proceeding directly against the Guarantor to enforce the Capital
Securities Guarantee Trustee's rights
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under this Series A Capital Securities Guarantee, without first instituting a
legal proceeding against the Issuer, the Capital Securities Guarantee Trustee or
any other person or entity. The Guarantor waives any right or remedy to require
that any action be brought first against the Issuer or any other person or
entity before proceeding directly against the Guarantor.
SECTION 5.5 GUARANTEE OF PAYMENT
This Series A Capital Securities Guarantee creates a guarantee
of payment and not of collection.
SECTION 5.6 SUBROGATION
The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Issuer in respect of any amounts paid to such Holders by
the Guarantor under this Series A Capital 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 Series A Capital
Securities Guarantee, if, at the time of any such payment, any amounts are due
and unpaid under this Series A Capital 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 Issuer with respect to the Series A
Capital Securities, and that the Guarantor shall be liable as principal and as
debtor hereunder to make Guarantee Payments pursuant to the terms of this Series
A Capital Securities Guarantee notwithstanding the occurrence of any event
referred to in subsections (a) through (h), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 LIMITATION OF TRANSACTIONS
So long as any Capital Securities remain outstanding, the
Guarantor shall not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Guarantor's capital stock (which includes common and preferred stock) or
(ii) make any payment of principal of, or premium, if any, or interest on
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or repay, repurchase or redeem any debt securities of the Guarantor (including
any Other Debentures) that rank PARI PASSU with or junior in right of payment to
the Debentures or (iii) make any guarantee payments with respect to any
guarantee by the Guarantor of the debt securities of any subsidiary of the
Guarantor (including other Guarantees) if such guarantee ranks PARI PASSU with
or junior in right of payment to the Debentures (other than (a) dividends or
distributions in shares of, or options, warrants, rights to subscribe for or
purchase shares of, common stock of the Guarantor, (b) any declaration of a
dividend in connection with the implementation of a stockholders' 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, (c) payments under this Series A
Capital Securities Guarantee or the Common Guarantee, (d) as a result of a
reclassification of the Guarantor's capital stock or the exchange or the
conversion of one class or series of the Guarantor's capital stock for another
class or series of the Guarantor's capital stock, (e) the purchase of fractional
interests in shares of the Guarantor's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
ex- changed, and (f) purchases of common stock related to the issuance of common
stock or rights under any of the Guarantor's benefit plans for its directors,
officers or employees or any of the Guarantor's dividend reinvestment plans) if
at such time (i) there shall have occurred any event of which the Guarantor has
actual knowledge that (a) is, or with the giving of notice or the lapse of time,
or both, would be an Indenture Event of Default and (b) in respect of which the
Guarantor shall not have taken reasonable steps to cure, (ii) if such Debentures
are held by the Property Trustee, the Guarantor shall be in default with respect
to its payment of any obligations under this Series A Capital Securities
Guarantee or (iii) the Guarantor shall have given notice of its election of the
exercise of its right to extend the interest payment period pursuant to Section
16.01 of the Indenture and any such extension shall be continuing.
SECTION 6.2 RANKING
This Series A Capital Securities Guarantee will constitute an
unsecured obligation of the Guarantor and will rank (i) subordinate and junior
in right of payment to Senior Indebtedness (as defined in the Indenture), to the
same extent and in the same manner that the Debentures are subordinated to
Senior Indebtedness pursuant to the Indenture, (ii) PARI PASSU with the
Debentures, the Other Debentures, the Common Securities Guarantee and any Other
Guarantee and any Other Common Securities Guarantee, and (iii) senior to the
Guarantor's capital stock.
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ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION
This Series A Capital Securities Guarantee shall terminate (i)
upon full payment of the Redemption Price (as defined in the Declaration) of all
Series A Capital Securities, (ii) upon liquidation of the Issuer, the full
payment of the amounts payable in accordance with the Declaration or the
distribution of the Debentures to the Holders and the holders of the Common
Securities or (iii) upon exchange of all the Series A Capital Securities for the
Series B Capital Securities in the Exchange Offer. Notwithstanding the
foregoing, this Capital Securities Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any Holder must restore
payment of any sums paid under the Series A Capital Securities or under this
Series A Capital Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 EXCULPATION
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this Series
A Capital 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 Series A Capital 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 might properly be paid.
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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, damage, claim or expense incurred without negligence or bad faith on
its part, 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
Series A Capital Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 SUCCESSORS AND ASSIGNS
All guarantees and agreements contained in this Series A
Capital Securities Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Guarantor and shall inure to the benefit of
the Holders then outstanding.
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 Series A Capital Securities Guarantee may only be amended
with the prior approval of the Holders of a Majority in liquidation amount of
the Securities (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). The provisions of the Declaration
with respect to consents to amendments thereof (whether at a meeting or
otherwise) shall apply to the giving of such approval.
SECTION 9.3 NOTICES
All notices provided for in this Series A Capital 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 Issuer, in care of the Administrative
Trustee at the Issuer's mailing address set forth below (or such other address
as the Issuer may give notice of to the Holders and the Capital Securities
Guarantee Trustee):
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OnBank Capital Trust I
c/o ONBANCORP, INC.
P.O. Box 4983
Syracuse, New York 13221-4983
Attention: William M. LeBeau
Administrative Trustee
Telecopy: (315) 424-5951
(b) If given to the Capital Securities Guarantee Trustee, at
the Capital Securities Guarantee Trustee's mailing address set forth below (or
such other address as the Capital Securities Guarantee Trustee may give notice
of to the Holders and the issuer):
The Bank of New York
101 Barclay Street, 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Telecopy: (212) 815-5915
(c) 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 and the Capital Securities Guarantee Trustee):
ONBANCorp, Inc.
101 South Salina Street
Syracuse, New York 13202
Attention: Robert J. Berger
Senior Vice President, Treasurer
and Chief Financial Officer
Telecopy: (315) 424-5951
(d) If given to any Holder, at the address set forth on the
books and records of the Issuer.
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 EXCHANGE OFFER
In the event an Exchange Offer Registration Statement (as
defined in the Registration Rights Agreement) becomes effective and the Issuer
issues any Series B Capital Securities in the Exchange Offer, the Guarantor will
enter into a new capital securities guarantee agreement, in substantially the
same form as
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this Series A Capital Securities Guarantee, with respect to the Series B Capital
Securities.
SECTION 9.5 BENEFIT
This Series A Capital Securities Guarantee is solely for the
benefit of the Holders and, subject to Section 3.1(a), is not separately
transferable from the Series A Capital Securities.
SECTION 9.6 GOVERNING LAW
THIS SERIES A CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
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THIS SERIES A CAPITAL SECURITIES GUARANTEE is executed as of the day and year
first above written.
ONBANCORP, INC., as Guarantor
By: /s/ Robert J. Berger
-----------------------------
Name: Robert J. Berger
Title: Senior Vice President,
Treasurer & Chief
Financial Officer
THE BANK OF NEW YORK, as Capital
Securities Guarantee Trustee
By: /s/ Walter Gitlin
-----------------------------
Name: Walter Gitlin
Title: Authorized Signatory
<PAGE>
EXHIBIT 4.21
AMENDMENT TO SERIES A CAPITAL SECURITIES GUARANTEE AGREEMENT
This Amendment to Series A Capital Securities Guarantee
Agreement (the "Amendment") is made as of December 17, 1999 by and between
Olympia Financial Corp., a Delaware corporation, and The Bank of New York, a New
York banking corporation.
WITNESSETH
WHEREAS, Olympia Financial Corp., successor by merger to
ONBANCorp, Inc., (the "Guarantor"), and The Bank of New York, as trustee (in
such capacity, the "Capital Securities Guarantee Trustee") previously entered
into a Series A Capital Securities Guarantee Agreement dated as of February 4,
1997 (the "Guarantee Agreement") by which the Guarantor agreed to make certain
payments to the Holders of Series A Capital Securities issued pursuant to an
Amended and Restated Declaration of Trust dated as of February 4, 1997 by and
between Guarantor, in its capacity as Sponsor, The Bank of New York, as property
trustee, and The Bank of New York (Delaware), a Delaware banking corporation, as
Delaware trustee; and
WHEREAS, ONBANCorp, Inc. has been merged with and into Olympia
Financial Corp., a wholly owned subsidiary of M&T Bank Corporation, a New York
corporation; and
WHEREAS, the Administrative Trustees of the Trust have changed
the name of the Trust from "OnBank Capital Trust I" to "M&T Capital Trust III;"
and
WHEREAS, the Guarantor and the Guarantee Trustee desire to
amend the Guarantee Agreement to provide for the change of the Guarantor from
"ONBANCorp, Inc." to "Olympia Financial Corp.," and the name of the Trust from
"OnBank Capital Trust I" to "M&T Capital Trust III."
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 to this
Amendment, for the benefit of the other parties and for the benefit of the
Holders, hereby amends the Guarantee Agreement, and agrees, intending to be
legally bound, as follows:
SECTION 1. DEFINITIONS.
1.1. For all purposes of this Amendment, except as otherwise
expressly provided, terms used but not defined in this Amendment shall have the
meanings assigned to them in the Guarantee Agreement.
1.2. The definition of "Guarantor" in the preamble of the
Guarantee Agreement is amended to mean Olympia Financial Corp., a Delaware
corporation.
<PAGE>
1.3. The definition of "Issuer" in the preamble of the
Guarantee Agreement is amended to read "M&T Capital Trust III."
SECTION 2. MISCELLANEOUS.
2.1. CONTINUING AGREEMENT. The Guarantee Agreement shall not
be amended by this Amendment except as specifically provided in this Amendment
and, amended as so specifically provided, the Guarantee Agreement shall remain
in full force and effect. References in the Guarantee Agreement to "this
Guarantee Agreement" shall be deemed to be references to the Guarantee Agreement
as amended by this Amendment.
2.2. CONFLICTS. In the event of a conflict between the terms
and conditions of the Guarantee Agreement and the terms and conditions of this
Amendment, the terms and conditions of this Amendment shall prevail.
2.3. COUNTERPART ORIGINALS. The parties may sign any number of
copies of this Amendment. Each signed copy shall be an original, but all of them
together represent the same agreement.
2.4. HEADINGS, ETC. The headings of the sections of this
Amendment have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
IN WITNESS WHEREOF the parties have caused this Amendment to
be executed as of the day and year first above written.
OLYMPIA FINANCIAL CORP.
as Guarantor
By: /s/ Michael P. Pinto
-----------------------------------
Michael P. Pinto
Chairman of the Board and President
THE BANK OF NEW YORK
as Guarantee Trustee,
and not in its individual capacity
By: /s/ Iliana A. Arciprete
-----------------------------------
Iliana A. Arciprete
Assistant Treasurer
-2-
<PAGE>
EXHIBIT 10.1
===============================================================================
U.S. $30,000,000
CREDIT AGREEMENT
Dated as of November 19, 1999
between
M & T BANK CORPORATION
AS BORROWER
and
CITIBANK, N.A.
AS LENDER
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms.........................................1
SECTION 1.02. Types of Advances.............................................9
SECTION 1.03 Accounting Terms and Determinations...........................9
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Commitment...............................................10
SECTION 2.02. Advances.....................................................10
SECTION 2.03. Interest Elections...........................................10
SECTION 2.04. Termination, Reduction and Extension of the Commitment.......11
SECTION 2.05. Repayment of Advances; Note..................................12
SECTION 2.06. Prepayment of Advances.......................................12
SECTION 2.07 Facility Fees; Utilization Fees..............................13
SECTION 2.08. Interest.....................................................13
SECTION 2.09. Alternate Rate of Interest...................................14
SECTION 2.10. Increased Costs..............................................15
SECTION 2.11. Break Funding Payments.......................................15
SECTION 2.12. Taxes........................................................16
SECTION 2.13. Payments Generally...........................................16
ARTICLE III CONDITIONS OF LENDING
SECTION 3.01. Condition Precedent to Initial Advance.......................17
SECTION 3.02. Conditions Precedent to Each Advance.........................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Organization; Powers.........................................18
SECTION 4.02. Authorization; Enforceability................................18
SECTION 4.03. Government Approvals; No Conflicts...........................18
SECTION 4.04. Financial Condition; No Material Adverse Change..............19
SECTION 4.05. Year 2000....................................................19
SECTION 4.06. Litigation...................................................19
SECTION 4.07. Compliance with Laws and Agreements..........................19
SECTION 4.08. Investment and Holding Company Status........................19
SECTION 4.09. Margin Regulations...........................................19
SECTION 4.10. Taxes........................................................19
SECTION 4.11. Environmental Matters........................................20
SECTION 4.12. Existing Agreement...........................................20
SECTION 4.13. Solvency.....................................................20
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE V COVENANTS OF THE BORROWER
SECTION 5.01. General Covenants............................................20
SECTION 5.02. Financial Covenants..........................................26
ARTICLE VI EVENTS OF DEFAULT
SECTION 6.01. Events of Default............................................27
ARTICLE VII MISCELLANEOUS
SECTION 7.01. Amendments, Etc..............................................29
SECTION 7.02. Notices, Etc.................................................29
SECTION 7.03. No Waiver; Remedies..........................................29
SECTION 7.04. Costs, Expenses and Indemnification..........................29
SECTION 7.05. Assignments and Participations...............................30
SECTION 7.06. Governing Law; Submission to Jurisdiction....................30
SECTION 7.07. Severability.................................................31
SECTION 7.08. Execution in Counterparts....................................31
SECTION 7.09. Survival.....................................................31
SECTION 7.10. Waiver of Jury Trial.........................................31
SECTION 7.11. No Fiduciary Relationship....................................31
SECTION 7.12. No Reliance..................................................31
SCHEDULES
Schedule I - Existing Credit Agreements/Existing Liens
EXHIBITS
Exhibit A - Form of Note
</TABLE>
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<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of November 19, 1999, between M & T BANK
CORPORATION, a New York corporation (the "BORROWER"), and CITIBANK, N.A. (the
"LENDER"), a national bank.
The Borrower has requested that the Lender make Advances to it in an
aggregate principal amount up to but not exceeding $30,000,000 at any one time
outstanding, and the Lender is prepared to make such Advances on and subject to
the terms and conditions hereof. Accordingly, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ADVANCE" means each advance by the Lender to the Borrower pursuant to
Section 2.01.
"AFFILIATE" means any Person that, directly or indirectly, controls,
is controlled by or is under common control with the Borrower. For purposes of
this definition, the term "CONTROL" (including the terms "CONTROLLING",
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH") of a Person shall mean the
possession, direct or indirect, of the power to vote 10% or more of the Voting
Stock of such Person or to direct or cause the direction of the management and
policies of such Person, whether through the ownership of such Voting Stock, by
contract or otherwise. Notwithstanding the foregoing, no individual shall be
deemed to be an Affiliate solely by reason of his or her being an officer or
director of the Borrower and the Borrower and the Subsidiaries shall not be
deemed to be Affiliates of each other.
"APPLICABLE FACILITY FEE RATE" means 0.11% per annum.
"APPLICABLE LENDING OFFICE" means the office of the Lender specified
on the signature page hereof, or such other office of the Lender as the Lender
may from time to time specify to the Borrower.
"APPLICABLE MARGIN" means (a) with respect to Base Rate Advances, 0%
per annum and (b) with respect to LIBO Rate Advances, 0.34% per annum.
"APPLICABLE UTILIZATION FEE RATE" means 0.10% per annum.
<PAGE>
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"BANK SUBSIDIARY" means a Subsidiary of the Borrower that is a bank or
banking institution and shall include any Insured Subsidiary.
"BASE RATE" means a fluctuating interest rate per annum in effect from
time to time which shall at all times be equal to the highest of:
(a) the rate of interest announced publicly by the Lender in New
York, New York, from time to time, as the Lender's Base Rate;
(b) 0.50% per annum above the latest three-week moving average of
secondary market morning offering rates in the United States for three-month
certificates of deposit of major United States money center banks, such
three-week moving average (adjusted to the basis of a year of 365 days) being
determined weekly on each Monday (or, if such day is not a Business Day, on the
next succeeding Business Day) for the three-week period ending on the previous
Friday by the Lender on the basis of such rates reported by certificate of
deposit dealers to and published by the Federal Reserve Bank of New York or, if
such publication shall be suspended or terminated, on the basis of quotations
for such rates received by the Lender from three New York certificate of deposit
dealers of recognized standing selected by the Lender, in either case adjusted
to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent,
to the next higher 1/4 of one percent;
(c) 0.50% per annum above the Federal Funds Rate; and
(d) for the period from and including December 15, 1999 to and
including January 15, 2000, 2% per annum above the "targeted federal funds rate"
(as defined in Regulation A of the Board of Governors of the Federal Reserve
System).
Each change in any interest rate provided for herein based upon the Base Rate
resulting from a change in the Base Rate shall take effect at the time of such
change in the Base Rate.
"BASE RATE ADVANCE" means, at any time, an Advance which bears
interest at the Base Rate.
"BORROWER" means M&T Bank Corporation and its successors and assigns.
"BUSINESS DAY" means (a) a day on which banks are not required or
authorized to close in New York, New York and (b) if the applicable Business Day
relates to any LIBO Rate Advance, on which dealings in deposits are carried on
in the London interbank market.
"CHANGE IN CONTROL" means any of the following events:
(a) the Borrower is merged, consolidated or reorganized into or with
another corporation or other Person, and as a result of such merger,
consolidation or reorganization less than a majority of the combined
voting power of the then outstanding Voting Stock of the corporation
or other Person that is the survivor of such merger, consolidation or
reorganization
<PAGE>
-3-
immediately after such transaction is held in the aggregate by the holders of
Voting Stock of the Borrower immediately prior to such transaction; or
(b) the Borrower sells all or substantially all of its assets to any
other corporation or other Person, and less than a majority of the combined
voting power of the then outstanding Voting Stock of such corporation or other
Person immediately after such transaction is held in the aggregate by the
holders of Voting Stock of the Borrower immediately prior to such sale; or
(c) any "person" or "group" as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable (except
that for purposes of this paragraph (c) such person or group shall not include
the Wilmers Group or its members) is or becomes the "beneficial owner" (as such
term is used in Rule 13d-3 promulgated pursuant to the Exchange Act), directly
or indirectly, of more than 50% of the aggregate voting power of all Voting
Stock of the Borrower, or Mr. Robert G. Wilmers shall, as a result of a sale or
other disposition (other than a share exchange in connection with a merger
otherwise permitted hereby) of shares, cease to own, beneficially and of record,
at least 5% of the aggregate voting power of all Voting Stock of the Borrower;
or
(d) during any period of 13 consecutive calendar months, a majority
of the Board of Directors of the Borrower shall no longer be composed of
individuals (i) who were members of said Board on the first day of such period,
(ii) whose election or nomination to said Board was approved by individuals
referred to in clause (i) above constituting at the time of such election or
nomination at least a majority of said Board or (iii) whose election or
nomination to said Board was approved by individuals referred to in clauses (i)
and (ii) above constituting at the time of such election or nomination at least
a majority of said Board.
"CLOSING DATE" means the date on which the Lender notifies the
Borrower that the conditions precedent set forth in Section 3.01 have been
satisfied.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITMENT" has the meaning specified in Section 2.01.
"COMMITMENT TERMINATION DATE" means the day 364 days after the Closing
Date or, in the event that the Commitment is extended pursuant to Section
2.04(d), the date to which the Commitment is extended; PROVIDED, that if such
day is not a Business Day, the Commitment Termination Date shall be the
immediately preceding Business Day.
"CONSOLIDATED NET WORTH" means the aggregate of the capital stock,
surplus and retained earnings of the Borrower and its Consolidated Subsidiaries,
but excluding treasury stock and capital stock subscribed and unissued, all
determined on a consolidated basis.
"CONSOLIDATED NON-PERFORMING ASSETS" means, on any date, the aggregate
amount of loans and leases that are not accruing interest or that are 90 days or
more past due in the payment of principal and interest, renegotiated or
restructured loans and leases, in substance
<PAGE>
-4-
foreclosures and foreclosed real estate and other foreclosed property of the
Borrower and its Consolidated Subsidiaries on such date.
"CONSOLIDATED RESERVE FOR CREDIT LOSSES" means, on any date, the
consolidated allowance for loan and lease losses for the Borrower and its
Consolidated Subsidiaries on such date.
"CONSOLIDATED SUBSIDIARY" means, at any date, any Subsidiary of the
Borrower the accounts of which would be consolidated with those of the Borrower
in its consolidated financial statements if such statements were prepared in
accordance with GAAP as of such date.
"CONSOLIDATED TANGIBLE NET WORTH" means the Consolidated Net Worth
less the book value of goodwill, patents, trademarks, service marks, trade
names, copyrights, charters, franchises, certificates, permits and licenses and
any other intangible assets of the Borrower and its Consolidated Subsidiaries on
a consolidated basis.
"CONSOLIDATED TOTAL TANGIBLE ASSETS" means, at any time, the aggregate
amount of assets of the Borrower and its Consolidated Subsidiaries determined in
accordance with GAAP less the book value of goodwill, patents, trademarks,
service marks, trade names, copyrights, charters, franchises, certificates,
permits and licenses and any other intangible assets of the Borrower and its
Consolidated Subsidiaries on a consolidated basis.
"DEBT" of any Person means (a) indebtedness of such Person for
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services (excluding, however, trade
accounts payable arising in the ordinary course of business and not overdue),
(d) capital lease obligations of such Person, (e) Debt of others Guaranteed by
such Person, (f) Debt of others secured by a Lien on the property of such
Person, (g) all obligations of such Person to redeem, retire, defease or
otherwise make any payment in respect of shares of capital stock of such Person,
(h) all obligations, contingent or otherwise, of such Person in respect of
letters of credit or acceptances (other than commercial letters of credit in
respect of trade accounts payable and not overdue) and (i) the net liability of
such Person under Hedge Agreements, EXCLUDING, from this definition, other than
for purposes of Section 6.01(d), the Junior Subordinated Debentures issued by
the Borrower in connection with preferred capital securities issued by First
Empire Capital Trust I, a Delaware business trust, First Empire Capital Trust
II, a Delaware business trust, or OnBank Capital Trust I, a Delaware business
trust.
"DEFAULT" means an Event of Default or an event that, with notice or
lapse of time or both, would become an Event of Default.
"DOLLARS" and "$" means lawful money of the United States of America.
"DOUBLE LEVERAGE RATIO" means the ratio of (i) the aggregate
investment of the Borrower in capital stock of its Subsidiaries, including its
interest in undistributed earnings and intangibles (determined in accordance
with GAAP) of its Subsidiaries, to (ii) Consolidated Net Worth of the Borrower.
<PAGE>
-5-
"ENVIRONMENTAL LAWS" means any and all present and future Federal,
state and local laws, rules or regulations, and any orders or decrees, in each
case as now or hereafter in effect, relating to the regulation or protection of
human health, safety or the environment or to emissions, discharges, releases or
threatened releases of Hazardous Materials into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 4143 of the Code.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"EVENTS OF DEFAULT" has the meaning specified in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED TAXES" means, with respect to the Lender or any other
recipient of any payment to be made by or on account of any obligation of the
Borrower hereunder, (a) income or franchise Taxes imposed on (or measured by)
its net income by the United States of America, or by the jurisdiction under the
laws of which such recipient is organized or in which its principal office is
located or, in the case of the Lender, in which its Applicable Lending Office is
located and (b) any branch profits Taxes imposed by the United States of America
or any similar Tax imposed by any other jurisdiction in which the Borrower is
located.
"FEDERAL FUNDS RATE" means, for any day, a fluctuating interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by the
Lender from three Federal funds brokers of recognized standing selected by it.
"GAAP" means generally accepted United States accounting principles.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or
<PAGE>
-6-
pay (or advance or supply funds for the purchase or payment of) such Debt
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise, other than agreements
to purchase goods at an arm's length price in the ordinary course of business)
or (ii) entered into for the purpose of assuring in any other manner the holder
of such Debt of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part); provided, that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "GUARANTEE" used as a verb has a corresponding meaning.
"HAZARDOUS MATERIALS" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"HEDGE AGREEMENT" means any rate, basis, commodity, currency, debt or
equity swap, any cap, collar or floor agreement, or any similar agreement
entered into for the purpose of hedging risk.
"INDEMNIFIED TAXES" means Taxes other than Excluded Taxes.
"INSURED SUBSIDIARY" means any insured depositary institution (as
defined in 12 U.S.C. Section 1813(c)(2) or any successor provision, as amended,
reenacted or redesignated from time to time) that is controlled (within the
meaning of 12 U.S.C. Section 1841(a)(2) or any successor provision as amended,
reenacted or redesignated from time to time) by the Borrower.
"INTEREST PAYMENT DATE" means (a) with respect to any Base Rate
Advance, each Quarterly Date and (b) with respect to any LIBO Rate Advance, the
last day of each Interest Period therefor and, in the case of any Interest
Period that has a duration of more than three months, each day prior to the last
day of such Interest Period that occurs at intervals of three months after the
first day of such Interest Period.
"INTEREST PERIOD" means, with respect to any LIBO Rate Advance, the
period beginning on the date such LIBO Rate Advance is made, or converted from a
Base Rate Advance, or on the last day of the immediately preceding Interest
Period, and ending on the last day of the period selected by the Borrower
pursuant to the provisions below. The duration of each Interest Period in
respect of any LIBO Rate Advance shall be 1, 2, 3 or 6 months as the Borrower
may select as provided in Section 2.03; PROVIDED, HOWEVER, that (i) each
Interest Period that begins on the last Business Day of a calendar month (or on
any day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month, (ii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day,
except that, if such extension would cause the last day of such Interest Period
to occur in the next following calendar month, the last day of such Interest
Period shall occur on the next preceding Business
<PAGE>
-7-
Day, and (iii) any Interest Period that would otherwise extend beyond the
Commitment Termination Date shall end on the Commitment Termination Date.
"LENDER" means Citibank, N.A. and its successors and assigns.
"LIBO RATE" means, with respect to any LIBO Rate Advance, for any
Interest Period:
(a) the offered rate for deposits in Dollars with a maturity
comparable to such Interest Period appearing on Page 3750 of the Telerate
Service of Bridge Information Service (or on any successor or substitute page of
such Service, or any successor to such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Lender from time to time, for purposes of providing quotations
of interest rates applicable to Dollar deposits in the London interbank market)
as of approximately 11:00 a.m. (London time) on the date two Business Days prior
to the commencement of such Interest Period;
(b) if such date does not appear on said Page 3750 (or such
successor), the offered rate for deposits in Dollars with a maturity comparable
to such Interest Period appearing on the display designated on page "LIBO" on
the Reuter Monitor Money Rates Service (or on any successor or substitute page
of such Service, providing rate quotations comparable to those currently
provided on such page of such Service, as determined by the Lender from time to
time, for purposes of providing quotations of interest rates applicable to
Dollar deposits in the London interbank market) as of approximately 11:00 a.m.
(London time) on the date two Business Days prior to the commencement of such
Interest Period; and
(c) in the event that neither rate referred to in clauses (a) or (b)
is available at such time for any reason, an interest rate per annum equal to
the rate per annum at which deposits in Dollars are offered by the principal
office of the Lender in London, England to prime banks in the London interbank
market at approximately 11:00 a.m. (London time) on the date two Business Days
before the first day of such Interest Period in the amount of the Advance if
such Advance were to be outstanding for such Interest Period.
"LIBO RATE ADVANCE" means, at any time, an Advance which bears
interest at a rate based upon the LIBO Rate.
"LIBO RATE RESERVE PERCENTAGE" for any Interest Period for any LIBO
Rate Advance means the effective rate (expressed as a percentage) at which
reserve requirements (including, without limitation, emergency, supplemental and
other marginal reserve requirements) are imposed on the Lender during such
Interest Period (or if more than one such percentage shall be so applicable, the
daily average of such percentages for those days in such Interest Period during
which any such percentage shall be so applicable) under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to such Interest Period.
<PAGE>
-8-
"LIEN" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, condition (financial or otherwise), operations or prospects of the
Borrower or of the Borrower and its Consolidated Subsidiaries taken as a whole,
(ii) the legality, validity or enforceability of this Agreement or the Note or
(iii) the ability of the Borrower to perform its obligations under this
Agreement or the Note in any material respect.
"MULTIEMPLOYER PLAN" means a multiemployer plan defined as such in
Section 4001(a)(3) of ERISA to which contributions have been made by the
Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA.
"NON-PERFORMING ASSET COVERAGE RATIO" means, on any date, the ratio of
(a) Consolidated Net Worth PLUS Consolidated Reserve for Credit Losses on such
date to (b) Consolidated Non-Performing Assets on such date.
"NOTE" has the meaning specified in Section 2.05(b).
"OTHER TAXES" means any and all present or future stamp or documentary
Taxes or any other excise or property Taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERSON" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"PLAN" means an employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate and that is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"QUARTERLY DATE" means the last Business Day of each March, June,
September and December.
"SIGNIFICANT SUBSIDIARY" means (i) any Subsidiary of the Borrower that
would be a "significant subsidiary" within the meaning of Regulation S-X of the
SEC and (ii) any Bank Subsidiary.
"SOLVENT" means, with respect to any Person on a particular date, that
(i) the fair value of the property of such Person is greater than the total
amount of the liabilities, including, without limitation, contingent
liabilities, of such Person, (ii) the present fair salable value of the
<PAGE>
-9-
assets of such Person is not less than the amount that will be required to pay
the probable liability of such Person on its debts as they become absolute and
matured, (iii) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay such debts
and liabilities as they mature, and (iv) such Person is not engaged in business,
and is not about to engage in business, for which such Person's property would
constitute unreasonably small capital.
"SUBSIDIARY" means any Person of which at least a majority of the
Voting Stock is at the time directly or indirectly owned or controlled by the
Borrower or one or more Subsidiaries or by the Borrower and one or more
Subsidiaries.
"TAXES" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any governmental
authority.
"VOTING STOCK" means, at any time, the outstanding securities of any
Person the holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of directors (or persons performing similar
functions) of such Person.
"WILMERS GROUP" means Robert G. Wilmers and the other members of the
group of related Persons described under the caption "PRINCIPAL BENEFICIAL
OWNERS OF SHARES" in the proxy statement of the Borrower relating to its 1999
Annual Meeting of Stockholders.
"YEAR 2000 PROBLEM" means any significant risk that computer hardware
or software used in its essential business systems, process control systems or
other operations of the Borrower will not, in the case of dates or time periods
occurring after December 31, 1999, function adequately so that no Material
Adverse Effect will result from the advent of year 2000.
SECTION 1.02. TYPES OF ADVANCES. The "Type" of an Advance refers to
whether it is at the time a Base Rate Advance or a LIBO Rate Advance.
SECTION 1.03 ACCOUNTING TERMS AND DETERMINATIONS. Except as otherwise
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Lender hereunder shall (unless
otherwise disclosed to the Lender in writing at the time of delivery thereof in
the manner described in subsection (b) below) be prepared, in accordance with
GAAP applied on a basis consistent with those used in the preparation of the
latest financial statements furnished to the Lender hereunder after the date
hereof. All calculations made for the purposes of determining compliance with
the terms of Section 5.02 shall (except as otherwise expressly provided herein)
be made by application of GAAP applied on a basis consistent with those used in
the preparation of the annual or quarterly financial statements furnished to the
Lender pursuant to Section 5.01(g) hereof.
<PAGE>
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ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. THE COMMITMENT. The Lender agrees, on the terms and
conditions hereinafter set forth, to make Advances to the Borrower in Dollars
from time to time on any Business Day during the period from the date hereof
until the Commitment Termination Date in an aggregate principal amount not to
exceed at any one time outstanding $30,000,000 (the "COMMITMENT"). Within the
foregoing limits and subject to the terms and conditions of this Agreement the
Borrower may borrow, prepay and reborrow the amount of the Commitment. Each
Advance shall be in a minimum amount of $1,000,000 or any whole multiple of
$1,000,000 in excess thereof.
SECTION 2.02. ADVANCES. To request an Advance, the Borrower shall give
the Lender irrevocable, written notice of such Advance (i) in the case of a LIBO
Rate Advance, not later than 11:00 a.m. (New York City time) on the third
Business Day prior to the date of such Advance or (ii) in the case of a Base
Rate Advance, not later than 11:00 a.m. (New York City time) on the day of such
Advance. Each such notice shall be by telecopier, telex or cable and shall
specify the requested (i) date of such Advance, which shall be a Business Day,
(ii) Type of Advance, (iii) amount of such Advance and (iv) in the case of an
Advance consisting of a LIBO Rate Advance, initial Interest Period for such
Advance. The Lender will make the proceeds of each Advance available to the
Borrower by crediting the amount thereof, in immediately available funds, to an
account of the Borrower maintained with the Lender in New York City (or such
other account as the Lender and the Borrower may agree) (i) by 12:00 noon (New
York City time) in the case of a LIBO Rate Advance and (ii) by the end of the
same Business Day, if possible, in the case of a Base Rate Advance.
SECTION 2.03. INTEREST ELECTIONS. Each Advance initially shall be of
the Type specified in the notice of such Advance and, in the case of a LIBO Rate
Advance, shall have an initial Interest Period as specified in such notice.
Thereafter, the Borrower may elect to convert such Advance to a different Type
or to continue such Advance as the same Type and, in the case of a LIBO Rate
Advance, may elect Interest Periods therefor, all as provided in this Section
2.03. The Borrower may elect different options with respect to different
portions of the affected Advance, in which case each such portion shall be
considered a separate Advance (PROVIDED, that each such portion, in the case of
a LIBO Rate Advance, shall be in a minimum amount of $1,000,000 or any whole
multiple of $1,000,000 in excess thereof). To make an election pursuant to this
Section 2.03, the Borrower shall notify the Lender of such election by telephone
by the time that a notice of Advance would be required under Section 2.02 if the
Borrower were requesting an Advance of the Type resulting from such election to
be made on the effective date of such election. Each such telephonic election
shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Lender of a written interest election request in a form approved
by the Lender and signed by the Borrower. Each telephonic and written interest
election request shall specify the following information:
(i) the Advance to which such interest election request
applies and, if different options are being elected with respect to different
portions thereof, the portions thereof to be
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allocated to each resulting Advance (in which case the information to be
specified pursuant to clauses (iii) and (iv) of this paragraph shall be
specified for each resulting Advance);
(ii) the effective date of the election made pursuant to such interest
election request, which shall be a Business Day;
(iii) whether the resulting Advance is to be a Base Rate Advance or a
LIBO Rate Advance, or a specified combination thereof; and
(iv) if the resulting Advance is a LIBO Rate Advance, the Interest
Period to be applicable thereto after giving effect to such election, which
shall be a period contemplated by the definition of the term "Interest Period".
If any such interest election request requests a LIBO Rate Advance but does not
specify an Interest Period, then the Borrower shall be deemed to have selected
an Interest Period of one month's duration. If the Borrower fails to deliver a
timely and complete interest election request with respect to a LIBO Rate
Advance prior to the end of the Interest Period applicable thereto, then, unless
such Advance is repaid as provided herein, at the end of such Interest Period
such Advance shall be converted to a Base Rate Advance. Notwithstanding any
contrary provision hereof, if an Event of Default has occurred and is continuing
and the Lender so notifies the Borrower, then, so long as an Event of Default is
continuing (i) no outstanding Advance may be converted to or continued as a LIBO
Rate Advance and (ii) unless repaid, each LIBO Rate Advance shall be converted
to a Base Rate Advance at the end of the Interest Period applicable thereto.
SECTION 2.04. TERMINATION, REDUCTION AND EXTENSION OF THE COMMITMENT.
(a) Unless previously terminated, the Commitment shall automatically
terminate on the Commitment Termination Date.
(b) The Borrower shall have the right to terminate or reduce the
Commitment at any time or from time to time; PROVIDED, that (i) the Borrower
shall give irrevocable, written notice of each such termination or reduction to
the Lender at least three Business Days before such termination or reduction,
(ii) each partial reduction shall be in a minimum amount of $5,000,000 or any
whole multiple of $1,000,000 in excess thereof and (iii) the Borrower shall not
terminate or reduce the Commitment if, after giving effect to any concurrent
prepayment of the Advances pursuant to Section 2.06, at any time, the aggregate
outstanding principal amount of the Advances at such time would exceed the
Commitment.
(c) The Commitment once terminated or reduced pursuant to this
Section 2.04 may not be reinstated.
(d) The Borrower may, by written notice to the Lender not less than
30 days and not more than 45 days prior to the Commitment Termination Date then
in effect (the "EXISTING COMMITMENT TERMINATION DATE"), request that the Lender
extend the Commitment Termination Date to the date falling 364 days after the
Existing Commitment Termination Date. The Existing Commitment Termination Date
shall be extended (effective as of the Existing Commitment
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Termination Date) to the date falling 364 days after the Existing Commitment
Termination Date if the Lender so agrees, in its sole discretion; PROVIDED, that
no such extension shall be effective unless (i) no Event of Default or Default
shall have occurred and be continuing on the date of such request or on the
Existing Commitment Termination Date and (ii) the representations and warranties
made by the Borrower in Article IV hereof shall be true on and as of the date of
such request and the Existing Commitment Termination Date with the same force
and effect as if made on and as of such dates (or, if any such representation or
warranty is expressly stated to have been made as of a specific date, as of such
specific date). Each request for extension hereunder by the Borrower shall
constitute a certification by the Borrower to the effect set forth in clauses
(i) and (ii) above (both as of the date of such request and, unless the Borrower
otherwise notifies the Lender prior to the Existing Commitment Termination Date,
as of the Existing Commitment Termination Date). The Lender will notify the
Borrower in writing of its decision not less than 20 days and not more than 30
days prior to the Existing Commitment Termination Date; PROVIDED that in no
event may the Borrower request more than two such extensions. If any such
extension of the Existing Commitment Termination Date shall not become
effective, then the Commitment shall reduce to zero on the Existing Commitment
Termination Date and the Commitment Termination Date shall remain the Existing
Commitment Termination Date.
SECTION 2.05. REPAYMENT OF ADVANCES; NOTE.
(a) The Borrower hereby unconditionally promises to pay to the Lender
the outstanding principal amount of the Advances on the Commitment Termination
Date.
(b) The Advances shall be evidenced by a single promissory note of
the Borrower (the "NOTE") in substantially the form of Exhibit A hereto, dated
the date hereof, payable to the Lender in a principal amount equal to the amount
of the Commitment and otherwise duly completed. The Lender is hereby authorized
by the Borrower to endorse on the schedule (or a continuation thereof) attached
to the Note the date, amount and Type of and the Interest Period (if any) for
each Advance made by the Lender to the Borrower hereunder and the date and the
amount of each payment or prepayment of principal of such Advance received by
the Lender; PROVIDED, that any failure by the Lender to make any such
endorsement shall not affect the obligations of the Borrower under the Note or
hereunder.
SECTION 2.06. PREPAYMENT OF ADVANCES.
(a) The Borrower shall have the right at any time and from time to
time to prepay any Advance in whole or in part, subject to the requirements of
this Section 2.06.
(b) The Borrower shall notify the Lender by telephone (confirmed by
telecopy) of any optional prepayment hereunder (i) in the case of prepayment of
a LIBO Rate Advance, not later than 11:00 a.m. (New York City time) two Business
Days before the date of prepayment or (ii) in the case of prepayment of an Base
Rate Advance, not later than 11:00 a.m. (New York City time) on the date of
prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Advance or portion thereof to
be prepaid. Each partial prepayment of any Advance shall be in a minimum amount
of $1,000,000 or any whole multiple of $1,000,000 in excess thereof and shall be
applied to prepay any outstanding
<PAGE>
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Base Rate Advances before any LIBO Rate Advances. Prepayments shall be
accompanied by accrued interest to the extent required by Section 2.08 and all
amounts payable in connection therewith pursuant to Section 2.11.
(c) If either (i) there shall occur a Change in Control, or (ii) the
Borrower shall, with respect to any Significant Subsidiary, cease to own,
beneficially and of record, a majority of the issued and outstanding Voting
Stock of such Significant Subsidiary, the Borrower shall, within 5 Business Days
of the making of written demand by the Lender, prepay in full the outstanding
Loans together with accrued and unpaid interest thereon and all other amounts
payable hereunder, and upon the giving of such demand the Commitment shall
forthwith terminate. Nothing herein shall require a prepayment by reason of the
transfer of assets of a Significant Subsidiary to the Borrower or another
Significant Subsidiary.
SECTION 2.07 FACILITY FEES; UTILIZATION FEES.
(a) The Borrower shall pay to the Lender a facility fee on the amount
of the Commitment (whether or not utilized) for the period from and including
the date of this Agreement to but not including the earlier of the date such
Commitment is terminated or the Commitment Termination Date, at a rate per annum
equal to the Applicable Facility Fee Rate. Accrued facility fee shall be payable
in arrears on each Quarterly Date and on the earlier of the date the Commitment
terminates and the Commitment Termination Date. All facility fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).
(b) The Borrower shall pay to the Lender a utilization fee on the
aggregate outstanding principal amount of the Advances during any period that
the aggregate outstanding principal amount of the Advances exceeds an amount
equal to 50% of the aggregate amount of the Commitment, at a rate per annum
equal to the Applicable Utilization Fee Rate. Accrued utilization fee shall be
payable on each day on which a payment of interest is due under Section 2.08.
All utilization fees shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).
SECTION 2.08. INTEREST.
(a) Each Base Rate Advance shall bear interest at a rate per annum
equal to the Base Rate plus the Applicable Margin.
(b) Each LIBO Rate Advance shall bear interest during each Interest
Period therefor at a rate per annum equal to the LIBO Rate for such Interest
Period plus the Applicable Margin.
(c) Notwithstanding clauses (a) and (b) above, during any period that
an Event of Default has occurred and is continuing, the Borrower agrees to pay
to the Lender interest at a rate per annum equal to (i) in the case of any
principal of any Advance, 2% per annum PLUS the rate otherwise applicable to
such Advance as provided above or (ii) in the case of any other amount, 2% per
annum above the Base Rate.
<PAGE>
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(d) Accrued interest on each Advance shall be payable in arrears on
each Interest Payment Date for such Advance and upon termination of the
Commitment; PROVIDED, that (i) interest accrued pursuant to paragraph (c) of
this Section 2.08 shall be payable on demand, (ii) in the event of any repayment
or prepayment of any Advance, accrued interest on the principal amount repaid or
prepaid shall be payable on the date of such repayment or prepayment and (iii)
in the event of any conversion of any LIBO Rate Advance prior to the end of the
then current Interest Period therefor, accrued interest on such Advance shall be
payable on the effective date of such conversion.
(e) The Borrower agrees to pay to the Lender, so long as the Lender
shall be required under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (or the equivalent),
additional interest on the unpaid principal amount of each LIBO Rate Advance,
from the date of such LIBO Rate Advance until such principal amount is paid in
full, at an interest rate per annum equal at all times to the remainder obtained
by subtracting (i) the LIBO Rate for the then current Interest Period for such
LIBO Rate Advance from (ii) the rate obtained by dividing such LIBO Rate by a
percentage equal to 100% MINUS the LIBO Rate Reserve Percentage for such
Interest Period, payable on each date on which interest is payable on such LIBO
Rate Advance. A certificate of the Lender setting forth the amount to which the
Lender is then entitled under this Section 2.08(e) shall be conclusive and
binding on the Borrower in the absence of manifest error.
(f) All computations of interest based on the Base Rate shall be made
on the basis of a year of 365 or 366 days, as the case may be, and all
computations of interest based on the LIBO Rate and computations of interest
pursuant to Section 2.08(e) shall be made on the basis of a year of 360 days, in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest is payable.
SECTION 2.09. ALTERNATE RATE OF INTEREST. If prior to the commencement
of any Interest Period for a LIBO Rate Advance the Lender determines (which
determination shall be conclusive absent manifest error) that:
(a) adequate and reasonable means do not exist for ascertaining the
LIBO Rate for such Interest Period; or
(b) the LIBO Rate for such Interest Period will not adequately and
fairly reflect the cost to the Lender of making or maintaining such Advance for
such Interest Period;
then the Lender shall give notice thereof to the Borrower by telephone or
telecopy as promptly as practicable thereafter certifying the reasons for its
determination and, until the Lender notifies the Borrower that the circumstances
giving rise to such notice no longer exist, (i) any interest election request
that requests the conversion of any Advance to, or continuation of any Advance
as, a LIBO Rate Advance shall be ineffective and (ii) if any notice of Advance
requests a LIBO Rate Advance, such Advance shall be made as a Base Rate Advance.
<PAGE>
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SECTION 2.10. INCREASED COSTS.
(a) If, due to either (i) the introduction of or any change (other
than any change by way of imposition or increase of reserve requirements
included in the LIBO Rate Reserve Percentage) in or in the interpretation of (to
the extent any such introduction or change occurs after the date hereof) any law
or regulation or (ii) the compliance with any guideline or request of any
central bank or other governmental authority adopted or made after the date
hereof (whether or not having the force of law), there shall be any increase in
the cost to the Lender of agreeing to make or making, funding or maintaining
LIBO Rate Advances, the Borrower shall from time to time, within 30 days after
delivery by the Lender to the Borrower of a certificate as to such change or
required compliance and the amount of such increased cost, pay to the Lender the
amount of the increased costs set forth in such certificate (which certificate
shall be conclusive and binding on the Borrower in the absence of manifest
error).
(b) If the Lender determines that compliance with any law or
regulation enacted or introduced after the date hereof or any guideline or
request of any central bank or other governmental authority adopted or made
after the date hereof (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by the Lender
or any corporation controlling the Lender and that the amount of such capital is
increased by or based upon the existence of the Lender's Commitment and other
commitments of this type, or the Advances, then, the Borrower shall, within 30
days after delivery by the Lender to the Borrower of a certificate as to such
required compliance, pay to the Lender the amount required to compensate the
Lender therefor (a certificate of the Lender as to such amount to be conclusive
and binding on the Borrower in the absence of manifest error).
SECTION 2.11. BREAK FUNDING PAYMENTS. In the event of (a) the payment
of any principal of any LIBO Rate Advance other than on the last day of an
Interest Period therefor (including without limitation as a result of an Event
of Default), (b) the conversion of any LIBO Rate Advance other than on the last
day of an Interest Period therefor or (c) the failure to borrow, convert,
continue or prepay any Advance on the date specified in any notice delivered
pursuant hereto, then, in any such event, the Borrower shall compensate the
Lender for the loss, cost and expense attributable to such event, which shall be
the amount, as reasonably determined by the Lender, equal to the excess, if any,
of (i) the LIBO Rate for the balance of such Interest Period (or for the
Interest Period that would have commenced on such borrowing, conversion,
continuation or prepayment), over (ii) the amount of interest that the Lender
would earn on such principal amount for the balance of such Interest Period (or
for such Interest Period) if the Lender were to invest such principal amount for
such period at the interest rate that would be bid by the Lender (or an
Affiliate of the Lender) for Dollar deposits from other banks in the Eurodollar
market at the commencement of such period. A certificate of the Lender setting
forth any amount or amounts that the Lender is entitled to receive pursuant to
this Section 2.11 shall be delivered to the Borrower and shall be conclusive
absent manifest error. The Borrower shall pay the Lender the amount shown as due
on any such certificate within 15 days after receipt thereof.
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SECTION 2.12. TAXES.
(a) Any and all payments by or on account of any obligation of the
Borrower hereunder shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; PROVIDED, that if the Borrower shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.12) the Lender receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make
such deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant governmental authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant governmental authority in accordance with applicable law.
(c) The Borrower shall indemnify the Lender, within 15 days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section 2.12) paid by the Lender and
any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant governmental authority.
A certificate as to the amount of such payment or liability delivered to the
Borrower by the Lender shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a governmental authority, the Borrower shall
deliver to the Lender the original or a certified copy of a receipt issued by
such governmental authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Lender.
(e) The Lender agrees to use reasonable efforts, consistent in its
opinion with applicable law and with its policies, to minimize to the extent
reasonably possible any applicable Taxes.
SECTION 2.13. PAYMENTS GENERALLY.
(a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest or fees, or under Section 2.10, 2.11
or 2.12, or otherwise) prior to 12:00 noon (New York City time) on the date when
due, in Dollars and immediately available funds, without set-off or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Lender, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Lender at its office at 399 Park Avenue, New York, New York
10043. If any payment hereunder shall be due on a day that is not a Business
Day, the date for payment shall be extended to the next succeeding Business Day
and, in the case of any payment accruing interest, interest thereon shall be
payable for the period of such extension.
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(b) If at any time insufficient funds are received by and available
to the Lender to pay fully all amounts of principal, interest and fees then due
hereunder, such funds shall be applied first, to pay interest then due
hereunder, then to pay fees and other amounts (other than principal) hereunder,
then to pay principal due hereunder.
(c) Without limiting any of the obligations of the Borrower or
the rights of the Lender hereunder, if the Borrower shall fail to pay when due
(whether at stated maturity, by acceleration or otherwise) any amount payable by
it hereunder or under the Note, the Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by applicable law, without
prior notice to the Borrower (which notice is expressly waived by the Borrower
to the fullest extent permitted by applicable law), to set off and appropriate
and apply against such amount any and all deposits (general or special, time or
demand, provisional or final, in any currency, matured or unmatured) with, and
any other obligations at any time held or owing by, the Lender or any branch or
agency thereof to or for the credit or account of the Borrower. The Lender shall
promptly provide notice to the Borrower of such set-off; PROVIDED, that failure
by the Lender to provide such notice to the Borrower shall not give the Borrower
any cause of action or right to damages or affect the validity of such set-off
and application. The rights of the Lender under this Section are in addition to
any other rights and remedies (including, without limitation, any other rights
of set-off) that the Lender may have.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. CONDITION PRECEDENT TO INITIAL ADVANCE. The obligation
of the Lender to make its initial Advance is subject to the condition precedent
that the Lender shall have received, on or before November 23, 1999, the
following documents, each (unless otherwise specified below) dated the Closing
Date and in form and substance satisfactory to the Lender:
(a) The Note, duly executed by the Borrower, payable to the order of
the Lender in the principal amount of the Commitment.
(b) Certified copies of (x) the charter and by-laws of the Borrower
(or equivalent documents) of the Borrower, (y) the resolutions of the Board of
Directors of the Borrower authorizing and approving this Agreement and the Note
and (z) all documents evidencing other necessary corporate action, if any, with
respect to this Agreement and the Note.
(c) A certificate of the Borrower certifying the names and true
signatures of the officers of the Borrower authorized to sign this Agreement,
the Note and any other documents to be delivered hereunder.
(d) A certificate of the Secretary of the State of New York dated a
date reasonably close to the date hereof as to the good standing of and charter
documents filed by the Borrower.
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(e) A favorable written opinion of Richard A. Lammert, Esq., Senior
Vice President and General Counsel of the Borrower, covering such matters
relating to this Agreement and the Note as the Lender may require.
(f) A favorable written opinion of Milbank, Tweed, Hadley & McCloy
LLP, special New York counsel for the Lender, covering such matters relating to
the transactions contemplated hereby as the Lender may require.
SECTION 3.02. CONDITIONS PRECEDENT TO EACH ADVANCE. The obligation of
the Lender to make each Advance (including, without limitation, the initial
Advance) shall be subject to the further conditions precedent that on the date
of such Advance (a) the representations and warranties set forth in Article IV
are true and correct on and as of the date of such Advance, before and after
giving effect to such Advance and to the application of the proceeds thereof, as
though made on and as of such date and (b) no Default has occurred and is
continuing, or would result from such Advance or from the application of the
proceeds thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender that:
SECTION 4.01. ORGANIZATION; POWERS. Each of the Borrower and each
Significant Subsidiary is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, has all requisite power
and authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.
SECTION 4.02. AUTHORIZATION; ENFORCEABILITY. The execution, delivery
and performance of this Agreement and the Note by the Borrower are within the
Borrower's corporate powers and have been duly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by the
Borrower and constitutes, and the Note when duly executed and delivered for
value will constitute, a legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms, except as such enforceability may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar
laws of general applicability affecting the enforcement of creditors' rights and
(b) the application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 4.03. GOVERNMENT APPROVALS; NO CONFLICTS. The execution,
delivery and performance of this Agreement and the Note by the Borrower (a) do
not require any consent or approval of, registration or filing with, or any
other action by, any governmental authority, (b) will not violate any applicable
law or regulation or the charter, by-laws or other organizational documents of
the Borrower or any Subsidiary, (c) will not violate or result in a default
under any indenture, agreement or other instrument binding upon the Borrower or
any Subsidiary and (d)
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will not result in the creation or imposition of any Lien on any asset of the
Borrower or any Subsidiary.
SECTION 4.04. FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE. The
Borrower has heretofore furnished to the Lender its audited consolidated balance
sheet and statements of income, stockholders' equity and cash flows as of and
for the fiscal year ended December 31, 1998, with the opinion thereon of
Pricewaterhouse Coopers LLP. Such financial statements present fairly the
consolidated financial position and consolidated results of operations and cash
flows of the Borrower and its Consolidated Subsidiaries as of such date and for
such period in accordance with GAAP. Since December 31, 1998, no event or
circumstance has occurred that has had or could reasonably be expected to have a
Material Adverse Effect.
SECTION 4.05. YEAR 2000. The Borrower has reviewed and is currently
completing a detailed analysis of its operations with a view to assessing
whether it or any Subsidiary will be vulnerable to a Year 2000 Problem. Based on
such review, the Borrower does not believe that a Material Adverse Effect will
result from a Year 2000 Problem.
SECTION 4.06. LITIGATION. There are no actions, suits or proceedings
by or before any arbitrator or governmental authority now pending against or, to
the knowledge of the Borrower, threatened against or affecting the Borrower or
any Subsidiary (i) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect or (ii)
that involve this Agreement or the Note or the transactions contemplated hereby
or thereby.
SECTION 4.07. COMPLIANCE WITH LAWS AND AGREEMENTS. The Borrower and
each Significant Subsidiary are in compliance with all applicable laws
(including without limitation Environmental Laws, Tax laws and ERISA),
regulations and orders of any governmental authority and all indentures,
agreements and other instruments to which any of them is a party, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 4.08. INVESTMENT AND HOLDING COMPANY STATUS. Neither the
Borrower nor any Significant Subsidiary is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION 4.09. MARGIN REGULATIONS. On the date hereof and immediately
after applying the proceeds of each Advance, not more than 25% of the value of
the assets subject to Section 5.01(j) or Section 5.01(l) hereof is represented
by margin stock as defined in Regulation U or X of the Board of Governors of the
Federal Reserve System.
SECTION 4.10. TAXES. The Borrower and each Significant Subsidiary have
filed (or have obtained extensions of the time by which they are required to
file) all United States Federal income Tax returns and all other material Tax
returns required to be filed by them and have paid all Taxes shown due on the
returns so filed as well as all other material Taxes, assessments and
governmental charges which have become due, except such Taxes, if any, as are
being contested in good faith and as to which adequate reserves have been
provided.
<PAGE>
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SECTION 4.11. ENVIRONMENTAL MATTERS. Each of the Borrower and each
Significant Subsidiary has obtained all environmental, health and safety
permits, licenses and other authorizations required under all Environmental Laws
to carry on its business as now being or as proposed to be conducted, except to
the extent failure to have any such permit, license or authorization could not
reasonably be expected to have a Material Adverse Effect. Each of such permits,
licenses and authorizations is in full force and effect and each of the Borrower
and each Significant Subsidiary is in compliance with the terms and conditions
thereof, and is also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in any applicable Environmental Law or in any regulation,
code, plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder, except to the extent failure to
comply therewith could not (either individually or in the aggregate) reasonably
be expected to have a Material Adverse Effect.
SECTION 4.12. EXISTING AGREEMENT. Schedule I hereto is a complete and
correct list of each credit agreement, loan agreement, indenture or other
similar arrangement providing for or otherwise relating to any Debt or any
extension of credit (or commitment for any extension of credit) to the Borrower
or any Significant Subsidiary outstanding on the date hereof.
SECTION 4.13. SOLVENCY. The Borrower is and, after giving effect to
each Advance and the use of proceeds thereof, will be Solvent.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. GENERAL COVENANTS. So long as any principal of or
interest on any Advance or any other amount payable hereunder or under the Note
remains outstanding or the Commitment remains in effect, the Borrower covenants
and agrees that:
(a) The Borrower will, and will cause each Significant Subsidiary to,
do or cause to be done all things necessary (i) to preserve its legal existence
and (ii) to preserve, renew and keep in full force and effect in all material
respects the rights, licenses, permits, privileges and franchises material to
the conduct of its business; PROVIDED, that the foregoing shall not prohibit any
merger, consolidation, liquidation or dissolution permitted under Section
5.01(j).
(b) The Borrower will, and will cause each Significant Subsidiary to,
pay its obligations, including Tax liabilities, that, if not paid, could result
in a Material Adverse Effect before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) the Borrower or such Significant
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (c) the failure to make payment pending such contest
could not reasonably be expected to result in a Material Adverse Effect.
(c) The Borrower will, and will cause each Significant Subsidiary to,
comply with all applicable laws, statutes, rules, regulations and orders of,
including without limitation all
<PAGE>
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applicable Environmental Laws, Tax laws and ERISA, except for any non-compliance
which could not (either individually or in the aggregate) reasonably be expected
to have a Material Adverse Effect.
(d) The Borrower will, and will cause each Significant Subsidiary to,
keep adequate records and books of account, in which complete entries will be
made in accordance with GAAP, and permit representatives of the Lender, upon
reasonable prior notice, to examine, copy and make extracts from its books and
records, to inspect any of its property, and to discuss its business and affairs
with its officers, all at such reasonable times and as often as reasonably
requested by the Lender.
(e) The Borrower will, and will cause each Significant Subsidiary to,
preserve and maintain its property in good repair, working order and condition
and from time to time make all needful and proper repairs, renewals,
replacements, additions, betterments and improvements thereto, except in each
case where the failure to do so could not (either individually or in the
aggregate) reasonably be expected to have a Material Adverse Effect.
(f) The Borrower will, and will cause each Significant Subsidiary to,
maintain insurance with financially sound and reputable insurance companies, and
with respect to property and risks of a character usually maintained by
corporations engaged in the same or similar business similarly situated, against
loss, damage and liability of the kinds and in the amounts customarily
maintained by such corporations.
(g) The Borrower will furnish to the Lender:
(i) as soon as available and in any event within 100 days after
the end of each fiscal year of the Borrower, the consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as at the end
of such year and the consolidated statements of income and cash flows
of the Borrower and its Consolidated Subsidiaries for such year, with
the unqualified opinion thereon of an independent public accountant of
recognized national standing;
(ii) as soon as available and in any event within 55 days after
the end of each of the first three fiscal quarters of the Borrower,
consolidated statements of income, retained earnings and cash flow of
the Borrower and its Consolidated Subsidiaries for such fiscal quarter
and for the portion of the fiscal year ended at the end of such fiscal
quarter, and the related consolidated balance sheet as at the end of
such fiscal quarter, setting forth in each case in comparative form
the corresponding figures for the previous fiscal year and
accompanied, in each case, by a certificate of the chief financial
officer of the Borrower which certificate shall state that said
consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries in accordance with GAAP (except for the
absence of footnotes) consistently applied as at the end of, and for,
such fiscal quarter (subject to normal year-end audit adjustments);
<PAGE>
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(iii) as soon as possible and in any event within five days after
the occurrence of any Default, a statement of the chief financial
officer of the Borrower setting forth details of such Default and the
action which the Borrower has taken and proposes to take with respect
thereto;
(iv) promptly upon their becoming available, the "Consolidated
Reports of Condition and Income" of the Bank Subsidiaries, the "Parent
Company Only Financial Statements for Bank Holding Companies" (report
no. FR Y-9LP or any successor form of the Federal Reserve System) of
the Borrower and the "Consolidated Financial Statements for Bank
Holding Companies" (report no. FR Y-9C) of the Borrower;
(v) promptly upon the mailing thereof to the shareholders of
the Borrower generally, copies of all financial statements, reports
and proxy statements so mailed;
(vi) as soon as possible, and in any event within ten days after
the Borrower knows or has reason to know that any of the events or
conditions specified below with respect to any Plan or Multiemployer
Plan have occurred or exist, a statement signed by a senior financial
officer of the Borrower setting forth details respecting such event
or condition and the action, if any, which the Borrower or its ERISA
Affiliate proposes to take with respect thereto (and a copy of any
report or notice required to be filed with or given to PBGC by the
Borrower or an ERISA Affiliate with respect to such event or
condition):
(i) any reportable event, as defined in Section 4043(c) of
ERISA and the regulations issued thereunder, with respect to a
Plan, as to which PBGC has not by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified
within 30 days of the occurrence of such event (PROVIDED, that
a failure to meet the minimum funding standard of Section 412
of the Code or Section 302 of ERISA shall be a reportable event
regardless of the issuance of any waivers in accordance with
Section 412(d) of the Code);
(ii) the distribution under Section 4041 of ERISA of a
notice of intent to terminate any Plan or the termination of
any Plan, other than a Plan separately maintained by an
entity that becomes an ERISA Affiliate after the date hereof
and which has been an ERISA Affiliate for less than one year at
the time such notice of intent is filed; PROVIDED, that such
notice does not relate to a "distress termination" described
in Section 4041(c) of ERISA;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Borrower
or any ERISA Affiliate of a notice from a Multiemployer Plan
that such action has been taken by PBGC with respect to such
Multiemployer Plan;
(iv) the complete or partial withdrawal by the Borrower
or any ERISA Affiliate under Section 4201 or 4204 of ERISA from
a Multiemployer Plan, or the receipt
<PAGE>
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by the Borrower or any ERISA Affiliate of notice from a
Multiemployer Plan that is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends
to terminate or has terminated under Section 4041A of ERISA;
and
(v) the institution of a proceeding by a fiduciary of
any Multiemployer Plan against the Borrower or any ERISA
Affiliate to enforce Section 515 of ERISA, which proceeding is
not dismissed within 30 days;
(vii) promptly after the sending or filing thereof, copies of all
reports and registration statements which the Borrower files with the
Securities and Exchange Commission or any national securities
exchange;
(viii) promptly upon the Borrower determining that there has been
the occurrence of any Change in Control or upon the Borrower's ceasing
to own, beneficially and of record, at least a majority of the issued
and outstanding shares of Voting Stock of any Significant Subsidiary,
notice of such event together a reasonably detailed description of
such transaction; and
(ix) such other information respecting the condition or
operations, financial or otherwise, of the Borrower as the Lender may
from time to time reasonably request.
(h) The Borrower shall promptly give to the Lender notice of all
legal or arbitral proceedings, and of all proceedings by or before any
governmental or regulatory authority or agency, affecting the Borrower or any
Significant Subsidiary, except proceedings which would not be likely to have a
Material Adverse Effect.
(i) The Borrower will use the proceeds of the Advances for its
general corporate purposes, including as commercial paper backstop, and/or to
finance the repurchase or redemption of outstanding shares of capital stock of
the Borrower, in compliance with all applicable laws; PROVIDED, that the Lender
shall have no responsibility as to the use of any of such proceeds.
(j) The Borrower shall not sell or otherwise dispose of all or
any substantial portion of the shares of the capital stock of any of its
Significant Subsidiaries, and neither the Borrower nor any of its Significant
Subsidiaries shall sell, lease or otherwise dispose of all or any substantial
portion of their assets other than in the ordinary course of business, or
liquidate, merge or consolidate with or into any other Person; PROVIDED, that
the Borrower may merge or consolidate with or into another Person if no Default
or Change in Control has occurred and is continuing or would result from such
merger or consolidation and if the Borrower is the surviving company; and
PROVIDED, further, that any Subsidiary may merge or consolidate with or into
another Person if no Default or Change in Control has occurred and is continuing
or would result from such merger or consolidation and if the Subsidiary is the
surviving company; and PROVIDED, further, that any Subsidiary may be liquidated
if the net assets of such Subsidiary are distributed to the Borrower or another
Subsidiary. The Borrower will not, and will not permit any Significant
Subsidiary to, engage to any material extent in any business other than
businesses of the types conducted by the Borrower and its Significant
Subsidiaries on the date
<PAGE>
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hereof and businesses which are otherwise permitted to them under the applicable
provisions of the Bank Holding Company Act of 1956, as amended, the New York
Banking Law, the National Bank Act, the Federal Reserve Act or other applicable
laws.
(k) The Borrower will not, and will not permit any Significant
Subsidiary to, at any time create, assume or suffer to exist any Lien upon or
with respect to any of the capital stock of any Significant Subsidiary.
(l) The Borrower will not, nor will it permit any Significant
Subsidiary to, create, incur, assume or suffer to exist any Lien upon any of its
property, whether now owned or hereafter acquired, except the following (each, a
"PERMITTED LIEN"):
(i) Liens in existence on the date hereof and listed in Schedule I
hereto;
(ii) Liens imposed by any governmental authority for Taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if, unless the amount thereof is not
material with respect to it or its financial condition, adequate reserves
with respect thereto are maintained on the books of the Borrower or its
Significant Subsidiary, as the case may be, in accordance with GAAP;
(iii) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
that are not overdue for a period of more than 30 days or that are being
contested in good faith and by appropriate proceedings and Liens securing
judgments but only to the extent for an amount and for a period not
resulting in an Event of Default under Section 6.01(f) hereof;
(iv) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(v) deposits to secure the performance of bids, trade contracts
(other than for Debt) leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(vi) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of property or minor imperfections in title thereto that, in the
aggregate, are not material in amount, and that do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Borrower or any
Significant Subsidiary;
(vii) Liens arising under escrows, trusts, custodianships, separate
accounts, funds withheld procedures, and similar deposits, arrangements, or
agreements established with respect to insurance policies, annuities,
guaranteed investment contracts and similar products underwritten by, or
reinsurance agreements entered into by, any Insurance Subsidiary in the
ordinary course of business;
<PAGE>
-25-
(viii) Liens on property of any corporation that becomes a Significant
Subsidiary of the Borrower after the date hereof; PROVIDED, that such Liens
are in existence at the time such corporation becomes a Significant
Subsidiary of the Borrower and were not created in anticipation thereof;
(ix) Liens upon real and/or tangible personal property acquired after
the date hereof (by purchase, construction or otherwise) by the Borrower or
any Significant Subsidiary, each of which Liens either (A) existed on such
property before the time of its acquisition and was not created in
anticipation thereof or (B) was created solely for the purpose of securing
Debt representing, or incurred to finance, refinance or refund, the cost
(including the cost of construction) of such property; PROVIDED, that (i)
no such Lien shall extend to or cover any property of the Borrower or such
Significant Subsidiary other than the property so acquired and improvements
thereon and (ii) the principal amount of Debt secured by any such Lien
shall at no time exceed 80% of the fair market value (as determined in good
faith by a senior financial officer of the Borrower) of such property at
the time it was acquired (by purchase, construction or otherwise);
(x) judgment and other similar Liens arising in connection with court
proceedings, PROVIDED, that the execution or other enforcement of such
judgment or other similar Lien is effectively stayed and the claims secured
thereby are being actively contested in good faith and by appropriate
proceedings (without prejudice to Section 6.01(f));
(xi) rights of lessors under capitalized leases;
(xii) Liens on its assets created in connection with the refinancing
of indebtedness secured by Permitted Liens on such assets, PROVIDED, that
the amount of indebtedness secured by any such Lien shall not be increased
as a result of such refinancing and no such Liens shall extend to property
and assets of the Borrower or any Significant Subsidiary not encumbered
prior to any such refinancing;
(xiii) Liens incurred in connection with repurchase agreements; Liens
incurred in connection with asset securitizations; Liens granted to a
Federal Reserve Bank or a Federal Home Loan Bank to secure advances or
other transactions incidental to the banking business of the Borrower or
any Significant Subsidiary, including loans to meet liquidity requirements;
and
(xiv) Liens securing obligations of a Significant Subsidiary to the
Borrower or another Significant Subsidiary.
(m) The Borrower will not, and will not permit any Significant
Subsidiary to, enter into, incur or permit to exist any indenture, agreement,
instrument or other contractual arrangement that, directly or indirectly,
prohibits or restricts, or has the effect of prohibiting or restricting, or
imposes any condition upon the ability of such Significant Subsidiary to declare
or pay any dividend or other distribution on any class of its stock to the
Borrower.
<PAGE>
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(n) The Borrower will take all action reasonable necessary to ensure
that a Year 2000 Problem does not occur.
(o) The Borrower will not, and will not permit any Significant
Subsidiary to, directly or indirectly, (a) make any capital contribution or
extension of credit to an Affiliate, (b) transfer, sell, lease, assign or
otherwise dispose of any assets to an Affiliate, (c) merge into or consolidate
with an Affiliate except as explicitly permitted by Section 5.01(j), or purchase
or acquire assets from an Affiliate or (d) enter into any other transaction,
directly or indirectly, with or for the benefit of an Affiliate (including,
without limitations, guarantees and assumptions of obligations of an Affiliate),
other than transactions (excluding credit extended by the Borrower or any
Significant Subsidiary to an Affiliate) entered into on an arm's-length basis,
on terms no more favorable to such Affiliate than would be available to
unrelated Persons; PROVIDED, that this Section 5.01(o) shall not prevent the
Borrower or any Significant Subsidiary from entering into transactions with (i)
any Affiliate the shares of which have been acquired by the Borrower or such
Subsidiary in satisfaction of a debt previously contracted in good faith if such
transactions are reasonably determined by the Borrower or such Subsidiary to be
necessary or appropriate in connection with the ownership or disposition of such
shares or (ii) any Affiliate that is a venture capital investment in which the
Borrower may invest under applicable banking regulations if such transactions
are reasonably determined by the Borrower or such Subsidiary to be necessary or
appropriate in furtherance of such investment, PROVIDED that in any such case
the relevant transactions under this proviso, individually or in the aggregate,
would not have a Material Adverse Effect.
SECTION 5.02. FINANCIAL COVENANTS.
(a) The Borrower shall not permit its Double Leverage Ratio at any
time to be greater than 1.25 to 1.0.
(b) The Borrower shall not permit its Consolidated Tangible Net Worth
to be at any time less than the higher of (i) $1,000,000,000 and (ii) 5% of
Consolidated Total Tangible Assets at such time.
(c) The Borrower shall not permit its Non-Performing Asset Coverage
Ratio on any date to be less than 2.5 to 1.0.
(d) The Borrower will, and will cause each Bank Subsidiary to,
maintain at all times such amount of capital as may be prescribed by the Board
of Governors of the Federal Reserve System (in the case of the Borrower and any
state member bank Subsidiary) or the Comptroller of the Currency (in the case of
any national bank Subsidiary), as the case may be, from time to time, whether by
regulation, agreement or order. The Borrower shall at all times ensure that each
Insured Subsidiary shall be "adequately capitalized" within the meaning of 12
U.S.C. Section 1831o, as amended, reenacted or redesignated from time to time.
<PAGE>
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT. If any of the following events
("EVENTS OF DEFAULT") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Advance when
the same becomes due and payable; or the Borrower shall fail to pay any interest
on any Advance or any fee or other amount whatsoever payable hereunder or under
the Note when due and such failure remains unremedied for three Business Days;
or
(b) Any representation or warranty made by the Borrower herein or in
any certificate or other document delivered in connection with this Agreement
shall prove to have been incorrect in any material respect when made or deemed
made; or
(c) (i) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in (i) Sections 5.01(a), 5.01(g), 5.01(h),
5.01(i), 5.01(j), 5.01(k), 5.01(l), 5.01(n), 5.01(o), 5.02, or (ii) the Borrower
shall fail to perform or observe any other term or covenant in this Agreement on
its part to be performed or observed and such failure remains unremedied for
thirty Business Days after notice thereof shall have been given to the Borrower
by the Lender; or
(d) The Borrower or any Significant Subsidiary shall fail to pay any
principal of or premium or interest on any other Debt of the Borrower or any
Debt of such Significant Subsidiary having an aggregate outstanding principal
amount of $10,000,000 or more ("MATERIAL DEBT") when the same becomes due and
payable, and such failure shall continue after the applicable grace period, if
any, specified in the agreement or instrument relating to such Material Debt; or
any other event shall occur or condition shall exist under any agreement or
instrument relating to any such Material Debt and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Material Debt; or any such Material Debt
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), redeemed, purchased or defeased,
or an offer to prepay, redeem, purchase or defease such Material Debt shall be
required to be made, in each case prior to the stated maturity thereof; or
(e) The Borrower or any Significant Subsidiary shall generally not
pay its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the Borrower
or such Significant Subsidiary seeking to adjudicate it as bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency, moratorium or reorganization or relief of
debtors, or liquidation or winding up, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property and such proceeding
shall
<PAGE>
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remain undismissed or unstayed for a period of 60 days; or the Borrower or any
Significant Subsidiary shall take any corporate action to authorize any of the
actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of
$10,000,000 shall be rendered against the Borrower or any Significant Subsidiary
and shall remain unsatisfied, and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order and such proceedings
shall not have been stayed or (ii) there shall be any period of 30 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(g) The Borrower shall incur liability to a Plan, a Multiemployer
Plan or the PBGC (or any combination of the foregoing) that, either individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect; or
(h) Any Bank Subsidiary shall cease accepting deposits on the
instruction of any Federal, state or other regulatory body with authority to
give such instruction other than pursuant to an instruction applicable to
national banks generally or a substantial portion thereof or banks located in a
particular state or substantial portion thereof; or any Federal or state
regulatory authority having jurisdiction to regulate any Bank Subsidiary shall,
pursuant to any Federal or state statute, notify such Bank Subsidiary, that such
Bank Subsidiary's capital stock has become impaired; or any Bank Subsidiary
shall cease to be an insured bank under the Federal Deposit Insurance Act, as
amended, and the rules and regulations promulgated thereunder; or any Insured
Subsidiary as of the date hereof shall be required (whether or not the time
allowed by the appropriate Federal banking agency for the submission of such
plan has been established or elapsed) to submit a capital restoration plan of
the type referred to in 12 U.S.C. Section 1831o(b)(2)(C), as amended, reenacted
or redesignated from time to time; or the Borrower shall guarantee in writing
(voluntarily or otherwise) the capital of any Insured Subsidiary as part of or
in connection with any agreement or arrangement with any Federal banking agency
other than in connection with obtaining regulatory approval for the acquisition
of such Insured Subsidiary;
then, and in any such event, the Lender may, by notice to the Borrower, (i)
declare the obligation of the Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and/or (ii) declare the Advances
and the Note, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Advances and the Note,
all such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrower; PROVIDED, HOWEVER, that in
the event of an entry of an order for relief with respect to the Borrower
described in clause (e) of this Section, (A) the obligation of the Lender to
make Advances shall automatically be terminated and (B) the Advances and the
Note, all such interest and all such amounts shall automatically become and be
due and payable, without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by the Borrower.
<PAGE>
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ARTICLE VII
MISCELLANEOUS
SECTION 7.01. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement or the Note, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. This
Agreement and the Note and the documents referred to herein and therein
constitute the entire agreement of the parties with respect to the subject
matter hereof and thereof.
SECTION 7.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telecopier communication)
and mailed, telecopied or delivered, to the respective addresses set forth on
the signature pages hereof or at such other address as shall be designated by
any party in a written notice to the other party. All such notices and
communications shall, when mailed or telecopied, be effective when deposited in
the mails or telecopied, respectively, except that notices and communications to
the Lender pursuant to Article II or VII shall not be effective until received
by the Lender.
SECTION 7.03. NO WAIVER; REMEDIES. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder or under the
Note shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 7.04. COSTS, EXPENSES AND INDEMNIFICATION.
(a) The Borrower agrees to pay and reimburse to the Lender on demand
for reasonable costs and expenses incurred by the Lender in connection with the
preparation, negotiation, execution and delivery and administration of this
Agreement, the Note and the other documents to be delivered hereunder and
(subject to such limitation as has heretofore been agreed) and the modification,
amendment or enforcement thereof, including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel for the Lender with respect thereto
and with respect to advising the Lender as to its rights and responsibilities
under or in connection with this Agreement.
(b) The Borrower hereby indemnifies the Lender and each of its
Affiliates and their respective officers, directors, employees, agents, advisors
and representatives (each, an "INDEMNIFIED PARTY") from and against any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, fees and disbursements of counsel), joint or several, that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or relating to any investigation,
litigation or proceeding or the preparation of any defense with respect thereto
arising out of or in connection with or relating to this Agreement or the
transactions contemplated hereby or any use made or proposed to be made with the
proceeds of the Advances, whether or not such investigation, litigation or
proceeding is brought by the Borrower, any of its shareholders or creditors, an
Indemnified Party or any other
<PAGE>
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Person, or an Indemnified Party is otherwise a party thereto, and whether or not
any of the conditions precedent set forth in Article III are satisfied or the
other transactions contemplated by this Agreement are consummated, except to the
extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct.
SECTION 7.05. ASSIGNMENTS AND PARTICIPATIONS.
(a) The Lender may, with the consent of the Borrower (which shall not
be unreasonably withheld), assign to another Person all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of the Commitment, the Advances and the Note); PROVIDED, HOWEVER,
that no such consent by the Borrower shall be required in the case of any
assignment to an Affiliate of the Lender; and PROVIDED, FURTHER, that any such
partial assignment shall be in an amount at least equal to $5,000,000 or in an
integral multiple of $1,000,000 in excess thereof.
(b) The Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the Advances and the Note); PROVIDED, HOWEVER, that the Lender's obligations
under this Agreement (including, without limitation, its Commitment hereunder)
shall remain unchanged.
(c) The Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
7.05, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower or any of its Subsidiaries
furnished to the Lender by or on behalf of the Borrower.
(d) Notwithstanding any other provision set forth in this Agreement,
the Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Advances and
the Note) in favor of any Federal Reserve Bank in accordance with Regulation A
of the Board of Governors of the Federal Reserve System.
(e) All amounts payable by the Borrower to the Lender under Sections
2.08(e), 2.10, 2.11, 2.12 and 7.04(b) shall be determined as if the Lender had
not sold or agreed to sell any participations in the Advances or the Note or its
Commitment and as if the Lender were funding each of such Advances and
Commitment in the same way that it is funding the portion of such Advances and
Commitment in which no participations have been sold.
SECTION 7.06. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement and the Note shall be governed by, and construed in accordance with,
the law of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York state court sitting in New York County
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Borrower irrevocably
waives, to the fullest extent permitted by applicable law, any objection that it
may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
<PAGE>
-31-
SECTION 7.07. SEVERABILITY. In case any provision in this Agreement or
in the Note shall be held to be invalid, illegal or unenforceable, such
provision shall be severable from the rest of this Agreement or the Note, as the
case may be, and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 7.08. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 7.09. SURVIVAL. The obligations of the Borrower under Sections
2.08(e), 2.10, 2.11, 2.12 and 7.04 shall survive the repayment of the Advances
and the termination of the Commitment. Each representation and warranty made or
deemed to be made herein or pursuant hereto shall survive the making of such
representation and warranty, and the Lender shall not be deemed to have waived,
by reason of making any Advance, any Default or Event of Default that may arise
by reason of such representation or warranty proving to have been false or
misleading.
SECTION 7.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE
LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, THE NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 7.11 NO FIDUCIARY RELATIONSHIP. The Borrower acknowledges that
the Lender has no fiduciary relationship with, or fiduciary duty to, the
Borrower arising out of or in connection with this Agreement or the Note, and
the relationship between the Lender and the Borrower is solely that of creditor
and debtor. This Agreement does not create a joint venture among the parties.
SECTION 7.12 NO RELIANCE. The Lender represents and warrants that it
in good faith has not relied and will not rely upon any margin stock as
collateral in entering into this Agreement or making or maintaining the
Advances.
<PAGE>
-32-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
M & T BANK CORPORATION
By /s/ GARY S. PAUL
Name: Gary S. Paul
Title: Senior Vice President
Address for Notices:
M&T Bank Corporation
One M&T Plaza
Buffalo, NY 14240
Attention: Chief Financial Officer
Telephone: (716) 842-5844
Fax: (716) 842-5220
CITIBANK, N.A.
By /s/ KEITH W. WAITT
Name: Keith W. Waitt
Title: Senior Credit Risk Manager
Applicable Lending Office:
399 Park Avenue
New York, NY 10043
Attention: Bernard Cuda
Telephone: (212) 559-6347
Facsimile: (212) 793-5904
<PAGE>
-33-
SCHEDULE I
EXISTING CREDIT AGREEMENTS; EXISTING LIENS
<TABLE>
<CAPTION>
M&T Bank Corporation(1)
Existing Agreements
(in thousands) BALANCE
9/30/99
-------
<S> <C>
SHORT-TERM BORROWINGS
Federal Funds Purchased and repurchase agreements $1,370,044
Term Federal Funds $50,000
Advances from Federal Home Loan Banks:
Funds purchased $250,000
Variable rates $71,000
Other $88,987
-------------
Total Short-Term Borrowings $1,830,031
=============
LONG-TERM BORROWINGS
Subordinated notes of Manufacturers and Traders Trust Company:
8 1/8% due 2002 $75,000
7% due 2005 $100,000
Preferred capital securities:
First Empire Capital Trust I - 8.234% $150,000
First Empire Capital Trust II - 8.277% $100,000
OnBank Capital Trust I - 9.25% $60,000
Advances from Federal Home Loan Banks:
Variable rates $1,175,000
Fixed rates $90,563
Other $24,334
-------------
Total Long-Term Borrowings $1,774,897
=============
$25 Million Revolving Credit Agreement between M&T Bank Corporation and BankBoston, N.A.(2) $0
Unused portion of Federal Home Loan Bank Advances available $48,300
</TABLE>
(1) Schedule does not include intercompany borrowings
(2) Agreement to be terminated following the consummation of Citibank, N.A.
Credit Agreement
<PAGE>
EXHIBIT A
[FORM OF NOTE]
U.S.$30,000,000 Dated: _______ __, 1999
FOR VALUE RECEIVED, the undersigned, M & T BANK CORPORATION, a
_________ corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of
CITIBANK, N.A. (the "LENDER") for the account of its Applicable Lending Office
(as defined in the Credit Agreement referred to below) on the Commitment
Termination Date (as so defined) the principal sum of U.S.$30,000,000 (THIRTY
MILLION UNITED STATES DOLLARS) or, if less, the aggregate outstanding principal
amount of the Advances (as defined below) pursuant to the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of
each Advance from the date of such Advance until such principal amount is paid
in full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America at the office of the Lender at 399 Park Avenue, New York, New
York 10043, in same day funds. Each Advance made by the Lender to the Borrower
pursuant to the Credit Agreement, and all payments made on account of principal
thereof, shall be recorded by the Lender and, prior to any transfer hereof,
endorsed on the grid attached hereto which is part of this Note; PROVIDED, that
the failure of the Lender to make any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under the Credit Agreement.
This Note is the Note referred to in, and is entitled to the benefits
of, the Credit Agreement dated as of November 19, 1999 (the "CREDIT AGREEMENT",
the terms defined therein being used herein as therein defined) between the
Borrower and the Lender. The Credit Agreement contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.
The Borrower hereby waives presentment, demand, protest and notice of
any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York, United States.
M & T BANK CORPORATION
By__________________________
Name:
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
===========================================================================================================================
<S> <C> <C> <C> <C>
Date Amount and Type of Amount of Unpaid of Notation
Advance Principal Paid Principal Made By
or Prepaid Balance
===========================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-32044 and 333-16077) of M&T Bank Corporation of
our report dated January 10, 2000, relating to the Financial Statements, which
appear in this Form 10-K. We also consent to the reference to us under the
heading "Experts" in such Registration Statements.
/s/ PRICEWATERHOUSECOOPERS LLP
Buffalo, New York
February 24, 2000
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-12207, 33-58500, 33-63917, 333-43171, 333-43175
and 333-63985) of M&T Bank Corporation of our report dated January 10, 2000
relating to the Financial Statements, which appear in this Form 10-K. We also
consent to the reference to us under the heading "Experts" in Registration
Statements (Nos. 33-12207, 33-58500, 333-43171, 333-43175 and 333-63985).
/s/ PRICEWATERHOUSECOOPERS LLP
Buffalo, New York
February 24, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
Article 9 Financial Data Schedule for Form 10-K for the year ended December
31, 1999
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 592,755
<INT-BEARING-DEPOSITS> 1,092
<FED-FUNDS-SOLD> 643,555
<TRADING-ASSETS> 641,114
<INVESTMENTS-HELD-FOR-SALE> 1,680,760
<INVESTMENTS-CARRYING> 219,762
<INVESTMENTS-MARKET> 218,100
<LOANS> 17,572,861
<ALLOWANCE> 316,165
<TOTAL-ASSETS> 22,409,115
<DEPOSITS> 15,373,620
<SHORT-TERM> 2,554,159
<LIABILITIES-OTHER> 909,157
<LONG-TERM> 1,775,133
0
0
<COMMON> 40,508
<OTHER-SE> 1,756,538
<TOTAL-LIABILITIES-AND-EQUITY> 22,409,115
<INTEREST-LOAN> 1,323,262
<INTEREST-INVEST> 127,638
<INTEREST-OTHER> 27,731
<INTEREST-TOTAL> 1,478,631
<INTEREST-DEPOSIT> 506,476
<INTEREST-EXPENSE> 719,234
<INTEREST-INCOME-NET> 759,397
<LOAN-LOSSES> 44,500
<SECURITIES-GAINS> 1,575
<EXPENSE-OTHER> 578,958
<INCOME-PRETAX> 418,314
<INCOME-PRE-EXTRAORDINARY> 265,626
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 265,626
<EPS-BASIC> 34.05
<EPS-DILUTED> 32.83
<YIELD-ACTUAL> 4.02
<LOANS-NON> 61,816
<LOANS-PAST> 31,017
<LOANS-TROUBLED> 10,353
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 306,347
<CHARGE-OFFS> 59,655
<RECOVERIES> 19,337
<ALLOWANCE-CLOSE> 316,165
<ALLOWANCE-DOMESTIC> 216,678
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 99,487
</TABLE>
