<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 1997
REGISTRATION NO. 333-_______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<TABLE>
<S> <C>
MEGABANK FINANCIAL CORPORATION MB CAPITAL I
(Name of small business issuer in its charter) (Name of small business co-issuer in its charter)
COLORADO DELAWARE
(State or jurisdiction of incorporation or organization) (State or jurisdiction of incorporation or organization)
6712 6719
(Primary Standard Industrial Classification Code Number) (Primary Standard Industrial Classification Code Number)
84-0949755 APPLIED FOR
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
8100 EAST ARAPAHOE ROAD 8100 EAST ARAPAHOE ROAD
ENGLEWOOD, COLORADO 80112 ENGLEWOOD, COLORADO 80112
(303) 740-2265 (303) 740-2265
(Address and telephone number of principal executive offices) (Address and telephone number of principal executive offices)
</TABLE>
THOMAS R. KOWALSKI, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
8100 EAST ARAPAHOE ROAD
ENGLEWOOD, COLORADO 80112
(303) 740-2265
(Name, address and telephone number of agent for service)
COPIES TO:
<TABLE>
<S> <C>
Reid A. Godbolt, Esq. Matthew C. Boba, Esq.
Jones & Keller, P.C. Chapman and Cutler
1625 Broadway, Suite 1600 111 West Monroe Street
Denver, Colorado 80202 Chicago, Illinois 60603
(303) 573-1600 (312) 845-3000
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED (1) REGISTERED PER UNIT(1) PRICE FEE
- - ------------------------------- ---------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C>
% Cumulative Preferred Securities of MB Capital I 1,200,000 $10.00 $12,000,000 $3,540
% Junior Subordinated Debentures of MegaBank Financial Corporation (2) -- -- --
Guarantee of MegaBank Financial Corporation with respect to the
% Cumulative Preferred Securities (3) (3) -- -- --
Total Registration Fee -- -- -- $3,540
</TABLE>
__________
(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(a).
(2) The % Junior Subordinated Debentures (the "Junior Subordinated
Debentures") will be purchased by MB Capital I ("MB Capital") with the
proceeds of the sale of the % Cumulative Preferred Securities (the
"Preferred Securities"). The Junior Subordinated Debentures may later
be distributed for no additional consideration to the holders of the
Preferred Securities upon MB Capital's dissolution and the
distribution of its assets.
(3) This Registration Statement is deemed to cover the Junior Subordinated
Debentures of MegaBank Financial Corporation (the "Company"), the
rights of holders of the Junior Subordinated Debentures of the Company
under the Indenture, the rights of holders of the Preferred Securities
under the Trust Agreement, the Guarantee, the Expense Agreement
entered into by the Company and certain backup undertakings as
described herein. No separate consideration will be received for the
Guarantee or such backup undertakings.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE> 3
SUBJECT TO COMPLETION, DATED DECEMBER 12, 1997
1,200,000 TRUST PREFERRED SECURITIES
MB CAPITAL I
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER TRUST PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
MEGABANK FINANCIAL CORPORATION
[MEGABANK LOGO]
The % Cumulative Trust Preferred Securities (the "Preferred
Securities") offered hereby represent undivided beneficial interests in the
assets of MB Capital I, a statutory business trust formed under the laws of the
State of Delaware ("MB Capital"). MegaBank Financial Corporation, a Colorado
corporation (the "Company"), will be the owner of all of the beneficial
interests represented by common securities of MB Capital (the "Common
Securities" and, collectively with the Preferred Securities, the "Trust
Securities"). MB Capital exists for the sole purpose of issuing the Trust
Securities and investing the proceeds thereof in % Junior Subordinated
Debentures (the "Junior Subordinated Debentures") to be issued by the Company.
The Junior Subordinated Debentures will mature on , 2028, which date
may be shortened (such date, as it may be shortened, the "Stated Maturity") to a
date not earlier than , 2003 if certain conditions are met (including
the Company having received prior approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve") to do so if then required under
applicable capital guidelines or policies of the Federal Reserve). The
Preferred Securities will have a preference under certain circumstances with
respect to cash distributions and amounts payable on liquidation, redemption or
otherwise over the Common Securities, which will be held by the Company. See
"Description of the Preferred Securities -- Subordination of Common Securities
of MB Capital Held by the Company."
___________________________ (Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
___________________________
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, BY ANY OTHER GOVERNMENTAL
AGENCY, OR OTHERWISE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==========================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC COMMISSION(1) MB CAPITAL(2)(3)
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security $ 10.00 (2) $ 10.00
- - -------------------------------------------------------------------------------------------------------------------------
Total $ 12,000,000 (2) $12,000,000
==========================================================================================================================
</TABLE>
(1) The Company and MB Capital have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) In view of the fact that all of the proceeds of the sale of the
Preferred Securities will be used to purchase the Junior Subordinated
Debentures, the Company has agreed to pay the Underwriters as
compensation for arranging the investment therein of such proceeds $
per Preferred Security, or $ in the aggregate. See
"Underwriting."
(3) Before deducting offering expenses payable by the Company estimated at
$ .
___________________________
The Preferred Securities are being offered by the Underwriters subject
to prior sale and when, as and if delivered to and accepted by the
Underwriters. It is expected that the Preferred Securities will be ready for
delivery in book-entry form only through the facilities of The Depository Trust
Company in New York, New York, on or about
, 1998, against payment therefor in immediately available funds.
HOWE BARNES INVESTMENTS, INC.
The date of this Prospectus is , 1998
<PAGE> 4
Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash distributions accruing from the date of original
issuance and payable quarterly in arrears on the 15th day of January, April,
July and October of each year (subject to possible deferral as described
below), commencing April 15, 1998, at the annual rate of % of the Liquidation
Amount of $10 per Preferred Security ("Distributions"). The amount of each
Distribution due with respect to the Preferred Securities will include amounts
accrued through the date the distribution payment is due. The Company will have
the right to defer payments of interest on the Junior Subordinated Debentures
at any time or from time to time for a period not exceeding 20 consecutive
quarters with respect to each deferral period (each, an "Extension Period"),
provided that no Extension Period may extend beyond the Stated Maturity of the
Junior Subordinated Debentures. Upon the termination of any such Extension
Period and the payment of all amounts then due, the Company may elect to begin
a new Extension Period subject to the requirements set forth herein. If
interest payments on the Junior Subordinated Debentures are so deferred,
Distributions on the Preferred Securities will also be deferred and the Company
will not be permitted, subject to certain exceptions described herein, to
declare or pay any cash distributions with respect to its capital stock or to
make any payment with respect to its debt securities that rank pari passu with
or junior to the Junior Subordinated Debentures. During an Extension Period,
interest on the Junior Subordinated Debentures will continue to accrue (and the
amount of Distributions to which holders of the Preferred Securities are
entitled will accumulate) at the rate of % per annum, compounded quarterly,
and holders of the Preferred Securities will be required to accrue income and
will be required to pay United States federal income tax on that income. See
"Description of Junior Subordinated Debentures -- Option to Extend Interest
Payment Period" and "Certain Federal Income Tax Consequences -- Interest Income
and Original Issue Discount."
The Company has, through the Guarantee, Trust Agreement, Junior
Subordinated Debentures, Indenture and the Expense Agreement (each as defined
herein), taken together, fully, irrevocably and unconditionally guaranteed, on
a subordinated basis, all of MB Capital's obligations under the Preferred
Securities. See "Relationship Among the Preferred Securities, the Junior
Subordinated Debentures and the Guarantee -- Full and Unconditional Guarantee."
Under the Guarantee, the Company guarantees the payment of Distributions by MB
Capital and payments on liquidation of or redemption of the Preferred
Securities (subordinate to the right to payment of Senior and Subordinated Debt
of the Company) to the extent of funds held by MB Capital. The Guarantee does
not cover payment of Distributions when MB Capital does not have sufficient
funds to pay such Distributions. See "Description of Guarantee." If the
Company does not make required payments on the Junior Subordinated Debentures
held by MB Capital, MB Capital will have insufficient funds to pay
Distributions on the Preferred Securities. In such event, a holder of the
Preferred Securities may institute a legal proceeding directly against the
Company to enforce payment of such Distributions to such holder. See
"Description of Junior Subordinated Debentures--Enforcement of Certain Rights
by Holders of Preferred Securities." The obligations of the Company under the
Guarantee and the Junior Subordinated Debentures are subordinate and junior in
right of payment to all Senior and Subordinated Debt (as defined in
"Description of Junior Subordinated Debentures--Subordination") of the Company.
The Preferred Securities are subject to mandatory redemption, in whole
or in part, upon repayment of the underlying Junior Subordinated Debentures at
maturity or to the extent of their earlier redemption in an amount equal to the
amount of Junior Subordinated Debentures maturing or being redeemed. The
redemption price will equal the aggregate liquidation preference of the
Preferred Securities plus any accumulated and unpaid Distributions thereon to
the date of redemption. The Junior Subordinated Debentures are redeemable
prior to maturity at the option of the Company, subject to any required prior
approval of the Federal Reserve, (i) on or after , 2003, in whole
at any time or in part from time to time, or (ii) at any time, in whole (but
not in part), upon the occurrence and continuation of a Tax Event, an
Investment Company Event or a Capital Treatment Event (each as defined herein),
in each case at a redemption price equal to the accrued and unpaid interest on
the Junior Subordinated Debentures to the date fixed for redemption, plus 100%
of the principal amount thereof. See "Description of the Preferred Securities
- - -- Redemption."
(Continued on next page)
-2-
<PAGE> 5
The Company will have the right at any time to terminate MB Capital
and cause the Junior Subordinated Debentures to be distributed to the holders
of the Trust Securities in liquidation of MB Capital, subject to the Company
having received prior approval of the Federal Reserve if required. See
"Description of the Preferred Securities -- Redemption." The Junior
Subordinated Debentures are unsecured and subordinated to all Senior and
Subordinated Debt, which essentially consists of all debt of the Company. As
of September 30, 1997, the Company had $2.0 million aggregate principal amount
of Senior and Subordinated Debt outstanding, all of which will be paid with
certain net proceeds of the sale by the Company of the Junior Subordinated
Debentures to MB Capital. See "Use of Proceeds." The terms of the Junior
Subordinated Debentures place no limitation on the amount of Senior and
Subordinated Debt that the Company can incur. See "Description of Junior
Subordinated Debentures -- Subordination."
In the event of the termination of MB Capital, after satisfaction of
liabilities to creditors of MB Capital as required by applicable law, the
holders of Preferred Securities will be entitled to receive a liquidation
amount of $10 per Preferred Security ("Liquidation Amount"), plus accumulated
and unpaid Distributions thereon through the date of distribution, which may be
in the form of a distribution of a Like Amount (as defined herein) of Junior
Subordinated Debentures, including accumulated and unpaid interest thereon
equal to the accumulated and unpaid Distributions on the Preferred Securities
through the date of distribution. See "Description of the Preferred Securities
- - -- Liquidation Distribution Upon Termination."
The Company intends to include the Preferred Securities for quotation
on the Nasdaq National Market. Although the Underwriters have indicated an
intention to make a market in the Preferred Securities, the Underwriters are
not obligated to do so, and any market making may be discontinued at any time
at the sole discretion of such Underwriters. There can be no assurance that a
market will develop for the Preferred Securities. See "Risk Factors--Absence
of Existing Public Market; Market Prices" and "Underwriting."
The Preferred Securities will be represented by one or more global
certificates registered in the name of The Depository Trust Company (the
"Depositary") or its nominee. Beneficial interests in the Preferred Securities
will be shown on, and transfers thereof will be effected only through, records
maintained by participants in the Depositary. Except as described herein, the
Preferred Securities in certificate form will not be issued in exchange for
global certificates. See "Book-Entry Issuance."
AS USED HEREIN, (I) THE "INDENTURE" MEANS THE SUBORDINATED INDENTURE
DATED AS OF , 1998, AS AMENDED AND SUPPLEMENTED FROM TIME TO TIME,
BETWEEN THE COMPANY AND WILMINGTON TRUST COMPANY, AS TRUSTEE (THE "INDENTURE
TRUSTEE"), UNDER WHICH THE JUNIOR SUBORDINATED DEBENTURES WILL BE ISSUED, (II)
THE "TRUST AGREEMENT" MEANS THE AMENDED AND RESTATED TRUST AGREEMENT, UNDER
WHICH THE TRUST SECURITIES WILL BE ISSUED, DATED AS OF ,
1998, AS AMENDED AND SUPPLEMENTED FROM TIME TO TIME, AMONG THE COMPANY, AS
DEPOSITOR, WILMINGTON TRUST COMPANY, AS TRUSTEE (THE "PROPERTY TRUSTEE" AND
THE "DELAWARE TRUSTEE"), AND THE ADMINISTRATIVE TRUSTEES NAMED THEREIN AND THE
HOLDERS, FROM TIME TO TIME, OF THE TRUST SECURITIES, (III) THE "GUARANTEE"
MEANS THE GUARANTEE AGREEMENT RELATING TO THE GUARANTEE BETWEEN THE COMPANY AND
WILMINGTON TRUST COMPANY, AS TRUSTEE (THE "GUARANTEE TRUSTEE"), AND (IV) THE
"EXPENSE AGREEMENT" MEANS THE EXPENSE AGREEMENT BETWEEN THE COMPANY AND MB
CAPITAL.
___________________________
(Continued on next page)
-3-
<PAGE> 6
INFORMATION INCLUDED IN THIS PROSPECTUS INCLUDES "FORWARD LOOKING
STATEMENTS," WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY
SUCH AS "MAY," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE," OR "CONTINUE," OR
THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY.
THE STATEMENTS IN "RISK FACTORS" AND OTHER STATEMENTS AND DISCLAIMERS IN THE
PROSPECTUS CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS,
INCLUDING CERTAIN RISKS AND UNCERTAINTIES, WITH RESPECT TO SUCH FORWARD-LOOKING
STATEMENTS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS.
___________________________
The Company intends to furnish its securityholders, including the
securityholders of MB Capital, with annual reports containing consolidated
financial statements of the Company audited by its independent public
accountants and quarterly reports for the first three quarters of each fiscal
year containing unaudited financial information. Prior to this Offering, the
Company has not been a reporting company with the Securities and Exchange
Commission (the "SEC" or the "Commission").
___________________________
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
PREFERRED SECURITIES, INCLUDING STABILIZING TRANSACTIONS, AND PASSIVE MARKET
MAKING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
___________________________
NO SEPARATE FINANCIAL STATEMENTS OF MB CAPITAL HAVE BEEN INCLUDED
HEREIN. THE COMPANY AND MB CAPITAL DO NOT CONSIDER THAT SUCH FINANCIAL
STATEMENTS WOULD BE MATERIAL TO HOLDERS OF THE PREFERRED SECURITIES BECAUSE MB
CAPITAL IS A NEWLY FORMED SPECIAL PURPOSE ENTITY, HAS NO OPERATING HISTORY OR
INDEPENDENT OPERATIONS AND IS NOT ENGAGED IN AND DOES NOT PROPOSE TO ENGAGE IN
ANY ACTIVITY OTHER THAN HOLDING AS TRUST ASSETS THE JUNIOR SUBORDINATED
DEBENTURES OF THE COMPANY AND ISSUING THE TRUST SECURITIES. SEE "PROSPECTUS
SUMMARY--MB CAPITAL," "DESCRIPTION OF THE PREFERRED SECURITIES," "DESCRIPTION
OF JUNIOR SUBORDINATED DEBENTURES" AND "DESCRIPTION OF GUARANTEE."
-4-
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and consolidated financial information appearing elsewhere
in this Prospectus. Unless the context clearly suggests otherwise, references
to the Company include the Company and its subsidiaries.
THE COMPANY
MegaBank Financial Corporation (the "Company") was founded in 1984 by
its Chairman and Chief Executive Officer, Thomas R. Kowalski, with the
objective of building a banking franchise in the Denver, Colorado metropolitan
area that would deliver a broad based package of products and services to
businesses and individuals. The Company's banking subsidiary, MegaBank of
Arapahoe (the "Bank") was organized in 1983. Since the advent of branch
banking in Colorado in 1993, the Bank has opened six additional banking
locations throughout the Denver area. Two more branches are in the planning
and construction phases and are currently expected to begin operations in 1998.
Since inception, the Bank has specialized its lending practice in the
residential construction industry. The Company's Chairman has extensive
experience in the home building industry and has expanded the Bank's lending
practice to date such that the Bank is one of the area's leading originators of
residential construction loans to small and medium sized homebuilders.
Currently, the Bank can finance a builder or developer from the acquisition and
development loan process, including assistance with special district financing,
through the construction loan phase. During the five years ended December 31,
1996, the Bank originated over $500 million in residential construction loans
and during the nine months ended September 30, 1997, originated an additional
$125 million of such loans. While some of these loans remain on the Company's
balance sheet, most have been repaid, refinanced or participated out to other
financial institutions.
The Company has experienced substantial growth over the past three
years. Total assets have increased to $159 million as of September 30, 1997
from $119 million, $102 million and $63 million as of December 31, 1996,
December 31, 1995 and December 31, 1994, respectively. The Company has
maintained above average profitability while achieving strong asset growth.
During the same time period, net income grew to $2.4 million for the year ended
December 31, 1996 from $1.6 million and $0.8 million for the years ended
December 31, 1995 and 1994, respectively. For the nine months ended September
30, 1997, net income was $2.0 million. On an annualized basis, as of September
30, 1997, return on average assets for the Company equaled 1.93% while return
on average equity equaled 27.37%. With respect to the Bank, a recent industry
publication ranked it 22nd nationally in overall profitability for banks
between $100 million and $1 billion in assets with a return on assets of 2.28%
during the five years ended December 31, 1996.
The Bank intends to continue to focus on its niche of residential
construction lending in addition to providing a complete array of products and
services for its customers. High quality customer service has been a
fundamental tenet of the Bank's operating strategy since its inception. The
Bank intends to continue to pursue its successful strategies and concentrate on
increasing its market share through referrals from existing customers and the
implementation of advertising and marketing strategies targeted at the
communities in which its branches are located.
The Company's principal executive office is located at 8100 East
Arapahoe Road, Englewood, Colorado 80112, and its telephone number is (303)
740-2265.
-5-
<PAGE> 8
MB CAPITAL
MB Capital is a statutory business trust formed under Delaware law and
continued pursuant to (i) the Trust Agreement and (ii) the filing of a
certificate of trust with the Delaware Secretary of State on December 8, 1997.
MB Capital's business and affairs are conducted by the Property Trustee, the
Delaware Trustee and three individual Administrative Trustees who are officers
of the Company. MB Capital exists for the exclusive purposes of (i) issuing
and selling the Trust Securities, (ii) using the proceeds from the sale of the
Trust Securities to acquire the Junior Subordinated Debentures issued by the
Company, and (iii) engaging in only those other activities necessary, advisable
or incidental thereto (such as registering the transfer of the Trust
Securities). Accordingly, the Junior Subordinated Debentures will be the sole
assets of MB Capital, and payments by the Company under the Junior Subordinated
Debentures and the Expense Agreement will be the sole revenues of MB Capital.
The Company will acquire Common Securities in an aggregate liquidation amount
equal to 3% of the total Liquidation Amount of the Trust Securities. All of
the Common Securities will be owned by the Company. The Common Securities will
rank pari passu, and payments will be made thereon pro rata, with the Preferred
Securities, except that upon the occurrence and during the continuance of an
event of default under the Trust Agreement resulting from an event of default
under the Indenture, the rights of the Company as holder of the Common
Securities to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the Preferred Securities. See "Description of the Preferred
Securities -- Subordination of Common Securities of MB Capital Held by the
Company." MB Capital has a term of 31 years, but may terminate earlier as
provided in the Trust Agreement.
MB Capital's principal executive offices are located at 8100 East
Arapahoe Road, Englewood, Colorado 80112, and its telephone number is (303)
740-2265.
THE OFFERING
Preferred Securities issuer MB Capital
Securities offered . . . . 1,200,000 Preferred Securities. The
Preferred Securities represent undivided
beneficial interests in MB Capital's assets,
which will consist solely of the Junior
Subordinated Debentures and payments
thereunder.
Distributions . . . . . . . The Distributions payable on each Preferred
Security will be fixed at a rate per annum
of __% of the Liquidation Amount of $10 per
Preferred Security, will be cumulative, will
accrue from the date of issuance of the
Preferred Securities, and will be payable
quarterly in arrears on the 15th day of
January, April, July and October of each
year, commencing on April 15, 1998 (subject
to possible deferral as described below).
The amount of each distribution due with
respect to the Preferred Securities will
include amounts accrued through the date the
distribution payment is due. See
"Description of the Preferred Securities --
Distributions."
Extension Periods . . . . . So long as no Debenture Event of Default (as
defined herein) has occurred and is
continuing, the Company will have the right,
at any time, to defer payments of interest on
the Junior Subordinated Debentures by
extending the interest payment period thereon
for a period not exceeding 20 consecutive
quarters with respect to each deferral period
(each an "Extension Period"), provided that
no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated
Debentures. If interest payments are so
deferred, Distributions on the Preferred
Securities will also be deferred and the
Company will not be permitted, subject to
certain exceptions described herein, to
declare or pay any cash distributions with
respect to the Company's capital stock or
debt securities that rank pari passu with or
junior to the Junior Subordinated Debentures.
During an Extension Period, Distributions
will continue to accrue with income
-6-
<PAGE> 9
thereon compounded quarterly. Because
interest would continue to accrue and
compound on the Junior Subordinated
Debentures, to the extent permitted by
applicable law, holders of the Preferred
Securities would be required to accrue income
for United States federal income tax
purposes. See "Description of Junior
Subordinated Debentures--Option to Extend
Interest Payment Period," "Certain Federal
Income Tax Consequences -- Interest Income
and Original Issue Discount" and "Risk
Factors--Option to Extend Interest Payment
Period; Tax Consequences; Market Price
Consequences."
Maturity . . . . . . . . The Junior Subordinated Debentures will
mature on __________, 2028, which date may be
shortened (such date, as it may be shortened,
the "Stated Maturity") to a date not earlier
than ____________, 2003 if certain conditions
are met (including the Company having
received prior approval of the Federal
Reserve to do so if then required under
applicable capital guidelines or policies of
the Federal Reserve).
Redemption . . . . . . . The Preferred Securities are subject to
mandatory redemption upon repayment of the
Junior Subordinated Debentures at maturity or
their earlier redemption in an amount equal
to the amount of Junior Subordinated
Debentures maturing or being redeemed at a
redemption price equal to the aggregate
Liquidation Amount of the Preferred
Securities, plus accumulated and unpaid
Distributions thereon to the date of
redemption. Subject to Federal Reserve
approval, if then required under applicable
capital guidelines or policies of the Federal
Reserve, the Junior Subordinated Debentures
are redeemable prior to maturity at the
option of the Company (i) on or after
_____________, 2003, in whole at any time or
in part from time to time, or (ii) at any
time, in whole (but not in part), upon the
occurrence and during the continuance of a
Tax Event, an Investment Company Event or a
Capital Treatment Event, in each case at a
redemption price equal to 100% of the
principal amount of the Junior Subordinated
Debentures so redeemed, together with any
accrued but unpaid interest to the date fixed
for redemption. See "Description of the
Preferred Securities -- Redemption" and
"Description of Junior Subordinated
Debentures -- Redemption."
Distribution of Junior
Subordinated
Debentures . . . . . . . The Company has the right at any time to
terminate MB Capital and cause the Junior
Subordinated Debentures to be distributed to
holders of Preferred Securities in
liquidation of MB Capital, subject to the
Company having received prior approval of the
Federal Reserve to do so if then required
under applicable capital guidelines or
policies of the Federal Reserve. See
"Description of the Preferred Securities --
Distribution of Junior Subordinated
Debentures."
Guarantee . . . . . . . . Taken together, the Company's obligations
under various documents described herein,
including the Guarantee, provide a full
guarantee on a subordinated basis of payments
by MB Capital of Distributions and other
amounts due on the Preferred Securities.
Under the Guarantee, the Company guarantees
the payment of Distributions by MB Capital
and payments on liquidation of or redemption
of the Preferred Securities (subordinate to
the right to payment of Senior and
Subordinated Debt of the Company, as defined
herein) to the extent of funds held by MB
Capital. If MB Capital has insufficient
funds to pay Distributions on the Preferred
Securities (i.e., if the Company has failed
to make required payments under the Junior
Subordinated Debentures), a holder of the
Preferred Securities would have the right to
institute a legal proceeding directly against
the Company to enforce payment of such
Distributions to such holder.
-7-
<PAGE> 10
See "Risk Factors--Limitations on Direct
Actions Against the Company and on Rights
Under the Guarantee" and "Description of
Junior Subordinate Debentures--Debenture
Events of Default," "--Enforcement of Certain
Rights of Holders of Preferred Securities,"
"Description of Guarantee."
Ranking . . . . . . . . The Preferred Securities will rank pari
passu, and payments thereon will be made pro
rata, with the Common Securities of MB
Capital held by the Company, except as
described under "Description of the Preferred
Securities-- Subordination of Common
Securities of MB Capital Held by the
Company." The obligations of the Company
under the Guarantee, the Junior Subordinated
Debentures and other documents described
herein are unsecured and rank subordinate and
junior in right of payment to all current and
future Senior and Subordinated Debt, the
amount of which is unlimited. At September
30, 1997, the aggregate outstanding Senior
and Subordinated Debt of the Company was $2.0
million, all of which will be paid with
certain net proceeds of the sale by the
Company of the Junior Subordinated Debentures
to MB Capital. See "Use of Proceeds." In
addition, because the Company is a holding
company, all obligations of the Company
relating to the securities described herein
will be effectively subordinated to all
existing and future liabilities of the
Company's subsidiaries, including the Bank.
The Company may cause additional preferred
securities to be issued by trusts similar to
MB Capital in the future, and there is no
limit on the amount of such securities that
may be issued. In this event, the Company's
obligations under the junior subordinated
debentures to be issued to such other trusts
and the Company's guarantees of the payments
by such trusts will rank pari passu with the
Company's obligations under the Junior
Subordinated Debentures and the Guarantee,
respectively.
Voting Rights . . . . . The holders of the Preferred Securities will
generally have limited voting rights relating
only to the modification of the Preferred
Securities, the dissolution, winding-up or
termination of MB Capital and certain other
matters described herein. See "Description
of the Preferred Securities--Voting Rights;
Amendment of the Trust Agreement."
Proposed Nasdaq
National Market
Symbol . . . . . . . . MBFCA
Use of Proceeds . . . . The proceeds to MB Capital from the sale of
the Preferred Securities offered hereby will
be invested by MB Capital in the Junior
Subordinated Debentures of the Company. The
Company intends to use the net proceeds to
pay all $2.0 million of its Senior and
Subordinated Debt, use approximately $2.0
million to complete two new bank branch
locations expected to begin operations in
1998, and contribute approximately $4.0
million of capital to the Bank, with the
remainder of the proceeds to be used for
general corporate purposes, which may
include, without limitation, purchase and
construction of future bank branch locations,
possible future acquisitions and additional
capital contributions to the Bank. The
Company expects approximately $3.5 million of
the Preferred Securities to qualify as Tier 1
capital under the capital guidelines of the
Federal Reserve subject to regulatory
limitations. See "Use of Proceeds."
-8-
<PAGE> 11
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statements of operations data for the years ended
December 31, 1996 and 1995 and the consolidated balance sheet data as of
December 31, 1996 are derived from the Company's consolidated financial
statements and notes thereto which have been audited by Fortner, Bayens,
Levkulich & Co., P.C., independent public accountants and are included
elsewhere in this Prospectus. The consolidated statements of operations data
for the year ended December 31, 1994 and the balance sheet data as of December
31, 1995 and 1994 are derived from the Company's consolidated financial
statements which have been audited by Fortner, Bayens, Levkulich & Co., P.C.
but are not included herein. The consolidated statement of operations data for
the nine months ended September 30, 1997 and 1996, and the consolidated balance
sheet data at September 30, 1997 and 1996, have been derived from unaudited
consolidated financial statements, which, in the opinion of the Company,
reflect all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation of the financial position and results of
operations of the Company for those periods. The statements of operations data
for interim periods are not necessarily indicative of results for subsequent
periods or the full year. The following information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the Consolidated Financial Statements,
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
At or for the nine months ended September 30, At or for the year ended December 31,
--------------------------------------------- --------------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statements of Operations:
Interest income . . . . . . . . . . . . . $ 11,085 $ 8,206 $ 11,359 $ 8,427 $ 5,930
Interest expense . . . . . . . . . . . . 3,619 2,237 3,131 2,154 1,092
Net interest income . . . . . . . . . . . 7,466 5,969 8,228 6,273 4,838
Provision for loan losses . . . . . . . . 360 262 457 280 155
Other income . . . . . . . . . . . . . . 540 780 961 807 526
Other expenses . . . . . . . . . . . . . 4,584 3,686 4,959 4,136 3,833
Income tax expense . . . . . . . . . . . 1,031 1,063 1,353 1,017 522
Net income . . . . . . . . . . . . . . . 2,031 1,738 2,420 1,647 854
Balance sheet:
Total assets . . . . . . . . . . . . . . $158,850 $113,881 $118,929 $102,076 $62,649
Loans . . . . . . . . . . . . . . . . . . 115,719 86,733 94,973 68,845 46,663
Allowance for loan losses . . . . . . . . 1,567 1,008 1,150 759 546
Investment securities available for
sale . . . . . . . . . . . . . . . . . . 12,100 11,432 11,137 6,985 4,088
Investment securities held to maturity . -- -- -- 550 3,350
Nonperforming assets(1) . . . . . . . . . 1,677 69 14 76 554
Deposits . . . . . . . . . . . . . . . . 143,266 101,253 104,661 90,192 53,843
Shareholders' equity . . . . . . . . . . 10,962 8,095 8,827 6,393 4,617
Per Common Share:
Net income per share . . . . . . . . . . $ 9.51 $ 8.14 $ 11.33 $ 7.71 $ 4.00
Book value per share . . . . . . . . . . 51.33 37.90 41.33 29.93 21.62
Tangible book value per share . . . . . . 51.33 37.90 41.33 29.93 21.62
Key Ratios:
Net interest margin(2) . . . . . . . . . 8.01% 9.07% 9.01% 9.81% 9.39%
Net interest spread(2) . . . . . . . . . 6.70 7.64 7.60 8.34 8.37
Return on average assets . . . . . . . . 1.93 2.35 2.36 2.27 1.48
Return on average common equity . . . . . 27.37 32.02 31.80 29.92 18.93
Shareholders' equity to total assets . . 6.90 7.11 7.42 6.26 8.37
Tier 1 risk-based capital . . . . . . . . 8.53 11.90 10.70 12.15 11.12
Total risk-based capital . . . . . . . . 9.78 13.12 11.85 13.18 12.33
Nonperforming assets to total assets . . 1.06 0.06 0.01 0.07 0.88
Nonperforming loans to total loans . . . 1.45 0.08 0.01 0.11 1.19
Allowance for loan losses to total
loans . . . . . . . . . . . . . . . . . 1.35 1.16 1.21 1.10 1.17
Allowance for loan losses to nonperforming
loans . . . . . . . . . . . . . . . . . 93.43 1470.27 8463.03 998.23 98.49
Ratio of earnings to fixed charges (3):
including interest on deposits . . . . 1.85x 2.25x 2.21x 2.24x 2.26x
Excluding interest on deposits . . . . 12.73x 12.87x 12.20x 8.99x 9.76x
</TABLE>
- - ----------
(1) Includes loans 90 days or more delinquent and still accruing interest,
nonaccrual loans and restructured loans.
(2) On a tax equivalent basis.
(3) For purposes of computing the ratio of earnings to fixed charges,
earnings represent earnings before income taxes, extraordinary items
and fixed charges. Fixed charges represent interest expense.
-9-
<PAGE> 12
[INSERT MEGABANK LOGO AND MAP]
Banking Locations
Map of the Denver, Colorado, area indicating the Company's banking locations.
-10-
<PAGE> 13
RISK FACTORS
Prospective investors should consider, among other things, the
following factors in connection with a decision to purchase the Preferred
Securities.
RISK FACTORS RELATING TO THE PREFERRED SECURITIES
Ranking of the Company's Obligations Under the Junior Subordinated
Debentures and the Guarantee. The ability of MB Capital to pay amounts due to
holders of the Preferred Securities is solely dependent upon the Company making
payments on the Junior Subordinated Debentures as and when required. All
obligations of the Company under the Guarantee, the Junior Subordinated
Debentures and other documents described herein are unsecured and rank
subordinate and junior in right of payment to all current and future Senior and
Subordinated Debt, the amount of which is unlimited. At September 30, 1997,
the aggregate outstanding Senior and Subordinated Debt of the Company was $2.0
million, all of which will be paid with certain net proceeds of the sale by the
Company of the Junior Subordinated Debentures to MB Capital. See "Use of
Proceeds." None of the Indenture, the Guarantee or the Trust Agreement places
any limitation on the amount of secured or unsecured debt, including Senior and
Subordinated Debt, that may be incurred by the Company or its subsidiaries.
Further, there is no limitation on the Company's ability to issue additional
junior subordinated debentures in connection with any future offerings of
Preferred Securities, and any such additional debentures would rank pari passu
with the Junior Subordinated Debentures.
In addition, because the Company is a holding company, all obligations
of the Company relating to the securities described herein will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, including the Bank. As a holding company, the right of the
Company to participate in any distribution of assets of any subsidiary upon
such subsidiary's liquidation or reorganization or otherwise (and thus the
ability of holders of the Preferred Securities to benefit indirectly from such
distribution) is subject to the prior claims of creditors of that subsidiary,
except to the extent that the Company may itself be recognized as a creditor of
that subsidiary. Accordingly, holders of the Preferred Securities should look
only to the assets of the Company, and not of its subsidiaries, for principal
and interest payments on the Junior Subordinated Debentures. See "Description
of Junior Subordinated Debentures -- Subordination" and "Description of
Guarantee -- Status of the Guarantee."
Dependence on Dividends From Subsidiary Bank. As a holding company,
with the substantial majority of its assets represented by its equity interest
in the Bank, the Company's ability to pay interest on the Junior Subordinated
Debentures to MB Capital (and consequently MB Capital's ability to pay
Distributions on the Preferred Securities and the Company's ability to pay its
obligations on the Guarantee) depends primarily upon the cash dividends the
Company receives from the Bank. Dividend payments from the Bank are subject to
regulatory limitations, generally based on current and retained earnings,
imposed by the various regulatory agencies with authority over the Bank.
Payment of dividends is also subject to regulatory restrictions if such
dividends would impair the capital of the Bank. Payment of Bank dividends is
also subject to its profitability, financial condition and capital expenditures
and other cash flow requirements. No assurance can be given that the Bank will
be able to pay dividends at past levels, or at all, in the future.
Option to Extend Interest Payment Period; Tax Consequences; Market
Price Consequences. So long as no Debenture Event of Default (as defined
herein) has occurred and is continuing, the Company has the right under the
Indenture to defer the payment of interest on the Junior Subordinated
Debentures at any time or from time to time for a period not exceeding 20
consecutive quarters with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. As a consequence of any such deferral, quarterly
Distributions on the Preferred Securities by MB Capital will be deferred (and
the amount of Distributions to which holders of the Preferred Securities are
entitled will accumulate additional amounts thereon at the rate of % per
annum, compounded quarterly, from the relevant payment date for such
Distributions, to the extent permitted by applicable law) during any such
Extension Period. During any such Extension Period, the Company will be
prohibited from making certain payments or distributions with respect to the
Company's capital stock (including dividends on or redemptions of common or
-11-
<PAGE> 14
preferred stock which may be issued in the future) and from making certain
payments with respect to any debt securities of the Company that rank pari
passu with or junior in interest to the Junior Subordinated Debentures;
however, the Company will not be restricted from (a) paying dividends or
distributions in common stock of the Company, (b) redeeming rights or taking
certain other actions under a stockholders' rights plan, if any, (c) making
payments under the Guarantee or (d) making purchases of common stock related to
the issuance of common stock or rights under any future benefit plans for the
Company's directors, officers or employees. Further, during an Extension
Period, the Company would have the ability to continue to make payments on
Senior and Subordinated Debt. Prior to the termination of any Extension
Period, the Company may further extend such Extension Period provided that such
extension does not cause such Extension Period to exceed 20 consecutive
quarters or to extend beyond the Stated Maturity. Upon the termination of any
Extension Period and the payment of all interest then accrued and unpaid
(together with interest thereon at the annual rate of %, compounded
quarterly, to the extent permitted by applicable law), the Company may elect to
begin a new Extension Period subject to the above requirements. There is no
limitation on the number of times that the Company may elect to begin an
Extension Period. See "Description of the Preferred Securities--Distributions"
and "Description of Junior Subordinated Debentures -- Option to Extend Interest
Payment Period."
The Company believes the likelihood of it exercising its option to
defer payments of interest is remote. Consequently, the Junior Subordinated
Debentures will be treated as issued without "original issue discount" ("OID")
for United States federal income tax purposes, and each beneficial owner of the
Preferred Securities will be treated as owning an undivided beneficial interest
in the Junior Subordinated Debentures. As a result, holders of Preferred
Securities will include interest in taxable income under their own methods of
accounting (i.e., cash or accrual). If the Company exercises its right to
defer payments of interest or if the Internal Revenue Service successfully took
the position that the exercise of such right was not remote at the time of
issuance of the Junior Subordinated Debentures, OID would arise, and the
holders of Preferred Securities would be required to include their pro rata
share of OID in gross income as it accrues for United States federal income tax
purposes in advance of the receipt of cash. See "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount." The Company has
no current intention of exercising its right to defer payments of interest by
extending the interest payment period on the Junior Subordinated Debentures.
However, should the Company elect to exercise its right to defer payments of
interest in the future, the market price of the Preferred Securities is likely
to be adversely affected. A holder that disposes of such holder's Preferred
Securities during an Extension Period, therefore, might not receive the same
return on such holder's investment as a holder that continues to hold the
Preferred Securities. In addition, the mere existence of the Company's right
to defer payments of interest on the Junior Subordinated Debentures may cause
the market price of the Preferred Securities to be more volatile than the
market prices of other securities on which OID accrues that are not subject to
such deferrals.
Tax Event Redemption, Investment Company Act Redemption or Capital
Treatment Event Redemption. Upon the occurrence and during the continuation of
a Tax Event, an Investment Company Event or a Capital Treatment Event (whether
occurring before or after _____________, 2003), the Company has the right to
redeem the Junior Subordinated Debentures in whole (but not in part) at 100% of
the principal amount together with accrued but unpaid interest to the date
fixed for redemption within 90 days following the occurrence of such Tax Event,
Investment Company Event or Capital Treatment Event and therefore cause a
mandatory redemption of the Trust Securities. The exercise of such right is
subject to the Company having received prior approval of the Federal Reserve to
do so if then required under applicable guidelines or policies of the Federal
Reserve. See "Description of the Preferred Securities -- Redemption."
A "Tax Event" means the receipt by the Company and MB Capital 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
such pronouncement or decision is announced on or after the original issuance
of the Preferred Securities, there is more than an insubstantial risk that (i)
MB Capital 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 Junior Subordinated Debentures, (ii) interest payable by the Company on
the Junior
-12-
<PAGE> 15
Subordinated Debentures is not, or within 90 days of such opinion, will not be,
deductible by the Company, in whole or in part, for United States federal
income tax purposes, or (iii) MB Capital is, or will be within 90 days of the
date of the opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges. See "-- Possible Tax Law Changes
Affecting the Preferred Securities" below for a discussion of certain
legislative proposals that, if adopted, could give rise to a Tax Event, which
may permit the Company to cause a redemption of the Junior Subordinated
Debentures (and therefore a redemption by MB Capital of the Preferred
Securities) prior to _______, 2003.
An "Investment Company Event" means the receipt by the Company and MB
Capital of an opinion of counsel experienced in such matters to the effect
that, as a result of any change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, MB Capital is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act, which change becomes effective on or after the original
issuance of the Preferred Securities.
A "Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any
proposed change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such proposed change, pronouncement or decision is announced on or
after the date of issuance of the Preferred Securities under the Trust
Agreement, there is more than an insubstantial risk of impairment of the
Company's ability to treat the Preferred Securities (or any substantial portion
thereof) as "Tier 1 Capital" (or the then equivalent thereof) for purposes of
the capital adequacy guidelines of the Federal Reserve, as then in effect and
applicable to the Company.
Possible Tax Law Changes Affecting Preferred Securities. Certain
legislative proposals were made in 1996 and 1997 which, if enacted, could have
adversely affected the ability of the Company to deduct interest paid on the
Junior Subordinated Debentures. These proposals were not, however,
incorporated into the legislation enacted on August 5, 1997 as the Taxpayer
Relief Act of 1997. Nevertheless, there can be no assurance that other
legislation enacted after the date hereof will not otherwise adversely affect
the ability of the Company to deduct the interest payable on the Junior
Subordinated Debentures. Consequently, there can be no assurance that a Tax
Event will not occur. A Tax Event would permit the Company, upon approval of
the Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve, to cause a redemption of the Preferred
Securities before, as well as after, _______, 2003. See "Description of the
Preferred Securities--Redemption," "Description of Junior Subordinated
Debentures--Redemption," and "Certain Federal Income Tax Consequences."
Possible Distribution of Junior Subordinated Debentures to Holders of
Preferred Securities. The Company will have the right at any time to terminate
MB Capital and cause the Junior Subordinated Debentures to be distributed to
the holders of the Preferred Securities in liquidation of MB Capital, subject
to the receipt of any required prior approval of the Federal Reserve. Because
holders of the Preferred Securities may receive Junior Subordinated Debentures
in liquidation of MB Capital and because Distributions are otherwise limited to
payments on the Junior Subordinated Debentures, prospective purchasers of the
Preferred Securities are also making an investment decision with regard to the
Junior Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein. See
"Description of the Preferred Securities -- Liquidation Distribution Upon
Termination" and "Description of the Junior Subordinated Debentures."
Limitations on Direct Actions Against the Company and on Rights Under
the Guarantee. Under the Guarantee, the Company guarantees the payment of
Distributions by MB Capital and payments on liquidation of or redemption of the
Preferred Securities (subordinate to the right to payment of Senior and
Subordinated Debt of the Company) to the extent of funds held by MB Capital.
If MB Capital has insufficient funds to pay Distributions on the Preferred
Securities (i.e., if the Company has failed to make required payments under the
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<PAGE> 16
Junior Subordinated Debentures), a holder of the Preferred Securities would
have the right to institute a legal proceeding directly against the Company for
enforcement of payment to such holder of the principal of or interest on such
Junior Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such holder. Except as
described herein, holders of the Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the Junior
Subordinated Debentures or assert directly any other rights in respect of the
Junior Subordinated Debentures.
Under the Guarantee, Wilmington Trust Company will act as indenture
trustee (the "Guarantee Trustee"). The holders of not less than a majority in
aggregate Liquidation Amount of the Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of the Guarantee or to direct the
exercise of any trust power conferred upon the Guarantee Trustee under the
Guarantee Agreement. Any holder of the Preferred Securities may institute a
legal proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against MB Capital, the
Guarantee Trustee or any other person or entity. The Trust Agreement provides
that each holder of the Preferred Securities by acceptance thereof agrees to
the provisions of the Guarantee Agreement and the Indenture. See "Description
of Junior Subordinated Debentures--Enforcement of Certain Rights of Holders of
Preferred Securities" and "--Debenture Events of Default" and "Description of
Guarantee."
Limited Covenants. The covenants in the Indenture are limited, and
there are no covenants relating to the Company in the Trust Agreement. As a
result, neither the Indenture nor the Trust Agreement protects holders of
Junior Subordinated Debentures or Preferred Securities, respectively, in the
event of a material adverse change in the Company's financial condition or
results of operations or limits the ability of the Company or any subsidiary to
incur additional indebtedness. Therefore, the provisions of these governing
instruments should not be considered a significant factor in evaluating whether
the Company will be able to comply with its obligations under the Junior
Subordinated Debentures or the Guarantee.
Limited Voting Rights. Holders of the Preferred Securities will
generally have limited voting rights relating only to the modification of the
Preferred Securities and certain other matters described herein. In the event
that (i) there is a Debenture Event of Default (as defined herein) with respect
to the Junior Subordinated Debentures (see "Description of the Junior
Subordinated Debentures--Events of Default"), (ii) the Property Trustee fails
to pay any Distribution on the Preferred Securities for 30 days (subject to
deferral of Distributions as provided under "Description of the Preferred
Securities--Extension Periods"), (iii) the Property Trustee fails to pay the
redemption price on the Preferred Securities when due upon redemption, (iv) the
Property Trustee fails to observe a covenant in the Trust Agreement for the
Preferred Securities for 60 days after receiving a Notice of Default, or (v)
the Property Trustee is declared bankrupt or insolvent and not replaced by the
Company within 60 days, the holders of a majority of the outstanding Preferred
Securities will be able to remove the Property Trustee and the Indenture
Trustee (but not the Administrative Trustees who may only be removed by the
Company as holder of the Common Securities). See "Description of the Preferred
Securities--Removal of Trustees" and "--Voting Rights; Amendment of the Trust
Agreement."
Trading Characteristics of the Preferred Securities. The Preferred
Securities may trade at a price that does not reflect fully the value of
accrued but unpaid interest with respect to the underlying Junior Subordinated
Debentures. A holder who uses the accrual method of accounting for tax purposes
(and a cash method holder, if the Junior Subordinated Debentures are deemed to
have been issued with OID) and who disposes of its Preferred Securities between
record dates for payments of Distributions thereon will be required to include
accrued but unpaid interest on the Junior Subordinated Debentures through the
date of disposition in income as ordinary income (i.e., interest or, possibly,
OID), and to add such amount to its adjusted tax basis in its share of the
underlying Junior Subordinated Debentures deemed disposed of. If the selling
price is less than the holder's adjusted tax basis (which will include all
accrued but unpaid interest), a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes. See "Certain
Federal Income Tax Considerations -- Interest Income and Original Issue
Discount" and "--Sales or Redemption of Preferred Securities."
-14-
<PAGE> 17
Absence of Existing Public Market; Market Prices. There is no
existing market for the Preferred Securities. An application for listing is
pending for the Preferred Securities on the Nasdaq National Market System.
There can be no assurance that a listing of the Preferred Securities will be
available on Nasdaq or, if available, that an active and liquid trading market
for the Preferred Securities will develop. Although the representative of the
Underwriters has informed MB Capital and the Company that the Underwriters
intend to make a market in the Preferred Securities offered hereby, no
Underwriter is obligated to do so and any such market making activity may be
terminated at any time without notice to the holders of the Preferred
Securities. In addition, at least three market makers must make a market in
the Preferred Securities in order that they continue to be listed on Nasdaq.
There can be no assurance that these market makers will continue to make a
market in the Preferred Securities. If there were to be less than three market
makers for the Preferred Securities, the Nasdaq listing of the Preferred
Securities could be jeopardized and the liquidity and trading prices of the
Preferred Securities would be adversely affected. Future trading prices of the
Preferred Securities will depend on many factors including, among other things,
prevailing interest rates, the operating results and financial condition of the
Company, and the market for similar securities. There can be no assurance as
to the market prices for the Preferred Securities or the Junior Subordinated
Debentures that may be distributed in exchange for the Preferred Securities if
the Company exercises its right to terminate MB Capital. Accordingly, the
Preferred Securities that an investor may purchase, or the Junior Subordinated
Debentures that a holder of the Preferred Securities may receive in liquidation
of MB Capital, may decline in value from the price that the investor paid to
purchase the Preferred Securities offered hereby.
RISK FACTORS RELATING TO THE COMPANY
Loan Concentration. Since the 1980's the Bank has been one of the
leading originators of residential construction loans to small and medium sized
builders in the Denver, Colorado area. As of September 30, 1997 these loans,
in the aggregate, comprised 74.7% of the Bank's total loans. These loans could
be adversely affected by adverse economic conditions in the home building
industry. These conditions could occur as a result of significant increases in
interest rates, moratoriums of new building by municipalities, overbuilding of
new homes in the Denver area and a general economic downturn. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Economic Conditions and Impact of Interest Rates. Results of
operations for financial institutions, including the Company, may be materially
and adversely affected by changes in prevailing economic conditions, including
declines in real estate values, rapid changes in interest rates and the
monetary and fiscal policies of the federal government. The profitability of
the Company is in part a function of the spread between the interest rates
earned on assets and the interest rates paid on deposits and other
interest-bearing liabilities. Although management believes that the maturities
of the Company's assets are moderately balanced in relation to maturities of
liabilities ("asset/liability management"), asset/liability management involves
estimates as to how changes in the general level of interest rates will impact
the yields earned on assets and the rates paid on liabilities. A decrease in
interest rate spreads would have a negative effect on the net interest income
and profitability of the Company, and there can be no assurance that this
spread will not decrease. Although economic conditions in the market area of
the Company have been generally stronger than those in many other regions of
the country, there can be no assurance that such conditions will continue to
prevail. Moreover, substantially all of the loans of the Company are to
individuals and businesses in the Denver area, and any decline in the economy
of this market area could have an adverse impact on the Company. There can be
no assurance that positive trends or developments discussed herein will
continue or that negative trends or developments will not have a material
adverse effect on the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Growth and Acquisition Risks. The Company has pursued and intends to
continue to pursue an internal growth strategy, the success of which will
depend primarily on generating an increasing level of loans and deposits at
acceptable risk levels and terms without proportionate increases in noninterest
expenses. A significant portion of the net proceeds from the sale by the
Company of the Junior Subordinated Debentures is intended to be used to support
future growth, including the establishment of additional branches. The Company
has grown and intends to grow by the establishment of new branches.
Establishing new branches
-15-
<PAGE> 18
through land purchase and development takes significant amounts of capital and
time to build. Delays can be encountered in the process as a result of zoning,
building moratoriums by municipalities, and general construction and weather
problems. There can be no assurance that the Company will be successful in
continuing its internal growth strategy. Although the Company does not have
any discussions or negotiations underway relating to acquisitions, the Company
in the future intends to review and solicit acquisition opportunities and, at
any given time, may attempt to acquire financial institutions. The Company may
not be successful in identifying acquisition candidates, integrating acquired
institutions or preventing deposit erosion at acquired institutions.
Competition for acquisitions in the Company's market area is highly
competitive, and the Company may not be able to acquire institutions on terms
beneficial to the Company. Furthermore, the level of success of the Company's
growth strategy will depend on maintaining sufficient regulatory capital levels
and on continued favorable economic conditions in the Denver area.
Competitive Banking Environment. The banking business in Colorado is
highly competitive. The Company competes for loans and deposits with other
local, regional and national commercial banks, savings banks, savings and loan
associations, finance companies, money market funds, brokerage houses, credit
unions and nonfinancial institutions, many of which have substantially greater
financial resources than the Company. Interstate banking is permitted in
Colorado. As a result, management believes that the Company may experience
greater competition in its market area.
Allowance for Loan Losses. Inability of borrowers to repay loans can
erode earnings and capital of banks. Like all banks, the Company maintains an
allowance for loan losses to provide for loan defaults and nonperformance. The
allowance is based on prior experience with loan losses, as well as an
evaluation of the risks in the current portfolio, and is maintained at a level
considered adequate by management to absorb anticipated losses. The amount of
future losses is susceptible to changes in economic, operating and other
conditions, including changes in interest rates, that may be beyond
management's control, and such losses may exceed current estimates. At
September 30, 1997, the Company had nonperforming loans of $1.7 million and an
allowance for loan losses of $1.6 million or 1.35% of total loans and 93.43% of
nonperforming loans. There can be no assurance that the Company's allowance
for loan losses will be adequate to cover actual losses. Future provisions for
loan losses could materially and adversely affect results of operations of the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Dependence on Key Person. The Company is highly dependent on the
continued services of Thomas R. Kowalski, its Chairman and Chief Executive
Officer. The Company does not have an employment agreement with Mr. Kowalski.
Although the Company has a $3.0 million key man life insurance policy on Mr.
Kowalski, proceeds under the policy paid to the Company will, at the option of
certain affiliated shareholders of Mr. Kowalski, be utilized by the Company for
the repurchase of all or a portion of such shareholders' common stock. The
loss of the services of Mr. Kowalski could adversely affect the Company. See
"Management."
Government Regulation and Recent Legislation. The Company and the
Bank are subject to extensive federal and state legislation, regulation and
supervision which is intended primarily to protect depositors and the Bank
Insurance Fund, rather than investors. Recently enacted, proposed and future
legislation and regulations designed to strengthen the banking industry have
had and may have a significant impact on the banking industry. Although some
of the legislative and regulatory changes may benefit the Company and the Bank,
others may increase their costs of doing business or otherwise adversely affect
them and create competitive advantages for non-bank competitors. See
"Supervision and Regulation."
USE OF PROCEEDS
All of the proceeds from the sale of Preferred Securities will be
invested by MB Capital in the Junior Subordinated Debentures of the Company.
The net proceeds to the Company from the sale of the Junior Subordinated
Debentures are estimated to be approximately $11.2 million (net of estimated
underwriting commissions and offering expenses). The Company intends to use
the net proceeds to pay all $2.0 million of its Senior and Subordinated Debt,
use approximately $2.0 million to complete two new bank branch locations
expected to begin operations in 1998, and contribute approximately $4.0 million
of capital to the Bank, with the
-16-
<PAGE> 19
remainder to be used for general corporate purposes, which may include, without
limitation, purchase and construction of future bank branch locations, possible
future acquisitions and additional capital contributions to the Bank. The $4.0
million of additional capital contribution to the Bank will result in an
increased legal lending limit which is designed to further the Bank's internal
growth objectives. Although the Company does not have any discussions or
negotiations underway relating to acquisitions, the Company in the future
intends to review and solicit acquisition opportunities and, at any given time,
may attempt to acquire financial institutions. Pending their application, the
net proceeds may be invested in short-term, marketable, investment grade
interest-bearing securities.
The Company is required by the Federal Reserve to maintain certain
levels of capital for bank regulatory purposes. On October 21, 1996, the
Federal Reserve announced that certain qualifying amounts of securities having
the characteristics of the Preferred Securities could be included as Tier 1
capital for bank holding companies subject to certain limitations. See
"Capitalization." Such Tier 1 capital treatment, together with the Company's
ability to deduct, for federal income tax purposes, interest payable on the
Junior Subordinated Debentures, will provide the Company with a cost-effective
means of obtaining capital for bank regulatory purposes.
ACCOUNTING TREATMENT
For financial reporting purposes, MB Capital will be treated as a
subsidiary of the Company and, accordingly, the accounts of MB Capital will be
included in the Consolidated Financial Statements of the Company. The
Preferred Securities will be presented as a separate line item in the
consolidated balance sheets of the Company under the caption "Company Obligated
Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely
Junior Subordinated Debentures," and appropriate disclosures about the
Preferred Securities, the Guarantee and the Junior Subordinated Debentures will
be included in the Notes to Consolidated Financial Statements. For financial
reporting purposes, the Company will record Distributions payable on the
Preferred Securities as interest expense in the consolidated statements of
operations.
Future reports of the Company filed under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") will include a footnote to the
financial statements stating that (i) MB Capital is wholly-owned, (ii) the sole
assets of MB Capital are the Junior Subordinated Debentures (specifying the
principal amount, interest rate and maturity date of such Junior Subordinated
Debentures), and (iii) the obligations of the Company described herein, in the
aggregate, constitute a full and unconditional guarantee on a subordinated
basis by the Company of the obligations of MB Capital under the Preferred
Securities. MB Capital will not provide separate reports under the Exchange
Act.
-17-
<PAGE> 20
CAPITALIZATION
The following table sets forth the consolidated borrowings and
capitalization of the Company at September 30, 1997 and as adjusted to give
effect to the issuance of the Preferred Securities by MB Capital in this
offering and the use of net proceeds therefrom as described in "Use of
Proceeds."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------------------
ACTUAL AS ADJUSTED
---------- ------------
(Dollars in thousands)
<S> <C> <C>
Borrowings:
Advances from the Federal Home Loan Bank . . . . . . . . . . . . . . . . $ 1,788 $ 1,788
Note payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 --
---------- ----------
Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,788 $ 1,788
========== ==========
Company obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely Junior
Subordinated Debentures(1) . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 12,000
========== ==========
Shareholders' equity:
Common Stock, no par value; 500,000 shares authorized(2);
213,578 shares issued and outstanding . . . . . . . . . . . . . . . . . $ 1,961 $ 1,961
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,775 8,775
Unrealized gain (loss) on securities available for sale,
net of income tax effect . . . . . . . . . . . . . . . . . . . . . . . 226 226
---------- ----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . $ 10,962 $ 10,962
========== ==========
Consolidated regulatory capital ratios:
Total capital to risk-weighted assets . . . . . . . . . . . . . . . . . . 9.78% 19.12%
Tier 1 capital to risk-weighted assets(3) . . . . . . . . . . . . . . . . 8.53% 11.38%
Tier 1 capital to tangible assets(3) . . . . . . . . . . . . . . . . . . 7.11% 8.93%
</TABLE>
- - ----------
(1) The subsidiary trust is MB Capital, a wholly-owned subsidiary of the
Company that will hold, as its sole asset, $12.4 million principal
amount of Junior Subordinated Debentures, of which $12.0 million will
be purchased with the proceeds of the Preferred Securities issued by MB
Capital. The remaining $0.4 million of Junior Subordinated Debentures
will be purchased with the proceeds of the Common Securities issued by
MB Capital. The Company will own all of the Common Securities. See
"Description of Junior Subordinated Debentures" and "Description of
Preferred Securities."
(2) Effective January 15, 1998 the Company increased its authorized
capital stock to 50 million shares of Common Stock and 10 million
shares of Preferred Stock. The increase was made to provide for
possible future capital needs of the Company. There is no pending or
planned transaction which would require the issuance of any of the
newly authorized stock. The increase in capital was not part of a
plan by the Company's management to adopt a series of anti-takeover
measures over a period of time.
(3) The Preferred Securities have been structured to qualify as Tier 1
capital. However, they cannot be used to constitute more than 25% of
the Company's total Tier 1 capital. As adjusted for this offering,
the Company's Tier 1 capital as of September 30, 1997 would have been
$14.0 million of which $3.5 million would have been attributable to
the Preferred Securities. Any future increases in other elements of
the Company's Tier 1 capital, including retained earnings, should
permit the Company to include greater portions of the Preferred
Securities proceeds in Tier 1 capital.
-18-
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS ENVIRONMENT AND RISK FACTORS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and related notes included elsewhere herein.
The Company's future operating results may be affected by various trends and
factors which are beyond the Company's control. These include, among other
factors, the competitive banking environment in which the Company operates,
provisions for loan losses, risks relating to the Company's concentration of
loans related to residential construction, changes in general economic
conditions and interest rates, rapid or unexpected changes in technologies and
other uncertain business conditions that may affect the Company's business.
Accordingly, past results and trends may not be reliable indicators of future
results or trends.
With the exception of historical information, the matters discussed
below include forward-looking statements that involve risks and uncertainties.
The Company wishes to caution readers that a number of important factors
discussed herein could affect the Company's actual results and cause actual
results to differ materially from those in the forward-looking statements.
OVERVIEW
Since inception, the Company, through the Bank, has specialized its
lending practice in the residential construction industry. The Company's
Chairman has extensive experience in the home building industry and has
expanded the Bank's lending practice to date such that the Bank is one of the
area's leading originators of residential construction loans to small and
medium sized homebuilders. Currently, the Bank can finance a builder or
developer from the acquisition and development loan process, including
assistance with special district financing, through the construction loan
phase.
The Company has experienced substantial growth over the past three
years. Total assets have increased to $159 million as of September 30, 1997
from $119 million, $102 million and $63 million as of December 31, 1996,
December 31, 1995 and December 31, 1994, respectively. The Company has
maintained above average profitability while achieving its strong asset growth.
During the same time period, net income grew to $2.4 million for the year ended
December 31, 1996 from $1.6 million and $0.8 million for the years ended
December 31, 1995 and 1994, respectively. For the nine months ended September
30, 1997, net income was $2.0 million. On an annualized basis, as of September
30, 1997, return on average assets for the Company equaled 1.93% while return
on average equity equaled 27.37%.
RESULTS OF OPERATIONS
Net Interest Income. The Company's net income is derived primarily
from net interest income. Net interest income is the difference between
interest income, principally from loans, investment securities and funds sold,
and interest expense, principally on customer deposits. Changes in net
interest income result from changes in volume, net interest spread and net
interest margin. Volume refers to the average dollar levels of
interest-earning assets and interest-bearing liabilities. Net interest spread
refers to the difference between the average yield on interest-earning assets
and the average cost of interest-bearing liabilities. Net interest margin
refers to net interest income divided by average interest-earning assets and is
influenced by the level and relative mix of interest-earning assets and
interest-bearing liabilities.
The following tables set forth the average balances, net interest
income and expense and average yields and rates for the Company's earning
assets and interest-bearing liabilities for the indicated periods on a
tax-equivalent basis assuming a 34% tax rate.
-19-
<PAGE> 22
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,(1)
--------------------------------------------------------------------------------
1997 1996
-------------------------------------- -----------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE EARNED YIELD AVERAGE EARNED YIELD
BALANCE OR PAID OR COST BALANCE OR PAID OR COST
-------- -------- ------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Investment securities:
Taxable........................... $ 4,224 $ 209 6.60% $ 7,493 $ 382 6.80%
Tax exempt (tax equivalent)....... 6,203 626 13.46 2,156 217 13.42
Funds sold and interest-bearing
deposits..................... 11,981 481 5.35 4,020 190 6.31
Loans(2)............................ 106,806 9,982 12.46 76,024 7,491 13.14
Allowance for loan losses .......... (1,357) -- (855) --
-------- ------ ----- ------
Total interest-earning assets....... $127,857 $11,298 11.78 $88,838 $8,280 12.43
======== ------- ======= -----
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Demand, interest-bearing.......... $ 51,509 $ 1,776 4.60 $36,126 $ 1,218 4.50
Savings........................... 4,769 119 3.33 5,286 136 3.43
Certificates of deposit:
Under $100,000.................. 23,361 1,009 5.76 9,536 386 5.40
$100,000 and over............... 10,610 454 5.71 6,550 261 5.31
-------- ------- ------- -------
Total interest-bearing deposits..... 90,249 3,358 4.96 57,498 2,001 4.64
Advances from the Federal Home
Loan Bank and federal funds
purchased......................... 2,560 126 6.56 1,112 44 5.28
Notes payable....................... 2,250 135 8.00 3,673 192 6.97
-------- ------- ------- -------
Total interest-bearing liabilities.. $95,059 3,619 5.08 $62,283 2,237 4.79
======= ------- ======= -------
Net interest income (tax
equivalent)....................... $ 7,679 $ 6,043
======= =======
Net interest margin(3).............. 8.01% 9.07%
Net interest spread ................ 6.70% 7.64%
Ratio of average interest-bearing
liabilities to average
interest-earning assets .......... 74.35% 70.11%
</TABLE>
- - ---------------
(1) Yields are annualized.
(2) Loans are net of unearned discount. Nonaccrual loans are included in
average loans outstanding. Loan fees are included in interest income
as follows for the nine months ended September 30, 1997 - $1,879,441;
1996 - $1,677,209.
(3) Net interest margin is net interest income divided by average total
earning assets (on an annualized basis).
Net interest income, on a tax-equivalent basis, was $7.7 million for
the nine months ended September 30, 1997, an increase of $1.6 million from $6.0
million for the same period in 1996. Interest income for the nine months ended
September 30, 1997 and 1996 was $11.3 million and $8.3 million, respectively.
The increase of $3.0 million is primarily due to higher balances of
interest-earning assets, which offset lower investment rates. The various
changes in the mix of taxable investment securities and tax exempt securities
as well as funds sold were a result of the Company attempting to maximize its
yield on interest-earning assets other than loans. The Company achieved an
increase of $39.0 million or 43.9% in average interest-earning assets to $127.8
million for the nine months ended September 30, 1997 from $88.8 million for the
same period in 1996. The majority of the increase in interest-earning assets
was attributable to $30.8 million increase in average loans outstanding. The
majority of the loans in the Company's lending portfolio are floating rate
loans tied to the prime rate. The average yield on interest-earning assets
decreased to 11.78% for the nine months ended September 30, 1997 from 12.43%
for the comparable period in 1996.
Interest expense increased $1.4 million to $3.6 million for the nine
months ended September 30, 1997 compared to $2.2 million for the same period in
1996. The increase in average demand-bearing deposits to $51.5 million for the
nine months ended September 30, 1997 from $36.1 million for the comparable
period in 1996 was due to the Bank's growth at existing facilities, including
the opening of two additional branches. The
-20-
<PAGE> 23
significant increase in average balances of certificates of deposit under
$100,000 to $23.4 million for the nine months ended September 30, 1997 from
$9.5 million for the comparable period in 1996 was due to the Bank's growth as
well as promotional campaigns by the Bank directed at obtaining new accounts.
The increase in certificates of deposit of $100,000 and over was again due to
the growth in the Bank. The decrease in average notes payable to $2.2 million
for the nine months ended September 30, 1997 from $3.6 million for the
comparable period in 1996 was due to the Company's paydown of its note with a
commercial lender. The Company expects to pay off the note with the net
proceeds from the sale of the Junior Subordinated Debentures. The cost of
interest-bearing liabilities for the nine months ended September 30, 1997 and
1996 was 5.08% and 4.79%, respectively, and, when combined with
noninterest-bearing deposits, the cost of funds for the nine months ended
September 30, 1997 and 1996 was 3.72% and 3.29%, respectively. See "--
Deposits." These increases were due to an increase of $32.8 million in average
interest-bearing liabilities along with an increase in the cost of the Federal
Home Loan Bank ("FHLB") borrowings to 6.56% from 5.28%. Management expects
that borrowings will continue to supplement deposits with FHLB advances when
necessary to fund the lending and investing activities of the Company. As a
result of the foregoing, net interest margin, on a tax-equivalent basis,
decreased to 8.01% for the nine months ended September 30, 1997 from 9.07% for
the comparable period in 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1996 1995
------------------------------------------- -------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE EARNED YIELD AVERAGE EARNED YIELD
BALANCE OR PAID OR COST BALANCE OR PAID OR COST
-------- -------- ------- -------- --------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Investment securities:
Taxable . . . . . . . . . . . . . . . $ 7,127 $ 487 6.83% $ 7,376 $ 484 6.56%
Tax exempt (tax equivalent) . . . . . 2,780 374 13.45 -- -- --
Funds sold and interest-bearing deposits 3,471 215 6.19 2,963 304 10.26
Loans(1) . . . . . . . . . . . . . . . 80,213 10,410 12.98 54,219 7,639 14.09
Allowance for loan losses . . . . . . . (909) -- (632) --
---------- --------- ---------- ----------
Total interest-earning assets . . . . . $ 92,682 $ 11,486 12.39 $ 63,926 $ 8,427 13.18
========== --------- ========== ----------
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Demand, interest-bearing . . . . . . $ 37,983 $ 1,717 4.52 $ 22,586 $ 1,004 4.45
Savings . . . . . . . . . . . . . . . 5,442 186 3.42 4,752 157 3.30
Certificates of deposit:
Under $100,000 . . . . . . . . . . 9,639 522 5.42 8,033 427 5.32
$100,000 and over . . . . . . . . . 6,885 369 5.36 5,045 263 5.21
---------- --------- ---------- ----------
Total interest-bearing deposits . . . . 59,949 2,794 4.66 40,416 1,851 4.58
Advances from the Federal Home
Loan Bank and federal funds purchased 1,771 97 5.48 376 23 6.12
Notes payable . . . . . . . . . . . . . 3,673 240 6.53 3,728 280 7.51
---------- --------- ---------- ----------
Total interest-bearing liabilities . . $ 65,393 3,131 4.79 $ 44,520 2,154 4.84
========== --------- ========== ----------
Net interest income (tax equivalent) . $ 8,355 $ 6,273
========= ==========
Net interest margin(2) . . . . . . . . 9.01% 9.81%
Net interest spread . . . . . . . . . . 7.60% 8.34%
Ratio of average interest-bearing
liabilities to average interest-
earning assets . . . . . . . . . . . 70.56% 69.64%
</TABLE>
- - ---------------
(1) Loans are net of unearned discount. Nonaccrual loans are included in
average loans outstanding. Loan fees are included in interest income
as follows: 1996 - $2,239,017; 1995 - $1,800,165.
(2) Net interest margin is net interest income divided by average total
earning assets.
-21-
<PAGE> 24
Net interest income, on a tax-equivalent basis, was $8.4 million for
the year ended December 31, 1996, an increase of $2.1 million from $6.3 million
in 1995. Interest income increased $3.1 million to $11.5 million in 1996 from
$8.4 million in 1995. This increase resulted primarily from an increase of
$28.7 million in average interest-earning assets to $92.7 million in 1996 from
$64.0 million in 1995. The majority of the asset growth was due to growth in
the loan portfolio. Average loans increased $26.0 million or 47.9% to $80.2
million in 1996 from $54.3 million in 1995 due primarily to the Company's
continuing growth. The change in the relative mix of interest-earning assets
other than loans was due primarily to the Company's objective of maximizing its
yield on funds not used for loans, including investing in double tax exempt
securities. The average yield on interest-earning assets decreased to 12.39%
in 1996 from 13.18% in 1995.
Interest expense increased $0.9 million to $3.1 million in 1996 from
$2.2 million in 1995. A $15.4 million increase in interest-bearing demand
deposits accounted for $0.7 million of the increase. These deposits increased
due to the Company's growth, including the addition of a new branch in 1996.
Changes in the relative mix of average interest-bearing liabilities included a
$1.4 million increase in advances from the FHLB. The cost of interest-bearing
liabilities for the years ended December 31, 1996 and 1995 was 4.79% and 4.84%,
respectively, and, when combined with noninterest-bearing deposits, the cost of
funds was 3.31% in 1996 compared to 3.23% in 1995. In spite of the lower cost
of funds, net interest margin, on a tax-equivalent basis, decreased to 9.01% in
1996 from 9.81% in 1995, primarily as a result of lower yields.
The following table illustrates, for the periods indicated, the
changes in the Company's net interest income (on a tax-equivalent basis) due to
changes in volume and changes in interest rates. Changes in net interest
income due to both volume and rate have been allocated to volume and rate in
proportion to the relationship of the absolute dollar amounts of the change in
each.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------- -------------------- ------------------
1997 COMPARED TO 1996: 1996 COMPARED TO 1995: 1995 COMPARED TO 1994
--------------------- -------------------- ------------------
INCREASE (DECREASE) IN INCREASE (DECREASE) IN INCREASE (DECREASE) IN
NET INTEREST INCOME NET INTEREST INCOME NET INTEREST INCOME
DUE TO CHANGE IN DUE TO CHANGE IN DUE TO CHANGE IN
--------------------- -------------------- ------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME RATE TOTAL
------ ---- ----- ------ ---- ----- ------ ---- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-earning securities
Taxable . . . . . . . . . . . . . . . . $ (162) $ (11) $ (173) $ (17) $ 20 $ 3 $ 41 $128 $ 169
Tax exempt (tax equivalent) . . . . . . 408 1 409 374 -- 374 -- -- --
Fund sold . . . . . . . . . . . . . . . 320 (29) 291 31 (120) (89) (9) 189 180
Loans . . . . . . . . . . . . . . . . . 2,877 (386) 2,491 3,373 (602) 2,771 1,690 458 2,148
------ ----- ------ ------ ----- ------ ------ ---- ------
Total interest-earning assets . . . . . 3,443 (425) 3,018 3,761 (702) 3,059 1,722 775 2,497
------ ----- ------ ------ ----- ------ ------ ---- ------
Interest-bearing liabilities:
Demand, interest bearing . . . . . . . 530 28 558 696 17 713 172 332 504
Savings . . . . . . . . . . . . . . . . (13) (4) (17) 24 5 29 8 22 30
Certificates of deposit:
Under $100,000 . . . . . . . . . . . 597 26 623 87 8 95 119 107 226
$100,000 and over . . . . . . . . . . 174 19 193 99 7 106 94 62 156
Advances from the Federal Home
Loan Bank and federal funds purchased 71 11 82 76 (2) 74 17 -- 17
Notes payable . . . . . . . . . . . . . (85) 28 (57) (4) (36) (40) 96 33 129
------ ----- ------ ------ ----- ------ ------ ---- ------
Total interest-bearing liabilities. . . 1,274 108 1,382 978 (1) 977 506 556 1,062
------ ----- ------ ------ ----- ------ ------ ---- ------
Net increase (decrease) in net interest
income (tax equivalent) . . . . . . . $2,169 $(533) $1,636 $2,783 $(701) $2,082 $1,216 $219 $1,435
====== ===== ====== ====== ===== ====== ====== ==== ======
</TABLE>
-22-
<PAGE> 25
Other Income. The following table sets forth the Company's other
income for the indicated periods.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------
1997 1996 1996 1995
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Service charges . . . . . . . . . . . $ 52 $ 42 $ 56 $ 45
Bank charges . . . . . . . . . . . . 202 187 269 196
Building rent . . . . . . . . . . . . 111 155 206 208
Payroll services . . . . . . . . . . -- 233 233 265
Gain on sale of subsidiary . . . . . -- -- 65 --
Other . . . . . . . . . . . . . . . . 175 163 132 93
----- ----- ----- -----
Total other income . . . . . . . . . $ 540 $ 780 $ 961 $ 807
===== ===== ===== =====
</TABLE>
During the nine months ended September 30, 1997 total other income
decreased from $780,000 to $540,000 for the comparable period in 1996 due
primarily to the Company's sale of its payroll services subsidiary. Other
income for the year ended December 31, 1996 compared to 1995 increased by
approximately $154,000 due primarily to increases in bank charges and a
recognition of gain following the sale of the payroll services subsidiary.
However, payroll services income declined and management sold this operation in
1996, and certain contingent expenses in connection with the sale were incurred
in 1997.
Other Expenses. The following table sets forth the Company's
operating expenses for the indicated periods.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------
1997 1996 1996 1995
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Salaries and employee benefits . . . . $2,216 $1,635 $2,261 $1,708
Occupancy expense of premises . . . . . 539 485 642 568
Furniture and equipment expense . . . . 221 195 298 206
Payroll services . . . . . . . . . . . -- 370 384 461
Contract labor . . . . . . . . . . . . 59 93 130 65
Printing . . . . . . . . . . . . . . . 44 8 19 16
Computer systems and services . . . . . 83 26 42 44
Postage and freight . . . . . . . . . . 52 41 55 49
Supplies . . . . . . . . . . . . . . . 110 79 113 104
Consulting fees . . . . . . . . . . . . 49 30 55 --
Loan, legal and collection fees . . . . 130 58 73 76
Other . . . . . . . . . . . . . . . . . 1,081 666 887 839
------ ------ ------ ------
Total other expenses . . . . . $4,584 $3,686 $4,959 $4,136
====== ====== ====== ======
</TABLE>
During the nine months ended September 30, 1997 total other expenses
increased by $898,000 over the comparable 1996 period to $4.6 million,
primarily as a result of salaries and employee benefits increasing by $581,000
due to increased operations of the Bank and salary increases to Bank personnel.
Generally, the remaining expenses increased due to an increased level of
operations and increased expenses associated with opening two additional
branches in 1997. Loan, legal and collection fees increased due to a greater
amount of loan documentation required on certain loans, as well as fees
incurred in connection with non-accrual loans. Payroll services expenses were
not incurred in 1997 as a result of the sale of the payroll services operation
in 1996. During the year ended December 31, 1996 total operating expenses
increased $823,000 to $5.0 million from $4.1 million in 1995, with increases
occurring among the various components due to the Company's continued growth.
-23-
<PAGE> 26
Federal Income Tax. The Company's consolidated income tax rate varies
from statutory rates principally due to interest income from tax-exempt
securities and loans. The provision for income taxes was relatively unchanged
at $1.0 million for the nine months ended September 30, 1997 from $1.1 million
for the comparable period in 1996. The Company recorded income tax expenses
totaling $1.4 million in 1996 and $1.0 million in 1995, reflecting the increase
in net income for the period.
FINANCIAL CONDITION
Loan Portfolio Composition. The following table sets forth the
composition of the Company's loan portfolio by type of loan at the dates
indicated. Management believes that the balance sheet information as of the
dates indicated should be read in conjunction with the average balance
information in the tables above under "--Net Interest Income." As indicated
above, the Company specializes its lending practice in the residential
construction industry. Depending on life cycles of real estate development,
balances of the Company's commercial loans and construction loans may fluctuate
significantly. Therefore, the data below are not necessarily indicative of
trends within a particular category.
<TABLE>
<CAPTION>
December 31,
September 30, -----------------------------------------
1997 1996 1995
------------------ --------------- --------------------
Amount % Amount % Amount %
------ ----- ------- ---- ------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Construction............................... $ 85,287 74.7% $47,306 50.4% $29,732 43.7%
Commercial................................. 27,024 23.7 44,356 47.2 36,148 53.1
Installment and other...................... 4,196 3.6 4,103 4.4 3,444 5.0
Mortgage................................... 66 .1 67 .1 67 .1
Loans held for sale........................ -- -- -- -- -- --
-------- ----- ------- ----- ------- -----
Total face amount of loans................. 116,573 102.1 95,832 102.1 69,391 101.9
Deferred loan fees, discounts
and costs, net........................... (854) (.7) (859) (.9) (546) (.8)
-------- ----- ------- ----- ------- -----
Loans...................................... 115,719 101.4 94,973 101.2 68,845 101.1
Less allowance for loan losses............. (1,567) (1.4) (1,150) (1.2) (759) (1.1)
-------- ----- ------- ----- ------- -----
Net loans.................................. $114,152 100.0% $93,823 100.0% $68,086 100.0%
======== ===== ======= ===== ======= =====
</TABLE>
As of September 30, 1997 loans were $115.7 million, or $20.7 million
greater than loans of $95.9 million as of December 31, 1996. The difference is
due primarily to a greater amount of construction loans. Loans as of December
31, 1996 were up $26.1 million compared to December 31, 1995, principally due
to greater amounts of construction and commercial loans, which reflect the
Company's growth discussed above.
The Company's two primary categories of loans, construction loans and
commercial loans, trended upward as indicated at the various dates. These
loans as a group were $112.3 million as of September 30, 1997, $20.6 million
over the $91.7 million balance as of December 31, 1996, which in turn was $25.9
million greater than such loans as of December 31, 1995. In addition, the
significantly lower commercial loans as of September 30, 1997 compared to
December 31, 1996 is in large part due to the Company's reclassification in
1997 of land and acquisition loans to construction loans, with the
corresponding increase in construction loans.
Installment loans remained relatively constant with the balance of
$4.2 million as of September 30, 1997 compared to $4.1 million as of December
31, 1996. Installment loan balances were greater at $659,000 as of December
31, 1995 compared $3.5 million as of December 31, 1994, again due to the
Company's growth.
Mortgage loans also remained relatively constant, and have comprised
less than 1% of the Company's loan portfolio since year-end 1994. As discussed
earlier, the Company concentrates on construction lending rather than
residential mortgage lending.
Although the risk of non-payment exists for a variety of reasons with
respect to all loans, certain other more specific risks are associated with
each type of loan. Several risks are present in construction loans, including
economic conditions in the home building industry, fluctuating land values, the
failure of the contractor to complete the work and the borrower's inability to
repay. The primary risks of land loans include a general
-24-
<PAGE> 27
slowdown in the market resulting in fewer building permits and lower absorption
of newly developed sites to major home builders, building moratoriums by
municipalities, the general economy, and the fiscal condition of the developer.
Risks associated with commercial loans are quality of the borrower's management
and the impact of local economic factors. Installment loans also have risks
associated in a single type of loan. Installment loans additionally face the
risk of a borrower's unemployment as a result of deteriorating economic
condition as well as the personal circumstances of the borrower.
The Company believes that its philosophy in extending credit is
relatively conservative in nature, with a presumption that most credit should
have both a primary and a secondary source of repayment, and that the primary
source should generally be operating cash flows, while the secondary source
should generally be disposition of collateral. The Company engages in very
little unsecured lending, and generally requires personal guarantees of
principals for business obligations. The Company practices a system of
concurrence in the approval of commercial credit whereby the documented
concurrence of the loan committee is obtained in addition to that of the
recommending loan officer.
At September 30, 1997, net loans totaled approximately 79.7% of total
deposits and approximately 71.9% of total assets.
Loan Maturities. The following tables present, at September 30, 1997
and December 31, 1996, loans by maturity in each major category of the
Company's portfolio based on contractual repricing schedules. Actual
maturities may differ from the contractual repricing maturities shown below as
a result of renewals and prepayments. Loan renewals are evaluated in the same
manner as new credit applications.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------------------------------------------------------
OVER ONE YEAR
THROUGH FIVE YEARS OVER FIVE YEARS
ONE YEAR ------------------ ---------------
OR LESS FIXED RATE FLOATING RATE FIXED RATE FLOATING RATE TOTAL
-------- ---------- ------------- ---------- ------------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Construction . . . . . . . . . . . . . $ 85,287 $ -- $ -- $ -- $ -- $ 85,287
Commercial . . . . . . . . . . . . . . 21,719 4,902 -- 403 -- 27,024
Installment and other . . . . . . . . . 1,482 2,714 -- -- -- 4,196
Mortgage . . . . . . . . . . . . . . . -- -- -- 66 -- 66
-------- -------- ------- ------- ------- --------
Total face amount of loans . . . . . $108,488 $ 7,616 $ -- $ 469 $ -- $116,573
Deferred loans fees . . . . . . . . . . (642) (205) -- (7) -- (854)
-------- -------- ------- ------- ------- --------
Total loans . . . . . . . . . . . . . $107,846 $ 7,411 $ -- $ 462 $ -- $115,719
======== ======== ======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------------------------------------
OVER ONE YEAR
THROUGH FIVE YEARS OVER FIVE YEARS
ONE YEAR ------------------ ---------------
OR LESS FIXED RATE FLOATING RATE FIXED RATE FLOATING RATE TOTAL
-------- ---------- ------------- ---------- ------------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Construction . . . . . . . . . . . . . $ 47,131 $ 175 $ -- $ -- $ -- $ 47,306
Commercial . . . . . . . . . . . . . . 40,616 3,337 -- 403 -- 44,356
Installment and other . . . . . . . . . 1,509 2,594 -- -- -- 4,103
Mortgage . . . . . . . . . . . . . . . -- -- -- 67 -- 67
-------- -------- ------- ------- ------- --------
Total face amount of loans . . . . . $ 89,256 $ 6,106 -- $ 470 $ -- $ 95,832
Deferred loans fees . . . . . . . . . . (642) (209) -- (8) -- (859)
-------- -------- ------- ------- ------- --------
Total loans . . . . . . . . . . . . . $ 88,614 $ 5,897 $ -- $ 462 $ -- $ 94,973
======== ======== ======= ======= ======= ========
</TABLE>
Nonperforming Loans. Nonperforming loans consist of loans 90 days or
more delinquent and still accruing interest, nonaccrual loans and restructured
loans. When, in the opinion of management, a reasonable doubt exists as to the
collectibility of interest, regardless of the delinquency status of a loan, the
accrual of interest income is discontinued and interest accrued during the
current year is reversed through a charge to current year's earnings. While
the loan is on nonaccrual status, interest income is recognized only upon
receipt
-25-
<PAGE> 28
and then only if, in the judgment of management, there is no reasonable doubt
as to the collectibility of the principal balance. Loans 90 days or more
delinquent generally are changed to nonaccrual status unless the loan is in the
process of collection and management determines that full collection of
principal and accrued interest is probable.
Restructured loans are those for which concessions, including the
reduction of interest rates below a rate otherwise available to the borrower or
the deferral of interest or principal, have been granted due to the borrower's
weakened financial condition. Interest on restructured loans is accrued at the
restructured rates when it is anticipated that no loss of original principal
will occur. The Company did not have any restructured loans as of September
30, 1997.
The following table sets forth information concerning the
nonperforming assets of the Company at the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------
1997 1996 1995 1994
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Nonaccrual loans:.......................... $1,611 $14 $75 $554
Other loans 90 days past due............... 66 -- 1 --
Other real estate.......................... -- -- -- --
------ --- --- ----
Total nonperforming loans.................. $1,677 $14 $76 $554
====== === === ====
Ratio of nonaccrual and other loans 90
days past due to total loans............. 1.45% 0.01% 0.11% 1.19%
Ratio of nonperforming assets to total loans
plus other real estate................... 1.45 0.01 0.11 1.19
Ratio of nonperforming assets to total assets 1.06 0.01 0.07 0.88
</TABLE>
Of the amount of nonaccrual loans as of September 30, 1997,
approximately $1.6 million is the Bank's portion of five related loans totaling
approximately $4.5 million which are subject to a Chapter 11 bankruptcy
proceeding. The loans were originated by the Bank and were made at various
times during 1994, 1995 and 1996 in connection with a real estate development
on which the developer has constructed a residential building assembly plant.
The loans are secured by real estate consisting of 10 homes in various stages
of completion, 72 developed residential home sites as well as four homes that
comprise the model homes and the office property. The loans are also secured
by certificates of deposit in the amount of $770,000 as well as two personal
guarantees from the owners of the developer as well as guaranteed by a related
limited partnership, all three of which have substantial net worth. Management
believes that the Company is adequately collateralized on these loans.
Management is not aware of any adverse trend relating to the Company's loan
portfolio.
As of September 30, 1997, there was no significant balance of loans
excluded from nonperforming loans set forth above, where known information
about possible credit problems of borrowers causes management to have serious
doubts as to the ability of such borrowers to comply with the present loan
repayment terms and which may result in such loans becoming nonperforming.
Analysis of Allowance for Loan Losses. The allowance for loan losses
represents management's recognition of the risks of extending credit and its
evaluation of the quality of the loan portfolio. The allowance is maintained
at a level considered adequate to provide for anticipated loan losses based on
management's assessment of various factors affecting the loan portfolio,
including a review of problem loans, business conditions, historical loss
experience, evaluation of the quality of the underlying collateral and holding
and disposal costs. The allowance is increased by additional charges to
operating income and reduced by loans charged off, net of recoveries.
-26-
<PAGE> 29
The following table sets forth information regarding changes in the
allowance for loan losses of the Company for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------- -----------------------
1997 1996 1995
-------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Average total loans.................. $106,806 $80,213 $54,219
======== ======= =======
Total loans at end of period......... $115,719 $94,973 $68,845
======== ======= =======
Allowance at beginning of year....... $ 1,150 $ 759 $ 546
Charge-Offs:
Construction....................... -- -- --
Commercial and industrial.......... -- -- --
Installment........................ (4) (78) (76)
Mortgage........................... -- -- --
Other.............................. (1) (1) --
-------- ------- -------
Total charge-offs........... (5) (79) (76)
Recoveries:
Construction....................... -- -- --
Commercial and industrial.......... -- 10 9
Installment........................ 62 3 --
Mortgage........................... -- -- --
Other.............................. -- -- --
-------- ------- -------
Total recoveries........... 62 13 9
-------- ------- -------
Net (charge-offs) recoveries......... 57 (66) (67)
Provisions for loan losses........... 360 457 280
-------- ------- -------
Allowance at end of period........... $ 1,567 $ 1,150 $ 759
======== ======= =======
Ratio of net (charge-offs) recoveries
to average total loans............. 0.05% (0.08%) (0.12%)
Allowance to total loans at end of
period............................. 1.35% 1.21% 1.10%
Allowance to nonperforming loans..... 93.43% 8,462.72% 998.23%
</TABLE>
Net recoveries during the nine months ended September 30, 1997 totaled
approximately $57,000 or .07% of average loans compared to approximately
$13,000 of net charge-offs or .02% of average loans for the nine months ended
September 30, 1996. Net charge-offs during 1996 totaled approximately $66,000
or .08% of average loans compared to approximately $67,000 or .12% of average
loans in 1995.
The Company's lending personnel are responsible for continuous
monitoring of the quality of loan portfolios. The loan portfolios are also
monitored and examined by the Company loan review personnel. These reviews
assist in the identification of potential and probable losses, and also in the
determination of the level of the allowance for loan losses. The allowance for
loan losses is based primarily on management's estimates of possible loan
losses from the foregoing processes and historical experience. These estimates
involve ongoing judgments and may be adjusted over time depending on economic
conditions and changing historical experience.
State and federal regulatory agencies, as an integral part of their
examination process, review the Company's loans and its allowance for loan
losses. Management believes that the Company's allowance for loan losses is
adequate to cover anticipated losses. There can be no assurance, however, that
management will not determine a need to increase the allowance for loan losses
or that regulators, when reviewing the Company's loan portfolios in the future,
will not require the Company to increase such allowance, either of which
-27-
<PAGE> 30
could adversely affect the Company's earnings. Further, there can be no
assurance that the Company's actual loan losses will not exceed its allowance
for loan losses.
The following tables set forth an allocation of the allowance for loan
losses by loan category as of the dates indicated. Portions of the allowance
have been allocated to categories based on analysis of the status of particular
loans; however, the majority of the allowance is utilized as a single
unallocated allowance available for all loans. The allocation table should not
be interpreted as an indication of the specific amounts, by loan
classification, to be charged to the allowance. Management believes that the
table may be a useful device for assessing the adequacy of the allowance as a
whole. The table has been derived in part by applying historical loan loss
ratios to both internally classified loans and the portfolio as a whole in
determining the allocation of the loan losses attributable to each category of
loans.
<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------
1997 1996 1995
---- ---- ----
Loans in Loans in Loans in
Category Category Category
as a as a as a
Percentage Percentage Percentage
Amount of total Amount of total Amount of total
of Gross of Gross of Gross
Allowance Loans Allowance Loans Allowance Loans
--------- ------- --------- ---------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Construction............. $ 155 73.2% $ 155 49.3% $ -- 42.8%
Commercial and industrial 128 23.2 33 46.3 59 52.1
Installment and other.... -- 3.5 4 4.2 38 5.0
Mortgage................. -- 0.1 -- 0.2 -- 0.1
Unallocated.............. 1,284 0.0 958 0.0 662 0.0
------ ------ ------ ------ ------ ------
Total........... $1,567 100.0% $1,150 100.0% $ 759 100.0%
====== ====== ======
</TABLE>
Investments. The Company's investment policy is designed to ensure
liquidity for cash-flow requirements; to help manage interest rate risk; to
ensure collateral is available for public deposits, FHLB advances and
repurchase agreements; and to manage asset quality diversification.
Investments are managed centrally to maximize compliance and effectiveness of
overall investing activities. The Bank's President is responsible for
implementing investment strategy. Ongoing review of the performance of the
investment portfolio, market values, market conditions, current economic
conditions, profitability, capital ratios, liquidity needs, collateral position
with the FHLB and other matters related to investing activities is made.
The Company's investment portfolio at September 30, 1997 is comprised
of U.S. Treasury bonds and bills and general obligation and revenue municipal
bonds. Although the municipal securities are non-rated and privately placed,
none of these investments are derivatives, structured notes or similar
instruments that are classified as "High-Risk Securities" as defined by the
Federal Financial Institutions Examinations Counsel. In accordance with the
principles of the Financial Accounting Standards Board ("FASB") in its statement
of financial accounting standards no. 115 ("FASB 115"), Accounting for Certain
Investment in Debt and Equity Securities, all investments are accounted for as
"Available for Sale."
The following table sets forth the estimated market value of the
available for sale securities and the amortized cost basis of held to maturity
securities in the Company's investment portfolio by type at the dates
indicated.
<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------
1997 1996 1995(3)
---- ---- ----
(In thousands)
<S> <C> <C> <C>
U.S. Treasury securities.................. $ 5,016 $ 4,390 $7,330
Municipal securities(1)................... 6,202 6,203 --
------- ------- -----
Total (2)....................... $11,218 $10,593 $7,330
======= ======= ======
</TABLE>
- - ----------
(1) Exempt from both federal and state income taxation.
(2) Equity investments are excluded from this table.
(3) Includes securities held to maturity of $549,946.
-28-
<PAGE> 31
Investment Maturities and Yield. The following table sets forth the
estimated market value and approximate yield of the securities in the
investment portfolio by type and maturity at September 30, 1997.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------
TYPE AND MATURITY AMOUNT YIELD
----------------- ------- ------
(Dollars in thousands)
<S> <C> <C>
U.S. Treasury securities:
One year or less..................................... $ 1,488 6.30%
Over one through five years.......................... 3,528 6.25
Over five through 10 years........................... -- --
-------
Total........................................ $ 5,016 6.26
=======
Municipal Securities:
One year or less..................................... $ -- --
Over one through five years.......................... -- --
Over five through 10 years........................... 777 9.00
Over 10 years........................................ 5,425 8.90
-------
Total........................................ $ 6,202 8.92
=======
Total investment in securities:
One year or less..................................... $ 1,488 6.30
Over one through five years.......................... 3,528 6.25
Over five through 10 years........................... 777 9.00
Over 10 years........................................ 5,425 8.90
-------
Total........................................ $11,218
=======
</TABLE>
Deposits. The Company's primary source of funds has historically been
customer deposits, and deposits have experienced significant growth in recent
years with average deposits increasing to $125.0 million for the nine months
ended September 30, 1997 from $89.0 million for the year ended December 31,
1996 and $62.5 million for the year ended December 31, 1995. These increases
are primarily a result of the opening of two branches in 1997, one branch in
1996 and one branch in 1995. At September 30, 1997, noninterest-bearing
deposits comprised 27.8% of total deposits. Management believes this ratio may
decrease as the mix of deposits in new branches tend to be more
interest-bearing rather than noninterest-bearing due to start up marketing
activities.
The following table presents the average balances for each major
category of deposits and the weighted average interest rates paid for
interest-bearing deposits for the period indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------
1997 1996 1995
---- ---- ----
AVERAGE AVERAGE AVERAGE
AVERAGE INTEREST AVERAGE INTEREST AVERAGE INTEREST
BALANCE COST BALANCE COST BALANCE COST
------- -------- ------- -------- ------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Demand, interest-bearing......................... $ 51,509 4.60% $37,983 4.52% $22,586 4.45%
Savings......................................... 4,769 3.33 5,442 3.42 4,752 3.30
Certificates of deposit under $100,000.......... 23,361 5.76 9,639 5.42 8,033 5.32
Certificates of deposit $100,000 and over....... 10,610 5.71 6,885 5.36 5,045 5.21
-------- ------- -------
Total interest-bearing demand deposits.. 90,249 4.96 59,949 4.66 40,416 4.58
Noninterest-bearing demand deposits............. 34,760 29,096 22,078
-------- ------- -------
Total deposits.......................... $125,009 $89,045 $62,494
======== ======= =======
</TABLE>
The increases in average costs were due primarily to higher rates offered in
connection with new branch promotions. See "--Net Interest Income."
-29-
<PAGE> 32
The following table sets forth the amount and maturity of certificates
of deposit that had balances of more than $100,000 at September 30, 1997.
<TABLE>
<CAPTION>
REMAINING MATURITY (In thousands)
------------------
<S> <C>
Less than three months.....................................$ 4,122
Three months up to six months.............................. 4,462
Six months up to one year.................................. 1,525
One year and over.......................................... 650
--------
Total............................................$ 10,759
========
</TABLE>
FHLB Borrowings. The Bank is a member of the Federal Home Loan Bank
of Topeka, which is one of 12 regional FHLB's. The FHLB system functions as a
central bank providing credit for members. As a member of the FHLB, the Bank
is entitled to borrow funds from the FHLB and is required to own FHLB stock in
an amount determined by a formula based upon the Bank's total assets and its
FHLB borrowings. The Bank may use FHLB borrowings to supplement deposits as a
source of funds. See "Liquidity--Asset/Liability Management." Average FHLB
borrowings for the nine months ended September 30, 1997 were $2.2 million
compared to $0.9 million and $0 for the years ended December 31, 1996 and 1995,
respectively. At September 30, 1997, based on its FHLB stockholdings, the
Bank's total available and unused borrowing capacity based on the Bank's
current FHLB stockholdings was approximately $7.0 million, which was available
through a line of credit and term advances. FHLB borrowings are collateralized
by the Bank's FHLB stock, other investment securities and certain loans.
A variety of borrowing terms and maturities can be chosen from the
FHLB. Maturities available range generally from one day to 10 years. Interest
rates can be either fixed or variable and prepayment options are available if
desired. The FHLB offers both amortizing and nonamortizing advances. To date,
FHLB stock has been redeemable at the preset price of $100 per share, but there
can be no assurance that this will continue to be the case.
CAPITAL RESOURCES
The Company monitors compliance with bank and bank-holding company
regulatory capital requirements, focusing primarily on risk-based capital
guidelines. Under the risk-based capital method of capital measurement, the
ratio computed is dependent upon the amount and composition of assets recorded
on the balance sheet, and the amount and composition of off-balance sheet
items, in addition to the level of capital. Included in the risk-based capital
method are two measures of capital adequacy, Tier 1 or core capital, and Total
capital, which consists of Tier 1 plus Tier 2 capital. See "Supervision and
Regulation--MegaBank Financial Corporation- -Capital Adequacy" for definitions
of Tier 1 and Tier 2 capital.
-30-
<PAGE> 33
The following tables set forth the Company's capital ratios as of the
indicated dates.
<TABLE>
<CAPTION>
RISK-BASED CAPITAL RATIOS
September 30, December 31,
1997 1996
------------------ --------------------
Amount Ratio Amount Ratio
-------- ----- -------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Tier 1 capital . . . . . . . . $ 10,736 8.53% $10,632 10.70%
Tier 1 capital minimum
requirement (1) . . . . . . 5,032 4.00 3,976 4.00
-------- ---- ------- -----
Excess . . . . . . . . . . . . $ 5,704 4.53% $ 6,656 6.70%
======== ==== ======= =====
Total capital . . . . . . . . $ 12,303 9.78% $11,782 11.85%
Total capital minimum
requirement (1) . . . . . . 10,065 8.00 7,951 8.00
-------- ---- ------- -----
Excess . . . . . . . . . . . $ 2,238 1.78% $ 3,831 3.85%
======== ==== ======= =====
Total risk adjusted assets . . $125,808 $99,391
======== =======
</TABLE>
- - -----------------
(1) Based on risk-based capital guidelines of the Federal Reserve Bank, a
bank holding company is required to maintain a Tier 1 capital to
risk-adjusted assets ratio of 4% and a total capital to risk-adjusted
assets ratio of 8%. See "Supervision and Regulation--MegaBank
Financial Corporation--Capital Adequacy" for definitions of Tier 1 and
Tier 2 capital.
<TABLE>
<CAPTION>
LEVERAGE RATIOS
September 30, December 31,
1997 1996
------------------ ------------------
Amount Ratio Amount Ratio
-------- ----- -------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Tier 1 capital . . . . . . . $ 10,736 7.11% $ 10,632 10.35%
Minimum requirement (1) . . . 7,555 5.00 5,136 5.00
-------- ---- -------- -----
Excess . . . . . . . . . . . $ 3,181 2.11% $ 5,496 5.35%
======== ==== ======== =====
Average total assets . . . . $151,097 $102,720
======== ========
</TABLE>
- - -----------------
(1) The leverage ratio is defined as the ratio of Tier 1 capital to
average total assets. Based on Federal Reserve Bank guidelines, a
bank holding company generally is required to maintain a leverage
ratio of 5%. See "Supervision and Regulation--MegaBank Financial
Corporation--Capital Adequacy" for definitions of Tier 1 and Tier 2
capital.
LIQUIDITY
Sources of Liquidity. The Company manages its liquidity in order to
satisfy cash flow requirements of depositors and borrowers and allow the
Company to meet its own cash flow needs. The Company has two basic sources of
liquidity. The first is its retail deposit market served by its banking
offices. The Company has increased core deposits through growth of its
existing deposits and through promotions directed at existing and potential
customers. Average deposits increased by $26.5 million, or 42.5% in 1996 over
1995, and by $36.0 million or 40.4% from the nine months ended September 30,
1997 over 1996.
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<PAGE> 34
The second source of the Company's liquidity is FHLB advances and
Company lines of credit. FHLB advances are used regularly in the cash
management function both to fund a portion of the investment portfolio and to
manage the day-to-day fluctuations in liquidity resulting from needs of
depositors and borrowers. At September 30, 1997 the Company had available $7.0
million of unused borrowing capacity from the FHLB and $5.5 million from its
other lenders. The Company anticipates that it will continue to rely primarily
upon customer deposits, FHLB borrowings, other lending sources, loan
repayments, loan sales and retained earnings to provide liquidity, and will use
funds so provided primarily to make loans and to purchase investment
securities.
Asset/Liability Management. A principal function of asset/liability
management is to coordinate the levels of interest-sensitive assets and
liabilities to minimize net interest income fluctuations in times of
fluctuating market interest rates. Interest-sensitive assets and liabilities
are those that are subject to repricing in the near term, including both
variable rate instruments and those fixed-rate instruments which are
approaching maturity. Changes in net yield on interest-sensitive assets arise
when interest rates on those assets (e.g. loans and investment securities)
change in a different time period from that of interest rates on liabilities
(e.g. time deposits). Changes in net yield on interest-sensitive assets also
arise from changes in the mix and volumes of earning assets and
interest-bearing liabilities.
The following table sets forth the interest rate sensitivity of the
Company's assets and liabilities as of September 30, 1997, and sets forth the
repricing dates of the Company's interest-earning assets and interest-bearing
liabilities as of that date, as well as the Company's interest rate sensitivity
gap percentages for the periods presented. The table is based upon assumptions
as to when assets and liabilities will reprice in a changing interest rate
environment, and since such assumptions can be no more than estimates, certain
assets and liabilities indicated as maturing or otherwise repricing within a
stated period may, in fact, mature or reprice at different times and at
different volumes than those estimated. Also, the renewal or repricing of
certain assets and liabilities can be discretionary and subject to competitive
and other pressures. Therefore, the following table does not and cannot
necessarily indicate the actual future impact of general interest rate
movements on the Company's net interest income.
<TABLE>
<CAPTION>
ESTIMATED MATURITY OR REPRICING AT SEPTEMBER 30, 1997
--------------------------------------------------------------------
THREE MONTHS
LESS THAN TO LESS THAN ONE TO OVER
THREE MONTHS ONE YEAR FIVE YEARS FIVE YEARS TOTAL
-------- ------- ---------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Funds sold and interest-bearing deposits $ 11,428 $ 1,291 $ 83 $ -- $ 12,802
Investment securities available for sale 251 1,237 3,528 6,202 11,218
Loans. . . . . . . . . . . . . . . . . 106,137 1,709 7,411 462 115,719
-------- -------- ------- ------- --------
Total interest-earning assets. . . . . 117,816 4,237 11,022 6,664 139,739
Interest-bearing liabilities:
Deposits:
Demand, interest-bearing. . . . . . . 52,773 -- -- -- 52,773
Savings . . . . . . . . . . . . . . . 5,387 -- -- -- 5,387
Certificates of deposit
under $100,000 . . . . . . . . . . . 3,733 17,427 6,038 -- 27,198
$100,000 and over. . . . . . . . . . 4,122 5,987 650 -- 10,759
Federal Home Loan Bank borrowings. . . 365 176 1,247 -- 1,788
Note payable . . . . . . . . . . . . . -- 2,000 -- -- 2,000
-------- -------- ------- ------- --------
Total interest-bearing liabilities . . 66,380 25,590 7,935 -- 99,905
-------- -------- ------- ------- --------
Interest rate gap . . . . . . . . . . . $ 51,436 $(21,353) $ 3,087 $ 6,664 $ 39,834
======== ======== ======= ======= ========
Cumulative interest rate gap at
September 30, 1997 . . . . . . . . . . $ 51,436 $ 30,083 $33,170 $39,834
======== ======== ======= =======
Cumulative interest rate gap
to total assets . . . . . . . . . . . 32.38% 18.94% 20.88% 25.08%
======== ======== ======= =======
</TABLE>
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<PAGE> 35
Due to the volume of loans that reprice with changes in the prime
lending rate and the volume of noninterest-bearing deposits, the Company has
experienced a positive gap in assets and deposits that reprice or mature in
less than three months. Of the total interest-earning assets at September 30,
1997, 84.3% reprice or mature in less than three months while 66.4% of all
interest-bearing liabilities reprice or mature in that same time frame.
EFFECTS OF INFLATION AND CHANGING PRICES
Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on a financial
institution's performance than inflation. Although interest rates do not
necessarily move in the same direction or to the same extent as the prices of
goods and services, increases in inflation generally have resulted in increased
interest rates. Over short periods of time interest rates may not move in the
same direction or magnitude as inflation.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards
("SFAS" or "Statement") No. 114, Accounting by Creditors for Impairment of a
Loan, and SFAS No. 118, Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures (collectively referred to as "SFAS 114")
effective January 1, 1995. SFAS 114 requires that certain impaired loans be
measured based on the present value of expected cash flows discounted at the
loan's original effective interest rate. The adoption of this pronouncement
did not have a material impact on the Company.
In March 1995, the Financial Accounting Standards Board adopted SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. This Statement established accounting standards for
the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used and for long-lived assets
and certain identifiable intangibles to be disposed of. This Statement
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The Company adopted this Statement on January 1, 1996, with no
material impact on its financial condition, results of operations or liquidity.
In October 1995, the Financial Accounting Standards Board adopted SFAS
No. 123, Accounting for Stock-Based Compensation. This Statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans. This Statement defines a fair value based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic value
based method of accounting prescribed by APB Opinion No. 25, Accounting for
Stock Issued to Employees. Statement No. 123 requires that an employer's
financial statements include certain disclosures about stock-based employee
compensation arrangements regardless of the method used to account for them.
The Company adopted this Statement in 1996 and has elected to continue to
follow the provisions of APB Opinion No. 25 in accounting for stock-based
compensation.
In June 1996, the Financial Accounting Standards Board adopted SFAS
No. 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. This Statement provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. Those standards are based on consistent
application of a financial-components approach that focuses on control. Under
that approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This Statement provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. It requires that servicing assets and
other retained interests in the transferred assets be measured
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<PAGE> 36
by allocating the previous carrying amount between the assets sold, if any, and
retained interests, if any, based on their relative fair values at the date of
the transfer. The Statement will be effective for certain transfers and
servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996. The statement will be effective for repurchase
agreements, dollar-rolls, securities lending, or similar transactions as of
January 1, 1997. Management has not completed a final determination of the
expected impact of adopting this Statement but does not believe its
implementation will have a material impact on the Company.
YEAR 2000 COMPLIANCE
A significant issue has emerged in the banking industry and for the
economy overall regarding how existing application software programs and
operating systems can accommodate the date value for the year 2000. The
financial impact to the Company to ensure year 2000 compliance is not
anticipated by management to be material to the financial position, results of
operations or cash flow of the Company.
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<PAGE> 37
BUSINESS
GENERAL
MegaBank Financial Corporation (the "Company") was founded in 1984 by
its Chairman and Chief Executive Officer, Thomas R. Kowalski, with the
objective of building a banking franchise in the Denver, Colorado metropolitan
area that would deliver a broad based package of products and services to
businesses and individuals. The Company's banking subsidiary, MegaBank of
Arapahoe (the "Bank") was organized in 1983. Since the advent of branch
banking in Colorado in 1993, the Bank has opened six additional banking
locations throughout the Denver area. Two more branches are in the planning
and construction phases and are currently expected to begin operations in 1998.
Since inception, the Bank has specialized its lending practice in the
residential construction industry. The Company's Chairman has extensive
experience in the home building industry and has expanded the Bank's lending
practice to date such that the Bank is one of the area's leading originators of
residential construction loans to small and medium sized homebuilders.
Currently, the Bank can finance a builder or developer from the acquisition and
development loan process, including assistance with special district financing,
through the construction loan phase. During the five years ended December 31,
1996, the Bank originated over $500 million in residential construction loans
and during the nine months ended September 30, 1997, originated an additional
$125 million of such loans. While some of these loans remain on the Company's
balance sheet, most have been repaid, refinanced or participated out to other
financial institutions.
The Bank intends to continue to focus on its niche of residential
construction lending in addition to providing a complete array of products and
services for its customers. High quality customer service has been a
fundamental tenet of the Bank's operating strategy since its inception. The
Bank intends to continue to pursue its successful strategies and concentrate on
increasing its market share through referrals from existing customers and focus
on the implementation of advertising and marketing strategies targeted at the
communities in which its branches are located.
STRATEGY
Growth. The Bank's goal in continuing its expansion is to maintain a
profitable, customer-focused financial institution. Management believes that
the Company's existing capital structure, management, data and operational
systems are sufficient to achieve further growth in asset size, revenues and
capital. This growth should allow the Bank to increase its lending limits,
thereby enabling it to continue to serve the needs of its customers.
The Bank expects to continue its growth strategy through internal
growth and possibly through acquisitions. Management believes that the Bank's
largest source of growth is through referrals by existing customers, and that
the primary reason for referrals is positive customer feedback regarding the
Bank's customer service and response time. The Colorado banking market is
dominated by large national and regional financial institutions. This
dominance was achieved through the purchase of Colorado-based holding companies
over the past several years, which resulted in a significant consolidation of
the Colorado banking industry. Management believes that small and medium size
businesses often are not of sufficient size to be of interest to these large
banks, particularly as it relates to residential construction lending, and that
individuals frequently have difficulty in finding personalized banking
services. Many of these customers seek a banking relationship with a smaller
and significantly more service-oriented community banking organization such as
the Bank. Through the Bank's primary emphasis on customer service,
management's experience and the Company's product line, the Company will
continue to focus on attracting these customers in achieving internal growth.
Management also believes that the economic expansion in the Company's market
area contributes significantly to internal growth.
The Bank's market area is the Denver metropolitan area, which is the
most densely populated area in the Rocky Mountain region. Total population is
approximately 2.2 million, and the area has received a net
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<PAGE> 38
migration of over 200,000 persons since 1990. Employment in the area is
diversified across the manufacturing, construction, financial services,
tourism, transportation, technology, cable television, retail trade, services
and government sectors. In 1996, Colorado achieved the tenth straight year of
employment growth, with nonagricultural employment increasing 3.4% during 1996
to approximately 1.9 million.
In addition to internal growth, management believes there are
opportunities to grow through branching. The Bank has two additional branches
in the planning and construction process that are expected to begin operations
in 1998. In addition, in some cases, branching opportunities have arisen
through eliminations by bank holding companies of certain overlapping branches
resulting from acquisitions. As a result, branch locations have become
available from time to time for purchase by the Company. To date, the Company
has acquired one such branch from a large bank holding company. Also,
management intends to pursue acquisitions of smaller financial institutions,
although the sales prices of such institutions are currently at significant
premiums over those paid the past few years. Thus, it may be difficult to
complete such a transaction. Management has considered and intends to consider
a variety of criteria when evaluating expansion. These include (i) the
geographic location, (ii) the investment required for, and opportunity costs
of, the branch or acquisition, (iii) the financial strength of a potential
acquisition target, and (iv) economies of scale that may be achieved.
Operations and Marketing. The Bank's objective is to continue to
build a profitable, growing community banking franchise. Management believes
that, in meeting the needs of consumers and small to medium sized businesses in
its market area, the Bank's first and foremost strategy is to provide excellent
customer service. This strategy is emphasized above all others of the Company,
from top management down to each bank teller. The Bank's operational systems
have been designed to complement superior customer service. Management
believes the Company's banking locations are small enough to facilitate
personalized services and decision-making, yet of sufficient size to meet most
customers' needs.
The Bank seeks to maximize operational and support efficiencies
consistent with maintaining high quality customer service. The Bank utilizes
recently developed technology to provide customer support. Various management
and administrative functions are consolidated, including consumer credit
administration and lending, investment management and accounting, enabling
branch personnel to better focus on customer service and sales.
In expanding its banking franchise, the Bank has focused on
identifying and developing products and services that satisfy customer needs,
particularly customer service. The Bank's marketing programs targeting each
individual branch utilize direct mail and local print (promotional materials in
each location) as well as sponsorship of community events within the branch
area.
The Bank offers a wide range of consumer deposit products including
regular checking, checking with interest, money market accounts, regular
savings, certificates of deposit, and IRAs. The Bank also offers additional
access to its customers with an ATM/Visa Debit Card. The Bank's consumer loan
products are customized to meet the needs and requests of its customers. The
Bank also offers installment loans, including auto, recreational vehicle,
classic car and other secured and unsecured loans sourced directly by its
branches and from indirect sources. See "Loans" below for a discussion of
products that the Bank provides to commercial accounts.
LOANS
The Company has the ability to provide a broad range of commercial and
retail lending services. However, the vast majority of the Bank's loans are
residential construction loans. The Company follows a uniform credit policy
which sets forth underwriting and loan administration criteria, including
levels of loan commitment, loan types, credit criteria, concentration limits,
loan administration, loan review and grading and related matters. In addition,
the Company provides ongoing loan officer training and review, obtains outside
independent loan reviews, operates a centralized processing, underwriting and
servicing center for consumer
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<PAGE> 39
loans and manages problem assets centrally. At September 30, 1997,
substantially all loans outstanding were to customers within the Company's
market area.
Construction Loans. Construction loans include real estate
construction loans and land loans. Real estate construction loans are
principally made to builders to construct single family residences. These
loans typically have maturities of six to 12 months and adjustable interest
rates, and are subject to origination fees. Terms may vary depending upon many
factors, including, but are not limited to, location, type of project and
financial condition of the builder.
Land loans consist of loans made on raw land for the acquisition
and/or development of real property. At September 30, 1997, approximately
$30.0 million in loans were land loans to customers where the collateral for
the loan is raw or partially developed land. These loans typically have
maturities of six to 12 months and variable interest rates. Terms may vary
depending upon many factors, including adverse economic conditions in the home
building industry, location, type of project and financial condition of the
builder.
Commercial Loans. Commercial loans consist primarily of loans to
businesses for various purposes, including revolving lines of credit, equipment
financing, and commercial real estate lending. The commercial loans secured by
real estate are typically 20 to 25 year amortizing loans, callable in three to
five years, with fixed interest rates. The loans secured by collateral other
than real estate generally mature within one year, have adjustable interest
rates and are secured by inventory, accounts receivable or other commercial
assets. Revolving lines of credit generally are for business purposes,
generally mature annually and have adjustable interest rates.
Installment Loans. Installment loans to individuals which are not
secured by real estate generally have terms of two to five years and bear
interest at fixed rates. These loans usually are secured by motor vehicles,
equipment, receivables, inventory, investment securities or other personal
assets, and in some instances are unsecured.
The Company maintains a loan committee approach to commercial lending,
which it believes yields positive results in both responsiveness to customer
needs and asset quality. The loan committee usually meets twice per week to
review and discuss new loan requests.
Interest rates charged on loans vary with the degree of risk,
maturity, underwriting and servicing costs, loan amount, and extent of other
banking relationships maintained with customers, and are further subject to
competitive pressures, money market rates, availability of funds and government
regulations. Most of the loans in the Company's portfolio at September 30,
1997, had interest rates that float with the prime rate.
In the ordinary course of business, the Company issues letters of
credit. See Note M of Notes to Consolidated Financial Statements. The
Company applies the same credit standards to these commitments as it uses in
all its lending activities and has included these commitments in its lending
risk evaluations. The Company's exposure to credit loss under letters of
credit is represented by the amount of these commitments. Under applicable
federal and state law, permissible loans to one borrower were limited to an
aggregate of $1.8 million for the Company at September 30, 1997. As of October
16, 1997, that limit was raised to $2.0 million. With the infusion of
approximately $4.0 million in capital to the Bank (see "Use of Proceeds"), the
Company expects that the Bank's lending limit will increase by approximately
$0.6 million to a total of $2.6 million.
COMPETITION
The Company faces a high degree of competition. In its marketplace,
there are numerous small banks and several larger national and regional
financial banking groups. The Company also competes with insurance companies,
savings and loan associations, credit unions, leasing companies, mortgage
companies, and other financial service providers. Many of the banks and other
financial institutions with which the Company competes have capital resources
and legal lending limits substantially in excess of the capital resources and
legal lending limits of the Company.
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<PAGE> 40
The Company competes for loans and deposits principally based on the
range and quality of services provided, interest rates, loan fees and office
locations. The Company actively solicits deposit customers and competes by
offering them superior customer service and a complete product line. Over the
past few years, competition has increased as a result of changes in Colorado
banking laws that permit statewide branching and allow out-of-state holding
companies to acquire Colorado-based financial institutions. The Company
believes its customer service, broad product line and banking franchise enable
it to compete in its market area.
The Company will also face significant competition from other
financial institutions in any potential acquisitions. Many of these
competitors have substantially greater resources than the Company as well as
the ability to issue marketable equity securities that can be used as part of
the purchase price.
PROPERTIES
The principal offices of both the Company and the Bank are located in
a three story building at 8100 East Arapahoe Road, Englewood, Colorado. The
building is owned by Nagrom LLC. See "Related Party Transactions." The
Company and the Bank lease approximately 22,300 square feet at this facility.
The Bank maintains six other full service banking facilities in the
Denver metropolitan area. The North Denver Branch is located at 4988 Federal
Boulevard, Denver; the land is leased from an unaffiliated third party but the
facility, consisting of approximately 3,000 square feet, is owned by the
Company. The Monaco Branch is located at 777 South Monaco, Denver, and the
Company owns the land and building at this site, of which the banking facility
is approximately 3,000 square feet. The South Broadway Branch is located at
4600 South Broadway, Englewood, and the Company owns the land and the building.
The South Broadway facility comprises approximately 3,000 square feet. The
West Highland Branch is located at 3804 West 32nd Avenue, Denver, and the
Company leases the land and facility, comprising approximately 2,600 square
feet, from 1996 Newton LLC. See "Related Party Transactions." The Greenwood
Village Branch is located at 6300 South Syracuse Way, Greenwood Village, and
the Company leases the facilities from an unaffiliated third party. The
Greenwood Village facility comprises approximately 850 square feet. The Lower
Downtown ("LoDo") Branch is located at 1401 17th Street, and the Company leases
the 3,400 square foot facility from an unaffiliated third party.
LEGAL PROCEEDINGS
The Company and its subsidiaries are from time to time parties to
various legal actions arising in the normal course of business. Management
believes that there is no proceeding threatened or pending against the Company
or any of its subsidiaries which, if determined adversely, would have a
material adverse effect on the financial condition or results of operations of
the Company.
EMPLOYEES
As of September 30, 1997, the Company had 78 full-time employees.
Management considers its relationship with its employees to be good.
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<PAGE> 41
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, their respective
ages and positions as of December 11, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- - ---- --- ---------
<S> <C> <C>
Thomas R. Kowalski 58 Chairman of the Board and Chief Executive Officer of the Company and
the Bank
Larry A. Olsen(1) 52 President, Chief Operating Officer and Director of the Company and the
Bank
Raymond L. Anilionis 50 Vice President and Director of the Company and Director of the Bank
Susan A. Putland 50 Vice President, Finance and Secretary of the Company and Vice
President, Financial Services of the Bank
Hiram J. Welton 47 Treasurer and Chief Accounting Officer of the Company and Finance Officer of the
Bank
Dr. Donald B. Brown(1) 69 Director of the Company and the Bank
William F. Sievers(1) 54 Director of the Company and the Bank
- - ----------
</TABLE>
(1) Member of the Audit Committee.
There are no family relationships among any of the directors and
executive officers of the Company or the Bank except that Thomas R. Kowalski is
the father of the Bank's Vice President of Real Estate, Ryan Kowalski. All
directors of the Company hold office until the next meeting of shareholders or
until their successors are elected and qualified.
THOMAS R. KOWALSKI has been Chairman of the Board and Chief Executive
Officer of the Company since he founded it in 1984, and has served in the same
positions for the Bank since January 1983. Since 1980 he has been Chairman of
the Board and Chief Executive Officer of the First State Bank of Hotchkiss, a
Colorado bank. Mr. Kowalski is also Chief Executive Officer, and beneficial
owner of approximately 97.0% of the outstanding stock, of Orchard Valley
Financial Corporation, the bank holding company that owns First State Bank of
Hotchkiss. From October 1972 through September 1992, Mr. Kowalski was
President of Realtek Company, a general contractor and real estate development
corporation he sold to Ryan Kowalski in 1992.
LARRY A. OLSEN has been President, Chief Operating Officer and
Director of the Company since 1997 and has served in the same positions of the
Bank since 1994. From 1989 to 1994, Mr. Olsen was the Chief Operating Officer
of Non-Legal Affairs for Codilis and Stawiarski, P.C., a law firm. From 1972
to 1988, Mr. Olsen was employed by Columbia Savings & Loan Association, having
served from 1986 to 1988 as President and Chief Operating Officer.
RAYMOND L. ANILIONIS has been a Vice President and Director of the
Company since 1984 and a Director of the Bank since 1984. Since January 1994,
Mr. Anilionis has been the President of Landmark Realty Advisors, a real estate
consulting and appraisal company. From 1974 to December 1993, Mr. Anilionis
was employed in the mortgage banking and real estate development and management
industry by Mortgage Investment Company and Associated Investment Company in
various positions, including Senior Vice President. He is also the owner of
First Fidelity Service Corp., a real estate consulting firm.
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<PAGE> 42
SUSAN A. PUTLAND has been Vice President, Finance and Secretary of the
Company since 1997 and Vice President, Financial Services for the Bank since
1996. Ms. Putland also serves as an independent director of FirstPlus Funding
Corp. and CITGO Funding Corp II, special purpose finance securitization
entities. Ms. Putland was Vice President, Structured Finance for The Chotin
Group Corporation and its affiliates, a privately-held securities issuer and
investor, from 1989 to December 1995.
HIRAM J. WELTON has been Treasurer and Chief Accounting Officer of the
Company since 1997 and Finance Officer for the Bank since 1997. Mr. Welton was
Vice President of Red Rocks Federal Credit Union from 1996 to 1997. He was
Vice President of Trepp Risk Management from 1994 to 1996. Prior to 1994, Mr.
Welton was Manager of GRA, Thompson, White & Co. P.A., an accounting and
consulting firm.
DR. DONALD B. BROWN has been a Director of the Company since 1997 and
a Director of the Bank since 1989. Dr. Brown previously served as a Director
of the Company from 1989 to 1994. Dr. Brown has practiced medicine as an
endocrinologist since 1961.
WILLIAM F. SIEVERS has been a Director of both the Company and the
Bank since 1997. Since 1994, Mr. Sievers has been employed with Lucent
Technologies as Program Management Vice President in the Network Systems
Division. Previously, he worked for AT&T for over 30 years in several
capacities, including the senior management positions of Manufacturing Vice
President and Regional Vice President.
Directors of the Company have not been compensated by the Company for
their services, but in 1997 received $200 per Board meeting attended in their
capacities as Directors of the Bank. In 1998 each Director will receive $500
for each board meeting attended. In addition, directors are reimbursed for
expenses incurred in attending board meetings.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the
Company to its Chief Executive Officer for 1996. No other executive officer of
the Company received compensation from the Company exceeding $100,000 during
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Awards Payouts
____________________________
Securities
Other Under-
Annual Restricted lying All Other
Compen- Stock Options/ LTIP Compen-
Name Salary Bonus sation Award(s) SARs Payouts sation
and Principal Position Year ($) ($) ($) ($) (#) ($) ($)
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas R. Kowalski, 1996 150,000 238,101 -- -- -- -- --
Chairman of the Board and
Chief Executive Officer
______________________________________________________________________________________________________________________________
</TABLE>
The Company does not have any compensatory option or incentive plans.
None of the directors or officers of the Company have any options, warrants or
other similar rights to purchase securities of the Company. However, the
Company has the right to adopt or issue, as the case may be, such plans,
options, warrants or rights in the future.
INDEMNIFICATION
The Company's Articles of Incorporation provide that the board of
directors is authorized, without the need for shareholder approval, to
indemnify directors, officers and other persons without regard to whether or
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<PAGE> 43
not such powers are expressly provided for by Colorado law; provided, however,
that the exercise of such indemnification powers by the board of directors are
consistent with Colorado law. Generally under Colorado law, any director or
officer who is made or threatened to be made a party to any suit or proceeding
may be indemnified if such director or officer acted in good faith and had no
reasonable basis to believe that (i) in the case of conduct in an official
capacity with the Company, his or her conduct was in the Company's best
interests; and (ii) in all other cases, his or her conduct was at least not
opposed to the best interests of the Company; and, with respect to any criminal
proceeding, he or she had no reasonable cause to believe his or her conduct was
unlawful. Colorado law further provides that such indemnification is not
exclusive of any other rights to which such individuals may be entitled under a
company's Articles of Incorporation or Bylaws, or pursuant to any agreement,
insurance policies, vote of shareholders or disinterested directors or
otherwise.
In addition, the Company's Articles of Incorporation provide that to
the fullest extent permitted by Colorado law, the Company's directors will not
be liable for monetary damages for breach of the directors' fiduciary duty of
care to the Company and its shareholders. Notwithstanding such limitations on
liability, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Company or its shareholders, for acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, for certain activities prohibited by Colorado law (relating
primarily to the unlawful payment of dividends, repurchase of stock or improper
loans or guarantees to directors), and for any transaction from which the
director derived an improper personal benefit. This provision also does not
affect a director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.
There is no pending litigation or proceeding involving a director,
officer, employee or other agent of the Company as to which indemnification is
being sought. The Company is not aware of any other threatened litigation that
may result in claims for indemnification by any director, officer, employee or
other agent.
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<PAGE> 44
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding
beneficial ownership of Common Stock of the Company, as of December 11, 1997,
by (i) each shareholder known by the Company to be the beneficial owner of more
than 5% of the outstanding Common Stock and (ii) each director of the Company
and certain executive officers and (iii) all directors and executive officers
as a group. Unless otherwise indicated, based on information furnished by such
owners, management believes that the shareholders listed below have sole
investment and voting power with respect to their shares.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER OWNED OF CLASS
---------------- ------------- --------------
<S> <C> <C>
Thomas R. Kowalski. . . . . . . . . . . . . . . 109,055(1) 51.1%
8100 East Arapahoe Road
Englewood, Colorado 80112
Raymond L. Anilionis . . . . . . . . . . . . . . 21,426(2) 10.0%
9034 East Easter Place, Suite 202
Englewood, Colorado 80112
Warren P. Cohen . . . . . . . . . . . . . . . . 23,750 11.1%
595 South Broadway, Suite 200
Denver, Colorado 80209
Orchard Valley Financial Corporation . . . . . . 21,815(3) 10.2%
8100 East Arapahoe Road
Englewood, Colorado 80112
Realtek Company Employees' Profit . . . . . . . 20,494(3) 9.6%
Sharing Plan and Trust
8100 East Arapahoe Road, Suite 214
Englewood, Colorado 80112
Vernon J. Purdy . . . . . . . . . . . . . . . . 15,625 7.3%
1900 East Girard, Suite 509
Englewood, Colorado 80110
William D. Kenny . . . . . . . . . . . . . . . . 13,000 6.1%
38 Eagle Drive
Littleton, Colorado 80123
Larry A. Olsen . . . . . . . . . . . . . . . . . 5,053 2.4%
8100 East Arapahoe Road
Englewood, Colorado 80112
Dr. Donald B. Brown . . . . . . . . . . . . . . -- --
4545 East Ninth Avenue
Denver, Colorado 80220
William F. Sievers . . . . . . . . . . . . . . . -- --
26 West Dry Creek Circle, Suite 750
Littleton, Colorado 80120
All executive officers and
directors as a group (seven persons) . . . . 135,534 63.5%
</TABLE>
- - ------------
(1) Of this amount, 53,160 shares are owned directly, and all other shares
owned indirectly through entities or persons controlled by Mr.
Kowalski.
(2) Of this amount, 18,300 shares are owned directly, and all other shares
are owned by an entity controlled by Mr. Anilionis.
(3) Due to Mr. Kowalski's significant beneficial ownership of the named
entities, these shares are included in the ownership of Thomas R.
Kowalski in the table.
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<PAGE> 45
Stock Purchase Agreement. In December 1990, the Company, Thomas R.
Kowalski, Ryan R. Kowalski Trust, Realtek Company Profit Sharing Plan and
Trust, Thomas Investments and Orchard Valley Financial Corporation (the
"Shareholders") entered into a Stock Purchase Agreement in order to provide for
the orderly continuation of the affairs of the Company. The agreement, as
amended and restated in December 1997, provides that upon the death of Thomas
R. Kowalski, the Shareholders will have the option to require the Company to
purchase their shares of Company common stock to the extent the Company
receives proceeds from a life insurance policy on the life of Thomas R.
Kowalski. As of December 11, 1997, the Shareholders held an aggregate of
109,055 shares of common stock. The agreement specifies that each year the
Shareholders are to determine the value of the stock for purposes of
establishing the purchase price to be paid by the Company. If the Shareholders
do not determine a value, the value from the most recent determination will be
used, subject to appropriate adjustment to reflect book value per share of the
Company since the effective date of the last valuation. For 1996, the
Shareholders determined the value to be $45 per share. A valuation has not
been determined for 1997. The Company has purchased a life insurance policy in
the amount of $3,000,000 on Thomas R. Kowalski, which will be used, at the
option of Shareholders, to purchase all or a portion of the Shareholders'
shares. The value of the Shareholders' shares based on the 1996 valuation is
approximately $4.9 million.
RELATED PARTY TRANSACTIONS
Nagrom LLC, a Colorado limited liability company, owns the building
and land in which the Company's principal office is located. The Company and
the Bank lease office space in the building. The lease began in 1995 and is
for a period of 10 years. The rent for 1997 is approximately $328,000, and
will increase 3.5% per year. The Board of Directors of the Company believes
that the rates are comparable to those which could be obtained from
unaffiliated third parties. Nagrom LLC is beneficially owned by Kowalski
Capital LLC, a Colorado limited liability company (71.0%), Raymond L. Anilionis
(13.0%), an officer and director of the Company, and Warren P. Cohen (16.0%), a
director of the Bank. Kowalski Capital LLC is owned 95.0% by the Thomas R.
Kowalski Irrevocable Trust. The beneficiaries of the trust are Ryan Kowalski
(the adult son of Thomas R. Kowalski) and Ryan Kowalski's minor daughter. The
remaining 5.0% of Kowalski Capital LLC is owned by Respond Corp., of which
Thomas R. Kowalski is the sole shareholder.
1996 Newton LLC, a Colorado limited liability company, leases space to
the Bank for its branch at 32nd Avenue and Newton, Denver. 1996 Newton LLC is
owned by Kowalski Capital (50.0%), Raymond L. Anilionis (25.0%) and Warren P.
Cohen (25.0%). The lease commenced in May 1996 and runs for a period of 10
years. Rent is approximately $30,300 for the period of May 1997 through May
1998, and incrementally increases to $36,000 per year for the last five years
of the lease. The Board of Directors of the Company believes that the rates
are comparable to those which could be obtained from unaffiliated third
parties.
In July 1995, Thomas R. Kowalski, Raymond L. Anilionis and Warren P.
Cohen (the "Guarantors"), all of whom are officers and/or directors of the
Company and/or the Bank and significant shareholders of the Company, entered
into an agreement with the Company in connection with their personal guarantee
of a $3.0 million loan to the Bank from First Interstate Bank of Denver. In
return for the guarantee, the Company agreed to indemnify the Guarantors for
all liabilities, costs or expenses relating to the guarantee and to provide
additional compensation to the Guarantors. The additional compensation has
consisted of an aggregate fee, allocated among the three Guarantors, equal to
1.5% of the outstanding balance of the loan on each anniversary date plus a
performance bonus based on earnings of the Bank as specified in the agreement.
The present $2.0 million balance of the loan will be paid with net proceeds of
the sale of the Junior Subordinated Debentures to MB Capital. See "Use of
Proceeds." The fees paid to the Guarantors for 1995 and 1996 in the aggregate
were as follows: Mr. Kowalski - $254,512; Mr. Anilionis - $63,628; and Mr.
Cohen - $63,628.
In March 1997, the Bank entered into a Consulting Agreement with First
Fidelity Service Corp. ("First Fidelity"), a consulting firm which is
wholly-owned by Raymond L. Anilionis. The agreement provides that First
Fidelity will render services regarding bank site acquisitions, real estate
acquisitions, management of construction projects, evaluation and assistance
with negotiations of complex loans and work out transactions
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<PAGE> 46
and any other services reasonably requested by the Bank. The term of the
agreement is for one year, but automatically renews each year unless terminated
by either party upon 30 days notice. Pursuant to the terms of the consulting
agreement, First Fidelity is paid $5,000 per month for its services.
The Bank has entered into certain loan participations with First State
Bank of Hotchkiss, an entity controlled by Thomas R. Kowalski. Approximate
loan principal balances outstanding under these participations are summarized
as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
-------------------- -------- -------
(In thousands)
<S> <C> <C> <C>
Participations sold . . . . . . . $10,401 $10,916 $8,031
Participations purchased . . . . . 1,755 250 1,100
</TABLE>
The Bank has also sold loan participations to shareholders, officers
and directors of the Company on the same terms as sold to third parties. At
September 30, 1997, the participations sold to related parties were
approximately $1.9 million. At December 31, 1996 and 1995, the participations
sold to related parties were approximately $7.9 million and $0.5, respectively.
In September 1993 the Bank entered into an agreement with First State
Bank of Hotchkiss to purchase its branching rights. In total, the Bank paid
First State Bank of Hotchkiss $2,500 a month over 40 months ending in September
1997.
The officers, directors and principal shareholders of the Company and
members of their immediate families and businesses in which they hold
controlling interests are customers of the Bank. Credit transactions with
these parties are subject to review by the Bank's board of directors. All
outstanding loans and extensions of credit by the Bank to these parties were
made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and in the opinion of management
did not involve more than the normal risk of collectibility or present other
unfavorable features. At September 30, 1997, the aggregate balance of loans
and advances under existing lines of credit to these parties was approximately
$2.5 million or 2.2% of the Bank's total loans.
SUPERVISION AND REGULATION
GOVERNMENT REGULATION
The Company and the Bank are extensively regulated under federal and
Colorado law. These laws and regulations are primarily intended to protect
depositors and the deposit insurance fund of the Federal Deposit Insurance
Corporation ("FDIC"), not shareholders of the Company. The following
information is qualified in its entirety by reference to the particular
statutory and regulatory provisions. Any change in applicable laws, regulations
or regulatory policies may have a material effect on the business, operations
and prospects of the Company and the Bank. The Company is unable to predict
the nature or extent of the effects that fiscal or monetary policies, economic
controls or new federal or state legislation may have on its business and
earnings in the future.
MEGABANK FINANCIAL CORPORATION
General. The Company is a bank holding company registered under the
Bank Holding Company Act of 1956, as amended, and is subject to regulation,
supervision and examination by the Federal Reserve. The Company is required to
file an annual report and such other reports as the Federal Reserve now
requires or may require.
Acquisitions. As a bank holding company, the Company is required to
obtain the prior approval of the Federal Reserve before acquiring direct or
indirect ownership or control of more than 5% of the voting shares
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<PAGE> 47
of a bank or bank holding company. The Federal Reserve will not approve any
acquisition, merger or consolidation that would have a substantial
anti-competitive result, unless the anti-competitive effects of the proposed
transaction are outweighed by a greater public interest in meeting the needs
and convenience of the public. The Federal Reserve also considers managerial,
capital and other financial factors in acting on acquisition or merger
applications.
Permissible Activities. Subject to limited exceptions, a bank holding
company may not engage in, or acquire direct or indirect control of more than
5% of the voting shares of any company engaged in a non-banking activity,
unless such activity has been determined by the Federal Reserve to be closely
related to banking or managing banks. The Federal Reserve has identified
specific non-banking activities in which a bank holding company may engage with
notice to, or prior approval by, the Federal Reserve.
Capital Adequacy. The Federal Reserve monitors the capital adequacy
of bank holding companies. As discussed below, the Bank is also subject to the
capital adequacy requirements of the FDIC and the Division of Banking for the
State of Colorado. The Federal Reserve uses a combination of risk-based
guidelines and leverage ratios to evaluate capital adequacy of the Company.
The Federal Reserve has adopted a system using risk-based capital
adequacy guidelines to evaluate the capital adequacy of bank holding companies
on a consolidated basis. Under the risk-based capital guidelines, different
categories of assets are assigned different risk weights, based generally on
the perceived credit risk of the asset. These risk weights are multiplied by
corresponding asset balances to determine a "risk-weighted" asset base.
Certain off balance sheet items, such as loan commitments in excess of one
year, mortgage loans sold with recourse and letters of credit, are added to the
risk-weighted asset base by converting them to a balance sheet equivalent and
assigning to them the appropriate risk weight. For purposes of the risk-based
capital guidelines, total capital is defined as the sum of "Tier 1" and "Tier
2" capital elements, with Tier 2 being limited to 100% of Tier 1. For bank
holding companies, Tier 1 capital includes, with certain restrictions, common
shareholders' equity, perpetual preferred stock (no more than 25% of Tier 1
capital being comprised of cumulative preferred stock) and minority interests
in consolidated subsidiaries. Tier 2 capital includes, with certain
limitations, certain forms of perpetual preferred stock, as well as maturing
capital instruments and the allowance for loan losses (limited to 1.25% of
risk-weighted assets). The regulatory guidelines require a minimum ratio of
total capital to risk-weighted assets of 8% (of which at least 4% should be in
the form of Tier 1 capital).
At September 30, 1997, the Company's Tier 1 capital was $10.7 million.
In addition to the risk-based capital guidelines, the Federal Reserve
and the FDIC use a leverage ratio as an additional tool to evaluate the capital
adequacy of banks and bank holding companies. The leverage ratio is defined to
be a company's Tier 1 capital divided by its average tangible assets. Based
upon the current capital status of the Company, the applicable minimum required
leverage ratio is 5%.
The table below sets forth ratios of (i) total capital to
risk-weighted assets, (ii) Tier 1 capital to risk-weighted assets and (iii)
Tier 1 capital to tangible assets, at September 30, 1997.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
--------------------------
RATIO ACTUAL MINIMUM REQUIRED
----- ------ ----------------
<S> <C> <C>
TOTAL CAPITAL TO RISK-WEIGHTED ASSETS................... 9.78% 8%
TIER 1 CAPITAL TO RISK-WEIGHTED ASSETS.................. 8.53% 4%
TIER 1 CAPITAL TO AVERAGE TANGIBLE ASSETS............... 7.11% 5%
</TABLE>
Failure to meet the capital guidelines may result in the initiation by
the Federal Reserve of appropriate supervisory or enforcement actions.
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<PAGE> 48
MEGABANK OF ARAPAHOE
General. The Bank is a Colorado banking corporation, the deposits of
which are insured by the FDIC, and is subject to supervision and regulation by
the FDIC and the Colorado Division of Banking.
Permissible Activities. No Colorado bank may engage in any activity
not permitted for national banks, unless the institution complies with
applicable capital requirements and the FDIC determines that the activity poses
no significant risk to the insurance fund. The Bank is not presently involved
in the types of transactions covered by this limitation. Colorado has no
limitations on the number of branches a bank may establish.
Community Reinvestment Act. Enacted in 1977, the federal Community
Reinvestment Act ("CRA") has become increasingly important to financial
institutions, including their holding companies. The CRA currently allows
regulators to turn down an applicant seeking to make an acquisition or
establish a branch unless it has performed satisfactorily under the CRA.
Satisfactory performance means meeting adequately the credit needs of the
communities the applicant serves. The applicable federal regulators regularly
now conduct CRA examinations to assess the performance of financial
institutions. During the last examination, the Bank received a satisfactory
rating. As a result, management believes that the Bank's performance under CRA
will not impede regulatory approvals of proposed acquisitions or branching
opportunities.
Dividend Restrictions. Dividends paid by the Bank provide
substantially all of the operating and investing cash flow of the Company.
Under Colorado law, the approval of the principal regulator is required prior
to the declaration of any dividend by a bank if the total of all dividends
declared in any calendar year exceeds the total of its net profits of that year
combined with its retained net profits for the preceding two years. In
addition, a bank cannot pay a dividend if it will cause the bank to be
"undercapitalized." See "Risk Factors--Dependence on Dividends From Subsidiary
Bank."
Examinations. The Bank is examined from time to time by the FDIC.
Based upon such an evaluation, the examining regulator may revalue the assets
of an insured institution and require that it establish specific reserves to
compensate for the difference between the value determined by the regulator and
the book value of such assets. The Colorado Division of Banking (the
"Division") also conducts examinations of state-chartered banks. The Division
may accept the results of a federal examination in lieu of conducting an
independent examination. The Division also has the authority to revalue the
assets of a state-chartered institution and require it to establish reserves.
Capital Adequacy. The FDIC has adopted regulations establishing
minimum requirements for the capital adequacy of insured institutions. The
requirements address both risk-based capital and leverage capital, with
risk-based assets and Tier 1 and Tier 2 capital being determined in basically
the same manner as described above for bank holding companies. The FDIC may
establish higher minimum requirements if, for example, a bank has previously
received special attention or has a high susceptibility to interest rate risk.
The FDIC risk-based capital guidelines require state non-member banks
to have a ratio of Tier 1 or core capital to total risk-weighted assets of 4%
and a ratio of total capital to total risk-weighted assets of 8%.
The FDIC leverage guidelines require that state banks maintain Tier 1
capital of no less than 3% and up to 5% of total tangible assets. The Bank's
applicable guideline estimated to be 5%. Banks with capital ratios below the
required minimum are subject to certain administrative actions, including the
termination of deposit insurance upon notice and hearing, or a temporary
suspension of insurance without a hearing in the event the institution has no
tangible capital.
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<PAGE> 49
The table below sets forth the Bank's capital ratios at September 30,
1997.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
--------------------------
RATIO ACTUAL MINIMUM REQUIRED
----- ------ ----------------
<S> <C> <C>
TOTAL CAPITAL TO RISK-WEIGHTED ASSETS................... 10.72% 8%
TIER 1 CAPITAL TO RISK-WEIGHTED ASSETS.................. 9.48% 4%
TIER 1 CAPITAL TO AVERAGE TANGIBLE ASSETS............... 8.66% 4%
</TABLE>
Banking regulators have adopted regulations that define five capital
levels: well capitalized, adequately capitalized, undercapitalized, severely
undercapitalized and critically undercapitalized. An institution is critically
undercapitalized if it has a tangible equity to total assets ratio that is
equal to or less than 2%. An institution is well capitalized if it has a total
risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio
of 6% or greater, and a Tier 1 leverage ratio of 5% or greater, and the
institution is not subject to an order, written agreement, capital directive,
or prompt corrective action directive to meet and maintain a specific capital
level for any capital measure. An institution is adequately capitalized if it
has a total risk-based capital ratio of less than 10% but not less than 8%, a
Tier 1 risk-based capital ratio of less than 6% but not less than 4% and a
leverage ratio of less than 5% but not less than 4%. Under these regulations,
as of September 30, 1997, the Bank was well capitalized.
The Federal Deposit Insurance Corporation Improvement Act ("FDICIA")
requires the federal banking regulators to take "prompt corrective action" with
respect to capital-deficient institutions. In addition to requiring the
submission of a capital restoration plan, FDICIA contains broad restrictions on
certain activities of undercapitalized institutions involving asset growth,
acquisitions, branch establishment, and expansion into new lines of business.
With certain exceptions, an insured depository institution is prohibited from
making capital distributions, including dividends, and is prohibited from
paying management fees to control persons if the institution would be
undercapitalized after any such distribution or payment.
As an institution's capital decreases, the powers of the federal
regulators become greater. A significantly undercapitalized institution is
subject to mandated capital raising activities, restrictions on interest rates
paid and transactions with affiliates, removal of management, and other
restrictions. The regulators have very limited discretion in dealing with a
critically undercapitalized institution and are virtually required to appoint a
receiver or conservator if the capital deficiency is not corrected promptly.
Real Estate Lending Evaluations. The federal regulators have adopted
uniform standards for evaluations of loans secured by real estate or made to
finance improvements to real estate. Banks are required to establish and
maintain written internal real estate lending policies consistent with safe and
sound banking practices and appropriate to the size of the institution and the
nature and scope of its operations. The regulations establish loan to value
ratio limitations on real estate loans, which generally are equal to or higher
than the loan to value limitations established by the Bank.
Deposit Insurance Premiums. The assessment schedule for banks ranges
from 0 to 27 cents per $100 of deposits subject to Bank Insurance Fund ("BIF")
assessments, based on each institution's risk classification. The Bank's
insured deposits are subject to assessment payable to BIF. An institution's
risk classification is based on an assignment of the institution by the FDIC to
one of three capital groups and to one of three supervisory subgroups. The
capital groups are "well capitalized," "adequately capitalized" and
"undercapitalized." The three supervisory subgroups are Group "A" (for
financially solid institutions with only a few minor weaknesses), Group "B"
(for those institutions with weaknesses which, if uncorrected could cause
substantial deterioration of the institution and increase the risk to the
deposit insurance fund) and Group "C" (for those institutions with a
substantial probability of loss to the fund absent effective corrective
action). Currently, the Bank is a well capitalized institution and a Group A
supervisory subgroup.
Interstate Banking Legislation. The Riegle-Neal Interstate Banking
and Branching Efficiency Act of 1994 (the "Interstate Act"), which became
effective September 1995, has eliminated many of the historical barriers to the
acquisition of banks by out-of-state bank holding companies. The Interstate
Act facilitates the interstate
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<PAGE> 50
expansion and consolidation of banking organizations by permitting: (i) bank
holding companies that are adequately capitalized and managed to acquire banks
located in states outside their home states regardless of whether such
acquisitions are authorized under the laws of the host state; (ii) the
interstate merger of banks after June 1, 1997, subject to the right of
individual states either to pass legislation providing for earlier
effectiveness of such mergers or to "opt out" of this authority prior to such
date; (iii) banks to establish new branches on an interstate basis provided
that such action is specifically authorized by the law of the host state; (iv)
foreign banks to establish, with approval of the appropriate regulators in the
United States, branches outside their home states to the same extent that
national or state banks located in such state would be authorized to do so; and
(v) banks to receive deposits, renew time deposits, close loans, service loans
and receive payments on loans and other obligations as agent for any bank or
thrift affiliate, whether the affiliate is located in the same or different
state. Colorado has neither "opted-in" nor "opted-out" of the interstate
branching provisions and therefore out of state banks have become permitted to
branch into Colorado after June 30, 1997 in accordance with applicable laws.
The Bank does not currently have any plans generally to take any actions
permitted by the Interstate Act.
CHANGING REGULATORY STRUCTURE
The laws and regulations affecting banks and bank holding companies
are in a state of flux. The rules and the regulatory agencies in this area
have changed significantly over recent years, and there is reason to expect
that similar changes will continue in the future. It is difficult to predict
the outcome of these changes.
One of the major additional burdens imposed on the banking industry is
the increased authority of federal agencies to regulate the activities of
federal and state banks and their holding companies. The Federal Reserve, the
Comptroller of the Currency and FDIC have extensive authority to police unsafe
or unsound practices and violations of applicable laws and regulations by
depository institutions and their holding companies. These agencies can assess
civil money penalties and other laws have expanded the agencies' authority in
recent years, and the agencies have not yet fully tested the limits of their
powers. In addition, the Colorado Division of Banking possesses certain
enforcement powers to address violations of the Colorado Banking Code by
Colorado state-chartered banks.
EFFECT ON ECONOMIC ENVIRONMENT
The policies of regulatory authorities, including the monetary policy
of the Federal Reserve, have a significant effect on the operating results of
bank holding companies and their subsidiaries. Among the means available to
the Federal Reserve to affect the money supply are open market operations in
U.S. Government securities, changes in the discount rate on member bank
borrowings, and changes in reserve requirements against member bank deposits.
These means are used in varying combinations to influence overall growth and
distribution of bank loans, investments and deposits, and their use may affect
interest rates charged on loans or paid on deposits.
The Federal Reserve's monetary policies have materially affected the
operating results of commercial banks in the past and are expected to continue
to do so in the future. The nature of future monetary policies and the effect
of such policies on the business and earnings of the Company and its
subsidiaries cannot be predicted.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities and the Common Securities will be issued
pursuant to the terms of the Trust Agreement. The Trust Agreement will be
qualified as an indenture under the Trust Indenture Act. Initially, Wilmington
Trust Company will be the Delaware Trustee and the Property Trustee and will
act as trustee for the purpose of complying with the Trust Indenture Act. The
terms of the Preferred Securities will include those stated in the Trust
Agreement and those made part of the Trust Agreement by the Trust Indenture
Act. This summary of certain terms and provisions of the Preferred Securities
and the Trust Agreement does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the Trust
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<PAGE> 51
Agreement, including the definitions therein of certain terms, and the Trust
Indenture Act. Wherever particular defined terms of the Trust Agreement (as
amended or supplemented from time to time) are referred to herein, such defined
terms are incorporated herein. The form of the Trust Agreement has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part.
GENERAL
Pursuant to the terms of the Trust Agreement, the Administrative
Trustees on behalf of MB Capital will issue the Preferred Securities and the
Common Securities (collectively, the "Trust Securities"). The Preferred
Securities will represent preferred undivided beneficial interests in the
assets of MB Capital and the holders thereof will be entitled to a preference
in certain circumstances with respect to Distributions and amounts payable on
redemption or liquidation over the Common Securities of MB Capital (which will
be held by the Company), as well as other benefits as described in the Trust
Agreement.
The Preferred Securities will rank pari passu, and payments will be
made thereon pro rata, with the Common Securities of MB Capital except as
described under "Subordination of Common Securities of MB Capital Held by the
Company" below.
Legal title to the Junior Subordinated Debentures will be held by the
Property Trustee in trust for the benefit of the holders of the Trust
Securities. The Guarantee executed by the Company for the benefit of the
holders of the Preferred Securities (the "Guarantee") will be a guarantee on a
subordinated basis and will not guarantee payment of Distributions or amounts
payable on redemption of the Preferred Securities or on liquidation of the
Preferred Securities if MB Capital does not have funds on hand available to
make such payments. See "Description of Guarantee."
DISTRIBUTIONS
Payment of Distributions. Distributions on the Preferred Securities
will be payable at the annual rate of % of the stated Liquidation Amount of
$10, payable quarterly in arrears on the 15th day of January, April, July and
October in each year, commencing April 15, 1998 to the holders of the Preferred
Securities on the relevant record dates (each date on which Distributions are
payable in accordance with the foregoing, a "Distribution Date"). The amount
of each Distribution due with respect to the Preferred Securities will include
amounts accrued through the date the Distribution is due. Distributions on the
Preferred Securities will be payable to the holders thereof as they appear on
the register of MB Capital on the relevant record date which, for so long as
the Preferred Securities remain in book-entry form, will be one Business Day
(as defined below) prior to the relevant Distribution Date and, in the event
the Preferred Securities are not in book-entry form, will be the first day of
the month in which the relevant Distribution Date occurs. Distributions will
accumulate from the date of original issuance. The first Distribution Date for
the Preferred Securities will be April 15, 1998.
The amount of Distributions payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any
date on which Distributions are payable on the Preferred Securities is not a
Business Day, payment of the Distribution payable on such date will be made on
the next Business Day (and without any interest or other payment in respect to
any such delay) except that, if such Business Day is in the next succeeding
calendar year, payment of such Distribution shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable. As used in this Prospectus, a
"Business Day" means any day other than a Saturday or a Sunday, or a day on
which banking institutions in the State of Colorado are authorized or required
by law or executive order to remain closed or a day on which the corporate
trust office of the Property Trustee or the Indenture Trustee is closed for
business.
The funds of MB Capital available for distribution to holders of its
Preferred Securities will be limited to payments by the Company under the
Junior Subordinated Debentures in which MB Capital will invest the proceeds
from the issuance and sale of its Preferred Securities. See "Description of
Junior Subordinated Debentures." If the Company does not make interest
payments on the Junior Subordinated Debentures, the
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<PAGE> 52
Property Trustee will not have funds available to pay Distributions on the
Preferred Securities. The payment of Distributions (if and to the extent MB
Capital has funds legally available for the payment of such Distributions and
cash sufficient to make such payments) is guaranteed by the Company. See
"Description of Guarantee."
Extension Period. So long as no Debenture Event of Default has
occurred and is continuing, the Company has the right under the Indenture to
defer the payment of interest on the Junior Subordinated Debentures at any time
or from time to time for a period not exceeding 20 consecutive quarters with
respect to each such period (each, an "Extension Period"), provided that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. As a consequence of any such election, quarterly
Distributions on the Preferred Securities will be deferred by MB Capital during
any such Extension Period. Distributions to which holders of Preferred
Securities are entitled will accumulate additional amounts thereon at the rate
per annum of % thereof, compounded quarterly from the relevant Distribution
Date, to the extent permitted under applicable law. The term "Distributions"
as used herein shall include any such additional accumulated amounts. During
any such Extension Period, the Company may not (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of the 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, repurchase or redeem any debt securities of the
Company that rank pari passu with or junior in interest to the Junior
Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu with or junior in interest to the
Junior Subordinated Debentures (other than (a) dividends or distributions in
common stock of the Company, (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 Guarantee and (d)
purchases of common stock for issuance under any future benefit plans for its
directors, officers or employees). Prior to the termination of any such
Extension Period, the Company may further extend such Extension Period,
provided that such extension does not cause such Extension Period to exceed 20
consecutive quarters or extend beyond the Stated Maturity. Upon the
termination of any such Extension Period and the payment of all amounts then
due, and subject to the foregoing limitations, the Company may elect to begin a
new Extension Period. Subject to the foregoing, there is no limitation on the
number of times that the Company may elect to begin an Extension Period.
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures.
REDEMPTION
Mandatory Redemption of Preferred Securities. Upon the repayment or
redemption at any time, in whole or in part, of any Junior Subordinated
Debentures, the proceeds from such repayment or redemption shall be applied by
the Property Trustee to redeem a Like Amount (as defined below) of the Trust
Securities, upon not less than 30 nor more than 60 days' notice of a date of
redemption (the "Redemption Date"), at the Redemption Price (as defined below).
See "Description of Junior Subordinated Debentures -- Redemption." If less
than all of the Junior Subordinated Debentures are to be repaid or redeemed on
a Redemption Date, then the proceeds from such repayment or redemption shall be
allocated to the redemption of the Trust Securities pro rata.
Optional Redemption of Junior Subordinated Debentures. The Company
will have the right to redeem the Junior Subordinated Debentures (i) on or
after ____________, 2003, in whole at any time or in part from time to time at
a redemption price equal to the accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the date fixed for redemption, plus 100%
of the principal amount thereof, or (ii) at any time, in whole (but not in
part), upon the occurrence of a Tax Event, an Investment Company Event or a
Capital Treatment Event at a redemption price equal to the accrued and unpaid
interest on the Junior Subordinated Debentures so redeemed to the date fixed
for redemption, plus 100% of the principal amount thereof, in each case subject
to receipt of prior approval by the Federal Reserve if then required under
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applicable capital guidelines or policies of the Federal Reserve. See
"Description of Junior Subordinated Debentures -- Redemption."
Tax Event Redemption, Investment Company Event Redemption, Capital
Treatment Event Redemption or Distribution of Junior Subordinated Debentures.
If a Tax Event, an Investment Company Event or a Capital Treatment Event shall
occur and be continuing, the Company has the right to redeem the Junior
Subordinated Debentures in whole (but not in part) and thereby cause a
mandatory redemption of the Trust Securities in whole (but not in part) at the
Redemption Price (as defined below) within 90 days following the occurrence of
such Tax Event, Investment Company Event or Capital Treatment Event, in each
case subject to receipt of prior approval by the Federal Reserve if then
required under applicable capital guidelines or policies of the Federal
Reserve. In the event a Tax Event, an Investment Company Event or a Capital
Treatment Event has occurred and is continuing and the Company does not elect
to redeem the Junior Subordinated Debentures and thereby cause a mandatory
redemption of the Trust Securities or to liquidate MB Capital and cause the
Junior Subordinated Debentures to be distributed to holders of the Trust
Securities in liquidation of MB Capital as described below, such Trust
Securities will remain outstanding and Additional Sums (as defined below) may
be payable on the Junior Subordinated Debentures.
DEFINITIONS
"Additional Sums" means the additional amounts as may be necessary to
be paid by the Company with respect to the Junior Subordinated Debentures in
order that the amount of Distributions then due and payable by MB Capital on
the outstanding Trust Securities of MB Capital shall not be reduced as a result
of any additional taxes, duties and other governmental charges to which MB
Capital has become subject.
"Like Amount" means (i) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount (as defined below)
equal to that portion of the principal amount of Junior Subordinated Debentures
to be contemporaneously redeemed in accordance with the Indenture, allocated to
the Common Securities and to the Preferred Securities based upon the relative
Liquidation Amounts of such classes and the proceeds of which will be used to
pay the Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Junior Subordinated Debentures to holders of Trust Securities
in connection with a dissolution or liquidation of MB Capital, Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Junior Subordinated
Debentures are distributed.
"Liquidation Amount" means the stated amount of $10 per Trust
Security.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, allocated on a pro rata basis (based on
Liquidation Amounts) among the Trust Securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
Subject to the Company having received prior approval of the Federal
Reserve if so required under applicable capital guidelines or policies of the
Federal Reserve, the Company will have the right at any time to liquidate MB
Capital and, after satisfaction of the liabilities of creditors of MB Capital
as provided by applicable law, cause the Junior Subordinated Debentures to be
distributed to the holders of Trust Securities in liquidation of MB Capital.
After the liquidation date fixed for any distribution of Junior Subordinated
Debentures for Preferred Securities (i) such Preferred Securities will no
longer be deemed to be outstanding, (ii) the Depositary or its nominee, as the
record holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Junior Subordinated Debentures to
be delivered upon such distribution and (iii) any certificates representing
Preferred Securities not held by the Depositary or its nominee will be deemed
to represent the Junior Subordinated Debentures having a principal amount equal
to the Liquidation Amount of such Preferred Securities, and bearing accrued and
unpaid interest in an amount equal to the accrued and unpaid Distributions on
the Preferred Securities until such certificates are presented to the
Administrative Trustees or their agent for transfer or reissuance.
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There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for the Preferred Securities if a dissolution and liquidation of MB
Capital were to occur. Accordingly, the Preferred Securities that an investor
may purchase, or the Junior Subordinated Debentures that the investor may
receive on dissolution and liquidation of MB Capital, may trade at a discount
to the price that the investor paid to purchase the Preferred Securities
offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date will be redeemed
at the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Junior Subordinated Debentures. Redemptions of the Preferred
Securities will be made and the Redemption Price will be payable on each
Redemption Date only to the extent that MB Capital has funds on hand available
for the payment of such Redemption Price. See "-- Subordination of Common
Securities of MB Capital Held by the Company" and "-- Guarantee."
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each holder of Trust Securities at
such holder's registered address. Unless MB Capital defaults in payment of the
applicable Redemption Price, on and after the Redemption Date, Distributions
will cease to accrue on such Preferred Securities called for redemption.
If MB Capital gives a notice of redemption in respect of the Preferred
Securities, then, by 12:00 noon, Denver time, on the Redemption Date, the
Property Trustee will pay the Redemption Price to the Depositary, as the record
holder of the Preferred Securities, and the Depositary thereafter will credit
the Redemption Price to the Participants for whom it holds the Preferred
Securities. See "Book-Entry Issuance." If such Preferred Securities are no
longer in book-entry form, the Property Trustee, to the extent funds are
available, will deposit with the paying agent for such Preferred Securities
funds sufficient to pay the aggregate Redemption Price and will give such
paying agent irrevocable instructions and authority to pay the Redemption Price
to the holders thereof upon surrender of their certificates evidencing such
Preferred Securities. Notwithstanding the foregoing, Distributions payable on
or prior to the Redemption Date will be payable to the holders of such
Preferred Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of the holders of the
Preferred Securities will cease, except the right of the holders of the
Preferred Securities to receive the applicable Redemption Price, but without
interest on such Redemption Price, and such Preferred Securities will cease to
be outstanding. In the event that any date fixed for redemption of such
Preferred Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding Business Day
(and without any interest or other payment in respect of any such delay),
except that, if such Business Day falls in the next calendar year, such payment
will be made on the immediately preceding Business Day. In the event that
payment of the Redemption Price in respect of Preferred Securities called for
redemption is improperly withheld or refused and not paid either by MB Capital
or by the Company pursuant to the Guarantee, Distributions on such Preferred
Securities will continue to accrue at the then applicable rate, from the
Redemption Date originally established by MB Capital for such Preferred
Securities to the date such Redemption Price is actually paid, in which case
the actual payment date will be the date fixed for redemption for purposes of
calculating the Redemption Price. See "Description of Guarantee."
Subject to applicable law (including, without limitation, United
States federal securities law), the Company may at any time and from time to
time purchase outstanding Preferred Securities by tender, in the open market or
by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Junior Subordinated Debentures to holders of Preferred
Securities will be made to the applicable record holders thereof as they appear
on the register of such Preferred Securities on the relevant record date, which
date will be one Business Day prior to the relevant Redemption Date or
Liquidation Date, as applicable; provided, however, that in the event that any
Preferred Securities are not in book-entry form, the relevant record date for
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such Preferred Securities will be a date at least 15 days prior to the
Redemption Date or Liquidation Date, as applicable. In the case of a
liquidation, the record date will be no more than 45 days before the
Liquidation Date.
If less than all of the Trust Securities issued by MB Capital are to
be redeemed on a Redemption Date, then the aggregate Redemption Price for such
Trust Securities to be redeemed will be allocated pro rata to the Preferred
Securities and Common Securities based upon the relative Liquidation Amounts of
such classes. The particular Preferred Securities to be redeemed will be
selected by the Property Trustee from the outstanding Preferred Securities not
previously called for redemption, by such method as the Property Trustee shall
deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to $10 or an integral multiple thereof) of the
Liquidation Amount of Preferred Securities. The Property Trustee shall
promptly notify the Trust Securities registrar in writing of the Preferred
Securities selected for redemption and, in the case of any Preferred Securities
selected for partial redemption, the Liquidation Amount thereof to be redeemed.
For all purposes of the Trust Agreement, unless the context otherwise requires,
all provisions relating to the redemption of Preferred Securities will relate
to the portion of the aggregate Liquidation Amount of Preferred Securities
which has been or is to be redeemed.
SUBORDINATION OF COMMON SECURITIES OF MB CAPITAL HELD BY THE COMPANY
Payment of Distributions on, and the Redemption Price of, the
Preferred Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amounts of the Preferred Securities and Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date a Debenture Event of Default shall have occurred and be continuing, no
payment of any Distribution on, or applicable Redemption Price of, any of the
Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of the Common Securities, shall be made unless
payment in full in cash of all accumulated and unpaid Distributions on all of
the outstanding Preferred Securities for all Distribution periods terminating
on or prior thereto, or in the case of payment of the applicable Redemption
Price the full amount of such Redemption Price on all of the outstanding
Preferred Securities then called for redemption, shall have been made or
provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all Distributions on, or Redemption
Price of, the Preferred Securities then due and payable.
In the case of any Event of Default under the Trust Agreement
resulting from a Debenture Event of Default, the Company as holder of the
Common Securities will be deemed to have waived any right to act with respect
to any such Event of Default until the effects of all such Events of Default
have been cured, waived or otherwise eliminated. Until any such Events of
Default have been so cured, waived or otherwise eliminated, the Property
Trustee shall act solely on behalf of the holders of the Preferred Securities
and not on behalf of the Company as holder of the Common Securities, and only
the holders of the Preferred Securities will have the right to direct the
Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
The Company will have the right at any time to terminate MB Capital
and cause the Junior Subordinated Debentures to be distributed to the holders
of the Preferred Securities. Such right is subject to the Company having
received prior approval of the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve. See
"Distribution of Junior Subordinated Debentures" above.
In addition, pursuant to the Trust Agreement, MB Capital shall
automatically terminate upon expiration of its term and shall earlier terminate
on the first to occur of: (i) certain events of bankruptcy, dissolution or
liquidation of the Company; (ii) delivery by the Company of written direction
to the Property Trustee to terminate MB Capital (which direction is optional
and wholly within the discretion of the Company); (iii) redemption of all of
the Preferred Securities as described under "Description of the Preferred
Securities--Redemption--Mandatory Redemption;" and (iv) the entry of an order
for the dissolution of MB Capital by a court of competent jurisdiction.
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If an early termination occurs as described in clause (i), (ii) or
(iv) above or upon the expiration of the term of MB Capital, MB Capital shall
be liquidated by the Trustees as expeditiously as the Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of MB
Capital as provided by applicable law, to the holders of such Trust Securities
a Like Amount of the Junior Subordinated Debentures, unless such distribution
is determined by the Property Trustee not to be practical, in which event such
holders will be entitled to receive out of the assets of MB Capital available
for distribution to holders, after satisfaction of liabilities to creditors of
MB Capital as provided by applicable law, an amount equal to, in the case of
holders of Preferred Securities, the aggregate of the Liquidation Amount of $10
per Trust Security plus accrued and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"). If such
Liquidation Distribution can be paid only in part because MB Capital has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by MB Capital on the Preferred
Securities will be paid on a pro rata basis. The holder(s) of the Common
Securities will be entitled to receive distributions upon any such liquidation
pro rata with the holders of the Preferred Securities, except that if a
Debenture Event of Default has occurred and is continuing, the Preferred
Securities will have a priority over the Common Securities.
Under current United States federal income tax law and interpretations
and assuming, as expected, MB Capital is treated as a grantor trust, a
distribution of the Junior Subordinated Debentures should not be a taxable
event to holders of the Preferred Securities. Should there be a change in law,
a change in legal interpretation, a Tax Event or other circumstances, however,
the distribution could be a taxable event to holders of the Preferred
Securities. See "Certain Federal Income Tax Consequences." If the Company
elects neither to redeem the Junior Subordinated Debentures prior to maturity
nor to liquidate MB Capital and distribute the Junior Subordinated Debentures
to holders of the Preferred Securities, the Preferred Securities will remain
outstanding until the repayment of the Junior Subordinated Debentures.
If the Company elects to liquidate MB Capital and thereby causes the
Junior Subordinated Debentures to be distributed to holders of the Preferred
Securities in liquidation of MB Capital, the Company will continue to have the
right to shorten the maturity of such Junior Subordinated Debentures, subject
to certain conditions. See "Description of Junior Subordinated Debentures --
General."
EVENTS OF DEFAULT; NOTICE
Any one of the following events that has occurred and is continuing
constitutes an "Event of Default" under the Trust Agreement (an "Event of
Default") with respect to the Preferred Securities and Common Securities
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of a Debenture Event of Default under the
Indenture (see "Description of Junior Subordinated Debentures -- Debenture
Events of Default"); or
(ii) default by the Trust in the payment of any Distribution when
it becomes due and payable, and continuation of such default for a period of 30
days; or
(iii) default by the Trust in the payment of any Redemption Price of
any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Property Trustee in the Trust
Agreement (other than a default or breach in the performance of a covenant or
warranty which is addressed in clause (ii) or (iii) above), and continuation of
such default or breach, for a period of 60 days after there has been given, by
registered or certified mail, to the Property Trustee by the holders of at
least 25% in aggregate Liquidation Amount of the outstanding Preferred
Securities, a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of Default" under the
Trust Agreement; or
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(v) the occurrence of certain events of bankruptcy or insolvency
with respect to the Property Trustee and the failure by the Company to appoint
a successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee will transmit
notice of such Event of Default to the holders of the Preferred Securities, the
Administrative Trustees and the Company, unless such Event of Default shall
have been cured or waived. The Company and the Administrative Trustees are
required to file annually with the Property Trustee a certificate as to whether
they are in compliance with all the conditions and covenants applicable to them
under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities will have a preference over the Common Securities upon
termination of MB Capital as described above. See "-- Liquidation Distribution
Upon Termination." Upon a Debenture Event of Default, unless the principal of
all the Junior Subordinated Debentures has already become due and payable,
either the Property Trustee or the holders of not less than 25% in aggregate
principal amount of the Junior Subordinated Debentures then outstanding may
declare all of the Junior Subordinated Debentures to be due and payable
immediately by giving notice in writing to the Company (and to the Property
Trustee, if notice is given by holders of the Junior Subordinated Debentures).
If the Property Trustee or the holders of the Junior Subordinated Debentures
fail to declare the principal of all of the Junior Subordinated Debentures due
and payable upon a Debenture Event of Default, the holders of at least 25% in
Liquidation Amount of the Preferred Securities then outstanding will have the
right to declare the Junior Subordinated Debentures immediately due and
payable. In either event, payment of principal and interest on the Junior
Subordinated Debentures will remain subordinated to the extent provided in the
Indenture. In addition, holders of the Preferred Securities have the right in
certain circumstances to bring a Direct Action (as defined below). See
"Description of Junior Subordinated Debentures -- Enforcement of Certain Rights
by Holders of Preferred Securities."
REMOVAL OF TRUSTEES
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 Preferred
Securities. In no event will the holders of the Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Company as the holder of the Common
Securities. No resignation or removal of a Trustee and no appointment of a
successor trustee will be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of Trust Property
may at the time be located, the Company, as the holder of the Common
Securities, and the Administrative Trustees will have power to appoint one or
more persons either to act as a co-trustee, jointly with the Property Trustee,
of all or any part of such Trust Property, or to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the Trust Agreement. In case a Debenture Event of
Default has occurred and is continuing, the Property Trustee alone will have
power to make such appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any Person (as defined in the Trust Agreement) into which the Property
Trustee, the Delaware Trustee or any Administrative Trustee that is not a
natural person may be merged or converted or with which it may be consolidated,
or any Person resulting from any merger, conversion or consolidation to which
such Trustee will
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be a party, or any person succeeding to all or substantially all the corporate
trust business of such Trustee, shall be the successor of such Trustee under
the Trust Agreement, provided such corporation shall be otherwise qualified and
eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF MB CAPITAL
MB Capital 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 corporation or other Person, except as
described below. MB Capital may, at the request of the Company, with the
consent of the Administrative Trustees and without the consent of the holders
of the Preferred Securities, merge with or into, consolidate, amalgamate, or be
replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to a trust organized as such under the laws of any
State; provided, that (i) such successor entity either (a) expressly assumes
all of the obligations of MB Capital with respect to the Preferred Securities
or (b) substitutes for the Preferred Securities other securities having
substantially the same terms as the Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Preferred
Securities rank in priority with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Company expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Junior Subordinated Debentures, (iii) any
such transaction does not adversely affect the rights, preferences and
privileges of the holders of the Preferred Securities (including any Successor
Securities) in any material respect, (iv) such successor entity has a purpose
identical to that of MB Capital, (v) the Successor Securities will be listed or
traded on any national securities exchange or other organization on which the
Preferred Securities may then be listed, (vi) prior to such a transaction, the
Company has received an opinion from independent counsel to MB Capital
experienced in such matters to the effect that (a) such transaction does not
adversely affect the rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any material
respect, and (b) following any such transaction, neither MB Capital nor such
successor entity will be required to register as an investment company under
the Investment Company Act and (vii) the Company or any permitted successor or
designee owns all of the common securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding
the foregoing, MB Capital shall not, except with the consent of holders of 100%
in Liquidation Amount of the Preferred Securities, enter into any such
transaction, or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such transaction, would cause MB Capital or the
successor entity to be classified as other than a grantor trust for United
States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of Guarantee --
Amendments and Assignment" and as otherwise required by law and the Trust
Agreement, the holders of the Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company,
the Property Trustee and the Administrative Trustees, without the consent of
the holders of the Trust Securities, (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement, which shall not be inconsistent
with the other provisions of the Trust Agreement, or (ii) to modify, eliminate
or add to any provisions of the Trust Agreement to such extent as will be
necessary to ensure that MB Capital will be classified for United States
federal income tax purposes as a grantor trust at all times that any Trust
Securities are outstanding or to ensure that MB Capital 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 of Trust Securities, and
any amendments of the Trust Agreement shall become effective when notice
thereof is given to the holders of the Trust Securities. The Trust Agreement
may be amended by the Trustees and the Company (i) with the consent of holders
representing not less than a majority of the aggregate Liquidation Amount of
the outstanding Trust Securities, and (ii) upon receipt by the Trustees of an
opinion of counsel to the effect that such amendment or the exercise of any
power
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granted to the Trustees in accordance with such amendment will not affect MB
Capital's status as a grantor trust for United States federal income tax
purposes or MB Capital'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 Trust Agreement may not be amended to (i) change the
amount or timing of any Distribution on the Trust Securities or otherwise
adversely affect the amount of any Distribution required to be made in respect
of the Trust Securities as of a specified date or (ii) restrict the right of a
holder of Trust Securities to institute suit for the enforcement of any such
payment on or after such date.
So long as any Junior Subordinated 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 Indenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debentures, (ii) waive any past default that is
waivable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Junior Subordinated Debentures shall
be due and payable or (iv) consent to any amendment, modification or
termination of the Indenture or the Junior Subordinated Debentures, where such
consent shall be required, without, in each case, obtaining the prior approval
of the holders of a majority in aggregate Liquidation Amount of all outstanding
Preferred Securities; provided, however, that where a consent under the
Indenture would require the consent of each holder of Junior Subordinated
Debentures affected thereby, no such consent may be given by the Property
Trustee without the prior consent of each holder of the Preferred Securities.
The Trustees shall not revoke any action previously authorized or approved by a
vote of the holders of the Preferred Securities except by subsequent vote of
the holders of the Preferred Securities. The Property Trustee will notify each
holder of the Preferred Securities of any notice of default with respect to the
Junior Subordinated Debentures. In addition to obtaining the foregoing
approvals of such holders of the Preferred 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 MB Capital will not be
classified as an association taxable as a corporation for United States federal
income tax purposes on account of such action.
Any required approval of holders of the Preferred Securities may be
given at a meeting of holders of Preferred Securities convened for such purpose
or pursuant to written consent. The Property Trustee will cause a notice of
any meeting at which holders of the Preferred Securities are entitled to vote,
or of any matter upon which action by written consent of such holders is to be
taken, to be given to each holder of record of the Preferred Securities in the
manner set forth in the Trust Agreement.
No vote or consent of the holders of the Preferred Securities will be
required for MB Capital to redeem and cancel the Preferred Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Company, the Trustees or any
affiliate of the Company or any Trustees, shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
GLOBAL PREFERRED SECURITIES
The Preferred Securities will be represented by one or more global
certificates registered in the name of the Depositary or its nominee ("Global
Preferred Security"). Beneficial interests in the Preferred Securities will be
shown on, and transfers thereof will be effected only through, records
maintained by participants in the Depositary. Except as described below,
Preferred Securities in certificated form will not be issued in exchange for
the global certificates. See "Book-Entry Issuance."
A global security will be exchangeable for Preferred Securities
registered in the names of persons other than the Depositary or its nominee
only if (i) the Depositary notifies the Company that it is unwilling or unable
to continue as a depositary for such global security and no successor
depositary shall have been appointed, or if at any time the Depositary ceases
to be a clearing agency registered under the Exchange Act, at a time when the
Depositary is required to be so registered to act as such depositary, (ii) the
Company in its sole
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discretion determines that such global security shall be so exchangeable, or
(iii) there shall have occurred and be continuing an Event of Default under the
Indenture. Any global security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for definitive certificates registered in such
names as the Depositary directs. It is expected that such instructions will be
based upon directions received by the Depositary with respect to ownership of
beneficial interests in such global security. In the event that Preferred
Securities are issued in definitive form, they will be in denominations of $10
and integral multiples thereof and may be transferred or exchanged at the
offices described below.
Unless and until it is exchanged in whole or in part for the
individual Preferred Securities represented thereby, such Global Preferred
Security may not be transferred except as a whole by the Depositary to a
nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by the Depositary or any
nominee to a successor Depositary or any nominee of such successor.
Payments on Preferred Securities represented by a global security will
be made to the Depositary, as the depositary for the Preferred Securities. In
the event the Preferred Securities are issued in definitive form, Distributions
will be payable, the transfer of the Preferred Securities will be registrable,
and Preferred Securities will be exchangeable for Preferred Securities of other
denominations of a like aggregate Liquidation Amount, at the corporate office
of the Property Trustee, or at the offices of any paying agent or transfer
agent appointed by the Administrative Trustees, provided that payment of any
Distribution may be made at the option of the Administrative Trustees by check
mailed to the address of the persons entitled thereto or by wire transfer. In
addition, if the Preferred Securities are issued in certificated form, the
record dates for payment of Distributions will be the first day of the month in
which the relevant Distribution Date occurs. For a description of the terms of
the depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Book-Entry Issuance."
Upon the issuance of a Global Preferred Security, and the deposit of
such Global Preferred Security with or on behalf of the Depositary, the
Depositary or its nominee will credit, on its book-entry registration and
transfer system, the respective aggregate Liquidation Amounts of the individual
Preferred Securities represented by such Global Preferred Security to persons
that have accounts with such Depositary ("Participants"). Such accounts shall
be designated by the dealers, Underwriters or agents with respect to such
Preferred Securities. Ownership of beneficial interests in a Global Preferred
Security will be limited to Participants or persons that may hold interests
through Participants. Ownership of beneficial interests in such Global
Preferred Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary or its nominee
(with respect to interests of Participants) and the records of Participants
(with respect to interests of persons who hold through Participants). The laws
of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Preferred
Security.
So long as the Depositary for a Global Preferred Security, or its
nominee, is the registered owner of such Global Preferred Security, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Preferred Securities represented by such Global
Preferred Security for all purposes under the Trust Agreement governing such
Preferred Securities. Except as provided below, owners of beneficial interests
in a Global Preferred Security will not be entitled to have any of the
individual Preferred Securities represented by such Global Preferred Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Preferred Securities in definitive form and will not be
considered the owners or holders thereof under the Trust Agreement.
None of the Company, the Property Trustee, any Paying Agent, or the
Securities Registrar (defined below) for such Preferred Securities will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Global
Preferred Security representing such Preferred Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
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The Company expects that the Depositary for Preferred Securities or
its nominee, upon receipt of any payment of the Liquidation Amount or
Distributions in respect of a permanent Global Preferred Security, immediately
will credit Participants' accounts with payments in amounts proportionate to
their respective beneficial interest in the aggregate Liquidation Amount of
such Global Preferred Security as shown on the records of such Depositary or
its nominee. The Company also expects that payments by Participants to owners
of beneficial interests in such Global Preferred Security held through such
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." Such payments will be the responsibility
of such Participants.
If the Depositary for the Preferred Securities is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, MB Capital will
issue individual Preferred Securities in exchange for the Global Preferred
Security. In addition, MB Capital may at any time and in its sole discretion,
subject to any limitations described herein relating to such Preferred
Securities, determine not to have any Preferred Securities represented by one
or more Global Preferred Securities and, in such event, will issue individual
Preferred Securities in exchange for the Global Preferred Security or
Securities representing the Preferred Securities. Further, if MB Capital so
specifies with respect to the Preferred Securities, an owner of a beneficial
interest in a Global Preferred Security representing Preferred Securities may,
on terms acceptable to the Company, the Property Trustee and the Depositary for
such Global Preferred Security, receive individual Preferred Securities in
exchange for such beneficial interests, subject to any limitations described
herein. In any such instance, an owner of a beneficial interest in a Global
Preferred Security will be entitled to physical delivery of individual
Preferred Securities represented by such Global Preferred Security equal in
Liquidation Amount to such beneficial interest and to have such Preferred
Securities registered in its name. Individual Preferred Securities so issued
will be issued in denominations, unless otherwise specified by MB Capital, of
$10 and integral multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities will be made to the
Depositary, which will credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any of the Preferred Securities are not
held by the Depositary, such payments will be made by check mailed to the
address of the holder entitled thereto as such address will appear on the
Register. The paying agent (the "Paying Agent") will initially be the Property
Trustee and any co-paying agent chosen by the Property Trustee and acceptable
to the Administrative Trustees and the Company. The Paying Agent will be
permitted to resign as Paying Agent upon 30 days' written notice to the
Property Trustee and the Company. In the event that the Property Trustee shall
no longer be the Paying Agent, the Administrative Trustees will appoint a
successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and the Company) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the
Preferred Securities. Registration of transfers of the Preferred Securities
will be effected without charge by or on behalf of MB Capital, but upon payment
of any tax or other governmental charges that may be imposed in connection with
any transfer or exchange. MB Capital will not be required to register or cause
to be registered the transfer of the Preferred Securities after such Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to
this provision, the Property Trustee is under no obligation to exercise any of
the powers vested in it by the Trust Agreement at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be
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incurred thereby. If no Event of Default has occurred and is continuing and
the Property Trustee is required to decide between alternative causes of
action, construe ambiguous provisions in the Trust Agreement or is unsure of
the application of any provision of the Trust Agreement, and the matter is not
one on which holders of the Preferred Securities are entitled under the Trust
Agreement to vote, then the Property Trustee shall take such action as is
directed by the Company and if not so directed, shall take such action as it
deems advisable and in the best interests of the holders of the Trust
Securities and will have no liability except for its own bad faith, negligence
or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate MB Capital in such a way that MB Capital will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the Junior
Subordinated Debentures will be treated as indebtedness of the Company for
United States federal income tax purposes. In this regard, the Company and the
Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of MB Capital or the Trust
Agreement, that the Company and the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of the
related Preferred Securities. Holders of the Preferred Securities have no
preemptive or similar rights.
MB Capital may not borrow money or issue debt or mortgage or pledge
any of its assets.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures will be issued under the
Subordinated Indenture, dated as of _________, 1998 (the "Indenture"), between
the Company and Wilmington Trust Company, as trustee (the "Indenture Trustee").
The following summary of the terms and provisions of the Junior Subordinated
Debentures and the Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Indenture, which has been
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part, and to the Trust Indenture Act. The Indenture is qualified under
the Trust Indenture Act. Whenever particular defined terms of the Indenture
are referred to herein, such defined terms are incorporated herein or therein
by reference.
Concurrently with the issuance of the Preferred Securities, MB Capital
will invest the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in Junior Subordinated Debentures issued by
the Company. The Junior Subordinated Debentures will be issued as unsecured
debt under the Indenture.
GENERAL
The Junior Subordinated Debentures will bear interest at the annual
rate of % of the principal amount thereof, payable quarterly in arrears on
the 15th day of January, April, July and October of each year (each, an
"Interest Payment Date"), commencing April 15, 1998, to the person in whose
name each Junior Subordinated Debenture is registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. Notwithstanding the above, in the event that either the
(i) Junior Subordinated Debentures are held by the Property Trustee and the
Preferred Securities are no longer in book-entry only form or (ii) the Junior
Subordinated Debentures are not represented by a Global Subordinated Debenture
(as defined herein), the record date for such payment shall be the first day of
the month in which such payment is made. The amount of each interest payment
due with respect to the Junior Subordinated Debentures will include amounts
accrued through the Interest Payment Date. It is anticipated that, until the
liquidation, if any, of MB Capital, each Junior Subordinated Debenture will be
held in the name of the Property Trustee in trust for the benefit of the
holders of the Preferred Securities. The amount of interest payable for any
period will be computed on the basis of a 360-day year of twelve 30-day months.
In the event that any date on
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which interest is payable on the Junior Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on the date such
payment was originally payable. Accrued interest that is not paid on the
applicable Interest Payment Date will bear additional interest on the amount
thereof (to the extent permitted by law) at the rate per annum of % thereof,
compounded quarterly. The term "interest" as used herein shall include
quarterly interest payments, interest on quarterly interest payments not paid
on the applicable Interest Payment Date and Additional Sums (as defined below),
as applicable.
The Junior Subordinated Debentures will mature on ___________, 2028
(such date, as it may be shortened as hereinafter described, the "Stated
Maturity"). Such date may be shortened once at any time by the Company to any
date not earlier than ___________, 2003, subject to the Company having received
prior approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. In the event that the Company
elects to shorten the Stated Maturity of the Junior Subordinated Debentures, it
will give notice to the registered holders of the Junior Subordinated
Debentures, the Property Trustee and the Indenture Trustee of such shortening
no less than 90 days prior to the effectiveness thereof. The Property Trustee
must give notice to the holders of the Trust Securities of the shortening of
the Stated Maturity.
The Junior Subordinated Debentures will be unsecured and will rank
junior and be subordinate in right of payment to all Senior and Subordinated
Debt of the Company. Because the Company is a holding company, the right of
the Company to participate in any distribution of assets of any subsidiaries,
including the Bank, upon any such subsidiaries' liquidation or reorganization
or otherwise (and thus the ability of holders of the Preferred Securities to
benefit indirectly from such distribution), is subject to the prior claims of
creditors of that subsidiary, except to the extent that the Company may itself
be recognized as a creditor of that subsidiary. Accordingly, the Junior
Subordinated Debentures will be effectively subordinated to all existing and
future liabilities of the Company's subsidiaries, and holders of Junior
Subordinated Debentures should look only to the assets of the Company for
payments on the Junior Subordinated Debentures. The Indenture does not limit
the incurrence or issuance of other secured or unsecured debt of the Company,
including Senior and Subordinated Debt, whether under the Indenture or any
existing or other indenture that the Company may enter into in the future or
otherwise. See "Subordination" below.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default has occurred and is
continuing, the Company has the right under the Indenture at any time during
the term of the Junior Subordinated Debentures to defer the payment of interest
at any time or from time to time for a period not exceeding 20 consecutive
quarters (each such period an "Extension Period"), provided that no Extension
Period may extend beyond the Stated Maturity. At the end of such Extension
Period, the Company must pay all interest then accrued and unpaid (together
with interest thereon at the annual rate of %, compounded quarterly, to the
extent permitted by applicable law). During an Extension Period, interest will
continue to accrue and holders of Junior Subordinated Debentures will be
required to accrue interest income for United States federal income tax
purposes. See "Certain Federal Income Tax Consequences -- Potential Extension
of Interest Payment Period and Original Issue Discount."
During any such Extension Period, the Company may not (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company (including other Junior
Subordinated Debentures) that rank pari passu with or junior in interest to the
Junior Subordinated Debentures or make any guarantee payments with respect to
any guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu with or junior in interest to the
Junior Subordinated Debentures (other than (a) dividends or distributions in
common stock of the Company, (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
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in the future, or the redemption or repurchase of any such rights pursuant
thereto, (c) payments under the Guarantee, and (d) purchases of common stock
related to rights under any of the Company's benefit plans for its directors,
officers or employees). Prior to the termination of any such Extension Period,
the Company may further extend such Extension Period, provided that such
extension does not cause such Extension Period to exceed 20 consecutive
quarters or extend beyond the Stated Maturity. Upon the termination of any
such Extension Period and the payment of all amounts then due on any Interest
Payment Date, the Company may elect to begin a new Extension Period subject to
the above requirements. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company must give the
Property Trustee, the Administrative Trustees and the Indenture Trustee notice
of its election of any Extension Period at least one Business Day prior to the
earlier of (i) the date the Distributions on the Preferred Securities would
have been payable except for the election to begin or extend such Extension
Period or (ii) the date the Administrative Trustees are required to give notice
to the holders of the Preferred Securities of the record date or the date such
Distributions are payable, but in any event not less than one Business Day
prior to such record date. The Indenture Trustee shall give notice of the
Company's election to begin or extend a new Extension Period the holders of the
Preferred Securities. There is no limitation on the number of times that the
Company may elect to begin an Extension Period.
ADDITIONAL SUMS
If MB Capital is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the Junior Subordinated Debentures such amounts
("Additional Sums") as shall be required so that the Distributions payable by
MB Capital shall not be reduced as a result of any such additional taxes,
duties or other governmental charges.
REDEMPTION
Subject to the Company having received prior approval of the Federal
Reserve, if then required under applicable capital guidelines or policies of
the Federal Reserve, the Junior Subordinated Debentures are redeemable prior to
maturity at the option of the Company (i) on or after ________, 2003, in whole
at any time or in part from time to time, or (ii) at any time in whole (but not
in part), upon the occurrence and during the continuance of a Tax Event, an
Investment Company Event or a Capital Treatment Event, in each case at a
redemption price equal to the accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the date fixed for redemption, plus 100%
of the principal amount thereof.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each holder of Junior Subordinated
Debentures to be redeemed at such holder's registered address. Unless the
Company defaults in payment of the Redemption Price, on and after the
Redemption Date interest ceases to accrue on such Junior Subordinated
Debentures or portions thereof called for redemption.
The Junior Subordinated Debentures will not be subject to any sinking
fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Preferred Securities --
Liquidation Distribution Upon Termination," under certain circumstances
involving the termination of MB Capital, the Junior Subordinated Debentures may
be distributed to the holders of the Preferred Securities and Common Securities
in liquidation of MB Capital after satisfaction of liabilities to creditors of
MB Capital as provided by applicable law. If distributed to holders of the
Preferred Securities in liquidation, the Junior Subordinated Debentures will
initially be issued in the form of one or more global securities and the
Depositary, or any successor depositary for the Preferred Securities, will act
as depositary for the Junior Subordinated Debentures. It is anticipated that
the depositary arrangements for the Junior Subordinated Debentures would be
substantially identical to those in effect for the Preferred Securities. If
the Junior Subordinated Debentures are distributed to the holders of Preferred
Securities upon the liquidation of MB Capital, there can be no assurance as to
the market price of any Junior Subordinated Debentures that may be distributed
to the holders of Preferred Securities.
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RESTRICTIONS ON CERTAIN PAYMENTS
If at any time (i) there shall have occurred any event of which the
Company has actual knowledge that (a) with the giving of notice or the lapse of
time, or both, would constitute a Debenture Event of Default and (b) in respect
of which the Company shall not have taken reasonable steps to cure, or (ii) the
Company shall have given notice of its election of an Extension Period as
provided in the Indenture with respect to the Junior Subordinated Debentures
and shall not have rescinded such notice, or such Extension Period, or any
extension thereof, shall be continuing, or (iii) while the Junior Subordinated
Debentures are held by MB Capital, the Company shall be in default with respect
to its payment of any obligation under the Guarantee, then the Company will not
(1) 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 or (2) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company
(including other Junior Subordinated Debt) that rank pari passu with or junior
in interest to the Junior Subordinated Debentures or make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any subsidiary of the Company if such guarantee ranks pari passu or junior in
interest to the Junior Subordinated Debentures (other than (a) dividends or
distributions in common stock, (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 Guarantee and (d)
purchases of common stock related to rights under any of the Company's benefit
plans for its directors, officers or employees).
SUBORDINATION
In the Indenture, the Company has agreed that any Junior Subordinated
Debentures will be subordinate and junior in right of payment to all Senior and
Subordinated Debt to the extent provided in the Indenture. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up, reorganization, assignment for the benefit of creditors, marshaling of
assets or any bankruptcy, insolvency, debt restructuring or similar proceedings
in connection with any insolvency or bankruptcy proceeding of the Company, the
holders of Senior and Subordinated Debt will first be entitled to receive
payment in full of principal of (and premium, if any) and interest, if any, on
such Senior and Subordinated Debt before the holders of Junior Subordinated
Debentures will be entitled to receive or retain any payment in respect of the
principal of or interest, if any, on the Junior Subordinated Debentures.
In the event of the acceleration of the maturity of any Junior
Subordinated Debentures, the holders of all Senior and Subordinated Debt
outstanding at the time of such acceleration will first be entitled to receive
payment in full of all amounts due thereon (including any amounts due upon
acceleration) before the holders of Junior Subordinated Debentures will be
entitled to receive or retain any payment in respect of the principal of or
interest, if any, on the Junior Subordinated Debentures; provided, however,
that holders of Subordinated Debt shall not be entitled to receive payment of
any such amounts to the extent that such Subordinated Debt is by its terms
subordinated to trade creditors.
No payments on account of principal or interest, if any, in respect of
the Junior Subordinated Debentures may be made if there shall have occurred and
be continuing a default in any payment with respect to Senior and Subordinated
Debt or an event of default with respect to any Senior and Subordinated Debt
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Debt" means with respect to any person, whether recourse is to all or
a portion of the assets of such person and whether or not contingent: (i) every
obligation of such person for money borrowed; (ii) every obligation of such
person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person; (iv) every obligation of such person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities
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arising in the ordinary course of business); (v) every capital lease obligation
of such person; and (vi) every obligation of the type referred to in clauses
(i) through (v) of another person and all dividends of another person the
payment of which, in either case, such person has guaranteed or is responsible
or liable, directly or indirectly, as obligor or otherwise.
"Senior and Subordinated Debt" means the principal of (and premium, if
any) and interest, if any (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Company
whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt, whether incurred on or prior to the date of the Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Junior Subordinated
Debentures or to other Debt which is pari passu with, or subordinated to, the
Junior Subordinated Debentures; provided, however, that Senior and Subordinated
Debt shall not be deemed to include (i) any Debt of the Company which when
incurred and without respect to any election under section 1111(b) of the
United States Bankruptcy Code of 1978, as amended, was without recourse to the
Company, (ii) any Debt of the Company to any of its subsidiaries, (iii) any
Debt to any employee of the Company, (iv) any Debt which by its terms is
subordinated to trade accounts payable or accrued liabilities arising in the
ordinary course of business to the extent that payments made to the holders of
such Debt by the holders of the Junior Subordinated Debentures as a result of
the subordination provisions of the Indenture would be greater than they
otherwise would have been as a result of any obligation of such holders to pay
amounts over to the obligees on such trade accounts payable or accrued
liabilities arising in the ordinary course of business as a result of
subordination provisions to which such Debt is subject, (v) the Guarantee, and
(vi) any other debt securities issued pursuant to the Indenture.
The Indenture places no limitation on the amount of additional Senior
and Subordinated Debt that may be incurred by the Company. The Company expects
from time to time to incur additional indebtedness constituting Senior and
Subordinated Debt.
DENOMINATIONS, REGISTRATION AND TRANSFER
The Junior Subordinated Debentures will be represented by global
certificates registered in the name of the Depositary or its nominee ("Global
Subordinated Debenture"). Beneficial interests in the Junior Subordinated
Debentures will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary. Except as described below,
Junior Subordinated Debentures in certificated form will not be issued in
exchange for the global certificates. See "Book-Entry Issuance."
Unless and until a Global Subordinated Debenture is exchanged in whole
or in part for the individual Junior Subordinated Debentures represented
thereby, it may not be transferred except as a whole by the Depositary for such
Global Subordinated Debenture to a nominee of such Depositary or by a nominee
of such Depositary to such Depositary or another nominee of such Depositary or
by the Depositary or any nominee to a successor Depositary or any nominee of
such successor.
A global security shall be exchangeable for Junior Subordinated
Debentures registered in the names of persons other than the Depositary or its
nominee only if (i) the Depositary notifies the Company that it is unwilling or
unable to continue as a depositary for such global security and no successor
depositary shall have been appointed, or if at any time the Depositary ceases
to be a clearing agency registered under the Exchange Act at a time when the
Depositary is required to be so registered to act as such depositary, (ii) the
Company in its sole discretion determines that such global security shall be so
exchangeable or (iii) there shall have occurred and be continuing an Event of
Default under the Indenture with respect to such global security. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as the
Depositary shall direct. It is expected that such instructions will be based
upon directions received by the Depositary from its Participants with respect
to ownership of beneficial interests in such global security. In the event
that Junior Subordinated Debentures are issued in definitive form, such Junior
Subordinated Debentures will be in denominations of $10 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
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Payments on Junior Subordinated Debentures represented by a global
security will be made to the Depositary, as the depositary for the Junior
Subordinated Debentures. In the event Junior Subordinated Debentures are
issued in definitive form, principal and interest will be payable, the transfer
of the Junior Subordinated Debentures will be registrable, and Junior
Subordinated Debentures will be exchangeable for Junior Subordinated Debentures
of other denominations of a like aggregate principal amount, at the corporate
office of the Indenture Trustee, or at the offices of any paying agent or
transfer agent appointed by the Company, provided that payment of interest may
be made at the option of the Company by check mailed to the address of the
persons entitled thereto or by wire transfer. In addition, if the Junior
Subordinated Debentures are issued in certificated form, the record dates for
payment of interest will be the first day of the month in which such payment is
to be made. For a description of the Depositary and the terms of the
depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Book-Entry Issuance."
The Company will appoint the Indenture Trustee as securities registrar
under the Indenture (the "Securities Registrar"). Junior Subordinated
Debentures may be presented for exchange as provided above, and may be
presented for registration of transfer (with the form of transfer endorsed
thereon, or a satisfactory written instrument of transfer, duly executed), at
the office of the Securities Registrar. The Company may at any time rescind
the designation of any such registrar or approve a change in the location
through which any such registrar acts, provided that the Company maintains a
registrar in the place of payment. The Company may at any time designate
additional registrars with respect to the Junior Subordinated Debentures.
In the event of any redemption, neither the Company nor the Indenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of selection for redemption of Junior
Subordinated Debentures and ending at the close of business on the day of
mailing of the relevant notice of redemption or (ii) transfer or exchange any
Junior Subordinated Debentures so selected for redemption, except, in the case
of any Junior Subordinated Debentures being redeemed in part, any portion
thereof not to be redeemed.
GLOBAL SUBORDINATED DEBENTURE
Upon the issuance of the Global Subordinated Debenture, and the
deposit of such Global Subordinated Debenture with or on behalf of the
Depositary, the Depositary for such Global Subordinated Debenture or its
nominee will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Junior Subordinated Debentures
represented by such Global Subordinated Debenture to Participants. Ownership
of beneficial interests in a Global Subordinated Debenture will be limited to
Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Subordinated Debenture will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the applicable Depositary or its nominee (with respect to
interests of Participants) and the records of Participants (with respect to
interests of persons who hold through Participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Subordinated Debenture.
So long as the Depositary for a Global Subordinated Debenture, or its
nominee, is the registered owner of such Global Subordinated Debenture, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Junior Subordinated Debentures represented by such
Global Subordinated Debenture for all purposes under the Indenture governing
such Junior Subordinated Debentures. Except as provided below, owners of
beneficial interests in a Global Subordinated Debenture will not be entitled to
have any of the individual Junior Subordinated Debentures represented by such
Global Subordinated Debenture registered in their names, will not receive or be
entitled to receive physical delivery of any such Junior Subordinated
Debentures in definitive form and will not be considered the owners or holders
thereof under the Indenture.
Payments of principal of and interest on individual Junior
Subordinated Debentures represented by a Global Subordinated Debenture
registered in the name of the Depositary or its nominee will be made to the
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Depositary or its nominee, as the case may be, as the registered owner of the
Global Subordinated Debenture representing such Junior Subordinated Debentures.
None of the Company, the Indenture Trustee, any Paying Agent, or the Securities
Registrar for such Junior Subordinated Debentures will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Global Subordinated Debenture
representing such Junior Subordinated Debentures or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depositary or its nominee, upon receipt
of any payment of principal or interest in respect of the Global Subordinated
Debenture representing the Junior Subordinated Debentures, immediately will
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the principal amount of the Global
Subordinated Debenture as shown on the records of such Depositary or its
nominee. The Company also expects that payments by Participants to owners of
beneficial interests in such Global Subordinated Debenture held through such
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." Such payments will be the responsibility
of such Participants.
If the Depositary is at any time unwilling, unable or ineligible to
continue as depositary and a successor depositary is not appointed by the
Company within 90 days, the Company will issue individual Junior Subordinated
Debentures in exchange for the Global Subordinated Debenture. In addition, the
Company may at any time and in its sole discretion, determine not to have the
Junior Subordinated Debentures represented by one or more Global Subordinated
Debentures and, in such event, will issue individual Junior Subordinated
Debentures in exchange for the Global Subordinated Debenture. Further, if the
Company so specifies with respect to the Junior Subordinated Debentures, an
owner of a beneficial interest in a Global Subordinated Debenture representing
the Junior Subordinated Debentures may, on terms acceptable to the Company, the
Indenture Trustee and the Depositary for such Global Subordinated Debenture,
receive individual Junior Subordinated Debentures in exchange for such
beneficial interests. In any such instance, an owner of a beneficial interest
in a Global Subordinated Debenture will be entitled to physical delivery of
individual Junior Subordinated Debentures equal in principal amount to such
beneficial interest and to have such Junior Subordinated Debentures registered
in its name. Individual Junior Subordinated Debentures so issued will be
issued in denominations, unless otherwise specified by the Company, of $10 and
integral multiples thereof.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Junior Subordinated
Debentures will be made at the office of the Indenture Trustee, except that at
the option of the Company payment of any interest may be made (i) except in the
case of a Global Subordinated Debenture, by check mailed to the address of the
person entitled thereto as such address shall appear in the securities register
or (ii) by transfer to an account maintained by the person entitled thereto as
specified in the securities register, provided that proper transfer
instructions have been received by the regular record date. Payment of any
interest on Junior Subordinated Debentures will be made to the person in whose
name such Junior Subordinated Debenture is registered at the close of business
on the regular record date for such interest. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent; however, the Company will at all times be required to maintain a Paying
Agent in each place of payment for the Junior Subordinated Debentures.
Any moneys deposited with the Indenture Trustee or any Paying Agent,
or then held by the Company in trust, for the payment of the principal of or
interest on the Junior Subordinated Debentures and remaining unclaimed for two
years after such principal or interest has become due and payable shall, at the
request of the Company, be repaid to the Company and the holder of such Junior
Subordinated Debenture shall thereafter look, as a general unsecured creditor,
only to the Company for payment thereof.
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MODIFICATION OF INDENTURE
From time to time the Company and the Indenture Trustee may, without
the consent of the holders of the Junior Subordinated Debentures, amend, waive
or supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies (provided that any such
action does not materially adversely affect the interests of the holders of the
Junior Subordinated Debentures or the Preferred Securities so long as they
remain outstanding) and qualifying, or maintaining the qualification of, the
Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting the Company and the Indenture Trustee, with the consent of the
holders of not less than a majority in principal amount of the outstanding
Junior Subordinated Debentures, to modify the Indenture in a manner affecting
the rights of the holders of the Junior Subordinated Debentures; provided,
that, no such modification may, without the consent of the holder of each
outstanding Subordinated Debenture, (i) change the Stated Maturity of the
Junior Subordinated Debentures or extend the time of payment of interest
thereon (except as described under "Description of Junior Subordinated
Debentures--General" and "--Option to Extend Interest Payment Period"), or
reduce the principal amount thereof or the rate of interest thereon, or (ii)
reduce the percentage of principal amount of Junior Subordinated Debentures,
the holders of which are required to consent to any such modification of the
Indenture, provided that so long as any of the Preferred Securities remain
outstanding, no such modification may be made that adversely affects the
holders of such Preferred Securities in any material respect, and no
termination of the Indenture may occur, and no waiver of any Debenture Event of
Default or compliance with any covenant under the Indenture may be effective,
without the prior consent of the holders of at least a majority of the
aggregate Liquidation Amount of the Preferred Securities unless and until the
principal of the Junior Subordinated Debentures and all accrued and unpaid
interest thereon have been paid in full and certain other conditions are
satisfied.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures that has occurred and
is continuing constitutes a "Debenture Event of Default" with respect to the
Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Junior
Subordinated Debentures, when due (subject to the deferral of any due date in
the case of an Extension Period); or
(ii) failure to pay any principal on the Junior Subordinated
Debentures when due whether at maturity, upon redemption by declaration or
otherwise; or
(iii) failure by the Company to observe or perform in any material
respect certain other covenants contained in the Indenture for 90 days after
written notice to the Company from the Indenture Trustee or to the Company and
the Indenture Trustee by the holders of at least 25% in aggregate outstanding
principal amount of the Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of
the Company, including the voluntary commencement of bankruptcy proceedings,
entry of an order for relief against the Company in a bankruptcy proceeding,
appointment of a custodian over substantially all of the Company's property, a
general assignment for the benefit of creditors, or a court order for
liquidation of the Company.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Indenture Trustee. The Indenture Trustee or the holders of not less than 25%
in aggregate outstanding principal amount of the Junior Subordinated Debentures
may declare the principal due and payable immediately upon a Debenture Event of
Default. The holders of a majority in aggregate outstanding principal amount
of the Junior Subordinated Debentures may annul such declaration and waive the
default if the default (other than the non-payment of the principal of the
Junior Subordinated Debentures which has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and
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principal due otherwise than by acceleration has been deposited with the
Indenture Trustee. Should the holders of the Junior Subordinated Debentures
fail to annul such declaration and waive such default, the holders of a
majority in aggregate Liquidation Amount of the Preferred Securities shall have
such right. In case a Debenture Event of Default shall occur and be
continuing, the Property Trustee will have the right to declare the principal
of and the interest on such Junior Subordinated Debentures, and any other
amounts payable under the Indenture, to be forthwith due and payable and to
enforce its other rights as a creditor with respect to such Junior Subordinated
Debentures.
The Company is required to file annually with the Indenture Trustee a
certificate as to whether the Company is in compliance with all the conditions
and covenants applicable to it under the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest or
principal on the Junior Subordinated Debentures on the date such interest or
principal is otherwise payable, a holder of Preferred Securities may institute
a legal proceeding directly against the Company for enforcement of payment to
such holder of the principal of or interest on such Junior Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Preferred Securities of such holder ("Direct Action"). If the right to
bring a Direct Action is removed, MB Capital may become subject to the
reporting obligations under the Exchange Act. The Company shall have the right
under the Indenture to set-off any payment made to such holder of Preferred
Securities by the Company in connection with a Direct Action.
The holders of the Preferred Securities would not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures unless there
shall have been an Event of Default under the Trust Agreement. See
"Description of Preferred Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless (i)
in case the Company consolidates with or merges into another Person or conveys
or transfers its properties and assets substantially as an entirety to any
Person, the successor Person is organized under the laws of the United States
or any state or the District of Columbia, and such successor Person expressly
assumes the Company's obligations on the Junior Subordinated Debentures issued
under the Indenture; (ii) immediately after giving effect thereto, no Debenture
Event of Default, and no event which, after notice or lapse of time or both,
would become a Debenture Event of Default, shall have occurred and be
continuing; and (iii) certain other conditions as prescribed in the Indenture
are met.
The provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Company that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Indenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at their Stated Maturity within one year, and the Company deposits or
causes to be deposited with the Indenture Trustee, in trust, funds for the
purpose and in an amount in the currency or currencies in which the Junior
Subordinated Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Indenture Trustee for cancellation, for the principal and interest to the
date of the deposit or to the Stated Maturity, as the case may
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be, then the Indenture will cease to be of further effect (except as to the
Company's obligations to pay all other sums due pursuant to the Indenture and
to provide the officers' certificates and opinions of counsel described
therein), and the Company will be deemed to have satisfied and discharged the
Indenture.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed
by and construed in accordance with the laws of the State of Colorado.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Indenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Indenture Trustee is not required to
expend or risk its own funds or otherwise incur personal financial liability in
the performance of its duties if the Indenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
COVENANTS OF THE COMPANY
The Company will covenant in the Indenture, as to the Junior
Subordinated Debentures, that if and so long as (i) MB Capital is the holder of
all such Junior Subordinated Debentures, (ii) a Tax Event in respect of MB
Capital has occurred and is continuing and (iii) the Company has elected, and
has not revoked such election, to pay Additional Sums (as defined under
"Description of the Preferred Securities -- Redemption") in respect of the
Preferred Securities, the Company will pay to MB Capital such Additional Sums.
The Company will also covenant, as to the Junior Subordinated Debentures, (i)
to maintain directly or indirectly 100% ownership of the Common Securities of
MB Capital to which Junior Subordinated Debentures have been issued, provided
that certain successors which are permitted pursuant to the Indenture may
succeed to the Company's ownership of the Common Securities, (ii) not to
voluntarily terminate, wind up or liquidate MB Capital, except upon prior
approval of the Federal Reserve if then so required under applicable capital
guidelines or policies of the Federal Reserve, and except (a) in connection
with a distribution of Junior Subordinated Debentures to the holders of the
Preferred Securities in liquidation of MB Capital or (b) in connection with
certain mergers, consolidations, or amalgamations permitted by the Trust
Agreement and (iii) to use its reasonable efforts, consistent with the terms
and provisions of the Trust Agreement, to cause MB Capital to remain classified
as a grantor trust and not as an association taxable as a corporation for
United States federal income tax purposes.
BOOK-ENTRY ISSUANCE
The Depositary will act as securities depositary for all of the
Preferred Securities and the Junior Subordinated Debentures. The Preferred
Securities and the Junior Subordinated Debentures will be issued only as
fully-registered securities registered in the name of Cede & Co. (the
Depositary's nominee). One or more fully-registered global certificates will
be issued for the Preferred Securities and the Junior Subordinated Debentures
and will be deposited with the Depositary.
The Depositary is a limited purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. The Depositary holds securities that its Participants deposit
with the Depositary. The Depositary also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants" include securities brokers and
dealers, banks, trust companies,
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clearing corporations and certain other organizations. The Depositary is owned
by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the Depositary system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain custodial relationships with Direct Participants,
either directly or indirectly ("Indirect Participants"). The rules applicable
to the Depositary and its Participants are on file with the Commission.
Purchases of Preferred Securities or Junior Subordinated Debentures
within the Depositary system must be made by or through Direct Participants,
which will receive a credit for the Preferred Securities or Junior Subordinated
Debentures on the Depositary's records. The ownership interest of each actual
purchaser of each Preferred Security and each Junior Subordinated Debenture
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from the Depositary of their purchases, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect Participants
through which the Beneficial Owners purchased Preferred Securities or Junior
Subordinated Debentures. Transfers of ownership interests in the Preferred
Securities or Junior Subordinated Debentures are to be accomplished by entries
made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Preferred Securities or Junior Subordinated Debentures, except in
the event that use of the book-entry system for the or Junior Subordinated
Debentures is discontinued.
The Depositary has no knowledge of the actual Beneficial Owners of the
Preferred Securities or Junior Subordinated Debentures; the Depositary's
records reflect only the identity of the Direct Participants to whose accounts
such Preferred Securities or Junior Subordinated Debentures are credited, which
may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners and the
voting rights of Direct Participants, Indirect Participants and Beneficial
Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder
of the Preferred Securities or Junior Subordinated Debentures. If less than
all of the Preferred Securities or the Junior Subordinated Debentures are being
redeemed, the Depositary will determine by lot or pro rata the amount of the
Preferred Securities of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Preferred
Securities or the Junior Subordinated Debentures, in those instances in which a
vote is required, neither the Depositary nor Cede & Co. will itself consent or
vote with respect to Preferred Securities or Junior Subordinated Debentures.
Under its usual procedures, the Depositary would mail an omnibus proxy (the
"Omnibus Proxy") to the relevant Trustee as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts such Preferred Securities or Junior
Subordinated Debentures are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Distribution payments on the Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Trustee to the Depositary.
The Depositary's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on the
Depositary's records unless the Depositary has reason to believe that it will
not receive payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of the
Depositary, the relevant Trustee, MB Capital or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment
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of Distributions to the Depositary is the responsibility of the relevant
Trustee, disbursement of such payments to Direct Participants is the
responsibility of the Depositary, and disbursements of such payments to the
Beneficial Owners is the responsibility of Direct and Indirect Participants.
The Depositary may discontinue providing its services as securities
depositary with respect to any of the Preferred Securities or the Junior
Subordinated Debentures at any time by giving reasonable notice to the relevant
Trustee and the Company. In the event that a successor securities depositary
is not obtained, definitive Preferred Securities or Subordinated Debenture
certificates representing such Preferred Securities or Junior Subordinated
Debentures are required to be printed and delivered. The Company, at its
option, may decide to discontinue use of the system of book-entry transfers
through the Depositary (or a successor depositary). After a Debenture Event of
Default, the holders of a majority in liquidation preference of Preferred
Securities or aggregate principal amount of Junior Subordinated Debentures may
determine to discontinue the system of book-entry transfers through the
Depositary. In any such event, definitive certificates for such Preferred
Securities or Junior Subordinated Debentures will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that MB Capital
and the Company believe to be accurate, but MB Capital and the Company assume
no responsibility for the accuracy thereof. Neither MB Capital nor the Company
has any responsibility for the performance by the Depositary or its
Participants of their respective obligations as described herein or under the
rules and procedures governing their respective operations.
DESCRIPTION OF GUARANTEE
The Preferred Securities Guarantee Agreement (the "Guarantee") will be
executed and delivered by the Company concurrently with the issuance of the
Preferred Securities for the benefit of the holders of the Preferred
Securities. Wilmington Trust Company will act as trustee under the Guarantee
(the "Guarantee Trustee") for the purposes of compliance with the Trust
Indenture Act, and the Guarantee will be qualified under the Trust Indenture
Act. The following summary of certain provisions of the Guarantee does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Guarantee, including the definitions
therein of certain terms, and the Trust Indenture Act. The form of the
Guarantee has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. The Guarantee Trustee will hold the Guarantee
for the benefit of the holders of the Preferred Securities.
GENERAL
The Guarantee will be an irrevocable guarantee on a subordinated basis
of all of MB Capital's obligations under the Preferred Securities, but will
apply only to the extent that MB Capital has funds sufficient to make such
payments, and is not a guarantee of collection.
The Company will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined
below) to the holders of the Preferred Securities, as and when due, regardless
of any defense, right of set-off or counterclaim that MB Capital may have or
assert other than the defense of payment. The following payments with respect
to the Preferred Securities, to the extent not paid by or on behalf of MB
Capital (the "Guarantee Payments"), will be subject to the Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on the Preferred
Securities, to the extent that MB Capital has funds on hand available therefor
at such time, (ii) the Redemption Price with respect to any Preferred
Securities called for redemption to the extent that MB Capital has funds on
hand available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding up or liquidation of MB Capital (unless the Junior
Subordinated Debentures are distributed to holders of the Preferred
Securities), the lesser of (a) the Liquidation Distribution and (b) the amount
of assets of MB Capital remaining available for distribution to holders of
Preferred Securities. The Company's obligation to make a Guarantee Payment may
be satisfied by direct payment of the required amounts by the Company to the
holders of the Preferred Securities or by causing MB Capital to pay such
amounts to such holders.
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If the Company does not make interest payments on the Junior
Subordinated Debentures held by MB Capital, MB Capital will not be able to pay
Distributions on the Preferred Securities and will not have funds legally
available therefor. The Guarantee will rank subordinate and junior in right of
payment to all Senior and Subordinated Debt of the Company. See "Status of the
Guarantee" below. Because the Company is a holding company, the right of the
Company to participate in any distribution of assets of any subsidiary upon
such subsidiary's liquidation or reorganization or otherwise, is subject to the
prior claims of creditors of that subsidiary, except to the extent the Company
may itself be recognized as a creditor of that subsidiary. Accordingly, the
Company's obligations under the Guarantee will be effectively subordinated to
all existing and future liabilities of the Company's subsidiaries, and
claimants should look only to the assets of the Company for payments
thereunder. Except as otherwise described herein, the Guarantee does not limit
the incurrence or issuance of other secured or unsecured debt of the Company,
including Senior and Subordinated Debt whether under the Indenture, any other
indenture that the Company may enter into in the future, or otherwise.
The Company has, through the Guarantee, the Trust Agreement, the
Junior Subordinated Debentures, the Indenture and the Expense Agreement, taken
together, fully, irrevocably and unconditionally guaranteed on a subordinated
basis all of MB Capital's obligations under the Preferred Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee on a subordinated basis of all of MB
Capital's obligations under the Preferred Securities. See "Relationship Among
the Preferred Securities, the Junior Subordinated Debentures and the
Guarantee."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company
and will rank subordinate and junior in right of payment to all Senior and
Subordinated Debt in the same manner as the Junior Subordinated Debentures.
The Guarantee will constitute a guarantee of payment and not of
collection. The guaranteed party may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity. The
Guarantee will be held for the benefit of the holders of the Preferred
Securities. The Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by MB Capital or upon
distribution to the holders of the Preferred Securities of the Junior
Subordinated Debentures to the holders of the Preferred Securities. The
Guarantee does not place a limitation on the amount of additional Senior and
Subordinated Debt that may be incurred by the Company. The Company expects
from time to time to incur additional indebtedness constituting Senior and
Subordinated Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely
affect the rights of holders of the Preferred Securities (in which case no vote
will be required), the Guarantee may not be amended without the prior approval
of the holders of not less than a majority of the aggregate Liquidation Amount
of such outstanding Preferred Securities. See "Description of the Preferred
Securities -- Voting Rights; Amendment of Trust Agreement." All guarantees
and agreements contained in the Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of
the Company to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any
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proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee.
Any holder of the Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against MB Capital, the
Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether the Company is in compliance with
all the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and
continuance of a default by the Company in performance of the Guarantee,
undertakes to perform only such duties as are specifically set forth in the
Guarantee and, after default with respect to the Guarantee, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by
the Guarantee at the request of any holder of the Preferred Securities unless
it is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect
upon full payment of the Redemption Price of the Preferred Securities, upon
full payment of the amounts payable upon liquidation of MB Capital or upon
distribution of Junior Subordinated Debentures to the holders of the Preferred
Securities. The Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of the Preferred Securities must
restore payment of any sums paid under the Preferred Securities or the
Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the
laws of the State of Colorado.
THE EXPENSE AGREEMENT
Pursuant to the Agreement as to Expenses and Liabilities entered into
by the Company under the Trust Agreement (the "Expense Agreement"), the Company
will irrevocably and unconditionally guarantee to each person or entity to whom
MB Capital becomes indebted or liable, the full payment of any costs, expenses
or liabilities of MB Capital, other than obligations of MB Capital to pay to
the holders of the Preferred Securities or other similar interests in MB
Capital of the amounts due such holders pursuant to the terms of the Preferred
Securities or such other similar interests, as the case may be.
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE JUNIOR
SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred
Securities (to the extent MB Capital has funds available for the payment of
such Distributions) are irrevocably guaranteed by the Company as and to the
extent set forth under "Description of Guarantee." Taken together, the
Company's obligations under the Junior Subordinated Debentures, the Indenture,
the Trust Agreement, the Expense Agreement and the Guarantee provide, in the
aggregate, a full, irrevocable and unconditional guarantee on a subordinated
basis of payments of Distributions and other amounts due on the Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is
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<PAGE> 76
only the combined operation of those documents that has the effect of providing
a full, irrevocable and unconditional guarantee on a subordinated basis of MB
Capital's obligations under the Preferred Securities. If and to the extent
that the Company does not make payments on the Junior Subordinated Debentures,
MB Capital will not pay Distributions or other amounts due on the Preferred
Securities. The Guarantee does not cover payment of Distributions when MB
Capital does not have sufficient funds to pay such Distributions. In such
event, the remedy of a holder of the Preferred Securities is to institute a
legal proceeding directly against the Company for enforcement of payment of
such Distributions to such holder. The obligations of the Company under the
Guarantee are subordinate and junior in right of payment to all Senior and
Subordinated Debt.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due
on the Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments due on the Preferred Securities,
primarily because: (i) the aggregate principal amount of the Junior
Subordinated Debentures will be equal to the sum of the aggregate Liquidation
Amount of the Preferred Securities and Common Securities; (ii) the interest
rate and interest and other payment dates on the Junior Subordinated Debentures
will match the Distribution rate and Distribution and other payment dates for
the Preferred Securities; (iii) the Company shall pay for all and any costs,
expenses and liabilities of MB Capital except MB Capital's obligations to
holders of Preferred Securities; and (iv) the Trust Agreement further provides
that MB Capital will not engage in any activity that is not consistent with the
limited purposes of MB Capital.
Notwithstanding anything to the contrary in the Indenture, the Company
has the right to set-off any payment it is otherwise required to make
thereunder with and to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF THE PREFERRED SECURITIES UNDER THE GUARANTEE
A holder of any the Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, MB Capital or any other person or entity,
A default or event of default under any Senior and Subordinated Debt
would not constitute an Event of Default. However, in the event of payment
defaults under, or acceleration of, Senior and Subordinated Debt, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Junior Subordinated Debentures until such Senior and
Subordinated Debt has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on Junior Subordinated
Debentures would constitute an Event of Default.
LIMITED PURPOSE OF MB CAPITAL
The Preferred Securities evidence a beneficial interest in MB Capital,
and MB Capital exists for the sole purpose of issuing the Trust Securities and
investing the proceeds thereof in the Junior Subordinated Debentures. A
principal difference between the rights of a holder of the Preferred Securities
and a holder of a Subordinated Debenture is that a holder of a Subordinated
Debenture is entitled to receive from the Company the principal amount of and
interest accrued on Junior Subordinated Debentures held, while a holder of the
Preferred Securities is entitled to receive Distributions from MB Capital (or
from the Company under the Guarantee) if and to the extent MB Capital has funds
available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or
liquidation of MB Capital involving the liquidation of the Junior Subordinated
Debentures, the holders of Preferred Securities will be entitled to receive,
out of assets held by MB Capital, the Liquidation Distribution in cash. See
"Description of the Preferred Securities--Liquidation Distribution Upon
Termination." Upon any voluntary or involuntary liquidation or
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<PAGE> 77
bankruptcy of the Company, the Property Trustee, as holder of the Junior
Subordinated Debentures, would be a subordinated creditor of the Company,
subordinated in right of payment to all Senior and Subordinated Debt as set
forth in the Indenture, but entitled to receive payment in full of principal
and interest, before any stockholders of the Company receive payments or
distributions. Since the Company is the guarantor under the Guarantee and has
agreed to pay for all costs, expenses and liabilities of MB Capital (other than
MB Capital's obligations to the holders of its Preferred Securities), the
positions of a holder of the Preferred Securities and a holder of Junior
Subordinated Debentures relative to other creditors and to stockholders of the
Company in the event of liquidation or bankruptcy of the Company are expected
to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Jones & Keller, P.C., counsel to the Company
("Counsel"), the following summary accurately describes the material United
States federal income tax consequences that may be relevant to the purchase,
ownership and disposition of Preferred Securities. Unless otherwise stated,
this summary deals only with Preferred Securities held as capital assets by
United States Persons (defined below) who purchase the Preferred Securities
upon original issuance at the first price at which a substantial amount of
Preferred Securities were sold. As used herein, a "United States Person" means
a person that is (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, (iii) an estate
the income of which is subject to United States federal income taxation
regardless of its source, or (iv) a trust the income of which is subject to
United States federal income taxation regardless of its source; provided,
however, that for taxable years beginning after December 31, 1996 (or, if a
trustee so elects, for taxable years ending after August 20, 1996), a "United
States Person" shall include any trust if a court within the United States is
able to exercise primary supervision over the administration of such trust and
one or more United States fiduciaries have the authority to control all
substantial decisions of such trust. The tax treatment of holders may vary
depending on their particular situation. This summary does not address all the
tax consequences that may be relevant to a particular holder or to holders who
may be subject to special tax treatment, such as banks, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, foreign investors, persons that
will hold the Preferred Securities as part of a position in a "straddle" or as
part of a "hedging" or other integrated transaction, persons whose functional
currency is not the United States dollar or persons that do not hold the
Preferred Securities as capital assets. In addition, this summary does not
include any description of any alternative minimum tax consequences or the tax
laws of any state, local or foreign government that may be applicable to a
holder of Preferred Securities. This summary is based on the Internal Revenue
Code of 1986, as amended (the "Code"), the Treasury regulations promulgated
thereunder and administrative and judicial interpretations thereof, as of the
date hereof, all of which are subject to change, possibly on a retroactive
basis. Any such change could cause the tax consequences to vary substantially
from the consequences described below, possibly adversely affecting an owner of
Preferred Securities.
The following discussion does not discuss the tax consequences that
might be relevant to persons that are not United States Persons ("non-United
States Persons"). Non-United States Persons should consult their own tax
advisors as to the specific United States federal income tax consequences of
the purchase, ownership and disposition of Preferred Securities.
The authorities on which this summary is based are subject to various
interpretations and the opinions of Counsel are not binding on the Internal
Revenue Service ("Service") or the courts, either of which could take a
contrary position. Moreover, no rulings have been or will be sought from the
Service with respect to the transactions described herein. Accordingly, there
can be no assurance that the Service will not challenge the opinions expressed
herein or that a court would not sustain such a challenge. It is therefore
possible that the federal income tax treatment of the purchase, ownership and
disposition of Preferred Securities may differ from the treatment described
below.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN, AND OTHER
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<PAGE> 78
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER
TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF THE PREFERRED
SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS, SEE "DESCRIPTION OF
PREFERRED SECURITIES -- REDEMPTION."
CLASSIFICATION OF MB CAPITAL
In connection with the issuance of the Preferred Securities, Counsel
is of the opinion that, under current law and assuming compliance with the
terms of the Trust Agreement, and based on certain facts and assumptions
contained in such opinion, MB Capital will be classified as a grantor trust and
not as an association taxable as a corporation for United States federal income
tax purposes. As a result, each beneficial owner of the Preferred Securities
(a "Securityholder") will be treated as owning an undivided beneficial interest
in the Junior Subordinated Debentures. Accordingly, each Securityholder will
be required to include in its gross income its pro rata share of the interest
income or OID that is paid or accrued on the Junior Subordinated Debentures.
See "--Interest Income and Original Issue Discount." No amount included in
income with respect to the Preferred Securities will be eligible for the
dividends received deduction.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Company intends to take the position, based on the advice of Jones
& Keller, P.C., that the Junior Subordinated Debentures will be classified for
United States federal income tax purposes as indebtedness of the Company under
current law, and, by acceptance of a Preferred Security, each holder covenants
to treat the Junior Subordinated Debentures as indebtedness and the Preferred
Securities as evidence of an indirect beneficial ownership interest in the
Junior Subordinated Debentures. No assurance can be given, however, that such
position of the Company will not be challenged by the Service or, if
challenged, that such a challenge will not be successful. The remainder of
this discussion assumes that the Junior Subordinated Debentures will be
classified for United States federal income tax purposes as indebtedness of the
Company. See "Risk Factors--Possible Tax Law Changes Affecting Preferred
Securities."
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Except as set forth below, stated interest on the Junior Subordinated
Debentures generally will be included in income by a Securityholder at the time
such interest income is paid or accrued in accordance with such
Securityholder's regular method of tax accounting.
The Company believes that, under the applicable Treasury regulations,
the Junior Subordinated Debentures will not be considered to have been issued
with OID within the meaning of Section 1273(a) of the Code. This is because
under recently adopted amendments to the Treasury regulations a "remote"
contingency that stated interest will not be timely paid will be ignored in
determining whether a debt instrument is issued with OID. The Company believes
that the likelihood of exercising its option to defer payments of interest is
"remote." If the Company's option to defer payments of interest on the Junior
Subordinated Debentures were not treated as remote, the Junior Subordinated
Debentures would be considered issued with OID at original issuance which
would, in general, accrue over the term of the Junior Subordinated Debentures
described below.
If the Company exercises its right to defer payments of interest on
the Junior Subordinated Debentures, the Junior Subordinated Debentures will
become OID instruments, and the amount of OID would be equal to the aggregate
of all future payments of interest on the Junior Subordinated Debentures. In
such event, all Securityholders would be required to accrue the OID on the
Junior Subordinated Debentures on a daily basis during the Extension Period,
even though the Company would not pay such interest until the end of the
Extension Period, and even though some Securityholders may use the cash method
of tax accounting. Moreover, thereafter the Junior Subordinated Debentures
would be taxed as OID instruments for as long as they remained outstanding.
Thus, even after the end of the Extension Period, all Securityholders would be
required to continue to include the OID on the Junior Subordinated Debentures
in income on a daily economic accrual basis, regardless of their method of tax
accounting and in advance of receipt of the cash attributable to such
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<PAGE> 79
interest income. Under the OID economic accrual rules, a Securityholder would
accrue an amount of interest income each year that approximates the stated
interest payments called for under the Junior Subordinated Debentures, and
actual cash payments of interest on the Junior Subordinated Debentures would
not be reported separately as taxable income.
The Treasury regulations described above have not yet been addressed
in any rulings or other definitive interpretations by the Service, and it is
possible that the Service could take a contrary position. If the Service were
to assert successfully that the stated interest on the Junior Subordinated
Debentures was OID regardless of whether the Company exercises its right to
defer payments of interest on such debentures, all Securityholders would be
required to include such stated interest in income on a daily economic accrual
basis as described above.
The Company does not anticipate that Additional Sums (as defined in
the Indenture) will be paid. However, if Additional Sums are paid, they will
be taxable to the Securityholder as ordinary income (generally as interest
income).
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF PREFERRED
SECURITIES
Under current law, a distribution by MB Capital of the Junior
Subordinated Debentures as described under the caption "Description of
Preferred Securities -- Liquidation and Distribution Upon Termination" will be
non-taxable and will result in the Securityholder receiving directly its pro
rata share of the Junior Subordinated Debentures previously held indirectly
through MB Capital, with a holding period and aggregate tax basis equal to the
holding period and aggregate tax basis such Securityholder had in its Preferred
Securities before such distribution. If, however, the liquidation of MB
Capital were to occur because MB Capital is subject to United States federal
income tax with respect to income accrued or received on the Junior
Subordinated Debentures as a result of a Tax Event or otherwise, the
distribution of Junior Subordinated Debentures to Securityholders by MB Capital
would be a taxable event to MB Capital and each Securityholder, and a
Securityholder would recognize gain or loss as if the Securityholder had sold
or exchanged its Preferred Securities for the Junior Subordinated Debentures it
received upon the liquidation of MB Capital. See "--Sales or Redemption of
Preferred Securities." A Securityholder would recognize interest income in
respect of Junior Subordinated Debentures received from MB Capital in the
manner described above under "-- Interest Income and Original Issue Discount."
SALES OR REDEMPTION OF PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of
Preferred Securities (including a redemption for cash) in an amount equal to
the difference between the amount realized (which for this purpose, will
exclude amounts attributable to accrued interest or OID not previously included
in income) and the Securityholder's adjusted tax basis in the Preferred
Securities sold or so redeemed. A Securityholder's adjusted tax basis will be
its initial purchase price increased by any accrued OID previously included in
such Securityholder's gross income to the date of disposition and decreased by
payments (other than stated interest on the Junior Subordinated Debentures that
does not constitute OID) received on the Preferred Securities. Any gain or
loss on the sale, exchange or retirement of the Preferred Securities generally
will be treated as capital gain or loss. Under recently enacted legislation,
an individual U.S. holder generally will be subject to tax on the net amount
of his or her capital gain realized on the sale, exchange or retirement of the
Preferred Securities at a maximum rate of (i) 28% for Preferred Securities held
for more than one year but not more than 18 months, (ii) 20% for Preferred
Securities held for more than 18 months, and (iii) provided that the holding
period for such Preferred Securities begins after December 31, 2001, 18% for
Preferred Securities held for more than five years. Special rules (and
generally lower maximum rates) apply for individuals whose taxable income is
below certain levels.
Should the Company exercise its option to defer any payment of
interest on the Junior Subordinated Debentures, the Preferred Securities may
trade at a price that does not fully reflect the value of accrued but unpaid
interest with respect to the underlying Junior Subordinated Debentures. In the
event of such a deferral,
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<PAGE> 80
a Securityholder that disposes of its Preferred Securities between record dates
for payments of Distributions (and consequently does not receive a Distribution
from MB Capital for the period prior to such disposition) will nevertheless be
required to include in income as ordinary income accrued but unpaid interest on
the Junior Subordinated Debentures through the date of disposition and to add
such amount to its adjusted tax basis in its Preferred Securities disposed of.
Such United States Person will recognize a capital loss on the disposition of
its Preferred Securities to the extent the selling price (which may not fully
reflect the value of accrued but unpaid interest) is less than the United
States Person's adjusted tax basis in the Preferred Securities (which will
include accrued but unpaid interest that has been taken into account in
income). Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax
purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest paid or OID accrued, if any, on the Junior
Subordinated Debentures, beneficial ownership of which is reflected in the
Preferred Securities held of record by United States Persons (other than
corporations and other exempt Securityholders), will be reported to the
Service. Generally, income on the Preferred Securities will be reported to
Securityholders on Form 1099, which form should be mailed to Securityholders by
January 31 following each calendar year. "Backup" withholding at a rate of 31%
will apply to payments of interest to non-exempt United States Persons unless
the Securityholder furnishes its taxpayer identification number in the manner
prescribed in applicable Treasury Regulations, certifies that such number is
correct, certifies as to no loss of exemption from backup withholding and meets
certain other conditions. Any amounts withheld from a Securityholder under the
backup withholding rules will be allowed as a refund or a credit against such
Securityholder's United States federal income tax liability, provided the
required information is furnished to the Service. Payment of the proceeds from
the disposition of Preferred Securities to or through the United States office
of a broker is subject to information reporting and backup withholding unless
the Securityholder or beneficial owner establishes an exemption from
information reporting and backup withholding.
POSSIBLE TAX LAW CHANGES AFFECTING PREFERRED SECURITIES
There can be no assurance that future legislative proposals or final
legislation will not affect the ability of the Company to deduct interest on
the Junior Subordinated Debentures. Such a change could give rise to a Tax
Event, which may permit the Company to cause a redemption of the Trust
Preferred Securities. See "Risk Factors--Possible Tax Law Changes Affecting
Preferred Securities," "Description of the Preferred Securities--Redemption"
and "Description of Junior Subordinated Debentures--Redemption."
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code
("Plans"), generally may purchase Preferred Securities subject to the investing
fiduciary's determination that the investment in Preferred Securities satisfies
ERISA's fiduciary standards and other requirements applicable to investments by
the Plan.
In any case, the Company and/or any of its affiliates may be
considered a "party in interest" (within the meaning of ERISA) or a
"disqualified person" (within the meaning of Section 4975 of the Code) with
respect to certain Plans (generally, those Plans maintained or sponsored by, or
contributed to by, any such persons with respect to which the Company or an
affiliate is a fiduciary or Plans for which the Company or an affiliate provide
services). The acquisition and ownership of Preferred Securities by a Plan (or
by an individual retirement arrangement or other Plans described in Section
4975(e)(1) of the Code) with respect to which the Company or any of its
affiliates is considered a party in interest or a disqualified person may
constitute or result in a prohibited transaction under ERISA or Section 4975 of
the Code, unless such Preferred Securities are acquired pursuant to and in
accordance with an applicable exemption.
As a result, Plans with respect to which the Company or any of its
affiliates is a party in interest or a disqualified person should not acquire
Preferred Securities unless such Preferred Securities are acquired
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<PAGE> 81
pursuant to and in accordance with an applicable exemption. Any other Plans or
other entities whose assets include Plan assets subject to ERISA or Section
4975 of the Code proposing to acquire Preferred Securities should consult with
their own counsel.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement") among the Company and the Underwriters listed on the
table below (referred to individually as an "Underwriter" and collectively as
"Underwriters") for whom Howe Barnes Investments, Inc. is acting as
representative (the "Representative"), the Underwriters have severally agreed
to purchase from MB Capital an aggregate of 1,200,000 Preferred Securities in
the amounts set forth below opposite their respective names.
<TABLE>
<CAPTION>
Underwriters Number of Preferred Securities
------------ ------------------------------
<S> <C>
Howe Barnes Investments, Inc. . . . . . . . . .
Total . . . . . . . . . . . . . . . . . 1,200,000
=========
</TABLE>
The Underwriting Agreement provides that the Underwriters' obligations
are subject to conditions precedent and that the Underwriters are committed to
purchase all of the Preferred Securities offered hereby if the Underwriters
purchase any Preferred Securities.
The Underwriters have advised the Company and MB Capital that they
propose to offer the Preferred Securities to the public at the Price to Public
set forth on the cover page of this Prospectus and to selected dealers at such
price less a concession not in excess of $ per Preferred Security. The
Underwriters may allow and such dealers may reallow a concession not in excess
of $ per Preferred Security to certain other dealers. After the
offering, the Price to Public, concessions and other selling terms may be
changed by the Underwriters.
In view of the fact that all of the proceeds from the sale of the
Preferred Securities will be used to purchase the Junior Subordinated
Debentures, the Underwriting Agreement provides that the Company will pay the
Underwriters as compensation for arranging the investment therein of such
proceeds, $ per Preferred Security.
Each of the Company and MB Capital has agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
The Underwriters may engage in stabilizing transactions in accordance
with Regulation M under the Exchange Act, as well as passive market making
relating to the Preferred Securities. Stabilizing transactions permit bids and
purchases of the Preferred Securities so long as the stabilizing bids do not
exceed a specified maximum. Such stabilizing transactions may cause the price
of the Preferred Securities to be higher than it would otherwise be in the
absence of such transactions. Such stabilizing transactions, if commenced, may
be discontinued at any time.
The Underwriters have advised MB Capital that they do not intend to
confirm any sales of Preferred Securities to any discretionary accounts. In
connection with the offer and sale of the Preferred Securities, the
Underwriters will comply with Rule 2810 under the NASD Conduct Rules.
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<PAGE> 82
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the
Preferred Securities, the enforceability of the Trust Agreement and the
formation of MB Capital will be passed upon by Richards, Layton & Finger, P.A.,
Wilmington, Delaware, special Delaware counsel to the Company and MB Capital.
The validity of the Guarantee and the Junior Subordinated Debentures will be
passed upon for the Company by Jones & Keller, P.C., Denver, Colorado, counsel
to the Company. Certain other legal matters regarding regulatory issues
affecting the Company will be passed upon for the Company by Slivka Robinson
Waters & O'Dorsio, P.C., Denver, Colorado. Certain legal matters in connection
with this Offering will be passed upon for the Underwriters by Chapman and
Cutler, Chicago, Illinois. Jones & Keller, P.C. and Chapman and Cutler will
rely on the opinions of Richards, Layton & Finger as to matters of Delaware
law. Certain matters relating to United States federal income tax
considerations will be passed upon for the Company by Jones & Keller, P.C.
EXPERTS
The Consolidated Financial Statements of the Company as of December
31, 1996 and for each of the years in the two-year period ended December 31,
1996 have been included and incorporated herein by reference in reliance upon
the report of Fortner, Bayens, Levkulich & Co., P.C., independent certified
public accountants, appearing elsewhere and incorporated herein by reference,
and upon the authority of said firm as experts in accounting and auditing.
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<PAGE> 83
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Shareholders' Equity . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . F-8
</TABLE>
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<PAGE> 84
INDEPENDENT AUDITORS' REPORT
Board of Directors
MegaBank Financial Corporation
Englewood, Colorado
We have audited the consolidated balance sheet of MegaBank Financial
Corporation and Subsidiaries as of December 31, 1996 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the two years in the period ended December 31, 1996. These consolidated
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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of MegaBank Financial Corporation and Subsidiaries at December 31,
1996 and the consolidated results of their operations and consolidated cash
flows for each of the two years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Denver, Colorado
January 24, 1997
F-2
<PAGE> 85
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1997 (Unaudited)
and December 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and due from banks $ 14,434 $ 9,130
Interest-bearing deposits 1,542 --
Investment securities available for sale 12,100 11,137
Federal funds sold 11,260 785
Loans 115,719 94,973
Less allowance for loan losses (1,567) (1,150)
--------- ---------
114,152 93,823
Bank premises, leasehold improvements and equipment, net 3,889 2,630
Accrued interest receivable 895 681
Deferred tax asset 153 300
Other 425 443
--------- ---------
$ 158,850 $ 118,929
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Demand, non-interest bearing $ 47,149 $ 36,095
Demand, interest bearing 52,773 44,191
Savings 5,387 4,591
Time, $100,000 and over 10,759 8,680
Other time 27,198 11,104
--------- ---------
143,266 104,661
Federal Home Loan Bank borrowings 1,788 2,272
Income taxes payable -- 109
Accrued interest payable 152 106
Note payable 2,000 2,628
Other 682 326
--------- ---------
Total liabilities 147,888 110,102
Commitments (notes H, I, and L)
Shareholders' equity
Common stock; no par value, 500,000 shares
authorized, 213,578 shares issued and outstanding 1,961 1,961
Retained earnings 8,775 6,744
Unrealized gain on securities available for sale, net of taxes 226 122
--------- ---------
10,962 8,827
--------- ---------
$ 158,850 $ 118,929
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 86
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Nine months ended September 30, 1997 and 1996 (Unaudited)
and years ended December 31, 1996 and 1995
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30, December 31,
--------------------- ----------------------
1997 1996 1996 1995
--------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Interest income
Loans, including fees $ 9,982 $ 7,491 $ 10,410 $ 7,639
Taxable investment securities 209 382 487 484
Nontaxable investment securities 413 143 247 --
Funds sold 447 158 180 168
Other interest 34 32 35 136
--------- --------- --------- ---------
Total interest income 11,085 8,206 11,359 8,427
Interest expense
Deposits 3,358 2,001 2,794 1,851
Borrowed funds 126 44 97 23
Notes payable 135 192 240 280
--------- --------- --------- ---------
Total interest expense 3,619 2,237 3,131 2,154
--------- --------- --------- ---------
Net interest income 7,466 5,969 8,228 6,273
Provision for loan losses 360 262 457 280
--------- --------- --------- ---------
Net interest income after provision for
loan losses 7,106 5,707 7,771 5,993
Other income
Service charges on deposit accounts 253 228 325 241
Payroll services -- 233 233 265
Other income 287 319 403 301
--------- --------- --------- ---------
Total other income 540 780 961 807
Other expenses
Salaries and employee benefits 2,216 1,635 2,261 1,708
Occupancy expenses of premises 539 485 642 568
Furniture and equipment expense 221 195 298 206
Payroll services -- 370 384 461
Other expenses 1,608 1,001 1,374 1,193
--------- --------- --------- ---------
Total other expenses 4,584 3,686 4,959 4,136
--------- --------- --------- ---------
Income before income taxes 3,062 2,801 3,773 2,664
Income tax expense (benefit)
Current 1,025 1,061 1,431 1,019
Deferred 6 2 (78) (2)
--------- --------- --------- ---------
1,031 1,063 1,353 1,017
--------- --------- --------- ---------
NET INCOME $ 2,031 $ 1,738 $ 2,420 $ 1,647
========= ========= ========= =========
Income per share
Net income per share $ 9.51 $ 8.14 $ 11.33 $ 7.71
========= ========= ========= =========
Common shares outstanding 213,578 213,578 213,578 213,578
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 87
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the nine months ended September 30, 1997 (Unaudited)
and the years ended December 31, 1996 and 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
Unrealized
gain (loss) on
securities
available
Common Retained for sale,
stock earnings net of taxes Total
------- -------- ------------ -------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $ 1,961 $ 2,677 $ (21) $ 4,617
Net income for the year -- 1,647 -- 1,647
Net change in unrealized gains/
(losses) -- -- 129 129
------- ------- ------- -------
Balance at December 31, 1995 1,961 4,324 108 6,393
Net income for the year -- 2,420 -- 2,420
Net change in unrealized gains/
(losses) -- -- 14 14
------- ------- ------- -------
Balance at December 31, 1996 1,961 6,744 122 8,827
Net income for the period (unaudited) -- 2,031 -- 2,031
Net changes in unrealized gains/
(losses) (unaudited) -- -- 104 104
------- ------- ------- -------
Balance at September 30, 1997
(unaudited) $ 1,961 $ 8,775 $ 226 $10,962
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 88
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1997 and 1996 (unaudited)
and years ended December 31, 1996 and 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30, December 31,
---------------------- ----------------------
1997 1996 1996 1995
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income $ 2,031 $ 1,738 $ 2,420 $ 1,647
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses 360 262 457 280
Depreciation and amortization 203 162 238 185
Accretion of investment discount, net of premium (21) (15) (20) (19)
Stock dividend (16) (10) (15) --
Deferred income taxes 6 2 (78) (2)
Changes in deferrals and accruals
Interest receivable (214) (60) (76) (208)
Interest payable 46 (15) (1) 93
Income taxes payable (109) (90) 20 197
Other, net 374 467 217 13
-------- -------- -------- --------
Net cash provided by operating activities 2,660 2,441 3,162 2,186
Cash flows from investing activities
Net (increase) decrease in federal funds sold (10,475) 9,425 11,985 (12,770)
Net increase in interest-bearing deposits (1,542) -- -- --
Purchase of investment securities available for sale (3,531) (4,847) (6,676) (2,799)
Proceeds from maturities of investment securities
available for sale 2,850 350 2,550 2,800
Proceeds from maturities of investment securities
held to maturity -- 550 550 100
Net increase in loans (20,689) (17,901) (26,195) (22,249)
Expenditures for bank premises and equipment (1,462) (177) (1,623) (804)
-------- -------- -------- --------
Net cash used in investing activities (34,849) (12,600) (19,409) (35,722)
</TABLE>
F-6
<PAGE> 89
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1997 and 1996 (unaudited)
and years ended December 31, 1996 and 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30, December 31,
---------------------- ----------------------
1997 1996 1996 1995
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from financing activities
Net increase in deposits $ 38,605 $ 11,061 $ 14,469 $ 36,349
Advances from Federal Home Loan Bank (484) 1,323 2,272 --
Proceeds from notes payable -- -- -- 3,000
Payments on notes payable (628) (863) (735) (788)
Net decrease in federal funds purchased -- -- -- (1,000)
-------- -------- -------- --------
Net cash provided by financing activities 37,493 11,521 16,006 37,561
-------- -------- -------- --------
Net increase (decrease) in cash and due from banks 5,304 1,362 (241) 4,025
Cash and due from banks at beginning of period 9,130 9,371 9,371 5,346
-------- -------- -------- --------
Cash and due from banks at end of period $ 14,434 $ 10,733 $ 9,130 $ 9,371
======== ======== ======== ========
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest expense $ 3,573 $ 2,252 $ 3,077 $ 2,112
Income taxes 1,168 1,160 1,433 822
Noncash transaction
Note receivable exchanged for extinguishment
of note payable $ -- $ 1,700 $ 1,700 $ --
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE> 90
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF ACCOUNTING POLICIES
NATURE OF OPERATIONS
MegaBank Financial Corporation (the Company) was incorporated for the
purposes of owning shares of and acting as parent holding company for
MegaBank of Arapahoe (the Bank). The Bank provides a full range of
banking services to individual and corporate customers principally in
the Denver metropolitan area. A majority of the Bank's loans are
related to real estate (principally residential construction) and
commercial activities. The Bank is subject to competition from other
financial institutions for loans and deposit accounts. The Bank is
also subject to regulation by certain governmental agencies and
undergoes periodic examinations by those regulatory agencies.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period.
Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant
change in the near-term relate to the determination of the allowance
for loan losses. In connection with the determination of the
allowance for loan losses, management obtains independent appraisals
for significant properties and assesses estimated future cash flows
from borrowers' operations and the liquidation of loan collateral.
Management believes that the allowance for loan losses is adequate.
While management uses available information to recognize loan losses,
changes in economic conditions may necessitate revisions in future
years. In addition, various regulatory agencies, as an integral part
of their examination process, periodically review the Bank's allowance
for loan losses. Such agencies may require the Bank to recognize
additional losses based on their judgments about information available
to them at the time of their examination.
F-8
<PAGE> 91
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of its
respective subsidiaries. All material intercompany transactions have
been eliminated.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
The unaudited interim financial statements have been prepared in
conformity with generally accepted accounting principles and include
all adjustments which are, in the opinion of management, normal and
recurring in nature and necessary to a fair presentation of the
interim periods presented. Results of operations for the nine months
ended September 30, 1997 are not necessarily indicative of the results
to be expected for the full year.
INVESTMENT SECURITIES
Management determines the classification of debt securities at the
time of purchase and reevaluates such designation as of each balance
sheet date. Debt securities are classified as held-to-maturity when
the Bank has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at amortized cost.
Debt securities not classified as held-to-maturity are classified as
available-for-sale. Available-for-sale securities are stated at fair
value, with the unrealized gains and losses, net of tax, reported as a
component of retained earnings in shareholders' equity.
The amortized cost of debt securities classified as held-to-maturity
or available-for-sale is adjusted for amortization of premiums and
accretion of discounts to maturity or, in the case of mortgage-backed
securities, over the estimated life of the security. Such
amortization and accretion is included as an adjustment to interest
income from investments. Realized gains and losses and declines in
value judged to be other-than-temporary are included in net
securities gains (losses). The cost of securities sold is based on
the specific identification method.
F-9
<PAGE> 92
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
LOANS
Loans are reported at the principal amount outstanding, net of loan
fees and the allowance for credit losses. Interest on loans is
calculated by using the simple interest method on the daily balance of
the principal amount outstanding.
Loan fees which represent an adjustment to interest yield are deferred
and amortized over the estimated life of the loan. Most of the loans
originated by the Company are short-term.
Loans on which the accrual of interest has been discontinued are
designated as nonaccrual loans. Accrual of interest on loans is
discontinued either when reasonable doubt exists as to the full,
timely collection of interest or principal or when a loan becomes
contractually past due by ninety days or more with respect to interest
or principal. When a loan is placed on nonaccrual status, all
interest previously accrued but not collected is reversed against
current period interest income. Interest accruals are resumed on such
loans only when they are brought fully current with respect to
interest and principal and when, in the judgement of management, the
loans are estimated to be fully collectible as to both principal and
interest.
Renegotiated loans are those loans on which concessions in terms have
been granted because of a borrower's financial difficulty. Interest
is generally accrued on such loans in accordance with the new terms.
F-10
<PAGE> 93
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for
loan losses charged to expenses. Loans are charged against the
allowance for loan losses when management believes that the
collectibility of the principal is unlikely or, with respect to
consumer installment loans, according to an established delinquency
schedule. The allowance is an amount that management believes will be
adequate to absorb losses inherent in existing loans, leases and
commitments to extend credit, based on evaluations of the
collectibility and prior loss experience of loans, leases and
commitments to extend credit. The evaluations take into consideration
such factors as changes in the nature and volume of the portfolio,
overall portfolio quality, loan concentrations, specific problem
loans, leases and commitments, and current and anticipated economic
conditions that may affect the borrowers' ability to pay.
Impaired loans are measured based on the present value of expected
future cash flows discounted at the loan's original effective interest
rate. As a practical expedient, impairment may be measured based on
the loan's observable market price or the fair value of the collateral
if the loan is collateral dependent. When the measure of the impaired
loan is less than the recorded investment in the loan, the impairment
is recorded through a valuation allowance.
LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment are stated at cost. Depreciation
is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives,
principally on the straight-line method.
F-11
<PAGE> 94
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Provisions for income taxes are based on taxes payable or refundable
for the current year (after exclusion of non-taxable income such as
interest on state and municipal securities) and deferred taxes on
temporary differences between the amount of taxable income and pretax
financial income and between the tax bases of assets and liabilities
and their reported amounts in the financial statements. Deferred tax
assets and liabilities are included in the financial statements at
currently enacted income tax rates applicable to the period in which
the deferred tax assets and liabilities are expected to be realized or
settled. As changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income
taxes.
STATEMENT OF CASH FLOWS
For purposes of the Statement of Cash Flows, the Company has defined
cash equivalents as those amounts included in the balance sheet
caption "Cash and Due from Banks".
PER SHARE COMPUTATIONS
Net income per share is based on the weighted average number of common
shares outstanding during each year.
F-12
<PAGE> 95
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE B - INVESTMENT SECURITIES
At December 31, 1996, the Company had securities with the following
amortized cost and estimated fair market values (in thousands):
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Securities available for sale
U.S. Treasury securities $ 4,341 $ 49 $ - $ 4,390
State and political securities 6,180 25 (2) 6,203
Federal Home Loan Bank stock 313 - - 313
Equity securities 154 77 - 231
------- ---- ----- -------
$10,988 $151 $ (2) $11,137
======= ==== ===== =======
</TABLE>
The amortized cost and estimated market value of debt securities at
December 31, 1996 by contractual maturity are shown below (in
thousands). Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Market
Cost Value
--------- -------
<S> <C> <C>
Due in one year or less $ 3,092 $ 3,113
Due after one year through five years 1,249 1,277
Due after five years through ten years 775 777
Due after ten years 5,405 5,426
------- -------
$10,521 $10,593
======= =======
</TABLE>
Securities included in the accompanying balance sheet at December 31,
1996 with an amortized cost of $5,748,882 are pledged as collateral
for public deposits and for other purposes as required or permitted by
law.
There were no sales of investment securities in 1996 or 1995.
F-13
<PAGE> 96
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE C - LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
The components of the loan portfolio are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----------- ---------
(Unaudited)
<S> <C> <C>
Construction $ 85,287 $47,306
Commercial 27,024 44,356
Installment 4,030 3,988
Mortgage 66 67
Other 166 115
--------- -------
116,573 95,832
Less unearned loan fees (854) (859)
--------- -------
$ 115,719 $94,973
========= =======
</TABLE>
Transactions in the allowance for possible loan losses are as follows (in
thousands):
<TABLE>
<CAPTION>
Nine months ended Years ended December 31,
September 30, ----------------------------
1997 1996 1995
------------ -------- -----
(Unaudited)
<S> <C> <C> <C>
Balance at beginning of period $1,150 $ 759 $546
Provision for loan losses 360 457 280
Recoveries 62 13 9
Loans charged off (5) (79) (76)
------ ------ ----
Balance at end of period $1,567 $1,150 $759
====== ====== ====
</TABLE>
The outstanding principal balance of accruing loans having payments
delinquent more than ninety days at December 31, 1996 and 1995
amounted to $-0- and $1,025, respectively.
F-14
<PAGE> 97
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE C - LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES (CONTINUED)
Loans on which the accrual of interest has been discontinued or
reduced amounted to $3,592 and $75,000 at December 31, 1996 and 1995,
respectively.
Unaudited data as of September 30, 1997, follows:
<TABLE>
<S> <C>
Outstanding principal balance of accruing loans having
payments delinquent more than 90 days $66,399
Loans on which the accrual of interest has been discontinued 1,611,282
</TABLE>
Substantially all of the balance of nonaccrual loans as of September
30, 1997, relates to one borrower.
The Company had no impaired loans during 1996 and 1995 as recognized
in conformity with FASB Statement No. 114, as amended by FASB
Statement No. 118.
No loans were transferred to foreclosed real estate in 1996 and 1995.
The Company is not committed to lend funds to debtors whose loans have
been modified.
NOTE D - BANK PREMISES, LEASEHOLD IMPROVEMENTS AND EQUIPMENT
At December 31, 1996 leasehold improvements and equipment, less
accumulated depreciation and amortization, consisted of the following
(in thousands):
<TABLE>
<CAPTION>
Accumulated
depreciation
and Net
Cost amortization amount
------ ------------ ------
<S> <C> <C> <C>
Buildings and improvements $ 766 $ 24 $ 742
Leasehold improvements 126 80 46
Equipment 1,672 843 829
Land 1,013 - 1,013
------ ---- ------
$3,577 $947 $2,630
====== ==== ======
</TABLE>
F-15
<PAGE> 98
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE E - DEPOSITS
At December 31, 1996, the scheduled maturities of certificates of
deposit are as follows (in thousands):
<TABLE>
<S> <C>
1997 $18,300
1998 1,303
1999 50
2000 36
2001 22
Thereafter 73
-------
$19,784
=======
</TABLE>
NOTE F - FEDERAL HOME LOAN BANK BORROWINGS
As of December 31, 1996, the Bank had $2,275,275 in Federal Home Loan
Bank borrowings. The advances outstanding at December 31, 1996 are as
follows (in thousands):
<TABLE>
<CAPTION>
Interest
Amount Rate
------ ----------
<S> <C>
$ 439 6.81%
506 6.90
176 6.72
102 6.87
100 6.76
100 6.58
365 5.89
237 6.07
247 6.37
------
$2,272
======
</TABLE>
The Bank has a blanket pledge agreement with the FHLB of Topeka
collateralizing the above advances.
F-16
<PAGE> 99
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE F - FEDERAL HOME LOAN BANK BORROWINGS (CONTINUED)
Maturities of the aforementioned borrowings are as follows:
<TABLE>
<S> <C>
1997 $ 365
1998 176
1999 1,734
------
$2,275
======
</TABLE>
NOTE G - NOTE PAYABLE
At December 31, 1996, the Company has a note payable to First
Interstate Bank of Denver, N.A. for $2,500,000 which will require one
annual principal payment of $500,000 due August 15, 1997, with
interest calculated at the lending bank's prime rate; ten consecutive
quarterly interest payments, beginning November 15, 1996, with
interest calculated at the prime rate; and one principal payment of
$2,000,000, plus accrued interest on August 15, 1998. This note is
guaranteed by certain major shareholders of the Company. The loan
also calls for the Bank to maintain the following minimum financial
ratios:
o Return on assets before taxes equal to, or greater
than two percent (2%);
o Loan loss reserve of at least one percent (1%) of
total loans, but not less than 100% of subsidiary's
total non-performing loans plus other real estate
owned (OREO);
o Non-performing loans plus OREO divided by total
assets shall be less than two percent (2%);
o The Bank's risk-based capital ratios, as defined in
Regulation H of the Federal Reserve Board 12 C.F.R.
Section 208, et seq., shall not fall below the
following minimums:
<TABLE>
<S> <C>
Tier 1 capital ratio six percent (6%)
Total risk-based capital ratio ten percent (10%)
Leveraged ratio five percent (5%)
</TABLE>
F-17
<PAGE> 100
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE G - NOTE PAYABLE (CONTINUED)
As of December 31, 1996, minimum estimated annual principal payments
are as follows:
<TABLE>
<S> <C>
1997 $ 500,000
1998 2,000,000
</TABLE>
The balance of the note payable as of September 30, 1997, was
$2,000,000 (unaudited).
NOTE H - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit and stand-by letters of credit.
Those instruments involve, to a varying degree, elements of credit
risk in excess of the amount recognized in the statement of financial
position. The contract amounts of those instruments reflect the
extent of involvement the Bank has in particular classes of financial
instruments.
F-18
<PAGE> 101
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE H - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
(CONTINUED)
The Company's exposure to credit loss in the event of non-performance
by the other party to the financial instrument for commitments to
extend credit and stand-by letters of credit is represented by the
contractual notional amount of those instruments. The Company uses
the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments.
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(Unaudited) 1996
------------- -----------
(In thousands)
<S> <C> <C>
Financial instruments whose contract amounts
represent credit risk
Commitments to extend credit $45,053 $47,573
Stand-by letters of credit 4,864 7,022
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of
the commitments may expire without being drawn upon or be participated
to other financial institutions, the total commitment amounts do not
necessarily represent future cash requirements. The Company evaluates
each customer's credit-worthiness on a case-by-case basis.
The amount of collateral obtained if deemed necessary by the Company
upon extension of credit is based on management's credit evaluation.
Collateral held varies, but may include accounts receivable,
inventory, property, plant and equipment and income-producing
commercial properties.
Stand-by letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
The credit risk involved in issuing letters of credit is essentially
the same as that involved in extending loan facilities to customers.
F-19
<PAGE> 102
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE I - LEASE COMMITMENTS
Future minimum rental and lease payments under noncancellable
operating leases for premises, expiring at various dates through 2006
are as follows (in thousands):
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1997 $ 438
1998 416
1999 366
2000 364
2001 352
Thereafter 1,473
------
$3,409
======
</TABLE>
Total lease expense for all operating leases was $382,000 and $351,000
for the years ended December 31, 1996 and 1995, respectively.
NOTE J - INCOME TAXES
Deferred tax assets and liabilities are recorded based on the
differences between financial statement and tax basis of assets and
liabilities and the tax rates in effect when these differences are
expected to reverse. Temporary differences result from differences in
the allowance for loan losses, loan fees, and depreciation on
equipment.
Timing differences in the recognition of revenue and expense for tax
and financial reporting purposes resulted in a deferred tax asset as
of December 31, 1996 as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets
Provision for loan losses $322
Recognition of loan fees 63
----
Total deferred tax assets 385
</TABLE>
F-20
<PAGE> 103
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE J - INCOME TAXES (CONTINUED)
<TABLE>
<S> <C>
Deferred tax liabilities
Depreciation $ (52)
Market value adjustment (27)
Federal Home Loan Bank stock dividend (6)
------
Total deferred tax liabilities (85)
------
Net deferred tax asset $ 300
======
</TABLE>
The effective income tax rate varies from the statutory federal rate
because of several factors, the most significant being nontaxable
interest income earned on obligations of state and municipalities.
The following table reconciles the Company's effective tax rate to the
statutory federal rate.
<TABLE>
<CAPTION>
1996 1995
----------------------- ---------------------
Amount Percent Amount Percent
---------- ------- ---------- -------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Tax expense at statutory rate $1,283 34.0% $ 906 34.0%
Increase (decrease) in taxes due to:
Tax exempt municipal interest (84) (2.0) --
State tax 112 3.3 100 3.3
Other 42 .7 11 .7
------ ----- ------- -----
Total provision for income taxes $1,353 36.0% $ 1,017 38.0%
====== ===== ======= =====
</TABLE>
F-21
<PAGE> 104
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE K - RELATED PARTIES
The Bank has entered into certain loan participations with First State
Bank of Hotchkiss, a financial institution related through common
ownership. Approximate loan principal balances outstanding under
these participations are summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
September 30, -------------------
1997 1996 1995
----------- --------- --------
(Unaudited)
<S> <C> <C> <C>
Participations sold $10,401 $10,916 $8,031
Participations purchased 1,755 250 1,100
</TABLE>
The Bank has also sold loan participations to other related parties
(shareholders, directors, family members, businesses related through
common ownership). At December 31, 1996 and 1995, the participations
sold to related parties were approximately $ 7,882,388 and $500,000,
respectively. As of September 30, 1997, participations sold to
related parties were approximately $1,900,000 (unaudited).
The following is an analysis of loans that were made to shareholders,
directors and executive officers of the Company, and to corporations
and others associated with those individuals (in thousands):
<TABLE>
<S> <C>
Balance at January 1, 1996 $ 297
New loans 2,137
Repayments (1,372)
------
Balance at December 31, 1996 $ 1,062
=======
</TABLE>
As of September 30, 1997, these amounted to approximately $2,524,000
(unaudited).
In September 1993 the Bank entered into an agreement with First State
Bank of Hotchkiss (FSBH), a bank related through common ownership, to
purchase their branching rights. The Bank agreed to pay FSBH the sum
of $100,000 payable in monthly installments of $2,500 for forty
months. Payments commenced January 15, 1995, and are due on the 15th
of each month thereafter. The Bank capitalized these costs and the
unamortized cost of $5,000 is included in other assets.
F-22
<PAGE> 105
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE L - EMPLOYEE BENEFITS
The Company has an IRA contribution plan available for all personnel
who have been employed at least six months. If an employee
contributes 2 1/2% of his or her salary to an IRA the Company will
provide a contribution of up to two times the employee's contribution
to an aggregate total of both contributions of $2,000. Contributions
in 1996 and 1995 were $28,956 and $23,016, respectively.
NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following summary presents the methodologies and assumptions used
to estimate the fair value of the Company's financial instruments.
The Company operates as a going concern and except for its investment
portfolio, no active market exists for its financial instruments.
Much of the information used to determine fair value is highly
subjective and judgmental in nature and, therefore, the results may
not be precise. The subjective factors include, among other things,
estimates of cash flows, risk characteristics, credit quality and
interest rates, all of which are subject to change. Since the fair
value is estimated as of the balance sheet date, the amounts which
will actually be realized or paid upon settlement or maturity of the
various financial instruments could be significantly different.
CASH AND CASH EQUIVALENTS
For these short-term instruments, the carrying amount approximates
fair value.
INVESTMENTS
For securities held as investments, fair value equals quoted market
price, if available. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar securities.
The carrying amount of accrued interest receivable approximates its
fair value.
F-23
<PAGE> 106
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
LOANS
The fair value of fixed rate loans is estimated by discounting the
future cash flows using the current rates at which similar loans would
be made to borrowers with similar credit ratings and for the same
remaining maturities. For variable rate loans, the carrying amount is
a reasonable estimate of fair value. For loans where collection of
principal is in doubt, an allowance for losses has been estimated.
Loans with similar characteristics were aggregated for purposes of the
calculations. The carrying amount of accrued interest approximates
its fair value.
DEPOSITS
The fair value of demand deposits, savings accounts, NOW accounts, and
certain money market deposits is the amount payable on demand at the
reporting date (i.e. their carrying amount). The fair value of fixed
maturity time deposits is estimated using a discounted cash flow
calculation that applies the rates currently offered for deposits of
similar remaining maturities. The carrying amount of accrued interest
payable approximates its fair value.
SHORT-TERM BORROWINGS
For short-term borrowings, the carrying amount is a reasonable
estimate of fair value.
LONG-TERM BORROWINGS
The fair value of long-term borrowings is estimated by discounting the
future cash flows using the current rate at which a similar loan could
be financed.
F-24
<PAGE> 107
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT AND LINES OF CREDIT
The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present credit worthiness of
the counterparts. For fixed-rate loan commitments, fair value also
considers the difference between current levels of interest rates and
the committed rates. The fair value of letters of credit and lines of
credit is based on fees currently charged for similar agreements or on
the estimated cost to terminate them or otherwise settle the
obligations with the counterparts at the reporting date.
The following table presents estimated fair values of the Company's
financial instruments as of December 31, 1996:
<TABLE>
<CAPTION>
(In thousands of dollars)
-------------------------
Carrying Fair
Amount Value
------- --------
<S> <C> <C>
Financial assets
Cash and due from banks $ 9,130 $ 9,130
Federal funds sold 785 785
Investment securities
Securities held to maturity -- --
Securities available for sale 11,137 11,137
Loans, less allowance for loan losses 93,823 93,270
Accrued interest receivable 681 681
Financial liabilities
Deposits
Non-interest bearing $36,095 $ 36,095
Interest bearing 68,566 70,186
Other borrowings 4,900 4,900
Accrued interest payable 79 79
Unrecognized financial instruments (net
of contract amount)
Commitments to extend credit $47,574 $ 47,574
Standby letters of credit 7,022 7,002
</TABLE>
F-25
<PAGE> 108
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE N - SHAREHOLDERS' EQUITY AND REGULATORY RESTRICTIONS
The Company has a Stock Purchase Agreement with certain of its
shareholders. This agreement, as amended and restated in November
1997, provides that upon the death of the Company's Chairman of the
Board of Directors, the shareholders will have the option to require
the Company to purchase their shares of the Company's stock to the
extent the Company receives proceeds from a life insurance policy on
the life of the Chairman. These shareholders currently hold an
aggregate of 109,510 shares of common stock. The agreement specifies
that each year the shareholders are to determine the value of the
stock for purposes of establishing the purchase price to be paid by
the Company. If the shareholders do not determine a value, the value
of the most recent determination will be used, subject to appropriate
adjustment to reflect book value per share of the Company since the
effective date of the last valuation. For 1996, the shareholders
determined the value to be $45 per share. The Company has purchased a
life insurance policy in the amount of $3,000,000 on the Chairman.
Based on the current set value of the stock, a purchase of all of the
shares of the shareholders who are a party to the agreement would be
approximately $4.9 million.
Cash dividends paid to the Company by the Bank amounted to $950,000
and $900,000 for the years ended December 31, 1996 and 1995,
respectively, and $1,000,000 as of September 30, 1997 (unaudited).
The payment of dividends to the Company by the Bank is subject to
various state and federal regulatory limitations.
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken,
could have a direct material effect on the Bank's financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the bank's
assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier 1 capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier 1
capital (as defined) to average assets (as defined). Management
believes, as of December 31, 1996 and as of September 30, 1997, that
the Bank meets all capital adequacy requirements to which it is
subject.
F-26
<PAGE> 109
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE N - SHAREHOLDERS' EQUITY AND REGULATORY RESTRICTIONS
(CONTINUED)
As of December 31, 1996, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Bank must maintain minimum total
risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth
in the table. There are no conditions or events since that
notification that management believes have changed the institution's
category.
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------------------------------
(Amounts in thousands)
To be well
capitalized under
For capital prompt corrective
Actual adequacy purposes action provisions
------------------ ------------------------- -------------------------
Amount Ratio Amount Ratio Amount Ratio
------- ------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total capital to risk weighted assets $11,831 12.5% > or = $ 7,554 > or = 8.0% > or = $ 9,442 > or = 10.0%
Tier 1 capital to risk weighted assets 10,681 11.3 > or = 3,777 > or = 4.0 > or = 5,665 > or = 6.0
Tier 1 capital to average assets 10,681 9.0 > or = 4,741 > or = 4.0 > or = 5,926 > or = 5.0
</TABLE>
Unaudited capital ratios for the Bank as of September 30, 1997, are as
follows:
<TABLE>
<S> <C>
Total capital to risk-weighted assets 10.72%
Tier 1 capital to risk-weighted assets 9.48
Tier 1 capital to average assets 8.66
</TABLE>
The Federal Reserve Board requires banks to maintain reserve balances
composed of cash on hand and balances maintained at the Federal Reserve
Bank. These reserve balances are based primarily on deposit levels and
totaled approximately $767,000 at December 31, 1996.
F-27
<PAGE> 110
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE O - CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY ONLY
The following presents the condensed balance sheets as of September
30, 1997 (unaudited) and December 31, 1996 and statements of income
and of cash flows for the nine months ended September 30, 1997 and
1996 (unaudited) and for each of the two years ended December 31, 1996
for MegaBank Financial Corporation.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and interest bearing deposits $ 337 $ 267
Investment in subsidiaries 12,011 10,681
Other assets, net 767 441
-------- --------
Total assets $ 13,115 $ 11,389
======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Bank notes payable $ 2,000 $ 2,500
Accrued interest, taxes and other liabilities 153 62
Shareholders' equity 10,962 8,827
-------- --------
Total liabilities and shareholders' equity $ 13,115 $ 11,389
======== ========
</TABLE>
F-28
<PAGE> 111
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE O - CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY ONLY
(CONTINUED)
STATEMENTS OF INCOME
<TABLE>
Nine months ended Years ended
September 30, December 31,
--------------------- -----------------
1997 1996 1996 1995
------ ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C>
Income
Dividends from subsidiaries $1,000 $ 950 $ 950 $ 900
Interest 9 30 32 136
Intercompany income 245 197 263 266
Lease income 111 155 206 208
------ ------- ------- -------
Total income 1,365 1,332 1,451 1,510
Expenses
Interest 135 192 240 280
Lease expense 298 272 360 348
Other 424 155 203 195
------ ------- ------- -------
Total expenses 857 619 803 823
------ ------- ------- -------
Income before income taxes and equity in
undistributed net income of subsidiaries 508 713 648 687
Income tax benefit 167 89 114 76
Equity in undistributed net income of
Subsidiaries 1,356 936 1,658 884
------ ------- ------- -------
Net income $2,031 $ 1,738 $ 2,420 $ 1,647
====== ======= ======= =======
</TABLE>
F-29
<PAGE> 112
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE O - CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY ONLY
(CONTINUED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30, December 31,
--------------------- -----------------
1997 1996 1996 1995
------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income $ 2,031 $ 1,738 $ 2,420 $ 1,647
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for depreciation 2 3 5 1
Equity in undistributed net income of
subsidiaries (1,356) (936) (1,658) (884)
(Increase) decrease in other assets (74) (395) (158) 171
Increase (decrease) in accrued expense
and other liabilities (33) 2 (2) 33
------- ------- ------- -------
Net cash provided by operating activities 570 412 607 968
Cash flows from investing activities
Investment in subsidiaries -- -- -- (3,000)
Purchase of leaseholds -- (10) (10) (15)
------- ------- ------- -------
Net cash used in investing activities -- (10) (10) (3,015)
Cash flows from financing activities
Proceeds from note payable -- -- -- 3,000
Repayments of note payable (500) (646) (656) (764)
------- ------- ------- -------
Net cash provided by (used in)
financing activities (500) (646) (656) 2,236
------- ------- ------- -------
Net (decrease) increase in cash 70 (244) (59) 189
Cash, beginning of period 267 326 326 137
------- ------- ------- -------
Cash, end of period $ 337 $ 82 $ 267 $ 326
======= ======= ======= =======
</TABLE>
F-30
<PAGE> 113
No dealer, salesperson or any other person has been authorized to give
any information or to make any representation other than those contained in
this Prospectus in connection with the offer made by this Prospectus, and, if
given or made, such information or representation must not be relied upon as
having been authorized by the company or the Underwriters. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or the information herein or
incorporated by reference herein is correct as of any time subsequent to the
date of this Prospectus. This Prospectus does not constitute an offer or a
solicitation of an offer to buy by anyone in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so or to anyone to whom it is
unlawful to make such offer or solicitation.
<PAGE> 114
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
ACCOUNTING TREATMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
DESCRIPTION OF THE PREFERRED SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -60-
BOOK-ENTRY ISSUANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -69-
DESCRIPTION OF GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -71-
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE JUNIOR
SUBORDINATED DEBENTURES AND THE GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -73-
CERTAIN FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -75-
ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -78-
UNDERWRITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -79-
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -80-
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -80-
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
UNTIL_______________, 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE PREFERRED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE> 115
1,200,000 TRUST PREFERRED SECURITIES
MB CAPITAL I
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER TRUST PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
MEGABANK FINANCIAL
CORPORATION
MEGABANK
LOGO
-------------------
P R O S P E C T U S
-------------------
HOWE BARNES INVESTMENTS, INC.
, 1998
<PAGE> 116
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Directors, officers, employees and agents of the Company and/or the
Bank may be entitled to benefit from the indemnification provisions contained
in the Colorado Business Corporation Act, Title Seven of the Colorado Revised
Statutes (the "CBCA"), the Company's Articles of Incorporation and certain
indemnification agreements. In addition, certain provisions in the CBCA and
the Articles of Incorporation limit the liability of directors of the Company.
The general effect of these provisions is summarized below:
Article 109 of the CBCA permits a Colorado corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
suit, action or other proceeding by reason of the fact that such person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, or other enterprise. Such
indemnification may be against expenses, including attorneys' fees, judgments,
fines and other amounts in connection with such proceeding. Indemnification is
available if such person acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation, or,
with respect to any criminal action or proceeding, such person had no
reasonable cause to believe that the conduct was unlawful. Unless a court of
competent jurisdiction otherwise orders, indemnification is not available in
connection with a proceeding by or in the right of the corporation if the
person is adjudged liable to the corporation or derived an improper personal
benefit. A corporation is required to indemnify a director or officer who is
wholly successful in the defense of any such proceeding. Expenses (including
attorneys' fees) incurred by a director, officer, employee or agent of the
corporation in defending any such proceeding may be advanced by the corporation
before the final disposition if such person furnishes an undertaking to repay
such advances if it is ultimately determined that such person is not entitled
to be indemnified. Before a corporation may indemnify or advance expenses to a
person under these provisions, the board of directors (excluding any directors
who are parties to such a proceeding), independent legal counsel appointed by
the board of directors, or the shareholders must provide authorization. A
corporation may purchase insurance against any liability of individuals for
whom the corporation may provide such indemnification. Any provisions in a
corporation's articles of incorporation, bylaws, resolutions or in a contract
(except an insurance policy) for such indemnification are valid only to the
extent not inconsistent with Article 109 of the CBCA.
Article XIII of the Company's Articles of Incorporation states that
the Company shall have all powers to indemnify and make advances in connection
with such indemnification to its directors, officers and others, provided that
such powers and the exercise thereof are consistent with the Colorado
Corporation Code (which preceded the CBCA). This Article also states that the
board of directors is authorized, without shareholder action, to exercise the
Company's powers of indemnification, whether by provision in the bylaws or
otherwise.
The Bank has entered into indemnification agreements with certain of
its officers and directors in consideration of their agreement to serve in such
capacities. The terms of each agreement are identical for each such officer or
director. The indemnification agreement provides that the Bank will indemnify
and pay advances to the director or officer to the maximum extent provided in
the Bank's articles of incorporation or bylaws, subject to approval by the
board of directors and certain conditions and limitations. Such
indemnification is not available in connection with expenses, penalties or
other amounts in connection with proceedings brought by a regulatory agency
resulting in the assessment of civil money penalties of requiring the director
or officer to make payments to the Bank, nor will the Bank pay any advances in
connection with a proceeding brought by an regulatory agency. For each annual
period following the date of the indemnification agreement, the total liability
of the Bank for indemnification of all officers and directors of the bank,
whether under the agreement or otherwise, cannot exceed $1,000,000. The
indemnification available under the agreement does not limit any other
indemnification which may be available. However, indemnification under the
agreement is available only after the exhaustion of any available insurance
coverage.
II-1
<PAGE> 117
Section 7-108-402 of the CBCA permits a corporation, if so provided in
the articles of incorporation, to eliminate or limit the personal liability of
a director to the corporation or its shareholders for monetary damages for
breach of fiduciary duty. However, such a provision cannot eliminate or limit
such liability arising out of a breach of the director's duty of loyalty, acts
or omissions not in good faith or which involve intentional misconduct or
knowing violations of law, unlawful distributions, or any transaction for which
the director derived an improper personal benefit. Article XV of the Company's
Articles of Incorporation provides for such elimination of director liability.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee $ 3,540
NASD fee 1,700
Nasdaq fees 7,400
Trustees' fees and expenses 25,000
Legal fees and expenses 100,000
Blue Sky fees and expenses --
Accounting fees and expenses 30,000
Printing expenses 65,000
Miscellaneous expenses 17,360
---------
Total $ 250,000
=========
</TABLE>
All of the above items except the registration fee are estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 27. EXHIBITS
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- - ----------- -----------
<S> <C>
1.1 Form of Underwriting Agreement (1).
3.1 Amended and Restated Articles of Incorporation of MegaBank Financial Corporation (1).
3.2 Bylaws of MegaBank Financial Corporation (1).
4.1 Form of Subordinated Indenture dated _______, ____ to be entered into between the Registrant and
Wilmington Trust Company, as Indenture Trustee (1).
4.2 Form of Junior Subordinated Debenture (included as an exhibit to Exhibit 4.1).
4.3 Certificate of Trust of MB Capital I (1).
4.4 Trust Agreement of MB Capital I dated as of December 8, 1997 (1).
4.5 Form of Amended and Restated Trust Agreement of MB Capital I, dated ______, ____ (1).
4.6 Form of Preferred Security Certificate of MB Capital I (included as an exhibit to Exhibit 4.5).
4.7 Form of Preferred Securities Guarantee Agreement (1).
</TABLE>
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<PAGE> 118
<TABLE>
<S> <C>
4.8 Form of Agreement as to Expenses and Liabilities (included as an exhibit to Exhibit 4.5).
5.1 Opinion of Jones & Keller, P.C. (1).
5.2 Opinion and Consent of Richards, Layton & Finger, P.A. (1).
8.1 Opinion of Jones & Keller, P.C., as to certain federal income tax matters (2).
10.1 Federal Funds Transactions Purchase Agreement dated November 8, 1993 between MegaBank of Arapahoe and
Bankers' Bank of the West and renewal letter dated October 20, 1997 from Bankers' Bank of the West (1).
10.2 Lease dated December 29, 1994 between Nagrom, L.L.C. and MegaBank Financial Corporation (1).
10.3 Advance, Pledge and Security Agreement dated October 26, 1995 between Federal Home Loan Bank of Topeka
and MegaBank of Arapahoe (1).
10.4 Federal Funds line of credit agreement signed September 24, 1997 between Norwest Bank Colorado, N.A.
and MegaBank of Arapahoe (1).
10.5 Consulting Agreement - First Fidelity Corp. (1).
10.6 Branching Rights Purchase Agreement - First State Bank of Hotchkiss (1).
10.7 Amended and Restated Stock Purchase Agreement by and among MegaBank Financial Corporation, Thomas R.
Kowalski, the Ryan R. Kowalski Trust, the Realtek Company Profit Sharing Plan and Trust, Thomas
Investments Partnership and Orchard Valley Financial Corporation dated as of November 28, 1996 (1).
10.8 Indemnification Agreement dated July 20, 1995 between MegaBank Financial Corporation ("MegaBank") and
Raymond L. Anilionis, Warren P. Cohen and Thomas R. Kowalski (the "Guarantors") (1).
11.1 Statement re Computation of per share earnings - see Consolidated Financial Statements.
23.1 Consent of Fortner, Bayens, Levkulich & Co., P.C. (1).
23.2 Consent of Jones & Keller, P.C. (included in Exhibit 5.1 above).
23.3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2 above).
24.1 A power of attorney is set forth on the signature page of this Registration Statement.
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Subordinated
Indenture (1).
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Amended and
Restated Trust Agreement (1).
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Preferred
Securities Guarantee Agreement (1).
- - ----------
</TABLE>
(1) Filed herewith.
(2) To be filed by amendment.
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<PAGE> 119
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
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<PAGE> 120
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Englewood, State of Colorado, on this 11th day
of December, 1997.
MEGABANK FINANCIAL CORPORATION
By:/s/ Thomas R. Kowalski
----------------------------------------
Thomas R. Kowalski, Chairman and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Thomas R. Kowalski and Susan A. Putland
and each of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
upon said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or either of them, or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- - ---------- ----- ----
<S> <C> <C>
/s/ Thomas R. Kowalski Director, Chairman December 11, 1997
- - -------------------------------- and Chief Executive Officer
Thomas R. Kowalski (Principal Executive Officer)
/s/ Larry A. Olsen Director, President and December 11, 1997
- - -------------------------------------- Chief Operating Officer
Larry A. Olsen
/s/ Raymond L. Anilionis Director December 11, 1997
- - ----------------------------------
Raymond L. Anilionis
/s/ Dr. Donald B. Brown Director December 11, 1997
- - ----------------------------------
Dr. Donald B. Brown
/s/ William F. Sievers Director December 11, 1997
- - -------------------------------------
William F. Sievers
Hiram J. Welton Treasurer, Principal Financial December 11, 1997
- - ------------------------------------- and Accounting Officer
Hiram J. Welton
</TABLE>
<PAGE> 121
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- - ----------- -----------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation of MegaBank Financial Corporation
3.2 Bylaws of MegaBank Financial Corporation
4.1 Form of Subordinated Indenture dated _______, ____ to be entered into between the Registrant and
Wilmington Trust Company, as Indenture Trustee
4.2 Form of Junior Subordinated Debenture (included as an exhibit to Exhibit 4.1)
4.3 Certificate of Trust of MB Capital I
4.4 Trust Agreement of MB Capital I dated as of December 8, 1997.
4.5 Form of Amended and Restated Trust Agreement of MB Capital I, to be dated ______, 1998
4.6 Form of Preferred Security Certificate of MB Capital I (included as an exhibit to Exhibit 4.5)
4.7 Form of Preferred Securities Guarantee Agreement
4.8 Form of Agreement as to Expenses and Liabilities (included as an exhibit to Exhibit 4.5)
5.1 Opinion of Jones & Keller, P.C.
5.2 Opinion and Consent of Richards, Layton & Finger, P.A.
10.1 Federal Funds Transactions Purchase Agreement dated November 8, 1993 between MegaBank of Arapahoe and
Bankers' Bank of the West and renewal letter dated October 20, 1997 from Bankers' Bank of the West
10.2 Lease dated December 29, 1994 between Nagrom, L.L.C. and MegaBank Financial Corporation
10.3 Advance, Pledge and Security Agreement dated October 26, 1995 between Federal Home Loan Bank of Topeka
and MegaBank of Arapahoe
10.4 Federal Funds line of credit agreement signed September 24, 1997 between Norwest Bank Colorado, N.A.
and MegaBank of Arapahoe
10.5 Consulting Agreement - First Fidelity Corp.
10.6 Branching Rights Purchase Agreement - First State Bank of Hotchkiss
10.7 Amended and Restated Stock Purchase Agreement by and among MegaBank Financial Corporation, Thomas R.
Kowalski, the Ryan R. Kowalski Trust, the Realtek Company Profit Sharing Plan and Trust, Thomas
Investments Partnership and Orchard Valley Financial Corporation dated as of November 28, 1996
10.8 Indemnification Agreement dated July 20, 1995 between MegaBank Financial Corporation ("MegaBank") and
Raymond L. Anilionis, Warren P. Cohen and Thomas R. Kowalski (the "Guarantors")
</TABLE>
<PAGE> 122
<TABLE>
<S> <C>
11.1 Statement re Computation of per share earnings - see Consolidated Financial Statements
23.1 Consent of Fortner, Bayens, Levkulich & Co., P.C.
23.2 Consent of Jones & Keller, P.C. (included in Exhibit 5.1 above)
23.3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2 above)
24.1 A power of attorney is set forth on the signature page of this Registration Statement
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Subordinated
Indenture
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Amended and
Restated Trust Agreement
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Preferred
Securities Guarantee Agreement
</TABLE>
<PAGE> 1
EXHIBIT 1.1
$12,000,000 PREFERRED SECURITIES
MB CAPITAL I
_____% CUMULATIVE PREFERRED SECURITIES
(LIQUIDATION PREFERENCE OF $10 PER PREFERRED SECURITY)
UNDERWRITING AGREEMENT
________________, 1998
Howe Barnes Investments, Inc.
As Representative of the several Underwriters
named in Schedule A
135 South LaSalle Street
Chicago, Illinois 60603
Ladies and Gentlemen:
MegaBank Financial Corporation, a Colorado corporation (the "Company"),
and its fiduciary subsidiary, MB Capital I, a statutory business trust
organized under the Delaware Business Trust Act (the "Delaware Act") (the
"Trust" and, together with the Company, the "Offerors"), propose, subject to
the terms and conditions stated herein, to issue and sell to you (the
"Underwriters"), an aggregate of $12,000,000 of the Trust's _____% Cumulative
Preferred Securities, with a liquidation preference of $10.00 per capital
security (the "Preferred Securities"). The Offerors propose that the Trust
issue the Preferred Securities pursuant to a Trust Agreement, as amended and
restated, among Wilmington Trust Company, as Property Trustee and Delaware
Trustee, the administrative trustees named therein (the "Administrative
Trustees") and the Company (the "Trust Agreement"). The Preferred Securities
will be guaranteed by the Company with respect to distributions and payments
upon liquidation, redemption and otherwise (the "Guarantee") pursuant to a
Guarantee Agreement (the "Guarantee Agreement"), to be dated ____________,
1997, between the Company and Wilmington Trust Company, as trustee (the
"Guarantee Trustee"), and entitled to the benefits of certain backup
undertakings described in the Prospectus (as defined herein) with respect to
the Company's agreement pursuant to the Expense Agreement (as defined herein)
to pay all expenses relating to administration of the Trust.
The proceeds of the sale of the Preferred Securities will be used to
purchase junior subordinated deferrable interest debentures (the "Junior
Subordinated Debentures") issued by the Company pursuant
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<PAGE> 2
to an Indenture, to be dated __________, 1997, between the Company and
Wilmington Trust Company, as trustee (the "Indenture").
The Offerors have filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (File No. 333-______) and a
related preliminary prospectus for the registration of the Preferred
Securities, the Guarantee and the Junior Subordinated Debentures, under the
Securities Act of 1933, as amended (the "Act") and the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act") and the rules and regulations
thereunder. The registration statement, as amended, at the time it was
declared effective, including the information (if any) deemed to be part
thereof pursuant to Rule 430A under the Act, is herein referred to as the
"Registration Statement." The form of prospectus first filed by the Offerors
with the Commission pursuant to Rules 424(b) and 430A under the Act is referred
to herein as the "Prospectus." Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective or filed with the
Commission pursuant to Rule 424(a) under the Act is referred to herein as a
"Preliminary Prospectus." The Securities Exchange Act of 1934, as amended, is
referred to herein as the "Exchange Act." Copies of the Registration
Statement, including all exhibits and schedules thereto, any amendments thereto
and all Preliminary Prospectuses have been delivered to you.
The Offerors hereby confirm their agreement with respect to the purchase
of the Preferred Securities by the Underwriters as follows:
1. Representations and Warranties of the Offerors. (a) The
Offerors jointly and severally represent and warrant to, and agree with, each
of the Underwriters that:
(i) The Registration Statement has been declared
effective under the Act, and no post-effective amendment to the
Registration Statement has been filed with the Commission as of the date
of this Agreement. No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that
purpose has been instituted or threatened by the Commission.
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the Trust Indenture
Act and the rules and regulations of the Commission promulgated
thereunder, and did not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that the
Offerors make no representation or warranty as to information contained
in or omitted in reliance upon, and in conformity with, written
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<PAGE> 3
information furnished to the Offerors by or on behalf of any
Underwriter, expressly for use in the preparation thereof.
(iii) The Registration Statement conforms, and the
Prospectus and any amendments or supplements thereto will conform, in
all material respects to the requirements of the Act and the Trust
Indenture Act and the rules and regulations thereunder. Neither the
Registration Statement nor any amendment thereto, and neither the
Prospectus nor any supplement thereto, contains or will contain, as the
case may be, any untrue statement of a material fact or omits or will
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that the
Offerors make no representation or warranty as to (i) information
contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and
in conformity with, written information furnished to the Offerors by or
on behalf of any Underwriter, expressly for use in the preparation
thereof or (ii) information in those parts of the Registration Statement
which constitute the Statement of Eligibility and Qualification ("Form
T-1") under the Trust Indenture Act.
(iv) The Trust has been duly created and is validly
existing in good standing as a business trust under the Delaware Act
with full trust power and authority to own property and to conduct its
business as described in the Registration Statement and Prospectus and
is authorized to do business in each jurisdiction in which such
qualification is required, except where the failure to so qualify would
not have a material adverse effect on the Trust's condition (financial
or otherwise), earnings, business, prospects, assets, results of
operations or properties taken as a whole; the Trust has conducted and
will conduct no business other than the transactions contemplated by the
Trust Agreement and described in the Prospectus; the Trust is not a
party to or otherwise bound by any agreement other than those described
in the Prospectus; the Trust is and will be classified for United States
federal income tax purposes as a grantor trust and not as an association
taxable as a corporation; and the Trust is and will be treated as a
consolidated subsidiary of the Company pursuant to generally accepted
accounting principles.
(v) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Colorado and is duly registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended (the "BHC Act"), supervised
by the Board of Governors of the Federal Reserve System (the "Fed").
The Company does not directly or indirectly own any stock or other
equity interest in any corporation, partnership, joint venture,
unincorporated association or other entity other than MegaBank (the
"Bank"), (the Bank
-3-
<PAGE> 4
and any other entities owned by the Company being collectively referred
to herein as the "Subsidiaries"). Each Subsidiary has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own or lease its properties and conduct
its business as described in the Prospectus, and is duly qualified to
transact business in all jurisdictions in which the conduct of its
business or its ownership or leasing or property requires such
qualification and the failure so to qualify would have a material
adverse effect on the business or condition, financial or otherwise, of
the Company and the Subsidiaries, taken as a whole. All outstanding
shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and non-assessable, and
are owned, directly or indirectly, by the Company free and clear of all
liens, encumbrances and security interests, except as disclosed in the
Registration Statement. No options, warrants or other rights to
purchase, agreements or other obligations to issue, or other rights to
convert any obligations into, shares of capital stock or ownership
interests in any of the Subsidiaries are outstanding.
(vi) All of the issued and outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
nonassessable, were offered and sold in compliance with all federal and
state securities laws, and were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase
securities. Except as otherwise stated in the Registration Statement and
Prospectus, there are no preemptive rights or other rights to subscribe
for or to purchase, or any restriction upon the voting or transfer of,
the Junior Subordinated Debentures, the common securities of the Trust
held by the Company (the "Common Securities") or the Preferred
Securities. Neither the filing of the Registration Statement nor the
registration of the Preferred Securities, the Guarantee or the Junior
Subordinated Debentures gives rise to any rights for or relating to the
registration of any capital stock or other securities of the Company or
the Trust. The Company has an authorized and outstanding capitalization
as set forth in the Registration Statement and the Prospectus.
(vii) Each of this Agreement, the Indenture, the Trust
Agreement, the Guarantee Agreement and the Agreement as to Expenses and
Liabilities (the "'Expense Agreement") has been duly authorized,
executed and delivered by the Company and/or the Trust, as the case may
be, and constitutes a valid, legal and binding obligation of the Company
and/or the Trust, as the case may be, enforceable in accordance with its
terms, except as rights to indemnity hereunder may be limited by federal
or state securities laws and except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally
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<PAGE> 5
and subject to general principles of equity and, with respect to Section
7 hereof, by the public policy underlying the federal or state
securities laws. The execution, delivery and performance of this
Agreement, the Indenture, the Trust Agreement, the Guarantee Agreement
and the Expense Agreement and the consummation of the transactions
herein or therein contemplated will not result in a breach or violation
of any of the terms and provisions of, or constitute a default under,
any statute, any indenture, mortgage, deed of trust, loan agreement,
lease, franchise, license or other agreement or instrument to which the
Trust, the Company or any of the Subsidiaries is a party or by which the
Trust, the Company or any of the Subsidiaries is bound or to which any
property or assets of the Trust, the Company or any of the Subsidiaries
is subject, the Company's or any Subsidiary's charter or bylaws, the
Trust Agreement or the Trust's certificate of trust filed with the State
of Delaware on ______________, 1997 (the "Certificate of Trust") or any
order, rule, regulation or decree of any court or governmental agency or
body having jurisdiction over the Company, any Subsidiary or the Trust
or having jurisdiction over any of the properties of the Company, any
Subsidiary or the Trust. No consent, approval, authorization or or or
body is required for the execution, delivery and performance of this
Agreement, the Indenture, the Trust Agreement, the Guarantee Agreement
and the Expense Agreement or for the consummation of the transactions
contemplated hereby or thereby, including the issuance or sale of the
Junior Subordinated Debentures by the Company and the Common Securities
and the Preferred Securities by the Trust, except such as may be
required under the Act, all of which have been obtained or made, and
under state securities or blue sky laws. Each of the Company and the
Trust, as the case may be, has full power and authority to enter into
this Agreement, the Indenture, the Trust Agreement, the Guarantee
Agreement and the Expense Agreement, as the case may be, and to
authorize, issue and sell the Junior Subordinated Debentures or the
Common Securities and the Preferred Securities, as the case may be, as
contemplated by this Agreement; and each of the Indenture, the Trust
Agreement and the Guarantee Agreement has been duly qualified under the
Trust Indenture Act and will conform in all material respects to the
statements relating thereto in the Registration Statement and the
Prospectus.
(viii) The Junior Subordinated Debentures have been duly
authorized by the Company and at the Closing Date will have been duly
executed by the Company and, when authenticated in the manner provided
for in the Indenture and delivered against payment therefor as described
in the Prospectus, will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms,
except to the extent that enforcement thereof
-5-
<PAGE> 6
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally and subject to general
principles of equity, will be in the form contemplated by, and entitled
to the benefits of, the Indenture, will conform to the statements
relating thereto in the Prospectus, and will be owned by the Trust free
and clear of any security interest, pledge, lien, encumbrance, claim or
equity.
(ix) The Common Securities have been duly authorized by
the Trust Agreement and, when issued and delivered by the Trust to the
Company against payment therefor as described in the Prospectus, will be
validly issued and (subject to the terms of the Trust Agreement) fully
paid and nonassessable undivided beneficial interests in the assets of
the Trust and will conform to all statements relating thereto contained
in the Prospectus; and at the Closing Date all of the issued and
outstanding Common Securities of the Trust will be directly owned by the
Company free and clear of any security interest, pledge, lien,
encumbrance, claim or equity.
(x) The Preferred Securities have been duly authorized
by the Trust Agreement and, when issued and delivered pursuant to this
Agreement against payment of the consideration set forth herein, will be
validly issued and fully paid and non-assessable undivided beneficial
interests in the Trust, will be entitled to the benefits of the Trust
Agreement and will conform to the statements relating thereto contained
in the Prospectus; and holders of Preferred Securities will be entitled
to the same limitation of personal liability under Delaware law as
extended to stockholders of private corporations for profit.
(xi) The Indenture, the Trust Agreement, the Guarantee
Agreement and the Expense Agreement are in substantially the respective
forms filed as exhibits to the Registration Statement.
(xii) The Company's obligations under the Guarantee
Agreement are subordinated and junior in right of payment to all Senior
and Subordinated Debt (as defined in the Indenture) of the Company.
(xiii) The Junior Subordinated Debentures are subordinate
and junior in right of payment to all Senior and Subordinated Debt of
the Company.
(xiv) Each of the Administrative Trustees of the Trust is
an officer of the Company and has been duly authorized by the Company to
execute and deliver the Trust Agreement.
(xv) The financial statements, together with the related
notes and schedules, contained in the Registration Statement and
Prospectus present fairly the consolidated financial position, results
of operations, shareholders' equity and cash flows of the Company and
its consolidated Subsidiaries on the basis stated therein at the
indicated dates and for the indicated periods. Such financial
statements have been prepared in accordance with generally accepted
-6-
<PAGE> 7
accounting principles consistently applied throughout the periods
involved, and all adjustments necessary for a fair presentation of
results for such periods have been made, except as otherwise stated
therein. The selected financial and statistical data included in the
Registration Statement present fairly the information shown therein on
the basis stated in the Registration Statement and have been compiled on
a basis consistent with the financial statements presented therein.
(xvi) There is no action or proceeding pending or, to the
knowledge of the Trust or the Company, threatened or contemplated
against any of the Trust, the Company or any Subsidiary before any court
or administrative or regulatory agency which, if determined adversely to
the Trust, the Company or such Subsidiary would, individually or in the
aggregate, result in a material adverse change in the business or
condition (financial or otherwise), results of operations, shareholders'
equity or prospects of the Trust, the Company or such Subsidiary, taken
as a whole, except as set forth in the Registration Statement.
(xvii) There are no contracts or documents of the Trust or
the Company or any Subsidiary that are required by the Act or by the
rules and regulations thereunder to be filed as exhibits to the
Registration Statement which contracts or documents have not been so
filed.
(xviii) The Company and the Subsidiaries have good
and marketable title to all properties and assets reflected as owned in
the financial statements hereinabove described (or as described as owned
in the Prospectus), in each case free and clear of all liens,
encumbrances and defects, except such as are described in the Prospectus
or do not substantially affect the value of such properties and assets
and do not materially interfere with the use made and proposed to be
made of such properties and assets by the Company and the Subsidiaries;
and any real property and buildings held under lease by the Company and
the Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and the Subsidiaries.
(xix) Since the respective dates as of which information
is given in the Registration Statement, as it may be amended or
supplemented, (A) there has not been any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the condition, financial or otherwise, of the Trust, the
Company and the subsidiaries taken as a whole, or the business affairs,
management, financial position, shareholders' equity or results of
operations of the Trust, the Company and the Subsidiaries, taken as a
whole, whether or not occurring in the ordinary course of business,
including, without limitation, any material increase in the amount or
number of classified assets of the Bank, any decrease in net interest
margin for
-7-
<PAGE> 8
any month to a level below ___%, or any material decrease in the volume
of loan originations, the amount of deposits or the amount of loans, (B)
there has not been any transaction not in the ordinary course of
business entered into by the Trust, the Company or any of the
Subsidiaries which is material to the Trust, the Company and the
Subsidiaries, taken as a whole, other than transactions described or
contemplated in the Registration Statement, (C) the Trust, the Company
and the Subsidiaries have not incurred any material liabilities or
obligations, which are not in the ordinary course of business or which
could result in a material reduction in the future earnings of the
Trust, the Company and the Subsidiaries, (D) the Trust, the Company and
the Subsidiaries have not sustained any material loss or interference
with their respective businesses or properties from fire, flood,
windstorm, accident or other calamity, whether or not covered by
insurance, (E) there has not been any change in the capital stock of the
Company or the Subsidiaries (other than upon the exercise of options and
warrants described in the Registration Statement), or any material
increase in the short-term or long-term debt (including capitalized
lease obligations) of the Company aas a whole, and (F) there has not
been any declaration or payment of any dividends or any distributions of
any kind with respect to the capital stock of the Company or the
Subsidiaries other than any dividends or distributions described or
contemplated in the Registration Statement.
(xx) Neither the Company nor any of the Subsidiaries is
in violation of its respective charter or Bylaws; the Trust is not in
violation of the Trust Agreement or its Certificate of Trust; and none
of the Trust, the Company, or the Subsidiaries is in violation of or
otherwise in default under any statute, or any rule, regulation, order,
judgment, decree or authorization of any court or governmental or
administrative agency or body having jurisdiction over the Trust, the
Company or any of the Subsidiaries or any of their properties, or any
indenture, mortgage, deed of trust, loan agreement, lease, franchise,
license or other agreement or instrument to which the Trust, the Company
or any of the Subsidiaries is a party or by which any of them are bound
or to which any property or assets of the Trust, the Company or any of
the Subsidiaries is subject, which violation or default would have a
material adverse effect on the business, condition (financial or
otherwise), results of operations, shareholders' equity or prospects of
the Trust, the Company and the Subsidiaries, taken as a whole.
(xxi) The Trust, the Company and each of the Subsidiaries
holds and is operating in compliance with all licenses, approvals,
certificates and permits from governmental and regulatory authorities,
foreign and domestic, which are necessary to the conduct of its business
as described in the Prospectus. Without limiting the generality of the
foregoing, the Company has all
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<PAGE> 9
necessary approvals of the Fed to own the stock of the Subsidiaries.
None of the Trust, the Company or any Subsidiary has received notice of
or has knowledge of any basis for any proceeding or action relating
specifically to the Trust, the Company or the Subsidiaries for the
revocation or suspension of any such consent, authorization, approval,
order, license, certificate or permit or any other action or proposed
action by any regulatory authority having jurisdiction over the Trust,
the Company or the Subsidiaries that would have a material adverse
effect on the Trust, the Company or any Subsidiary.
(xxii) To the best of the Offerors' knowledge, Fortner,
Bayens, Levkulich and Co., P.C., which has certified certain of the
financial statements filed with the Commission as part of the
Registration Statement, are independent public accountants as required
by the Act and the rules and regulations thereunder.
(xxiii) The Offerors have not taken and will not
take, directly or indirectly, any action designed to, or which has
constituted, or which might reasonably be expected to cause or result
in, stabilization or manipulation of the price of the Preferred
Securities.
(xxiv) The Offerors' registration statement pursuant to
Section 12(g) of the Exchange Act with respect to the Preferred
Securities, has been declared effective by the Commission; the Preferred
Securities have been approved for quotation and trading, upon notice of
issuance, on the Nasdaq National Market under the symbol "MBFCA."
(xxv) The Offerors have not distributed and will not
distribute any prospectus or other offering material in connection with
the offering and sale of the Preferred Securities other than any
Preliminary Prospectus or the Prospectus or other materials permitted by
the Act to be distributed by the Company.
(xxvi) The deposit accounts of the Bank are insured by the
Federal Deposit Insurance Corporation (the "FDIC") to the fullest extent
provided by law. No proceeding for the termination of such insurance is
pending or is threatened. Neither the Company nor any Subsidiary has
received or is subject to any directive or order from the Fed, the FDIC,
the Colorado Division of Banking, or any other regulatory authority to
make any material change in the method of conducting their respective
businesses that has not been complied with in all material respects.
(xxvii) The Offerors are in material compliance with
all provisions of Florida Statutes Section 517.075 (Chapter 92-198, laws
of Florida). Neither the Offerors nor any of their affiliates does any
business, directly or indirectly, with the government of Cuba or with
any person or entity located in Cuba.
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<PAGE> 10
(xxviii) The Trust, the Company and the Subsidiaries,
to the best of their knowledge, have filed all federal, state, local and
foreign tax returns or reports required to be filed, and have paid in
full all taxes indicated by said returns or reports and all assessments
received by it or any of them to the extent that such taxes have become
due and payable, except where the Trust, the Company and the
Subsidiaries are contesting in good faith such taxes and assessments.
The Company and the Subsidiaries have also filed all required
applications, reports, returns and other documents and information with
all state and federal banking authorities and agencies.
(xxix) The Trust, the Company and each of the Subsidiaries,
to the best of their knowledge, owns or licenses all patents, patent
applications, trademarks, service marks, tradenames, trademark
registrations, service mark registrations, copyrights, licenses,
inventions, trade secrets and other similar rights necessary for the
conduct of their businesses as described in the Prospectus. Neither the
Trust, the Company nor any of the Subsidiaries has any knowledge of any
infringement of any patents, patent applications, trademarks, service
marks, tradenames, trademark registrations, service mark registrations,
copyrights, licenses, inventions, trade secrets or other similar rights
of others, and none of the Trust, the Company or any of the Subsidiaries
has received any notice or claim of conflict with the asserted rights of
others with respect to any of the foregoing.
(xxx) None of the Trust, the Company or any of the
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended, or an "investment adviser" within the meaning of the
Investment Advisers Act of 1940, as amended.
(xxxi) The Company and its Subsidiaries maintain, and the
Trust will maintain, a system of internal accounting controls sufficient
to provide reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (C) access to
records is permitted only in accordance with management's general or
specific authorization; and (D) the recorded accountability for assets
is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(xxxii) Other than as contemplated by this Agreement
and as disclosed in the Registration Statement, the Company has not
incurred any liability for any finder's or broker's fee or agent's
commission in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
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<PAGE> 11
(xxxiii) No report or application filed by the Company or
any of its subsidiaries with the Fed, the FDIC or the Colorado Division
of Banking, as of the date it was filed, contained an untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading when made or failed to comply with the applicable
requirements of the Fed, the FDIC or the Colorado Division of Banking,
as the case may be.
(xxxiv) The proceeds from the sale of the Preferred
Securities will constitute "tier 1" capital (as defined in 12 C.F.R.
Part 325), subject to applicable regulatory restrictions on the amount
thereof that can be included in tier 1 capital.
(xxxv) The Offerors meet all of the requirements for the
use of Form SB-2 to register the Preferred Securities, the Guarantee and
the Common Securities under the Act.
(b) Any certificate signed by or on behalf of the Trust or the
Company and delivered to the Underwriters or counsel to the Underwriters shall
be deemed to be a representation and warranty of the Trust or the Company to
each Underwriter as to the matters covered thereby.
2. Purchase, Sale and Delivery of Preferred Securities. On
the basis of the representations, warranties and agreements herein contained,
but subject to the terms and conditions herein set forth, the Trust agrees to
issue and sell to each Underwriter, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Trust, at a purchase price per
Capital Security of $10.00, the number of Preferred Securities set forth
opposite the name of such Underwriter in Schedule A hereto. As compensation to
the Underwriters for their commitments hereunder and in view of the fact that
the proceeds of the sale of the Preferred Securities (together with the entire
proceeds from the sale by the Trust to the Company of the Common Securities)
will be used to purchase the Junior Subordinated Debentures, the Company hereby
agrees to pay at the Closing Date to you a commission of $___________ per
Capital Security sold by the Trust hereunder.
The Preferred Securities will be delivered by the Company to you against
payment of the purchase price therefor at the offices of Jones & Keller,
Denver, Colorado, or such other location as may be mutually acceptable, at 8:00
a.m. Mountain time on _____________, 1998, or such other time and date as you
and the Company may agree upon in writing, such time and date of delivery being
herein referred to as the "Closing Date." The purchase price shall be payable
by wire transfer of immediately available funds to an account, such account to
be designated by the Trust at least two business days preceding the Closing
Date. The Underwriters' commission shall be payable by wire transfer of
immediately available funds to an account, such account to be designated by the
Underwriters at least two business days preceding the Closing Date. Delivery
of the Preferred Securities may be made by credit through full fast
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<PAGE> 12
transfer to the accounts at The Depository Trust Company designated by you.
Certificates representing the Preferred Securities, in definitive form and in
such denominations and registered in such names as you may request upon at
least two business days' prior notice to the Company shall be prepared and will
be made available for checking and packaging, not later than 10:30 a.m.,
Central time, on the business day next preceding the Closing Date at the
offices of Howe Barnes Investments, Inc., 135 South LaSalle Street, Chicago,
Illinois 60603, or such other location as may be mutually acceptable.
It is understood that any Underwriter may (but shall not be obligated
to) make payment to the Company on behalf of the other Underwriter for the
Securities to be purchased by such Underwriter. Any such payment shall not
relieve such other Underwriter of any of its obligations hereunder. Nothing
herein contained shall constitute the Underwriters an unincorporated
association or partner with either or both Offerors.
3. Offering by Underwriters. It is understood that the
several Underwriters propose to make a public offering of the Preferred
Securities as soon as the Underwriters deem it advisable to do so. The
Preferred Securities are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Underwriters may from
time to time thereafter change the public offering price and other selling
terms.
4. Covenants of the Offerors. The Offerors jointly and
severally covenant and agree with the several Underwriters that:
(a) The Offerors will prepare and timely file with the
Commission under Rule 424(b) under the Act a Prospectus containing
information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A under the Act, and will
not file any amendment to the Registration Statement or supplement to
the Prospectus of which the Underwriters shall not previously have been
advised and furnished with a copy and as to which the Underwriters shall
have reasonably objected in writing promptly after reasonable notice
thereof or which is not in compliance with the Act or the rules and
regulations thereunder.
(b) The Offerors will advise the Underwriters promptly
of any request of the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional
information, or of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of
the Prospectus, of the suspension of the qualification of the Preferred
Securities for offering or sale in any jurisdiction, or of the
institution or threatening of any proceedings for that purpose, and the
Offerors will use their best efforts to prevent the issuance of any such
stop order preventing or suspending the use of the
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<PAGE> 13
Prospectus or suspending such qualification and to obtain as soon as
possible the lifting thereof, if issued.
(c) The Offerors will cooperate with you and your
counsel in order to qualify the Preferred Securities for sale under the
securities laws of such jurisdictions as the Underwriters may reasonably
have designated in writing and to continue such qualifications in effect
for so long as the Underwriters may reasonably request for distribution
of the Preferred Securities (or obtain exemptions from the application
of such laws), provided that neither Offeror shall be required to
qualify as a foreign corporation or to file a general consent to service
of process in any jurisdiction where it is not now so qualified or
required to file such a consent. The Offerors will, from time to time,
prepare and file such statements, reports and other documents as may be
requested by the Underwriters for that purpose.
(d) The Offerors will furnish the Underwriters with as
many copies of any Preliminary Prospectus as the Underwriters may
reasonably request and, during the period when delivery of a prospectus
is required under the Act, the Offerors will furnish the Underwriters
with as many copies of the Prospectus in final form, or as thereafter
amended or supplemented, as the Underwriters may, from time to time,
reasonably request. The Offerors will deliver to the Underwriters, at
or before the Closing Date, two signed copies of the Registration
Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Underwriters such number of conformed
copies of the Registration Statement, without exhibits, and of all
amendments thereto, as the Underwriters may reasonably request.
(e) If, during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event
shall occur as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances existing at the time
the Prospectus is delivered to a purchaser, not misleading, or if for
any other reason it shall be necessary at any time to amend or
supplement the Prospectus to comply with any law, the Offerors promptly
will prepare and file with the Commission an appropriate amendment to
the Registration Statement or supplement to the Prospectus so that the
Prospectus as so amended or supplemented will not include an untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein in light of the
circumstances when it is so delivered, not misleading, or so that the
Prospectus will comply with law.
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<PAGE> 14
(f) The Offerors will make generally available to their
security holders, as soon as it is practicable to do so, but in any
event not later than 18 months after the effective date of the
Registration Statement, an earnings statement (which need not be
audited) in reasonable detail, covering a period of at least 12
consecutive months beginning after the effective date of the
Registration Statement, which earnings statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 thereunder and
will advise you in writing when such statement has been so made
available.
(g) The Company will, for five years from the Closing
Date, deliver to each Underwriter, as soon as they are available, copies
of its annual report and copies of all other documents, reports and
information furnished by the Company to its security holders or filed
with any securities exchange pursuant to the requirements of such
exchange or with the Commission pursuant to the Act or the Exchange Act.
The Company will deliver to each Underwriter similar reports with
respect to significant subsidiaries, as that term is defined in the
rules and regulations under the Act, which are not consolidated in the
Company's financial statements.
(h) The Offerors will apply the net proceeds from the
sale of the Subordinated Debentures and the Preferred Securities
substantially in accordance with the purposes set forth under "Use of
Proceeds" in the Prospectus.
(i) The Offerors will comply with all registration,
filing and reporting requirements of the Exchange Act and the Nasdaq
National Market.
5. Costs and Expenses. (a) The Offerors will pay (directly
or by reimbursement) all costs, expenses and fees incident to the performance
of the obligations of the Offerors under this Agreement, including, without
limiting the generality of the foregoing, the following: accounting fees of
the Offerors; the fees and disbursements of counsel for the Offerors; the cost
of preparing, printing and filing of the Registration Statement, Preliminary
Prospectuses and the Prospectus and any amendments and supplements thereto and
the printing, mailing and delivery to the Underwriters and dealers of copies
thereof and of this Agreement, the Selected Dealers Agreement, the Blue Sky
Memorandum, if deemed necessary by the Underwriters, after consultation with
the Offerors, and any supplements or amendments thereto (excluding, except as
provided below, fees and expenses of counsel to the Underwriters); the filing
fees of the Commission; the filing fees and expenses (including legal fees and
disbursements of counsel for the Underwriters) incident to securing any
required review by the National Association of Securities Dealers, Inc. (the
"NASD") of the terms of the sale of the Preferred Securities; the fees and
expenses of the Indenture Trustee, including the fees and disbursements of
counsel for the Indenture Trustee in connection with the Indenture and Junior
Subordinated Debentures; the fees and expenses of
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<PAGE> 15
the Property Trustee and the Delaware Trustee, including the fees and
disbursements of counsel for the Property Trustee and the Delaware Trustee in
connection with the Trust Agreement and the Certificate of Trust; the fees and
expenses of the Guarantee Trustee, including the fees and disbursements of
counsel for the Guarantee Trustee in connection with the Guarantee and
Guarantee Agreement; listing fees, if any, transfer taxes and the expenses,
including the fees and disbursements of counsel for the Underwriters, incurred
in connection with the qualification of the Preferred Sey laws; the fees and
expenses incurred in connection with the designation of the Preferred
Securities on the Nasdaq National Market; the costs of preparing certificates
representing Junior Subordinated Debentures or Preferred Securities; the costs
and fees of any registrar or transfer agent and all other costs and expenses
incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section 5. In addition, the
Offerors will pay all travel and lodging expenses incurred by management of the
Offerors in connection with any informational "road show" meetings held in
connection with the offering and will also pay for the preparation of all
materials used in connection with such meetings. The Offerors shall not be
required to pay for any of the Underwriters' expenses (other than those related
to qualification of the Preferred Securities under state securities or Blue Sky
laws and those incident to securing any required review by the NASD of the
terms of the sale of the Preferred Securities which shall be paid by the
Offerors as provided above) except that, if this Agreement shall not be
consummated because the conditions in Section 6 hereof are not satisfied, or
because this Agreement is terminated by the Underwriters pursuant to Sections
9(a) or 9(b) hereof, or by reason of any failure, refusal or inability on the
part of the Offerors to perform any undertaking or satisfy any condition of
this Agreement or to comply with any of the terms hereof on either of their
parts to be performed, unless such failure to satisfy said condition or to
comply with said terms shall be due to the default or omission of any
Underwriter, then the Offerors promptly upon request by the Underwriters shall
reimburse the several Underwriters for all actual, accountable out-of-pocket
expenses, up to $25,000, including fees and disbursements of counsel reasonably
incurred in connection with investigating, marketing and proposing to market
the Preferred Securities oforming their obligations hereunder; but the Offerors
shall not in any event be liable to any of the several Underwriters for damages
on account of loss of anticipated profits from the sale by them of the
Preferred Securities.
(b) Upon successful completion of the offering contemplated by
this Agreement, the Offerors will pay all reasonable and customary costs,
expenses and fees incident to tombstone advertisements of the offering and
incurred with the approval of the Company.
6. Conditions of Obligations of the Underwriters. The
several obligations of the Underwriters to purchase the Preferred Securities on
the Closing Date are subject to the condition that
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<PAGE> 16
all representations and warranties of the Offerors contained herein are true
and correct, at and as of the Closing Date, and the condition that each Offeror
shall have performed all of its covenants and obligations hereunder and to the
following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 4(a) hereof; no stop order suspending the effectiveness of
the Registration Statement, as amended from time to time, or any part
thereof shall have been issued and no proceedings for that purpose shall
have been initiated or threatened by the Commission; and all requests
for additional information on the part of the Commission shall have been
complied with to the reasonable satisfaction of the Underwriters.
(b) The Underwriters shall have received on the Closing Date
the opinion of Jones & Keller, Denver, Colorado, counsel for the
Offerors, dated the Closing Date, addressed to the Underwriters, to the
effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, with corporate power and
authority to own or lease its properties and conduct its business as
described in the Prospectus. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. The
holders of the Company's outstanding securities are not entitled to
any preemptive or other rights to subscribe for the Junior
Subordinated Debentures or the Preferred Securities under the
Company's Articles of Incorporation or Bylaws and, to the knowledge
of such counsel, no such rights exist under any other agreement or
arrangement. The Company has authorized and outstanding capital
stock as described in the Prospectus.
(ii) Each Subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation,
with corporate power and authority to own or lease its properties
and conduct its business as described in the Prospectus. The
outstanding capital stock of each such Subsidiary has been duly
authorized and validly issued, is fully paid and nonassessable and
is owned, directly or indirectly, by the Company, free and clear of
all liens, encumbrances and security interests, other than security
interests specifically disclosed in the Prospectus. To the
knowledge of such counsel, no options, warrants or
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<PAGE> 17
other rights to purchase, agreements or other obligations to issue
or other rights to convert any obligations into capital stock or
ownership interests in any Subsidiary are outstanding.
(iii) All of the issued and outstanding Common Securities
of the Trust are owned by the Company free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equitable
right.
(iv) The Trust Agreement, the Indenture, the Guarantee,
the Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee under the Indenture, the Form T-1 Statement of
Eligibility of Wilmington Trust Company to act as trustee under the
Trust Agreement, and the Form T-1 Statement of Eligibility of
Wilmington Trust Company to act as trustee under the Guarantee
Agreement have been duly qualified under the Trust Indenture Act.
(v) The Junior Subordinated Debentures are in the form
contemplated by the Indenture, have been duly authorized, executed
and delivered by the Company and, when authenticated by the
Indenture Trustee in the manner provided for in the Indenture and
delivered against payment therefor, will constitute valid and
binding obligations of the Company, enforceable against the Company
in accordance with their terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.
(vi) The Junior Subordinated Debentures are subordinate
and junior in right of payment to all "Senior and Subordinated Debt"
(as defined in the Indenture) of the Company.
(vii) Under current law, the Trust will be classified for
United States federal income tax purposes as a grantor trust and not
as an association taxable as a corporation; accordingly, for United
States federal income tax purposes each beneficial owner of
Preferred Securities will be treated as owning an undivided
beneficial interest in the Junior Subordinated Debentures, and
stated interest on the Junior Subordinated Debentures generally will
be included in income by a holder of Preferred Securities at the
time such interest income is paid or accrued in accordance with such
holder's regular method of tax accounting.
(viii) For federal income tax purposes, (a) the Junior
Subordinated Debentures will constitute indebtedness of the Company
and (b) the interest on the Junior Subordinated Debentures will be
deductible by the Company on an economic accrual basis in accordance
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<PAGE> 18
with Section 163(e) of the Internal Revenue Code of 1986, as
amended, and Treasury Regulation Section 1.163-7.
(ix) To the best of such counsel's knowledge and
information after due inquiry, the Trust is not required to be
authorized to do business in any other jurisdiction, except where
the failure to be so authorized would not have a material adverse
effect on the Trust's condition (financial or otherwise), earnings,
business, prospects, assets, results of operations or properties
taken as a whole and the Trust is not a party to or otherwise bound
by any material agreement other than those described in the
Prospectus.
(x) The Trust Agreement has been duly executed and
delivered by the Administrative Trustees.
(xi) To the best of such counsel's knowledge and
information after due inquiry, the Offerors are not in default in
the performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or any other instrument of
which either of them is a party or by which either of them may be
bound, or to which any of the property or assets of the Offerors is
subject.
(xii) The Company has full corporate power and authority
and the Trust has full trust power and authority to enter into this
Agreement, the Indenture, the Trust Agreement, the Guarantee
Agreement and the Expense Agreement, as applicable, and to issue the
Junior Subordinated Debentures or the Common Securities and
Preferred Securities, as the case may be, and to effect the
transactions contemplated by this Agreement, the Indenture, the
Trust Agreement, the Guarantee Agreement and the Expense Agreement,
as applicable, and each of this Agreement, the Indenture, the Trust
Agreement, the Guarantee Agreement and the Expense Agreement have
been duly authorized, executed and delivered by the Company and the
Trust, as applicable, and constitutes a valid, legal and binding
obligation of the Company and the Trust, as applicable, enforceable
in accordance with its terms (except as rights to indemnity
hereunder may be limited by federal or state securities laws and
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity).
The execution, delivery and performance of this Agreement, the
Indenture, the Trust Agreement, the Guarantee Agreement, the
Preferred Securities, the Common Securities, the Junior Subordinated
Debentures and the Expense Agreement and the consummation
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<PAGE> 19
of the transactions herein or therein contemplated will not result
in a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, rule or regulation (except
that such counsel need express no opinion regarding any Blue Sky or
state securities laws), any lease, contract, indenture, mortgage,
loan agreement or other agreement or instrument known to such
counsel to which the Company, the Trust or any Subsidiary is a party
or by which it is bound or to which any of its property is subject,
the Company's or any Subsidiary's charter or bylaws, or the Trust's
Certirder or decree known to such counsel of any court or
governmental agency or body having jurisdiction over the Company,
the Trust or any Subsidiary or any of their respective properties,
except for any breach, violation or default which would not have a
material adverse effect on the Company or the Trust; and no consent,
approval, authorization, order of, designation, declaration or
filing by or with, any court or any regulatory, administrative or
governmental agency or body is required for the execution, delivery
and performance of this Agreement, the Indenture, the Trust
Agreement, the Guarantee Agreement, the Expense Agreement, the
Common Securities, the Preferred Securities, or the Junior
Subordinated Debentures, or for the consummation of the transactions
contemplated hereby or thereby (other than as may be required by
federal or state laws governing banks or bank holding companies, the
NASD, or by state securities and blue sky laws, as to which such
counsel need express no opinion), including the issuance or sale of
the Junior Subordinated Debentures by the Company and the Common
Securities and Preferred Securities by the Trust, except (a) such as
may be required under the Act, which have been obtained or made, or
under state securities or blue sky laws, (b) such agreements,
instruments or obligations with respect to which valid consents or
waivers have been obtained by the Trust, the Company or any of the
Subsidiaries, and (c) the qualification of the Trust Agreement, the
Guarantee Agreement and the Indenture under the Trust Indenture Act
and the regulations thereunder, all of which have been effected.
The filing of the Registration Statement and the registration of the
Junior Subordinated Debentures, the Guarantee and the Preferred
Securities under the Act does not give rise to any rights for or
relating to the registration of any shares of capital stock or other
securities of the Company.
(xiii) The Registration Statement has become effective
under the Act and, to the knowledge of such counsel, no stop order
proceedings with respect thereto have been instituted or are pending
or threatened by the Commission.
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<PAGE> 20
(xiv) The Registration Statement, the Prospectus and each
amendment or supplement, thereto comply as to form in all material
respects with the requirements of the Act and the rules and
regulations thereunder (except that such counsel need express no
opinion as to the financial statements and related financial
schedules contained in the financial statements, Registration
Statement, the Prospectus and each amendment or supplement thereto).
(xv) The statements (A) in the Prospectus under the
captions "Risk Factors" -- Ranking of the Company's Obligations
Under the Junior Subordinated Debentures and the Guarantee," and --
Option to Extend Interest Payment Period; Tax Consequences; Market
Price Consequences;" and "Certain Federal Income Tax Consequences"
and (B) in the Registration Statement in Item 24, insofar as such
statements constitute a summary of matters of law, are accurate
summaries and fairly present the information called for with respect
to such matters.
(xvi) Such counsel does not know of any contracts,
agreements, documents or instruments required to be filed as
exhibits to the Registration Statement or described in the
Registration Statement or the Prospectus which are not so filed or
described as required; and insofar as any statements in the
Registration Statement or the Prospectus constitute summaries of any
contract, agreement, document or instrument to which the Trust, the
Company or any Subsidiary is a party, such statements are accurate
summaries and fairly present the information called for with respect
to such matters.
(xvii) Such counsel knows of no legal or governmental
proceeding, pending or threatened, before any court or
administrative body or regulatory agency, to which the Trust, the
Company or any of the Subsidiaries is a party or to which any of the
properties of the Trust, the Company or any of the Subsidiaries is
subject that are required to be described in the Registration
Statement or Prospectus and are not so described, or statutes or
regulations that are required to be described in the Registration
Statement or the Prospectus that are not so described (other than
any banking laws (as defined below), as to which counsel need
express no opinion).
(xviii) Neither the Company nor the Trust is, and
immediately upon completion of the sale of Preferred Securities
contemplated hereby, neither the Company nor the Trust will be, an
"investment company" or a company "controlled" by an investment
company under the Investment Company Act of 1940, as amended.
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<PAGE> 21
(xix) To the best of such counsel's knowledge, neither
the Company nor any of the Subsidiaries is in violation of its
respective charter or bylaws.
Such counsel shall also state that on the basis of such counsel's review
and participation in conferences in connection with the preparation of the
Registration Statement and the Prospectus, such counsel has no reason to
believe that, as of its effective date, the Registration Statement or any
further amendment thereto made by the Offerors prior to the Closing Date, as
the case may be (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that, as of its date, the Prospectus or any further amendment or supplement
thereto made by the Offerors prior to the Closing Date, (other than the
financial statements and related schedules therein, as to which such counsel
need express no opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading or that, as
of the Closing Date, either the Registration Statement or the Prospectus or any
further amendment or supplement thereto made by the Offerors prior to the
Closing Date (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
In rendering the above opinions, counsel may rely (i) as to matters of
law other than Colorado and federal law, upon the opinion or opinions of local
counsel provided that the extent of such reliance is specified in such opinion
and that such counsel shall state that such opinion or opinions of local
counsel are satisfactory to them and they believe they and you are justified in
relying thereon and (ii) as to matters of fact, upon the representations of the
Trust and the Company contained in this Agreement and upon certificates of
trustees or officers of the Trust, the Company and of public officials.
(c) The Underwriters shall have received on the Closing Date
the opinion of Slivka Robinson Waters & D'Orsto, P.C., banking counsel for the
Company, dated the Closing Date, addressed to the Underwriters, to the effect
that:
(i) The Bank has been duly chartered to conduct the
business of banking in its state of domicile and the Company has all
necessary power and authority to own the Bank. The Company and the
Bank have all necessary consents and approvals under applicable
federal and state laws and regulations relating to banks and bank
holding companies ("banking laws") to own their respective assets
and carry on their respective businesses as currently conducted.
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<PAGE> 22
(ii) The statements in the Prospectus under the captions
"Risk Factors -- Dependence on Dividends from Subsidiary Bank, --
Competitive Banking Environment and -- Government Regulation and
Recent Legislation," insofar as such statements constitute a summary
of banking laws, are accurate summaries and fairly present the
information called for with respect to such matters.
(iii) Such counsel knows of no legal or governmental
proceeding, pending or threatened, before any court or
administrative body or regulatory agency, to which the Company or
any of the Subsidiaries is a party or to which any of the properties
of the Company or any of the Subsidiaries is subject that are
required to be described in the Registration Statement or Prospectus
and are not so described, or statutes or regulations that are
required to be described in the Registration Statement or the
Prospectus that are not so described.
(iv) The execution and delivery of this Agreement, the
Indenture, the Trust Agreement, the Guarantee Agreement and the
Expense Agreement and the consummation of the transactions herein
and therein contemplated do not and will not conflict with or result
in a violation of or default under any banking laws, or any permit,
judgment, decree or order known to such counsel, or any lease,
contract, indenture, mortgage, loan agreement or other agreement or
other instrument or obligation known to such counsel to which the
Company or the Bank is a party or by which the Company or the Banks
or any of their respective properties is bound.
(v) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory,
administrative or other governmental body under banking laws is
necessary in connection with the execution and delivery of this
Agreement, the Indenture, the Trust Agreement, the Guarantee
Agreement and the Expense Agreement and the consummation of the
transactions herein and therein contemplated, except such as have
been obtained or made, specifying the same.
(vi) The proceeds from the sale of the Preferred
Securities will constitute "tier 1" capital (as defined in 12 C.F.R.
Part 325), subject to applicable regulatory limitations on the
amount thereof that can be included in tier 1 capital.]
(d) The Underwriters shall have received on the Closing
Date the opinion of Richards, Layton & Finger, P.A., counsel to
Wilmington Trust Company, as Property Trustee under the Trust
Agreement, Indenture Trustee under the Indenture, and Guarantee
Trustee under the Guarantee Agreement, dated the Closing Date,
addressed to the Underwriters, to the effect that:
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<PAGE> 23
(i) Wilmington Trust Company is duly incorporated and
is validly existing in good standing as a banking corporation under
the 'laws of the State of Delaware.
(ii) Wilmington Trust Company has the power and
authority to execute, deliver and perform its obligations under the
Trust Agreement, the Indenture and the Guarantee Agreement.
(iii) Each of the Trust Agreement, the Indenture and the
Guarantee Agreement has been duly authorized, executed and delivered
by Wilmington Trust Company and constitutes a legal, valid and
binding obligation of Wilmington Trust Company, enforceable against
Wilmington Trust Company, in accordance with its terms.
(iv) The execution, delivery and performance by
Wilmington Trust Company of the Trust Agreement, the Indenture and
the Guarantee Agreement do not conflict with or constitute a breach
of the charter or by-laws of Wilmington Trust Company.
(v) No consent, approval or authorization of, or
registration with or notice to, any governmental authority or agency
of the State of Delaware or the United States of America governing
the banking or trust powers of Wilmington Trust Company is required
for the execution, delivery or performance by Wilmington Trust
Company of the Trust Agreement, the Indenture and the Guarantee
Agreement.
(e) The underwriters shall have received on the Closing
Date the opinion of Richards, Layton & Finger, P.A., as special
counsel for the Offerors that:
(i) The Trust has been duly created and is validly
existing in good standing as a business trust under the Delaware
Act, and all filings required as of the date hereof under the
Delaware Act with respect to the creation and valid existence of the
Trust as a business trust have been made.
(ii) Under the Trust Agreement and the Delaware Act, the
Trust has the trust power and authority to own property and to
conduct its business, all as described in the Prospectus.
(iii) The Trust Agreement constitutes a valid and binding
obligation of the Company, the Property Trustee and each of the
Administrative Trustees, and is enforceable against the Company, the
Property Trustee and each of the Administrative Trustees in
accordance with its terms.
(iv) Under the Trust Agreement and the Delaware Act, the
Trust has the trust power and authority (i) to execute and deliver,
and to perform its obligations under, this Agreement, and (ii) to
issue, and to perform its obligations under, the Preferred
Securities and the Common Securities.
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<PAGE> 24
(v) Under the Trust Agreement and the Delaware Act, the
execution and delivery by the Trust of this Agreement, and the
performance by the Trust of its obligations under this Agreement,
have been duly authorized by all necessary trust action on the part
of the Trust.
(vi) Under the Delaware Act, the certificate attached to
the Trust Agreement as Exhibit C is an appropriate form of
certificate to evidence ownership of the Preferred Securities. The
Preferred Securities and the Common Securities have been duly
authorized by the Trust Agreement and are duly and validly issued
and, subject to the qualifications hereinafter expressed in this
paragraph (vi), fully paid and non-assessable undivided beneficial
interests in the assets of the Trust. The respective holders of the
Preferred Securities and the Common Securities, as beneficial owners
of the Trust, will 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. Such counsel may note that the respective holders of the
Preferred Securities and the Common Securities may be obligated,
pursuant to the Trust Agreement, to make certain payments under the
Trust Agreement.
(vii) Under the Trust Agreement and the Delaware Act, the
issuance of the Preferred Securities and the Common Securities is
not subject to preemptive or similar rights.
(viii) The issuance and sale by the Trust of the Preferred
Securities and the Common Securities, the purchase by the Trust of
the Junior Subordinated Debentures, the execution, delivery and
performance by the Trust of this Agreement and the Guarantee
Agreement, the consummation by the Trust of the transactions
contemplated by this Agreement and compliance by the Trust with its
obligations under this Agreement do not violate (a) any of the
provisions of the Certificate of Trust or the Trust Agreement or (b)
any applicable Delaware law or Delaware administrative regulations.
(f) The Underwriters shall have received from Chapman and
Cutler, Chicago, Illinois, counsel for the Underwriters, an opinion dated the
Closing Date, with respect to the formation of the Trust, the validity of the
Preferred Securities, the Indenture, the Trust Agreement, the Guarantee
Agreement, the Expense Agreement, this Agreement, the Registration Statement,
the Prospectus, and other related matters as the Underwriters may reasonably
request, and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters.
(g) The Underwriters shall have received on each of the date
hereof and the Closing Date a signed letter, dated as of the date hereof or the
Closing Date in form and substance satisfactory to the Underwriters, from
Fortner, Bayens, Levkulich and Co., P.C., to the effect that they are
independent public accountants with respect to the Trust, the Company and the
Subsidiaries within the meaning of the
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<PAGE> 25
Act and the related rules and regulations and containing statements and
information of the type ordinarily included in accountants' "comfort letters"
to underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus.
(h) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date there shall not have been any change or any
development involving a reasonably foreseeable change, in or affecting the
general affairs, management, financial position, shareholders' equity or
results of operations of the Offerors otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in your reasonable
judgment, is material and adverse to the Offerors and makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Preferred Securities being delivered at the Closing Date on the terms and in
the manner contemplated in the Prospectus.
(i) The Underwriters shall have received on the Closing Date a
certificate or certificates of the chief executive officer and the principal
financial officer of the Company, to the effect that, as of the Closing Date
each of them severally represents as follows:
(i) The Prospectus was filed with the Commission
pursuant to Rule 424(b) within the applicable period prescribed for
such filing by the rules and regulations under the Act and in
accordance with Section 4 of this Agreement; no stop order
suspending the effectiveness of the Registration Statement has been
issued, and no proceedings for such purpose have been initiated or
are, to his knowledge, threatened by the Commission.
(ii) The representations and warranties of the Company
set forth in Section 1 of this Agreement are true and correct at and
as of the Closing Date and the Company has performed all of its
obligations under this Agreement to be performed at or prior to the
Closing Date.
(j) The Underwriters shall have received on the Closing Date a
certificate or certificates of the Administrative Trustees, to the effect that,
as of the Closing Date each of them severally represents as follows:
(i) The Prospectus was filed with the Commission
pursuant to Rule 424(b) within the applicable period prescribed for
such filing by the rules and regulations under the Act and in
accordance with Section 4 of this Agreement; no stop order
suspending the effectiveness of the Registration Statement has been
issued, and no proceedings for such purpose have been initiated or
are, to his knowledge, threatened by the Commission.
(ii) The representations and warranties of the Trust set
forth in Section 1 of this Agreement are true and correct at and as
of the Closing Date and the Trust has performed all of its
obligations under this Agreement to be performed at or prior to the
Closing Date.
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<PAGE> 26
(k) The Offerors shall have furnished to the Underwriters such
further certificates and documents as the Underwriters may reasonably have
requested.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects reasonably satisfactory to the Underwriters and to Chapman
and Cutler, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Underwriters by notifying the Trust of such termination in writing or by
telegram at or prior to the Closing Date. In such event, the Trust and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 7 hereof).
Section 7. Indemnification. (a) The Offerors jointly and
severally agree to indemnify and hold harmless each Underwriter, each officer
and director thereof, and each person, if any, who controls any Underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities to which such Underwriter or such persons may became subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus or the
Prospectus, including any amendments or supplements thereto, (ii) the omission
or alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading in light of
the circumstances under which they were made, or (iii) any act or failure to
act or any alleged act or failure to act by any Underwriter in connection with,
or relating in any manner to, the Preferred Securities or the offering
contemplated hereby, and which is included as part of or referred to in any
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arising out of or based upon matters covered by clause (i) or (ii)
above, and will reimburse each Underwriter and each such controlling person for
any legal or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that the
Offerors shall not be liable (1) any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission, made in
the Registration Statement, any Preliminary Prospectus or the Prospectus,
including any amendments or supplements thereto, in reliance upon and in
conformity wion furnished to the Offerors by any Underwriter specifically for
use therein or (2) in the case of any matter covered by clause (iii) above to
the extent that it is determined in a final judgment by a court of competent
jurisdiction that such losses, claims, damages or liabilities resulted directly
from any
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<PAGE> 27
such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its gross negligence, recklessness or willful misconduct.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Offerors and the trustees and directors and officers who have
signed the Registration Statement, and each person, if any, who controls the
Offerors within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Offerors or any such person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made, and will reimburse
any legal or other expenses reasonably incurred by the Offerors or any such
person in connection with investigating or defending any such action or claim
as such expenses are incurred; provided, however, that each Underwriter will be
liable in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission has been
made in the Registration Statement, any Preliminary Prospectus, the Prospectus
or any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Trust or the Company by or through the
Underwriters specifically for use therein. The obligations of the Underwriters
under this Section 7(b) are several in proportion to their respective
underwriting obligations and not joint.
(c) The Company agrees to indemnify the Trust against all
loss, liability, claim damage and expense whatsoever, which may become due from
the Trust under subsection (a).
(d) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity or contribution may be sought pursuant to this Section 7, such person
(the "indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 7(a) or (b) or contribution provided
for in Section 7(e) shall be available with respect to a proceeding to any
party who shall fail to give notice of such proceeding as provided in this
Section 7(d) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by the
failure to give such notice, but the failure to give such notice shall not
relieve the indemnifying party or parties from any liability which it or they
may have to the indemnified party otherwise than on account of the provisions
of Section 7(a) or (b). In case any such proceeding shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement
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<PAGE> 28
thereof, the indemnifying party shall be entitled to participate therein and,
to the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party and shall pay as incurred the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel at its own expense. Notwithstanding the foregoing, the indemnifying
party shall pay promptly as incurred the reasonable fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indd the indemnified party shall have
reasonably concluded that there may be a conflict between the positions of the
indemnifying party and the indemnified party in conducting the defense of any
such action or that there may be legal defenses available to it or other
indemnified parties which are different from or additional to those available
to the indemnifying party. It is understood that the indemnifying party shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate
firm at any time for all such indemnified parties. Such firm shall be
designated in writing by the Underwriters and shall be reasonably satisfactory
to the Offerors in the case of parties indemnified pursuant to Section 7(a) and
shall be designated in writing by the Offerors and shall be reasonably
satisfactory to the Underwriters in the case of parties indemnified pursuant to
Section 7(b). The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
(e) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under Section
7(a) or (b) above in respect of any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Offerors on the
one hand and the Underwriters on the other from the offering of the Preferred
Securities. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Offerors on the one hand and the Underwriters on
the other in connection with the statements or omissions which resulted in such
losses,
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<PAGE> 29
claims, damages or liabilities (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Offerors on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Offerors bears to the
total underwriting discounts and commissions received by the underwriters, in
each case as set forth on the cover page of the prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Offerors on the
one hand or the Underwriters on the other and the parties' relative intent,
knowledge, opportunity to correct or prevent such statement or omission. The
Offerors and the Underwriters agree that it would not be just and equitable if
contributions pursuant to this Section 7(e) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7(e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereto)
referred to above in this Section 7(e) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7(e), no Underwriter shall be required to contribute
any amount in excess of the underwriting discounts and commissions applicable
to the Preferred Securities purchased by such Underwriter; and no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in this
Section 7(e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) The obligations of the Offerors under this Section 7 shall
be in addition to any liability which the Offerors may otherwise have, and the
obligations of the Underwriters under this Section 7 shall be in addition to
any liability which the Underwriters may otherwise have.
Section 8. Notices. All communications hereunder shall be in
writing and, except as otherwise provided herein, will be mailed, delivered or
telegraphed and confirmed as follows: if to the Underwriters, to them c/o Howe
Barnes Investments, Inc., 135 South LaSalle Street, Suite 1500, Chicago,
Illinois 60603, Attention: Daniel E. Coughlin, Senior Vice President and
Director of Corporate Finance; if to the Company, to MegaBank Financial
Corporation, 8100 East Arapahoe Road, Englewood, Colorado 80112, Attention:
Chairman; and if to the Trust, to it at ______________, Attention: Corporate
Trust Administration. All notices given by telegram shall be promptly
confirmed
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<PAGE> 30
by letter. Any notice to the Trust shall also be copied to the Company at the
address previously stated. Any party may change its address for notice
purposes by written notice to the other parties.
Section 9. Termination. This Agreement may be terminated by
you by notice to the Offerors as follows:
(a) At any time prior to the time this Agreement shall
become effective as to all its provisions, and any such termination
shall be without liability on the part of the Offerors to the
Underwriters (except for the expenses to be paid or reimbursed
pursuant to Section 5 and except to the extent provided in Section 7
hereof) or of any Underwriter to the Offerors;
(b) At any time prior to the Closing Date if any of the
following has occurred: (i) since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, any material adverse change in or affecting the
condition, financial or otherwise, of the Trust, the Company and the
Subsidiaries taken as a whole or the business affairs, management,
financial position, shareholders' equity or results of operations of
the Trust, the Company and the Subsidiaries taken as a whole,
whether or not arising in the ordinary course of business, (ii) any
outbreak or escalation of hostilities or declaration of war or
national emergency after the date hereof or other national or
international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, escalation, declaration,
emergency, calamity, crisis or change on the financial markets of
the United States would, in your judgment, make the offering or
delivery of the Preferred Securities impracticable or inadvisable,
(iii) suspension of trading in securities on the New York Stock
Exchange or the American Stock Exchange or limitation on prices
(other than limitations on hours or numbers of days of trading) for
securities on either such Exchange, or a halt or suspension of
trading in securities generally which are quoted on the Nasdaq
National Market or (iv) declaration of a banking moratorium by
either federal authorities or New York or Colorado state
authorities; or
(c) As provided in Section 6 of this Agreement.
Section 10. Written Information. For all purposes under this
Agreement (including, without limitation, Section 1, Section 3 and Section 7
hereof), the Offerors understand and agree with each of the Underwriters that
the following constitutes the only written information furnished to the
Offerors by the Underwriters specifically for use in preparation of the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto: (i) the per share "Price to Public" and per
share "Underwriting Discounts and Commissions" set forth on the cover page of
the Prospectus, (ii) the information relating to stabilization set forth on
page ___ of the Preliminary
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<PAGE> 31
Prospectus and the Prospectus, and (iii) the information set forth in the third
and sixth paragraphs under the caption "Underwriting" in the Preliminary
Prospectus and the Prospectus.
Section 11. Successors. This Agreement has been and is made
solely for the benefit of and shall be binding upon the Underwriters, the Trust
and the Company and their respective successors, executors, administrators,
heirs and assigns, and the trustees and controlling persons and the officers
and directors of any such controlling person referred to herein, and no other
person will have any right or obligation hereunder. The term "successors"
shall not include any purchaser of the Preferred Securities merely because of
such purchase.
Section 12. Miscellaneous. The reimbursement, indemnification
and contribution agreements contained in this Agreement and the
representations, warranties and covenants in this Agreement shall remain in
full force and effect regardless of (a) any termination of this Agreement, (b)
any investigation made by or on behalf of any Underwriter or controlling person
thereof, or by or on behalf of the Offerors or controlling persons thereof and
(c) delivery of and payment for the Preferred Securities under this Agreement.
Each provision of this Agreement shall be interpreted in such a manner
to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable under any applicable
law or rule in any jurisdiction, such provision will be ineffective only to the
extent of such invalidity, illegality or unenforceability in such jurisdiction
or any provision hereof in any other jurisdiction.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Illinois.
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<PAGE> 32
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Offerors and the
Underwriters in accordance with its terms.
Very truly yours,
MB CAPITAL I, a Delaware business trust
By_____________________________
MEGABANK FINANCIAL CORPORATION
By_______________________
The foregoing Underwriting Agreement
is hereby confirmed and accepted as of
the date first above written.
HOWE BARNES INVESTMENTS, INC.
As Representative of the several Underwriters
named in Schedule A
By___________________________________
Senior Vice President
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<PAGE> 33
Schedule A
SCHEDULE OF UNDERWRITERS
UNDERWRITER NUMBER OF
PREFERRED SECURITIES
TO BE PURCHASED
Howe Barnes Investments, Inc.
TOTAL:
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<PAGE> 1
EXHIBIT 3.1
STATE OF COLORADO
DEPARTMENT OF STATE CERTIFICATE
I, NATALIE MEYER, Secretary of State of the State of Colorado hereby
certify that the prerequisites for the issuance of this certificate have been
fulfilled in compliance with law and are found to conform to law.
Accordingly, the undersigned, by virtue of the authority vested in me
by law, hereby issues A CERTIFICATE OF AMENDMENT TO MEGABANK FINANCIAL
CORPORATION.
/s/ Natalie Meyer
-----------------
Secretary of State
Dated July 17, 1987
<PAGE> 2
SECOND
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
MEGABANK FINANCIAL CORPORATION
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation, as previously amended:
FIRST: The name of the corporation is MEGABANK FINANCIAL CORPORATION.
SECOND: The following amendments were adopted by the shareholders of
the corporation on January 13, 1987, in the manner prescribed by the Colorado
Corporation Code:
1. Article XIII of the Articles of Incorporation, as previously
amended, shall be amended to read in its entirety as follows:
"ARTICLE XIII
Indemnification
In addition to the other powers now or hereafter conferred upon the
corporation by these Articles of Incorporation, the Colorado Corporation Code
or otherwise, the corporation shall possess and may exercise all powers to
indemnify directors, officers and other persons and all powers whatsoever
incidental thereto (including without limitation the power to advance expenses
and the power to purchase and maintain insurance with respect thereto), without
regard to whether or not such powers are expressly provided for by the Colorado
Corporation Code, but provided that such powers and the exercise thereof are
consistent with the provisions of the Colorado Corporation Code. The board of
directors is hereby authorized on behalf of the corporation and without
shareholder action to exercise all of the corporation's powers of
indemnification, whether by provision in the Bylaws or otherwise."
THIRD: The number of shares of the corporation outstanding at the
time of such adoption was one hundred sixty-nine thousand (169,000), and the
number of shares entitled to vote thereon was one hundred sixty-nine thousand
(169,000).
FOURTH: The designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows:
CLASS NUMBER OF SHARES
NONE
2
<PAGE> 3
FIFTH: The number of shares voted for such amendment was one hundred
fifty-one thousand (151,000), and the number of shares voted against such
amendment was zero (0).
SIXTH: The number of shares of each class entitled to vote thereon as
a class voted for and against such amendment, respectively, was:
CLASS NUMBER OF SHARES VOTED
For Against
NONE
SEVENTH: The manner, if not set forth in such amendment, in
which any exchange, reclassification, or cancellation of issued shares provided
for in the amendment shall be effected, is as follows:
NO CHANGE
EIGHTH: The manner in which such amendment effects a change in the
amount of stated capital, and the amount of stated capital as changed by such
amendment, are as follows:
NO CHANGE
MEGABANK FINANCIAL CORPORATION
(SEAL) By: By: /s/Raymond Anlionlis
-------------------------
Its Vice President
ATTEST:
By:/s/ Jerry Weigand
------------------
Its Secretary
STATE OF COLORADO )
) ss.
COUNTY OF ARAPAHOE )
The foregoing instrument was acknowledged before me by Raymond L.
Anilionis as Vice President and Jerry L. Weigand as Secretary of MEGAGANK
FINANCIAL CORPORATION, a Colorado corporation, this 7th day of July, 1987.
Witness my hand and official seal.
My commission expires May 26, 1989.
/s/ Paula A. Hancock
--------------------
Notary Public'
3
<PAGE> 4
STATE OF COLORADO
DEPARTMENT OF STATE CERTIFICATE
I, NATALIE MEYER, Secretary of State of the State of Colorado hereby
certify that the prerequisites for the issuance of this certificate have been
fulfilled in compliance with law and are found to conform to law.
Accordingly, the undersigned, by virtue of the authority vested in me
by law, hereby issues A CERTIFICATE OF AMENDMENT TO MEGABANK FINANCIAL
CORPORATION, FORMERLY KNOWN AS FIRST COLORADO BANKSHARES, INC.
/s/ Natalie Meyer
------------------
Secretary of State
DATED: AUGUST 22, 1984
4
<PAGE> 5
FIRST
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
FIRST COLORADO BANKSHARES, INC.
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned Corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is First Colorado Bankshares, Inc.
SECOND: The following amendments were adopted by the Board of
Directors of the Corporation on August 1, 1984 in the manner prescribed by the
Colorado Corporation Code:
a. Article I of the Articles of Incorporation is amended in its
entirety to read:
"The name of the corporation shall be MegaBank Financial
Corporation".
b. Article X of the Articles of Incorporation is amended in its
entirety to read:
"Meetings of shareholders of the Corporation shall be held at
such place within or without the State of Colorado and at such
times as may be prescribed in the By-laws of the Corporation.
Special meetings of the shareholders of the Corporation may be
called by the President of the Corporation, the Board of
Directors, or by the record holder or holders of at least
twenty-five percent (25%) of all shares entitled to vote at
the meeting. At the meeting of the shareholders, except to
the extent otherwise provided by the By-laws, a quorum shall
consist of a majority of the Shares entitled to vote at the
meeting, represented in person or by proxy and, if a quorum is
present, the affirmative vote of the majority of shares
represented and entitled to vote at the meeting shall be the
act of the shareholders unless the vote of a greater number or
voting by classes is required by law"
THIRD: There were no shares of common stock outstanding at the time
of the adoption of the above amendment.
FOURTH: The above amendment was duly adopted by the Board of Directors
of the Corporation.
FIFTH: The aforesaid amendment was duly adopted in accordance with
the provisions of Section 7-2-106 and 7-2-107 of the Colorado Corporation Code.
5
<PAGE> 6
IN WITNESS WHEREOF, First Colorado Bankshares, Inc. has caused these
Articles of Amendment to be signed by the President, attested by its Assistant
Secretary and its corporate seal to be affixed this 16th day of August, 1984.
First Colorado Bankshares, Inc.
By: /s/ Thomas R. Kowalski
--------------------------
Thomas R. Kowalski, President
(SEAL)
ATTEST~
By: /s/ Clinton P. Swift
----------------------
Clinton P. Swift, Assistant Secretary
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
The foregoing instrument was acknowledged before me, Debra McArthur a
Notary Public in and for the said County and State, by Thomas R. Kowalski,
President and Clinton P. Swift, Assistant Secretary of First Colorado
Bankshares, Inc. a Colorado corporation.
Witness my hand and official seal.
/s/ Debra McArthur
------------------
Notary Public
210 University Blvd., 9th Floor
Denver, Colorado 80206
My Commission Expires:
November 8, 1986
6
<PAGE> 7
STATE OF COLORADO
DEPARTMENT OF STATE CERTIFICATE
I, NATALIE MEYER, Secretary of State of the State of Colorado hereby
certify that the prerequisites for the issuance of this certificate have been
fulfilled in compliance with law and are found to conform to law.
Accordingly, the undersigned, by virtue of the authority vested in me
by law, hereby issues A CERTIFICATE OF INCORPORATION TO FIRST COLORADO
BANKSHARES, INC.
/s/ Natalie Meyer
-----------------
Secretary of State
DATED: April 5, 1984
7
<PAGE> 8
ARTICLES OF INCORPORATION
OF
FIRST COLORADO BANKSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS:
THAT I, the undersigned, Clinton P. Swift being a natural person of
the age of eighteen years or more, and desiring to form a corporation under the
laws of the State of Colorado, do hereby sign, verify and deliver these
Articles of Incorporation to the Secretary of State of Colorado.
ARTICLE I
CORPORATE NAME
The name of the corporation shall be First Colorado Bankshares, Inc.
ARTICLE II
PURPOSES
The nature of the business of the corporation and the objects and
purposes to be transacted, promoted and carried on by it are as follows:
2.1 To acquire as principal, agent or partner, general or limited or
as a single or multibank holding company, by purchase, contract or otherwise,
financial institutions and to own, hold, manage, and sell, encumber or
otherwise dispose of and deal in financial institutions of every kind and
description, together with other non-banking activities that are closely
related to the operations of financial institutions.
2.2 To acquire as principal, agent or partner, general or limited, by
purchase, lease contract or otherwise, lands and interest in lands, buildings,
or other structures and to own, hold, improve, develop and manage the same, and
to erect or cause to be erected on any lands owned, held or occupied by the
corporation, buildings or other structures with their appurtenances, and to
rebuild, enlarge, alter or improve any buildings or other structures now or
hereafter erected on any lands so owned, held or occupied; and to mortgage,
sell, lease or otherwise dispose of any lands or interests in lands and in
buildings or other structures at any time owned or held by the corporation.
2.3 To invest in and to buy, sell or otherwise acquire or dispose
of and deal in loans secured by liens upon real and personal property both as
principal and as agent.
8
<PAGE> 9
2.4 To invest, as principal or agent, or partner, general or
limited, in all forms of personal investment property, including without
limitation, securities, stocks, bonds, mutual funds and secured or unsecured
notes.
2.5 To purchase or otherwise acquire the whole or any part of the
property, assets, business, goodwill and rights and to undertake or assume the
whole or any part of the bonds, mortgages, franchises, leases, contracts,
indebtedness, guaranties, liabilities, and obligations of any person, firm,
association, corporation or organization, and to pay for the same or any part
or combination thereof, in cash, shares of the capital stock, bonds,
debentures, debenture stock, notes and other obligations of this corporation,
or otherwise, or by undertaking and assuming the whole or any part of the
liabilities or obligations of the transferor; and to conduct in any lawful
manner the whole or any part of the businesses so acquired and to exercise all
the powers necessary or convenient in and about the conduct, management and
carrying on of such business.
2.6 To borrow money for any of the purposes of this corporation
and to issue bonds, debentures, debenture stock, notes or other obligations
therefore, and to secure the same by pledge or mortgage of the whole or any
part of the property of this corporation whether real or personal, or to issue
bonds, debentures, debenture stock, notes or other obligations with any such
security.
2.7 To lend money, to guarantee, purchase, acquire, exchange,
hold, sell assign, transfer, mortgage, pledge, or otherwise dispose of shares
of the capital stock of, or any bonds, securities or evidences of indebtedness
created by any corporation or corporations organized under the laws of this
State or of any other state, district or county and also bonds or evidences of
indebtedness of the United States or any state, territory, dependency, or
county or subdivision or municipality thereof, and while the owner thereof to
exercise all rights, powers, and privileges of ownership, including the right
to vote thereon.
2.8 To transact any and all lawful business for which corporations
may be incorporated pursuant to the Colorado Corporation Code now existing or
as hereafter amended, in any state, territory, district, possession, dependency
or other political subdivision of the United States of America, or in any
foreign country, to the extent that such business is not forbidden by the laws
of such state, territory, district, possession, dependency or political
subdivision of the United States or America or by such foreign country.
ARTICLE III
DURATION
This corporation shall have perpetual existence, unless dissolved
according to law.
9
<PAGE> 10
ARTICLE IV
CAPITAL STOCK
The amount of authorized capital stock of this corporation is 500,000
shares of no par value common stock. All shares when issued shall be fully paid
and nonassessable, and the shareholders shall not be individually liable for
corporate debts.
ARTICLE V
RIGHTS OF SHAREHOLDERS
The rights and privileges relating to the shares of capital stock
named in Article IV shall be as follows:
5.1 Holders of the shares of the common stock of the corporation
shall not be entitled to the right to purchase or subscribe for any unissued or
treasury shares, or any additional shares to be issued by reason of any
increase of the authorized shares of the corporation, or any bonds,
certificates of indebtedness, debentures, or other securities, rights,
warrants, or options, convertible into shares of any unissued or treasury
shares in accordance with their proportionate equity in the corporation.
5.2 Each share of capital stock shall be entitled to one vote,
either in person or by proxy, at all shareholders' meetings. Cumulative voting
shall not be allowed in the election of directors.
5.3 All outstanding shares of common stock shall share equally in
dividends and upon liquidation. Dividends are payable at the discretion of the
Board of Directors at such times and in such amounts as they deem advisable,
subject, however, to the provisions of the laws of the State of Colorado.
5.4 The Board of Directors may cause any stock issued by the
corporation to be issued subject to such lawful restrictions, qualifications,
limitations or special rights as they deem fit, which restrictions,
qualifications, limitations or special rights may be created by provisions in
the Bylaws of the corporation or in the minutes of any properly convened
meeting of the Board of Directors; provided, however, notice of such special
restrictions, qualifications, limitations or special rights must appear on the
certificate evidencing ownership of such stock.
ARTICLE VI
DIRECTORS
The affairs of the corporation shall be governed by a Board of
Directors of not less than three (3) nor more than twenty-five (25) Directors
as the Bylaws may determine from time to time, who shall be elected in
accordance with the Bylaws of the corporation.
10
<PAGE> 11
The organization and conduct of the Board shall be in accordance with
the following:
6.1 The names and addresses of the members of the initial Board of
Directors, who shall hold office until the first annual meeting of the
shareholders of the corporation, or until their successors shall have been
elected and qualified are:
Thomas R. Kowalski 9033 East Easter Place, Suite 214
Englewood, Colorado 80112
Warren P. Cohen 9729 East Ida Circle
Englewood, Colorado 80111
Edward H. Givens 345 Doulton Place
Creve Coeur, Missouri 63141
Clinton P. Swift 210 University Boulevard, 9th Floor
Denver, Colorado 80206
William Dennis Kenny 15 Fairway Lane
Littleton, Colorado 80123
James S. Frank 5674 South Fulton Way
Englewood, Colorado 80111
Ralph C. Epen 5213 South Ironton Way
Englewood, Colorado 80111
6.2 Directors of the corporation need not be residents of Colorado
nor holders of shares of the corporation's capital stock.
6.3 Meetings of the Board of Directors, regular or special, may be
held within or without Colorado upon such notice as may be prescribed by the
Bylaws of the corporation. Attendance of a Director at a meeting shall
constitute a waiver by him of notice of such meeting unless he attends only for
the express purpose of objecting to the transaction of any business at that
meeting on the ground that the meeting is not lawfully called or convened.
6.4 A majority of the number of Directors at any time constituting
the Board of Directors shall constitute a quorum for the transaction of
business, and the act of a majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
11
<PAGE> 12
6.5 By resolution adopted by a majority of the number of Directors
at any time constituting the Board of Directors, the Board of Directors may
designate two or more Directors to constitute an executive committee which
shall have and may exercise, to the extent permitted by law or in such
resolution, all of the authority of the Board of Directors in the management of
the corporation; provided, however, that such delegation of authority shall not
operate to relieve the Board of Directors or any member thereof of any
responsibility imposed on it or him by law.
6.6 Any vacancy in the Board of Directors, however caused, may be
filled by the affirmative vote of a majority of the remaining Directors, though
less than a quorum of the Board of Directors. A Director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office.
ARTICLE VII
PLACE OF BUSINESS
The principal office and the principal place of business of the
corporation initially shall be located in Denver, Colorado. The Board of
Directors may, however, from time to time establish such other offices,
branches, subsidiaries or divisions in such other place or places within or
without the State of Colorado as it deems advisable. The address of the
corporation's initial registered office in Colorado for the purposes of the
Colorado Corporation Code, as amended, shall be:
8100 East Arapahoe
Englewood, Colorado 80112
The name of the corporation's initial registered agent at the address of the
registered office for purposes of said Code shall be: Clinton P. Swift.
ARTICLE VIII
OFFICERS
The officers of the corporation shall consist of a President, one or
more Vice Presidents as may be prescribed by the Bylaws of the corporation, a
Secretary and a Treasurer, each of whom shall be elected by the Board of
Directors at such time and in such manner as may be prescribed by the Bylaws of
the corporation. Any two or more offices may be held by the same person,
except the offices of President and Secretary.
12
<PAGE> 13
ARTICLE IX
BYLAWS
The Board of Directors shall have the power to make and adopt such
prudent Bylaws for the government of the corporation not inconsistent with the
laws of the State of Colorado or these Articles of Incorporation for the
purpose of regulating and carrying on the business of the corporation within
the scope of its objects and purposes; and the Board of Directors from time to
time may change, alter or amend the same as may be beneficial to the interests
of the corporation except as otherwise specifically provided therein.
ARTICLE X
MEETINGS OF SHAREHOLDERS
Meetings of shareholders of the corporation shall be held at such
place within or without the State of Colorado and at such times as may be
prescribed in the Bylaws of the corporation. Special meetings of the
shareholders of the corporation may be called by the President of the
corporation, the Board of Directors, or by the record holder or holders of at
least ten percent (10%) of all shares entitled to vote at the meeting. At the
meeting of the shareholders, except to the extent otherwise provided by the
Bylaws, a quorum shall consist of a two-thirds (2/3) majority of the Shares
entitled to vote at the meeting, represented in person or by proxy and, if a
quorum is present, the affirmative vote of the majority of shares represented
and entitled to vote at the meeting shall be the act of the shareholders unless
the vote of a greater number or voting by classes is required by law.
ARTICLE XI
SALE OF ASSETS
Whenever the Board of Directors at any meeting thereof, by a
two-thirds (2/3) majority vote of the whole Board, determines that it is in the
best interests of the corporation, the corporation may sell, lease, exchange,
or convey all of its property and assets, including its good will and its
corporate franchises, upon such terms and conditions and for such consideration
as the Board of Directors shall deem expedient; provided, however, that the
sale or disposal of all or substantially all of the property and assets of the
corporation shall be authorized or ratified by the affirmative vote of the
holders of at least a two-thirds (2/3) majority of the capital stock then
issued and outstanding, such vote to be taken at a meeting of shareholders duly
called for that purpose as provided by the statutes of the State of Colorado.
ARTICLE XII
INTEREST OF DIRECTORS IN CONTRACTS
Any contract or other transaction between the corporation and one or
more of its
13
<PAGE> 14
Directors, between the corporation and any firm of which one or more of its
Directors are members or employees, or in which they are interested, or between
the corporation and any corporation or association of which one or more of its
Directors are shareholders, members, directors, officers or employees, or in
which they are interested, shall be valid for all purposes, notwithstanding the
presence of such Director or Directors at the meeting of the Board of Directors
of the corporation which acts upon or in reference to such contract or
transaction, and notwithstanding his or their participation in such action, if
the facts of such interest shall be disclosed or known to the Board of
Directors, and the Board of Directors shall, nevertheless, authorize, approve,
and ratify such contract or transaction by a vote of a majority of the Board of
Directors present. Such interested Director or Directors shall be counted in
determining whether a quorum is present but shall not be counted in calculating
the majority necessary to carry such vote. This Article shall not be construed
to invalidate any contract or other transaction which would otherwise be valid
under the common and statutory law applicable thereto.
ARTICLE XIII
INDEMNIFICATION OF DIRECTORS
The corporation shall indemnify any 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 corporation), by reason of the
fact that he is or was a Director or officer of the corporation, or is or was
serving at the request of the corporation as a Director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with the
defense or settlement of such action, suit or proceeding, to the extent and
under the circumstances permitted by the Colorado Corporation Code, as amended.
The corporation shall indemnify any person who was or is a party or it
threatened to be made a party to any threatened, pending, or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a Director or officer of the
corporation or is or was serving at the request of the corporation as a
Director or officer of another corporation, partnership, joint venture, trust,
or other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit to the extent and under the circumstances permitted by the
Colorado Corporation Code. Such indemnification (unless ordered by a Court)
shall be made as authorized in a specific case upon a determination that
indemnification of the Director, officer, employee or agent is proper in the
circumstances because he has met the applicable standards of conduct set forth
in the Colorado Corporation Code. Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of Directors who
were not parties to such action, suit or proceeding, or (2) if such quorum is
not obtainable, or even if obtainable, a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion or (3) by the
stockholders.
14
<PAGE> 15
The foregoing right of indemnification shall not be deemed exclusive
of any other right to which those seeking indemnification may be entitled under
any bylaw, agreement, vote of stockholders or disinterested Directors or
otherwise, and shall continue as to a person who has ceased to be a Director or
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE XIV
AMENDMENT OF ARTICLES OF INCORPORATION
The corporation expressly reserves the right to amend these Articles
of Incorporation and to alter, change, or repeal any provision contained herein
in any manner now or hereafter permitted by the Colorado Corporation Code, and
the rights of all shareholders are expressly made subject to such power of
amendment. Whenever an amendment to these Articles of Incorporation shall be
required to be adopted by the shareholders of the corporation, the proposed
amendment shall be adopted upon receiving the affirmative vote of a two-thirds
(2/3) majority of shares entitled to vote thereon.
IN WITNESS WHEREOF, I have hereunto set my hand this 30th day of March, 1984.
/s/ Clinton P. Swift
--------------------
Clinton P. Swift, Incorporator
STATE OF COLORADO )
)ss.
CITY AND COUNTY OF DENVER )
I, Debra McArthur, a notary public, hereby certify that on the 30th
day of March, l984, Clinton P. Swift personally appeared before me in the City
and County of Denver, State of Colorado, who being by me first duly sworn
declared that he was the person who signed the foregoing document as
incorporator and that the statements therein contained are true.
, IN WITNESS WHEREOF, I have set my hand and seal this 30th day of
March, 1984.
My commission expires: November 8, 1986.
/s/ Debra McArthur
------------------
Notary Public
Address:
210 University Blvd., 9th Floor
Denver, Colorado 80206
15
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
FIRST COLORADO BANKSHARES, INC.
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The Board of Directors shall designate
and the Corporation shall maintain a principal office within the State of
Colorado. The location of the principal office may be changed by the Board of
Directors. The Corporation may have such other offices within the State of
Colorado as the Board of Directors may designate or as the business of the
Corporation may require from time to time.
Section 2. REGISTERED OFFICE. The registered office of the Corporation
required by the Colorado Corporation Code to be maintained in the State of
Colorado may be, but need not be, identical with the principal office, and the
address of the registered office may be changed from time to time by the Board
of Directors.
ARTICLE II
SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of the shareholders
shall be held on the third Thursday of the month of January following the close
of the fiscal year, beginning with the year following the year of
incorporation, for the purpose of electing directors and for the transaction of
such other business as may come before the meeting. If the day fixed for the
annual meeting shall be a legal holiday, the meeting shall be held on the next
succeeding business day. If the election of directors shall not be held on the
day designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors may thereafter cause the election
to be held at a special meeting of the shareholders.
Section 2. SPECIAL MEETINGS. Special meetings of the shareholders, for
any proper purpose, unless otherwise prescribed by statute, may be called by
the President or by the Board of Directors, or by the record holders of at
least twenty-five percent (25%) of all shares entitled to vote at the meetings.
Section 3. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Colorado, as the place for any
annual meeting or for any special meeting called by the Board of Directors or
the President of the Corporation or by the record holder or holders of at least
twenty-five percent (25%) of all shares entitled to vote at the meeting. A
waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the State of Colorado, as the
place for such meeting. If no designation is made, or if a special meeting
shall be called other than by the Board, the place of meeting shall be the
principal office of the Corporation.
<PAGE> 2
Section 4. NOTICE OF MEETING. Written notice stating the place, day
and hour of the meeting, and, in case of a special meeting, the purposes for
which the meeting is called, shall be delivered not less than ten (10) nor more
than fifty (50) days before the date of the meeting, either personally or by
mail, by or at the direction of the president, the secretary, or the officer or
persons calling the meeting, to each shareholder of record entitled to vote at
such meeting, except that if the authorized capital stock is to be increased,
at least thirty (30) days' notice shall be given. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail, addressed
to the shareholder at his address as it appears on the stock transfer books of
the Corporation, with postage thereon prepaid.
Section 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for any stated period not
exceeding fifty (50) days. If the stock transfer books shall be closed for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders such books shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of closing the stock transfer
books, the Board of Directors may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than fifty (50) days, and, in case of a meeting of shareholders, not less than
ten (10) days prior to the date on which the particular action, requiring such
determination of shareholders is to be taken. If the stock transfer books are
not closed, and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividends is adopted, as the case may be, shall be the record
date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof, except where the determination has been made through the closing of
the stock transfer books and the stated period of closing has expired.
Section 6. VOTING LISTS. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least ten
(10) days before each meeting of shareholders, a complete list of the
shareholders entitled to vote at such meeting, or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each, which list, for a period of ten (10) days prior to such meeting,
shall be kept on file at the principal office of the Corporation, and shall be
subject to inspection by any shareholder at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any shareholder during
the whole time of the meeting. The original stock transfer books shall be
prima facie evidence as to who are the
2
<PAGE> 3
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders.
Section 7. QUORUM. A quorum of any annual or special meeting of
shareholders shall consist of shareholders representing either in person or by
proxy the majority of outstanding shares of stock of the Corporation entitled
to vote at such meetings, and any action taken during a meeting where less than
a quorum is present shall be null and void. If a quorum is not represented at
a meeting, a majority of the shares represented may adjourn the meeting from
time to time without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally called. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
If a quorum is present, the affirmative vote of a majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders, unless the vote of a greater number, or
voting by classes, is required by law or the Articles of Incorporation.
Section 8. PROXIES. At all meetings of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary or
any officer of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
Section 9. VOTING OF SHARES. Subject to any limits set forth in the
Articles of Incorporation, each outstanding share shall be entitled to one
vote, and each fractional share shall be entitled to a corresponding fractional
vote on each matter submitted to a vote at a meeting of shareholders. In the
election of directors, each record holder of stock entitled to vote at such
election shall have the right to vote the number of shares owned by him for as
many persons as there are directors to be elected, and for whose election he
has the right to vote. The election of directors shall be by ballot, except
that by the unanimous vote of all the shareholders represented at such meeting
the secretary of the meeting may be authorized and instructed to cast a single
ballot for one or more of all the directors to be elected.
Section 10. VOTING OF SHARES BY CERTAIN SHAREHOLDERS. Neither treasury
shares nor shares held by another corporation, if the majority of the shares
entitled to vote for the election of directors of the such other corporation is
held by the corporation, shall be voted at any meeting or counted in
determining the total number of outstanding shares at any given time.
Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxy as the bylaws of the
corporation may prescribe, or, in the absence of such provisions, as the board
of directors of that corporation may determine.
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Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of the shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer of the shares into his name if authority to
do so is contained in an appropriate order of the Court by which the receiver
was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Section 11. CHAIRMAN. The President of the Corporation or in his
absence the senior Vice President present shall act as Chairman at all meetings
of the shareholders.
Section 12. ORAL VOTE. Voting shall be oral but shall be by written
ballot if such vote is demanded by any shareholders present in person or by
proxy and entitled to vote.
Section 13. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting if a consent
in writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof. Such
consent shall have the same effect as a unanimous vote of the shareholders, and
may be stated as such in any articles or document filed under the Colorado
Corporation Code or otherwise.
ARTICLE III
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by its Board of Directors, except as otherwise provided by
applicable statute or by the Articles of Incorporation.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors
of the Corporation shall not be less than one (1) nor more than twenty-five
(25). The initial Board shall consist of seven (7) directors. Thereafter,
within the limits above specified, the number of directors shall be determined
by resolution of the Board of Directors, or by the shareholders at the annual
meeting. Directors shall be elected at each annual meeting of shareholders.
Each director shall hold office for the term for which he is elected and
thereafter until his successor shall have been elected and qualified.
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Directors of the Corporation need not be residents of Colorado nor holders of
shares of the Corporation's capital stock.
Section 3. RESIGNATIONS AND VACANCIES. Any director may resign at any
time by giving written notice to the president or to the secretary of the
Corporation. Such resignation shall take effect at the time specified therein,
but not retroactively; and unless otherwise specified, the acceptance of such
resignation shall not be necessary to make it effective. Any vacancy occurring
in the Board of Directors may be filled by the affirmative vote of a majority
of the remaining directors though less than a quorum. A director elected to
fill a vacancy shall be elected for the unexpired term of his predecessor in
office. Any directorship to be filled by reason of an increase in the number
of directors shall be filled by election at an annual meeting or at a special
meeting of shareholders called for that purpose.
Section 4. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place for the holding of
additional regular meetings without other notice than such resolution.
Section 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the president or any two
directors. The person or persons authorized to call special meetings of the
Board of Directors may fix the place for holding any special meeting of the
Board of Directors called by them.
Section 6. NOTICE. Reasonable notice of any special meeting (which
need not in any event exceed two (2) days) shall be given by mail, telegram or
telephone to each director at his last known business or residence address. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail so addressed, with postage thereon prepaid. If notice be
given by telegram, such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. Any director may waive notice
of any meeting. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 7. QUORUM. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
Section 8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
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Section 9. COMPENSATION. By resolution of the Board of Directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings; a fixed sum for attendance at each meeting; or a stated
salary as director. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
Section 10. PRESUMPTION OF ASSENT. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
Section 11. EXECUTIVE COMMITTEE. The Board of Directors; by resolution
adopted by a majority of the number of directors fixed in Section 2 of this
Article III may designate two (2) or more directors to constitute an executive
committee or other committee or committees which shall have and may exercise
all of the authority of the Board of Directors or such lesser authority as may
be set forth in said resolution. No such delegation of authority shall operate
to relieve the Board of Directors or any member of the Board from any
responsibility imposed by law.
Section 12. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at a meeting of the directors may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors entitled to vote with respect to the subject
matter thereof. Such consent shall have the same effect as a unanimous vote of
the directors, and may be stated as such in any articles or document filed with
the Secretary of State of the State of Colorado under the Colorado Corporation
Code.
Section 13. TELEPHONE MEETINGS. Members of the Board of Directors or
any committee designated by the Board may participate in a meeting of the Board
or committee by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each other
at the same time. Such participation shall constitute presence in person at
the meeting.
Section 14. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such
officer shall be chosen by the Board of Directors, shall preside at all
meetings of the Board of Directors at which he is present. He shall, subject
to the direction of the Board of Directors, have general oversight over the
affairs of the Corporation, and shall, from time to time, advise and consult
with the President in the direction and management of the Corporation's
business, and shall also do and perform such other duties as may, from time to
time, be assigned to him by the Board of Directors.
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Section 15. BANK ACCOUNTS. Anything herein to the contrary
notwithstanding, the Board of Directors may, except as otherwise required by
law, authorize any officer or officers, agent or agents, in the name of and on
behalf of the Corporation, to sign checks, drafts or other orders for the
payment of money or notes or other evidences of indebtedness, to endorse for
deposit, deposit to the credit of the Corporation at any bank or trust company
or banking institution in which the Corporation may maintain an account or to
cash checks, notes, drafts or other bank securities or instruments, and such
authority may be general or confined to specific instances, as the Board may
elect; but unless so authorized by the Board no officer, agent or employee
shall have the power or authority to bind the Corporation by any contract or
engagement, or to pledge its credit or to render it pecuniarily liable for any
purpose or to any amount.
Section 16. DIVIDENDS. The Board of Directors of the Corporation may,
from time to time, in the manner permitted by the Colorado Corporation Code,
declare, and the Corporation may pay, dividends in cash, property, or its own
shares.
Section 17. SALE, MORTGAGE, OR LEASE OF ASSETS. The sale; lease,
exchange, or other disposition of all or substantially all of the property and
assets of the Corporation in the usual and regular course of its business and
the mortgage or pledge of any or all property and assets or the Corporation,
whether or not in the usual and regular course of business, may be made upon
such terms and conditions and for such consideration, which may consist in
whole or in part of cash or other property, including shares, obligations, or
other securities of any other corporation, domestic or foreign, as are
authorized by its board of directors; and in any such case no authorization or
consent of the shareholders shall be required.
A sale, lease, exchange, or other disposition of all or substantially
all of the property and assets of the Corporation, with or without its
goodwill, if not in the usual and regular course of its business, may be made
upon such terms and conditions and for such consideration, which may consist in
whole or in part of cash or other property, including shares, obligations, or
other securities of any other corporation, domestic or foreign, as may be
authorized in the following manner:
(a) The Board of Directors shall adopt a resolution
recommending the sale, lease, exchange, or other disposition or the
mortgage or pledge of any assets or property and directing the
submission thereof to a vote at a meeting of shareholders, which may
be either an annual or a special meeting.
(b) Not less than twenty days before such meeting,
written notice shall be given to each shareholder of record, whether
or not entitled to vote at the meeting, in the manner provided in
these Bylaws for the giving of notice of meetings of shareholders.
Whether the meeting is an annual or a special meeting, the notice
shall state that the purpose or one of the purposes of the meeting is
to consider the proposed sale, lease, exchange, or other disposition
or the proposed mortgage or pledge.
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c) At such meeting the shareholders may authorize the
proposed sale; lease, exchange, or other disposition or the proposed
mortgage or pledge and may fix, or authorize the Board of Directors to
fix, any or all of the terms and conditions thereof and the
consideration to be received by the Corporation therefor. Such
authorization shall require the affirmative vote of two-thirds (2/3)
of the shares of the Corporation entitled to vote thereon.
(d) After such authorization by a vote of shareholders,
the Board of Directors nevertheless, in its discretion, may abandon
the sale, lease, exchange, or other disposition of assets, subject to
the rights of third parties under any contracts relating thereto,
without further action or approval by shareholders.
ARTICLE IV
OFFICERS AND AGENTS
Section 1. GENERAL. The officers of the Corporation shall be a
president, one or more vice presidents, a secretary and a treasurer. The
president shall be a shareholder and a director of the Corporation. The Board
of Directors may appoint such other officers, assistant officers, committees
and agents, including a chairman of the board, controller, assistant
secretaries, and assistant treasurers, as they may consider necessary, who
shall be chosen in such manner and hold their offices for such terms as from
time to time may be determined by the Board of Directors. The salaries of all
the officers of the Corporation shall be fixed by the Board of Directors. One
person may hold any two offices, except that no person may simultaneously hold
the offices of president and secretary. In all cases where the duties of any
officer, agent or employee are not prescribed by the Bylaws or by the Board of
Directors, such officer, agent or employee shall follow the orders and
instructions of the president, who shall be the chief executive officer of the
Corporation unless otherwise provided by the Board of Directors.
Section 2. ELECTION AND TERM OF OFFICE. The officers of the
Corporation shall be elected or appointed by the Board of Directors annually at
the first meeting of the Board held after each annual meeting of the
shareholders, or as soon thereafter as is convenient. Each officer shall hold
office until the first of the following to occur: until his successor shall
have been duly elected or appointed and shall have qualified; until death;
until resignation; or until he shall have been removed in the manner
hereinafter provided.
Section 3. REMOVAL Any officer or agent may be removed by the Board
of Directors, or by the executive committee, if any, whenever in its judgment
the best interests of the Corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not in itself
create contract rights.
Section 4. VACANCIES. A vacancy in any office, however occurring, may
be filled by the Board of Directors for the unexpired portion of the term.
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Section 5. PRESIDENT. The President shall be the chief executive
officer of the Corporation; he shall preside at any meeting of the shareholders
at which he is present, and in the absence of the Chairman of the Board shall
preside at any meeting of the Board of Directors at which he is present. He
shall be in charge of the management of the business of the Corporation and
shall see that all orders and resolutions of the Board are carried into effect,
and he shall have the authority and powers necessary to perform such duties.
Section 6. VICE PRESIDENT. Any Vice President shall, in the absence or
disability of the President, perform the duties and exercise the powers of the
President, and shall perform such other duties as may, from time to time, be
prescribed by the Board of Directors.
Section 7. SECRETARY. The Secretary shall, if required by the
President, attend all sessions of the Board of Directors and all meetings of
the shareholders and record all votes and the minutes of all proceedings in a
book or books to be kept for that purpose, and shall perform like duties for
the standing committees when required. He shall cause due notice to be given
of all meetings of the shareholders and Board of Directors. He shall keep in
safe custody the corporate records and the seal of the Corporation and when
authorized by the Board shall affix the seal to any instrument requiring it,
and when so affixed it shall be attested by his signature. He shall keep at
the registered office or the principal place of business of the Corporation a
record of the shareholders, giving names and addresses of all shareholders and
the number and class of shares held by each, and a copy of any voting trust
agreement, along with a copy of the names and addresses of the holders of
interests in the voting trust, the extent of each such holder's interest, the
number of shares of stock transferred to the voting trust, and the transfer of
interests in the voting trust, copies of all voting trust information shall be
furnished by the Trustee of the voting trust The Secretary shall sign with the
President or a Vice President Certificates for shares of the Corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors. He shall have general charge of the stock transfer books of the
Corporation and copies of information concerning voting trusts, if any. He
shall in general perform all duties incident to the office of Secretary and
such other duties as from time to time may be assigned to him by the President
or by the Board of Directors.
Assistant Secretaries, if any, shall have the same duties and powers,
subject to supervision by the Secretary.
Section 8. TREASURER. The Treasurer shall have custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in Books belonging to the Corporation, and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board, take proper vouchers for such disbursements, and shall render to the
President and the Directors whenever they may require it, an account of all his
transactions and of the financial condition of the Corporation. He shall, if
required
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by the Board, give the Corporation a bond in such sums and with such sureties
as shall be satisfactory to the Board, conditioned upon the faithful
performance of the duties and for the restoration to the Corporation of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the corporation.
Assistant Treasurers, if any, shall have the same powers and duties,
subject to the supervision of the Treasurer.
Section 9. POWERS AND DUTIES. The officers of the Corporation shall
have such additional powers and duties as usually pertain to their offices,
except as modified by the Board of Directors, and shall also have such powers
and duties as may from time to time be conferred upon them by the Board of
Directors.
ARTICLE V
STOCK
Section 1. CERTIFICATES. The shares of stock shall be represented by
consecutively numbered certificates signed in the name of the Corporation by
its president or a vice president and the secretary or an assistant secretary,
and shall be sealed with the seal of the Corporation, or with a facsimile
thereof. The signatures of the Corporation's officers on such certificate may
also be facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the Corporation itself or an employee of
the Corporation. In case any officer who has signed or whose facsimile
signature has been placed upon such certificate shall have cease to be such
officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer at the date of its issue.
Certificates of stock shall be in such form consistent with law as shall be
approved by the Board of Directors. No certificate shall be issued until the
shares represented thereby are fully paid.
Section 2. CONSIDERATION FOR SHARES. Except as provided for in the
Articles of Incorporation, shares shall be issued for such consideration,
expressed in dollars; as shall be fixed from time to time by the Board of
Directors. Such consideration may consist, in whole or in part of money, other
property, tangible or intangible, or in labor or services actually performed
for the Corporation, but neither promissory notes nor future services shall
constitute payment or part payment for shares.
Section 3. TRANSFER OF SHARES ON CORPORATION'S BOOKS. Upon the
surrender to the Corporation or to its transfer agent of a certificate for
shares duly endorsed or accompanied by proper evidence of succeeding assignment
of authority to transfer, it shall be the duty of the Corporation to issue a
new certificate. Every transfer shall be entered in the transfer book of the
Corporation which shall be kept at its principal office. The Board of
Directors may make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of shares of the Corporation.
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Section 4. REGISTERED SHAREHOLDERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Colorado.
Section 5. LOST AND DESTROYED CERTIFICATES. In case of the alleged
loss, destruction or mutilation of a certificate of stock the Board of
Directors may direct the issuance of a new certificate in lieu thereof upon
such terms and conditions in conformity with law as it may prescribe. The
Board of Directors may, in its discretion, require a bond in such form and
amount and with such surety as it may determine, before issuing a new
certificate.
ARTICLE VI
MISCELLANEOUS
Section 1. WAIVER OF NOTICE. Whenever notice is required by law, by
the Articles of Incorporation or by these Bylaws, a waiver thereof in writing
signed by the director, shareholder or other person entitled to said notice,
whether before, at or after the time stated therein, or his appearance at such
meeting in person or (in the case of a shareholder's meeting) by proxy, shall
be equivalent to such notice.
Section 2. SEAL The corporate seal of the Corporation shall be in such
form as the Board of Directors shall prescribe. The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall begin
on the first day of January and end on the last day of the next December unless
otherwise determined by resolution of the Board of Directors.
Section 4. AMENDMENTS. The Board of Directors shall have power to
make, amend and repeal the Bylaws of the Corporation at any regular meeting of
the board or at any special meeting called for this purpose.
Section 5. CONFLICTS. In the event of any conflict between any
provision in these Bylaws and the Corporation's Articles of Incorporation, the
provisions in the Articles shall control
.
Dated: June 1, 1984 /s/ Clinton P. Swift
-------------------------
Clinton P. Swift,
Assistant Secretary
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STATE OF COLORADO
DEPARTMENT OF STATE CERTIFICATE
I, NATALIE MEYER, Secretary of State of the State oL. Colorado hereby
certify that the prerequisites for the issuance oL. this certificate have been
fulfilled in compliance with law and are found to conform to law.
Accordingly, the undersigned, by virtue oL. the authority vested in me
by law, hereby issues A CERTIFICATE OF AMENDMENT TO MEGABANK FINANCIAL
CORPORATION.
Dated: APRIL 22, 1988
/s/ Natalie Meyer
-----------------
SECRETARY OF STATE
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ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendments to its
Articles of Incorporation:
FIRST: The name of the corporation is (note I) MegaBank Financial Corporation
SECOND: The following amendment to the Articles of Incorporation was
adopted on January 12, 1988, as prescribed by the Colorado Corporation Code. in
the manner marked with an X below:
___X___ Such amendment was adopted by the board of directors where no
shares have been issued.
_______ Such amendment was adopted by a vote of the shareholders. The
number of shares voted for the amendment was sufficient for approval.
Article XV was added to the Articles of Incorporation,
as amended. (See attached Exhibit A)
THIRD: The manner. If not set forth in such amendment, in which any
exchange. reclassification, or cancellation of issued shares provided for in
the amendment shall be effected, is as follows: None
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EXHIBIT A
Limitation of Liability of Directors
No director shall be personally liable to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director.
Notwithstanding said limitation on the liability of a director for monetary
damages, a director shall be liable to the corporation or its shareholders for
monetary damages for:
1. any breach of the director's duty of loyalty to the
corporation or to its shareholders;
2. acts or omissions not in good faith;
3. acts or omissions which involve intentional misconduct;
4. acts or omissions involving a knowing violation of law;
5. acts specified in Section 7-5-114 of the Colorado Corporation
Code, including:
a. voting for or assenting to the declaration of any
dividend or other distribution of the assets of a
corporation to its shareholders contrary to the
provisions of the Colorado Corporation Code or any
restrictions contained in these Articles of
Incorporation;
b. voting for or assenting to the purchase of the
corporation's own shares contrary to the provisions
of the Colorado Corporation Code;
c. voting for or assenting to any distribution of assets
of the corporation to its shareholders during the
liquidation of the corporation without the payment
and discharge of, or the making of adequate provision
for, all known debts, obligations and liabilities of
the corporation
d. voting for or assenting to the making or guaranteeing
of a loan to a director of the corporation (unless
the Voting procedure specified in Section
7-3-101(1)(f) of the Colorado Corporation Code has
been followed), or the making or guaranteeing of any
loan to a director secured by shares of the
corporation; and
6. any transaction from which the director derived an improper
personal benefit.
This Article is intended, and should be interpreted, to provide the
directors of the corporation with the maximum protection from liability
available under the Colorado Corporation Code.
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EXHIBIT 4.1
MEGABANK FINANCIAL CORPORATION
AS ISSUER
TO
WILMINGTON TRUST COMPANY,
AS TRUSTEE
SUBORDINATED INDENTURE
DATED AS OF ________________, 1998
____% Junior Subordinated Debentures
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS 1
ARTICLE II
DESCRIPTION, TERMS, CONDITIONS, REGISTRATION AND EXCHANGE OF
THE JUNIOR SUBORDINATED DEBENTURES 7
2.1 Designation and Principal Amount 7
2.2 Maturity 7
2.3 Form and Payment 7
2.4 Global Subordinated Debenture 8
2.5 Interest 9
2.6 Execution, Authentication, Delivery and Dating 9
2.7 Registration and Transfer 10
2.8 Mutilated, Destroyed, Lost and Stolen Junior Subordinated Debentures 10
ARTICLE III
REDEMPTION OF JUNIOR SUBORDINATED DEBENTURES 11
3.1 Redemption 11
3.2 Special Event Redemption 11
3.3 Optional Redemption by Company 12
3.4 Notice of Redemption 12
3.5 Payment upon Redemption 13
3.6 No Sinking Fund 13
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD 13
4.1 Extension of Interest Payment Period 13
4.2 Notice of Extension 14
4.3 Limitation of Transactions During Extension 14
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY 14
5.1 Payment of Principal and Interest 14
5.2 Maintenance of Agency 14
5.3 Paying Agents 15
5.4 Appointment to Fill Vacancy in Office of Trustee 15
5.5 Compliance with Consolidation Provisions 15
5.6 Restrictions on Certain Payments 16
5.7 Covenants as to the Trust 16
ARTICLE VI
SECURITYHOLDERS' LISTS AND REPORTS 16
6.1 Company to Furnish Trustee Names and Addresses of Securityholders 16
6.2 Preservation of Information; Communications with Securityholders 17
6.3 Reports by the Company 17
6.4 Reports by the Trustee 17
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ARTICLE VII
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT 18
7.1 Events of Default 18
7.2 Collection of Indebtedness and Suits for Enforcement by Trustee 19
7.3 Application of Moneys Collected 20
7.4 Limitation on Suits 20
7.5 Rights and Remedies Cumulative; Delay or Omission Not Waiver 21
7.6 Control by Securityholders 21
7.7 Undertaking to Pay Costs 22
ARTICLE VIII
FORM OF JUNIOR SUBORDINATED DEBENTURE AND ORIGINAL ISSUE 22
8.1 Form of Junior Subordinated Debenture 22
8.2 Original Issue of Junior Subordinated Debentures 22
ARTICLE IX
CONCERNING THE TRUSTEE 22
9.1 Certain Duties and Responsibilities of the Trustee 22
9.2 Certain Rights of Trustee 23
9.3 Trustee Not Responsible for Recitals or Issuance of the Junior Subordinated Debentures 24
9.4 May Hold Junior Subordinated Debentures 24
9.5 Moneys Held in Trust 24
9.6 Compensation and Reimbursement 24
9.7 Reliance on Officers' Certificate 25
9.8 Disqualification; Conflicting Interests 25
9.9 Corporate Trustee Required; Eligibility 25
9.10 Resignation and Removal; Appointment of Successor 25
9.11 Acceptance of Appointment by Successor 26
9.12 Merger, Conversion, Consolidation or Succession to Business 27
9.13 Preferential Collection of Claims Against the Company 27
9.14 Appointment of Authenticating Agent 27
ARTICLE X
CONCERNING THE SECURITYHOLDERS 28
10.1 Evidence of Action by Securityholders 28
10.2 Proof of Execution by Securityholders 29
10.3 Who May Be Deemed Owners 29
10.4 Certain Junior Subordinated Debentures Owned by Company Disregarded 29
10.5 Actions Binding on Future Securityholders 29
ARTICLE XI
SUPPLEMENTAL INDENTURES 30
11.1 Supplemental Indentures Without the Consent of Securityholders 30
11.2 Supplemental Indentures with Consent of Securityholders 30
11.3 Effect of Supplemental Indentures 31
11.4 Junior Subordinated Debentures Affected by Supplemental Indentures 31
11.5 Execution of Supplemental Indentures 31
ARTICLE XII
SUCCESSOR CORPORATION 32
12.1 Company May Consolidate, Etc. 32
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12.2 Successor Substituted 32
12.3 Evidence of Consolidation, Etc., to Trustee 32
ARTICLE XIII
SATISFACTION AND DISCHARGE 32
13.1 Satisfaction and Discharge of Indenture 32
13.2 Discharge of Obligations 33
13.3 Deposited Moneys to Be Held in Trust 33
13.4 Payment of Monies Held by Paying Agents 33
13.5 Repayment to Company 33
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS 33
14.1 No Recourse 33
ARTICLE XV
MISCELLANEOUS PROVISIONS 34
15.1 Effect on Successors and Assigns 34
15.2 Actions by Successor 34
15.3 Surrender of Company Powers 34
15.4 Notices 34
15.5 Governing Law 34
15.6 Treatment of Junior Subordinated Debentures as Debt 34
15.7 Compliance Certificates and Opinions 34
15.8 Payments on Business Days 35
15.9 Conflict with Trust Indenture Act 35
15.10 Counterparts 35
15.11 Separability 35
15.12 Assignment 35
15.13 Acknowledgment of Rights 35
ARTICLE XVI
SUBORDINATION OF JUNIOR SUBORDINATED DEBENTURES 36
16.1 Agreement to Subordinate 36
16.2 Default on Senior and Subordinated Debt 36
16.3 Liquidation; Dissolution; Bankruptcy 36
16.4 Subrogation 37
16.5 Trustee to Effectuate Subordination 38
16.6 Notice by the Company 38
16.7 Rights of the Trustee; Holders of Senior and Subordinated Debt 39
16.8 Subordination May Not Be Impaired 39
</TABLE>
4.1-iii
<PAGE> 5
MEGABANK FINANCIAL CORPORATION
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939, AS AMENDED,
AND SUBORDINATED INDENTURE, DATED AS OF ________________, 1998
<TABLE>
<CAPTION>
Trust Indenture Act Section Subordinated Indenture Section
- - --------------------------- ------------------------------
<S> <C>
Section 310 15.9
Section 310 (b) 9.8
Section 311 15.9
Section 311 (a) 9.13
(b) 9.13
Section 312 15.9
Section 312 (b) 6.2
Section 313 15.9
Section 313 (a) 6.4
(b) 6.4
(c) 6.4
Section 314 15.9
Section 315 15.9
Section 316 15.9
Section 317 15.9
</TABLE>
- - -------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Subordinated Indenture.
4.1-iv
<PAGE> 6
SUBORDINATED INDENTURE (the "Indenture"), dated as of ________________,
1998, between MegaBank Financial Corporation, a Colorado corporation (the
"Company") and Wilmington Trust Company, a Delaware banking corporation, as
trustee (the "Trustee");
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of its securities to be known as its ____% Junior Subordinated
Debentures due ________________ 2028 (hereinafter referred to as the "Junior
Subordinated Debentures"), the form and substance of such Junior Subordinated
Debentures and the terms, provisions and conditions thereof to be set forth as
provided in this Indenture; and
WHEREAS, MB Capital I, a Delaware statutory business trust (the
"Trust"), has offered to the public $12,000,000 aggregate liquidation amount of
its ____% Cumulative Preferred Securities (the "Preferred Securities"),
representing undivided beneficial interests in the assets of the Trust and
proposes to invest the proceeds from such offering, together with the proceeds
of the issuance and sale by the Trust to the Company of $371,150 aggregate
liquidation amount of its ____% Common Securities, in $12,371,150 aggregate
principal amount of the Junior Subordinated Debentures; and
WHEREAS, the Company has requested that the Trustee execute and deliver
this Indenture and all requirements necessary to make this Indenture a valid
instrument in accordance with its terms, and to make the Junior Subordinated
Debentures, when executed by the Company and authenticated and delivered by the
Trustee, the valid obligations of the Company; and
WHEREAS, to provide the terms and conditions upon which the Junior
Subordinated Debentures are to be authenticated, issued and delivered, the
Company has duly authorized the execution and delivery of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of
the Junior Subordinated Debentures by the holders thereof, it is mutually
covenanted and agreed as follows for the equal and ratable benefit of the
holders of Junior Subordinated Debentures:
ARTICLE I
DEFINITIONS
The terms defined in this Section (except as in this Indenture
otherwise expressly provided or unless the context otherwise requires) for all
purposes of this Indenture and of any indenture supplemental hereto shall have
the respective meanings specified in this Section and shall include the plural
as well as the singular. All other terms used in this Indenture that are defined
in the Trust Indenture Act of 1939, as amended, or that are by reference in said
Trust Indenture Act defined in the Securities Act of 1933, as amended (except as
herein otherwise expressly provided or unless the context otherwise requires),
shall have the meanings assigned to such terms in said Trust Indenture Act and
in said Securities Act as in force at the date of the execution of this
Indenture.
"Accelerated Maturity Date" means, if the Company elects to accelerate
the Maturity Date in accordance with Section 2.2, the date selected by the
Company which is prior to the Scheduled Maturity Date, but is after
________________, 2003.
"Additional Sums" shall have the meaning set forth in Section 2.5(c).
"Administrative Trustees" has the meaning set forth in the Trust
Agreement.
4.1-1
<PAGE> 7
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person, (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person, (d) a partnership in which the specified Person is a
general partner, (e) any officer or director of the specified Person, and (f) if
the specified Person is an individual, any entity of which the specified Person
is an officer, director or general partner.
"Authenticating Agent" means an authenticating agent with respect to
the Junior Subordinated Debentures appointed by the Trustee pursuant to Section
9.14.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or any
duly authorized committee of such Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the 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.
"Business Day" means any day other than a day on which federal or state
banking institutions in the State of Colorado are authorized or obligated by
law, executive order or regulation to close or a day on which the Trustee is
closed.
"Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any proposed
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such proposed change, pronouncement or decision is announced on or after the
date of issuance of the Preferred Securities under the Trust Agreement, there is
more than an insubstantial risk of impairment of the Company's ability to treat
the Preferred Securities (or any substantial portion thereof) as "Tier I
Capital" (or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable to the
Company.
"Certificate" means a certificate signed by the principal executive
officer, the principal financial officer or the principal accounting officer of
the Company. The Certificate need not comply with the provisions of Section
15.7.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this 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" means undivided beneficial interests in the assets
of the Trust which rank pari passu with Preferred Securities issued by the
Trust; provided, however, that upon the occurrence of an Event of Default, the
rights of holders of Common Securities to payment in respect of Distributions
and payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of Preferred Securities.
"Company" means MegaBank Financial Corporation, a corporation duly
organized and existing under the laws of the State of Colorado, and, subject to
the provisions of Article Twelve, shall also include its successors and assigns.
4.1-2
<PAGE> 8
"Compounded Interest" shall have the meaning set forth in Section 4.1.
"Corporate Trust Office" means the office of the Trustee at which, at
any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate
Trust Administration.
"Coupon Rate" shall have the meaning set forth in Section 2.5(a).
"Custodian" means any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"Debt" means with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or for which such Person is responsible or liable,
directly or indirectly, as obligor or otherwise.
"Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in Section 4.1.
"Depositary" means, with respect to Junior Subordinated Debentures
issued as a Global Subordinated Debenture, The Depository Trust Company, New
York, New York, another clearing agency, or any successor registered as a
clearing agency under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or other applicable statute or regulation, which, in each case,
shall be designated by the Company pursuant to either Section 2.1 or 2.4.
"Dissolution Event" means that as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Trust Agreement and the Junior Subordinated Debentures held by the Property
Trustee are to be distributed to the holders of the Trust Securities issued by
the Trust pro rata in accordance with the Trust Agreement.
"Distributions" shall have the meaning set forth in the Trust
Agreement.
"Event of Default" means any event specified in Section 7.1, continued
for the period of time, if any, therein designated.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 4.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Global Subordinated Debenture" means a Junior Subordinated Debenture
executed by the Company and delivered by the Trustee to the Depositary or
pursuant to the Depositary's instruction, all in accordance with this Indenture,
which shall be registered in the name of the Depositary or its nominee.
4.1-3
<PAGE> 9
"Governmental Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America that, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended) as custodian with respect to any such
Governmental Obligation or a specific payment of principal of or interest on any
such Governmental Obligation held by such custodian for the account of the
holder of such depositary receipt; provided, however, that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by the
custodian in respect of the Governmental Obligation or the specific payment of
principal of or interest on the Governmental Obligation evidenced by such
depositary receipt.
"Herein," "hereof," and "hereunder," and other words of similar import,
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into in accordance with the terms hereof.
"Interest Payment Date," when used with respect to any installment of
interest on the Junior Subordinated Debentures, means the date specified in the
Junior Subordinated Debenture as the fixed date on which an installment of
interest with respect to the Junior Subordinated Debentures is due and payable.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Investment Company Event" means the receipt by the Company and the
Trust of an Opinion of Counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in Investment
Company Act Law"), the Trust is or will be considered an "investment company"
that is required to be registered under the Investment Company Act, which Change
in Investment Company Act Law becomes effective on or after the date of original
issuance of the Preferred Securities under the Trust Agreement.
"Junior Subordinated Debentures" means the ____% Junior Subordinated
Debentures due 2028 authenticated and delivered under this Indenture.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
"Maturity Date" shall have the meaning set forth in Section 2.2.
"Non Book-Entry Preferred Securities" shall have the meaning set forth
in Section 2.4(a).
"Officers' Certificate" means a certificate signed by the Chief
Executive Officer, the President or a Vice President and by the Chief Accounting
Officer or the Controller or an Assistant Controller or the Secretary or an
Assistant Secretary of the Company that is delivered to the Trustee in
accordance with the terms hereof. Each such certificate shall include the
statements provided for in Section 15.7, if and to the extent required by the
provisions thereof.
"Opinion of Counsel" means an opinion in writing of legal counsel, who
may be an employee of or counsel for the Company, that is delivered to the
Trustee in accordance with the terms hereof. Each such opinion shall include the
statements provided for in Section 15.7, if and to the extent required by the
provisions thereof.
4.1-4
<PAGE> 10
"Outstanding," when used with reference to Junior Subordinated
Debentures means, subject to the provisions of Section 10.4, as of any
particular time, all Junior Subordinated Debentures theretofore authenticated
and delivered by the Trustee under this Indenture, except (a) Junior
Subordinated Debentures theretofore canceled by the Trustee or any paying agent,
or delivered to the Trustee or any paying agent for cancellation or that have
previously been canceled; (b) Junior Subordinated Debentures or portions thereof
for the payment or redemption of which moneys or Governmental Obligations in the
necessary amount shall have been deposited in trust with the Trustee or with any
paying agent (other than the 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, however, that if such Junior Subordinated Debentures or
portions of such Junior Subordinated Debentures are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been given as provided in
Article Three, or provision satisfactory to the Trustee shall have been made for
giving such notice; and (c) Junior Subordinated Debentures in lieu of or in
substitution for which other Junior Subordinated Debentures shall have been
authenticated and delivered pursuant to the terms of Section 2.8.
"Person" means any individual, corporation, partnership, joint venture,
joint-stock company, unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Junior Subordinated Debenture" means every previous Junior
Subordinated Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Junior Subordinated Debenture; and, for the
purposes of this definition, any Junior Subordinated Debenture authenticated and
delivered under Section 2.8 in lieu of a lost, destroyed or stolen Junior
Subordinated Debenture shall be deemed to evidence the same debt as the lost,
destroyed or stolen Junior Subordinated Debenture.
"Preferred Securities" means undivided beneficial interests in the
assets of the Trust which rank pari passu with Common Securities issued by the
Trust; provided, however, that upon the occurrence of an Event of Default, the
rights of holders of Common Securities to payment in respect of Distributions
and payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of Preferred Securities.
"Preferred Securities Certificate" has the meaning set forth in the
Trust Agreement.
"Preferred Securities Guarantee" means any guarantee that the Company
may enter into with the Property Trustee or other Persons that operates directly
or indirectly for the benefit of holders of Preferred Securities of the Trust.
"Property Trustee" has the meaning set forth in the Trust Agreement.
"Redemption Price" means the amount equal to 100% of the principal
amount of Junior Subordinated Debentures to be redeemed plus any accrued and
unpaid interest thereon to the date of the redemption of such Junior
Subordinated Debentures.
"Responsible Officer" when used with respect to the Trustee means the
Chairman of the Board of Directors, the President, any Vice President, the
Secretary, the Treasurer, any trust officer, any corporate trust officer or any
other officer or assistant officer of the Trustee customarily performing
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"Scheduled Maturity Date" means ________________, 2028.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 2.7.
"Securityholder," "Holder," "Registered Holder," or other similar term,
means the Person or Persons in whose name or names particular Junior
Subordinated Debentures shall be registered in the Securities Register.
4.1-5
<PAGE> 11
"Senior and Subordinated Debt" means the principal of (and premium, if
any) and interest, if any (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Company whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt of the Company, whether incurred on or prior to the date of this Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Junior Subordinated
Debentures or to other Debt which is pari passu with, or subordinated to, the
Junior Subordinated Debentures; provided, however, that Senior and Subordinated
Debt shall not be deemed to include (i) any Debt of the Company which when
incurred and without respect to any election under section 1111(b) of the United
States Bankruptcy Code of 1978, as amended, was without recourse to the Company,
(ii) any Debt of the Company to any of its Subsidiaries, (iii) any Debt to any
employee of the Company, (iv) any Debt which by its terms is subordinated to any
trade accounts payable or accrued liabilities arising in the ordinary course of
business to the extent that payments made to the holders of such Debt by the
Holders of the Junior Subordinated Debentures as a result of the subordination
provisions of this Indenture would be greater than they otherwise would have
been as a result of any obligation of such holders to pay amounts over to the
obligees on such trade accounts payable or accrued liabilities arising in the
ordinary course of business as a result of subordination provisions to which
such Debt is subject, (v) the Preferred Securities Guarantee, and (vi) any other
debt securities issued pursuant to this Indenture.
"Special Event" means a Tax Event, an Investment Company Event or a
Capital Treatment Event.
"Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person, or by one or more of its Subsidiaries,
or by such Person and one or more of its Subsidiaries, (ii) any general
partnership, joint venture or similar entity, at least a majority of whose
outstanding partnership or similar interests shall at the time be owned by such
Person, or by one or more of its Subsidiaries, or by such Person and one or more
of its Subsidiaries, and (iii) any limited partnership of which such Person or
any of its Subsidiaries is a general partner.
"Tax Event" means the receipt by the Company 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 (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance of
the Junior Subordinated Debentures there is more than an insubstantial risk that
(i) interest payable by the Company on the Junior Subordinated Debentures is
not, or within 90 days after the date of such Opinion of Counsel will not be,
deductible by the Company, in whole or in part, for United States federal income
tax purposes, (ii) the Trust is, or will be within 90 days after the date of
such Opinion of Counsel, subject to United States federal income tax with
respect to income received or accrued on the Junior Subordinated Debentures, or
(iii) the Trust is, or will be within 90 days after the date of such Opinion of
Counsel, subject to more than a de minimis amount of other taxes, duties,
assessments or other governmental charges.
"Trust" means MB Capital I, a Delaware statutory business trust created
for the purpose of issuing Trust Securities in connection with the issuance of
Junior Subordinated Debentures under this Indenture.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
as of ________________, 1998, of the Trust.
"Trustee" means Wilmington Trust Company and, subject to the provisions
of Article Nine, shall also include its successors and assigns, and, if at any
time there is more than one Person acting in such capacity hereunder, "Trustee"
shall mean each such Person.
"Trust Indenture Act," means the Trust Indenture Act of 1939 as in
force at the date of execution of this
4.1-6
<PAGE> 12
Indenture; provided, however, that in the event the Trust Indenture Act of 1939
is amended after such date, "Trust Indenture Act" means, to the extent required
by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Securities" means Common Securities and Preferred Securities of
the Trust.
"Voting Stock," as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person having ordinary voting power for the election of a
majority of the directors (or the equivalent) of such Person, other than shares,
interests, participations or other equivalents having such power only by reason
of the occurrence of a contingency.
ARTICLE II
DESCRIPTION, TERMS, CONDITIONS, REGISTRATION AND
EXCHANGE OF THE JUNIOR SUBORDINATED DEBENTURES
2.1 DESIGNATION AND PRINCIPAL AMOUNT. There is hereby authorized a
series of Securities designated the "____% Junior Subordinated Debentures due
2028," limited in aggregate principal amount to $12,371,150, which amount shall
be as set forth in any written order of the Company for the authentication and
delivery of Junior Subordinated Debentures pursuant to Section 8.2 of this
Indenture.
2.2 MATURITY.
(a) The Maturity Date will be either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to accelerate the Maturity Date to be a
date prior to the Scheduled Maturity Date in accordance with Section
2.2(b), the Accelerated Maturity Date.
(b) The Company may, at any time before the day which is 90 days before
the Scheduled Maturity Date, elect to shorten the Maturity Date only once to the
Accelerated Maturity Date, provided that the Company has received the prior
approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve.
(c) If the Company elects to accelerate the Maturity Date in accordance
with Section 2.2(b), the Company shall give notice to the Registered Holders of
the Junior Subordinated Debentures, the Property Trustee and the Trustee of the
acceleration of the Maturity Date and the Accelerated Maturity Date at least 90
days before the Accelerated Maturity Date.
2.3 FORM AND PAYMENT. Except as provided in Section 2.4, the
Junior Subordinated Debentures shall be issued in fully registered certificated
form without interest coupons. Principal and interest on the Junior
Subordinated Debentures issued in certificated form will be payable, the
transfer of such Junior Subordinated Debentures will be registrable and such
Junior Subordinated Debentures will be exchangeable for Junior Subordinated
Debentures bearing identical terms and provisions at the office or agency of
the Trustee; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the Holder at such address as shall
appear in the Securities Register. Notwithstanding the foregoing, so long as
the Holder of any Junior Subordinated Debentures is the Property Trustee, the
payment of the principal of and interest (including Compounded Interest and
Additional Sums, if any) on such Junior Subordinated Debentures held by the
Property Trustee will be made at such place and to such account as may be
designated by the Property Trustee.
4.1-7
<PAGE> 13
2.4 GLOBAL SUBORDINATED DEBENTURE.
(a) In connection with a Dissolution Event,
(i) the Junior Subordinated Debentures in certificated form may be
presented to the Trustee by the Property Trustee in exchange for a
Global Subordinated Debenture in an aggregate principal amount equal
to the aggregate principal amount of all outstanding Junior
Subordinated Debentures (a "Global Subordinated Debenture"), 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 a Global Subordinated Debenture in such aggregate principal
amount and deliver the same to the Trustee for authentication and
delivery in accordance with this Indenture. Payments on the Junior
Subordinated Debentures issued as a Global Subordinated Debenture will
be made to the Depositary; and
(ii) if any Preferred Securities are held in non book-entry
certificated form, the Junior Subordinated Debentures in certificated
form may be presented to the Trustee by the Property Trustee and any
Preferred Securities Certificate which represents Preferred Securities
other than Preferred Securities held by the Depositary or its nominee
("Non Book-Entry Preferred Securities") will be deemed to represent
beneficial interests in Junior Subordinated Debentures presented to the
Trustee by the Property Trustee having an aggregate principal amount
equal to the aggregate Liquidation Amount of the Non Book-Entry
Preferred Securities until such Preferred Securities Certificates are
presented to the Securities Registrar for transfer or reissuance at
which time such Preferred Securities Certificates will be canceled and
a Junior Subordinated Debenture, registered in the name of the holder
of the Preferred Securities Certificate or the transferee of the holder
of such Preferred Securities Certificate, as the case may be, with an
aggregate principal amount equal to the aggregate Liquidation Amount of
the Preferred Securities Certificate canceled, will be executed by the
Company and delivered to the Trustee for authentication and delivery in
accordance with this Indenture. On issue of such Junior Subordinated
Debentures, Junior Subordinated Debentures with an equivalent aggregate
principal amount that were presented by the Property Trustee to the
Trustee will be deemed to have been canceled.
(b) A Global Subordinated Debenture may be transferred, in whole but
not in part, only to another nominee of the Depositary, or to a successor
Depositary selected or approved by the Company or to a nominee of such successor
Depositary.
(c) If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or if at any time the Depositary
for such series shall no longer be registered or in good standing under the
Exchange Act or other applicable statute or regulation, and a successor
Depositary for such series 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 deliver the Junior Subordinated Debentures in
definitive registered form without coupons, in authorized denominations, and in
an aggregate principal amount equal to the principal amount of the Global
Subordinated Debenture in exchange for such Global Subordinated Debenture. In
addition, the Company may at any time determine that the Junior Subordinated
Debentures shall no longer be represented by a Global Subordinated Debenture. In
such event the Company will execute, and the Trustee, upon receipt of an
Officers' Certificate evidencing such determination by the Company, will
authenticate and deliver the Junior Subordinated Debentures in definitive
registered form without coupons, in authorized denominations, and in an
aggregate principal amount equal to the principal amount of the Global
Subordinated Debenture in exchange for such Global Subordinated Debenture. Upon
the exchange of the Global Subordinated Debenture for such Junior Subordinated
Debentures in definitive registered form without coupons, in authorized
denominations, the Global Subordinated Debenture shall be canceled by the
Trustee. Such Junior Subordinated Debentures in definitive registered form
issued in exchange for the Global Subordinated Debenture shall be registered in
such names and in such authorized denominations as
4.1-8
<PAGE> 14
the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall deliver
such Junior Subordinated Debentures to the Depositary for delivery to the
Persons in whose names such Junior Subordinated Debentures are so registered.
2.5 INTEREST.
(a) Each Junior Subordinated Debenture will bear interest at the rate
of ____% per annum (the "Coupon Rate") from the original date of issuance until
the principal thereof becomes due and payable, and on any overdue principal and
(to the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest at the Coupon Rate, compounded
quarterly, payable (subject to the provisions of Article Four) quarterly in
arrears on the 15th day of January, April, and October in each year (each, an
"Interest Payment Date"), commencing on April 15, 1998, to the Person in whose
name such Junior Subordinated Debenture or any Predecessor Junior Subordinated
Debenture is registered at the close of business on the regular record date for
such interest installment, which, in respect of (i) Junior Subordinated
Debentures of which the Property Trustee is the Holder and the Preferred
Securities are in book-entry only form or (ii) a Global Subordinated Debenture,
shall be the close of business on the Business Day next preceding that Interest
Payment Date. Notwithstanding the foregoing sentence, if (i) the Junior
Subordinated Debentures are held by the Property Trustee and the Preferred
Securities are no longer in book-entry only form or (ii) the Junior Subordinated
Debentures are not represented by a Global Subordinated Debenture, the record
date for such interest installment shall be the first day of the month in which
such payment is to be made. The amount of each interest payment due with respect
to the Junior Subordinated Debentures will include amounts accrued through the
date the interest payment is due.
(b) The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than a
full quarterly period for which interest is computed will be computed on the
basis of the actual number of days elapsed in such a quarterly period. In the
event that any date on which interest is payable on the Junior Subordinated
Debentures 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), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date.
(c) If, at any time while the Property Trustee is the Holder of any
Junior Subordinated Debentures, the Trust or the Property Trustee is required to
pay any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States, or any other taxing
authority, then, in any case, the Company will pay as additional interest
("Additional Sums") on the Junior Subordinated Debentures held by the Property
Trustee such additional amounts as shall be required so that the net amounts
received and retained by the Trust and the Property Trustee after paying such
taxes, duties, assessments or other governmental charges will be equal to the
amounts the Trust and the Property Trustee would have received had no such
taxes, duties, assessments or other government charges been imposed.
2.6 EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The Junior
Subordinated Debentures shall be executed on behalf of the Company by its Chief
Executive Officer, its President or any Vice President and attested by its
Secretary or Assistant Secretary. The signature of any of these officers on the
Junior Subordinated Debentures may be manual or facsimile.
Junior Subordinated Debentures bearing the manual or facsimile
signatures of individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and delivery
of such Junior Subordinated Debentures or did not hold such offices at the date
of such Junior Subordinated Debentures.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may
4.1-9
<PAGE> 15
deliver Junior Subordinated Debentures executed by the Company to the Trustee
for authentication, together with a Company order for the authentication and
delivery of such Junior Subordinated Debentures. The Trustee in accordance with
such Company order shall authenticate and deliver such Junior Subordinated
Debentures as in this Indenture provided and not otherwise.
Upon the initial issuance, each Junior Subordinated Debenture shall be
dated ________________, 1998, and thereafter Junior Subordinated Debentures
issued hereunder shall be dated the date of their authentication.
No Junior Subordinated Debenture shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose unless there appears on
such Junior Subordinated Debenture a certificate of authentication substantially
in the form provided for herein executed by the Trustee by manual signature, and
such certificate upon any Junior Subordinated Debenture shall be conclusive
evidence, and the only evidence, that such Junior Subordinated Debenture has
been duly authenticated and delivered hereunder and is entitled to the benefits
of this Indenture.
2.7 REGISTRATION AND TRANSFER. The Company shall cause to be kept at
the Corporate Trust Office of the Trustee a register (the register maintained in
such office or any other office or agency pursuant to Section 5.2 being herein
sometimes referred to as the "Securities Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of the Junior Subordinated Debentures and transfers of the Junior
Subordinated Debentures. The Trustee is hereby appointed "Securities Registrar"
for the purpose of registering the Junior Subordinated Debentures and transfers
of the Junior Subordinated Debentures as herein provided.
Upon surrender for registration of transfer of any Junior Subordinated
Debenture at an office or agency of the Company designated pursuant to Section
5.2 for such purpose, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, a new Junior Subordinated Debenture of the authorized denomination.
All Junior Subordinated Debentures issued upon any registration of
transfer of Junior Subordinated Debentures shall be valid obligations of the
Company, evidencing the same debt and entitled to the same benefits under this
Indenture as the Junior Subordinated Debentures surrendered upon such
registration of transfer.
Every Junior Subordinated Debenture presented or surrendered for
registration of transfer shall be duly endorsed for transfer (if so required by
the Company or the Trustee), or shall be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Securities Registrar duly
executed by the Holder thereof or such Holder's attorney duly authorized in
writing.
No service charge shall be made for any registration of transfer of
Junior Subordinated Debentures, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer of Junior Subordinated Debentures.
The Company shall not be required to issue or register the transfer of
any Junior Subordinated Debenture during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Junior Subordinated Debentures selected for redemption pursuant to Article Three
and ending at the close of business on the day of such mailing.
2.8 MUTILATED, DESTROYED, LOST AND STOLEN JUNIOR SUBORDINATED
DEBENTURES. If any mutilated Junior Subordinated Debenture is surrendered to the
Trustee, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Junior Subordinated Debenture of like tenor
and principal amount and bearing a number not contemporaneously outstanding.
4.1-10
<PAGE> 16
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Junior
Subordinated Debenture and (ii) such security or indemnity as may be required by
them to save each of them harmless, then, in the absence of notice to the
Company or the Trustee that such Junior Subordinated Debenture has been acquired
by a bona fide purchaser, the Company shall execute and upon its request the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Junior Subordinated Debenture, a new Junior Subordinated Debenture of
like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Junior
Subordinated Debenture has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Junior Subordinated
Debenture, pay such Junior Subordinated Debenture.
Upon the issuance of any new Junior Subordinated Debenture under this
Section, the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Junior Subordinated Debenture issued pursuant to this Section
in lieu of any destroyed, lost or stolen Junior Subordinated Debenture shall
constitute an original additional contractual obligation of the Company, whether
or not the destroyed, lost or stolen Junior Subordinated Debenture shall be at
any time enforceable by anyone, and shall be entitled to all of the benefits of
this Indenture.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Junior Subordinated Debentures.
ARTICLE III
REDEMPTION OF JUNIOR SUBORDINATED DEBENTURES
3.1 REDEMPTION. Subject to the Company having received prior approval
of the Federal Reserve, if then required under the applicable capital guidelines
or policies of the Federal Reserve, the Company may redeem the Junior
Subordinated Debentures in accordance with this Article Three.
3.2 SPECIAL EVENT REDEMPTION. Subject to the Company having received
the prior approval of the Federal Reserve, if then required under the applicable
capital guidelines or policies of the Federal Reserve, if a Special Event has
occurred and is continuing, then, notwithstanding Section 3.3, the Company shall
have the right upon not less than 30 days nor more than 60 days notice to the
Holders of the Junior Subordinated Debentures to redeem the Junior Subordinated
Debentures, in whole but not in part, for cash within 90 days following the
occurrence of such Special Event (the "90-Day Period") at the Redemption Price,
provided that if at the time there is available to the Company the opportunity
to eliminate, within the 90-Day Period, the Tax Event by taking some ministerial
action ("Ministerial Action"), such as filing a form or making an election, or
pursuing some other similar reasonable measure which has no adverse effect on
the Company, the Trust or the Holders of the Trust Securities issued by the
Trust, the Company shall pursue such Ministerial Action in lieu of redemption,
and, provided, further, that the Company shall have no right to redeem the
Junior Subordinated Debentures while the Trust is pursuing any Ministerial
Action to eliminate the Tax Event. The Redemption Price shall be paid prior to
2:00 p.m., Denver, Colorado 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 Redemption Price by 12:00 noon, Denver,
Colorado time, on the date such Redemption Price is to be paid.
4.1-11
<PAGE> 17
3.3 OPTIONAL REDEMPTION BY COMPANY.
(a) Except as otherwise may be specified in this Indenture, the Company
shall have the right to redeem the Junior Subordinated Debentures, in whole or
in part, from time to time, on or after ________________, 2003, at the
Redemption Price. Any redemption pursuant to this Section 3.3 will be made upon
not less than 30 days nor more than 60 days notice to the Holders of the Junior
Subordinated Debentures, at the Redemption Price. If the Junior Subordinated
Debentures are only partially redeemed pursuant to this Section 3.3, the Junior
Subordinated Debentures 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
Junior Subordinated Debentures are registered as a Global Subordinated
Debenture, the Depositary shall determine, in accordance with its procedures,
the principal amount of such Junior Subordinated Debentures held by each Holder
of Junior Subordinated Debentures to be redeemed. The Redemption Price shall be
paid prior to 2:00 p.m., Denver, Colorado 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 Redemption Price
by 12:00 noon, Denver, Colorado time, on the date such Redemption Price is to be
paid.
(b) If a partial redemption of the Junior Subordinated Debentures would
result in the delisting of the Preferred Securities issued by the Trust from the
Nasdaq National Market or any national securities exchange or other organization
on which the Preferred Securities may then be listed, if any, the Company shall
not be permitted to effect such partial redemption and may only redeem the
Junior Subordinated Debentures in whole or in part to such extent as would not
cause such delisting.
3.4 NOTICE OF REDEMPTION.
(a) In case the Company shall desire to exercise such right to redeem
all or, as the case may be, a portion of the Junior Subordinated Debentures in
accordance with the right reserved so to do, the Company shall, or shall cause
the Trustee to, give notice of such redemption to Holders of the Junior
Subordinated Debentures to be redeemed by mailing, first class postage prepaid,
a notice of such redemption not less than 30 days and not more than 60 days
before the date fixed for redemption to such Holders at their last addresses as
they shall appear upon the Securities Register. Any notice that is mailed in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the Registered Holder receives the notice. In any case, failure
duly to give such notice to the Holder of any Junior Subordinated Debenture
designated for redemption in whole or in part, or any defect in the notice,
shall not affect the validity of the proceedings for the redemption of any other
Junior Subordinated Debentures. In the case of any redemption of Junior
Subordinated Debentures prior to the expiration of any restriction on such
redemption provided elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with any such
restriction.
Each such notice of redemption shall specify the date fixed for
redemption and the Redemption Price, and shall state that payment of the
Redemption Price of such Junior Subordinated Debentures to be redeemed will be
made at the office or agency of the Company in Englewood, Colorado, upon
presentation and surrender of such Junior Subordinated Debentures, that interest
accrued to the date fixed for redemption will be paid as specified in said
notice, that from and after said date interest will cease to accrue. If less
than all the Junior Subordinated Debentures are to be redeemed, the notice to
the Holders of Junior Subordinated Debentures to be redeemed in whole or in part
shall specify the particular Junior Subordinated Debentures to be so redeemed.
In case any Junior Subordinated Debenture is to be redeemed in part only, the
notice that relates to such Junior Subordinated Debenture shall state the
portion of the principal amount thereof to be redeemed, and shall state that on
and after the redemption date, upon surrender of such Junior Subordinated
Debenture, a new Junior Subordinated Debenture or Junior Subordinated Debentures
in principal amount equal to the unredeemed portion thereof shall be issued to
the Holder.
(b) If less than all the Junior Subordinated Debentures are to be
redeemed, the Company shall give the Trustee at least 45 days' notice in advance
of the date fixed for redemption as to the aggregate principal amount of Junior
Subordinated Debentures to be redeemed, and thereupon the Trustee shall select,
by lot or in such other
4.1-12
<PAGE> 18
manner as it shall deem appropriate and fair in its discretion and that may
provide for the selection of a portion or portions (equal to ten U.S. dollars
($10) or any integral multiple thereof), the Junior Subordinated Debentures to
be redeemed and shall thereafter promptly notify the Company in writing of the
numbers of the Junior Subordinated Debentures to be redeemed, in whole or in
part.
The Company may, if and whenever it shall so elect, by delivery of
instructions signed on its behalf by its Chief Executive Officer, its President
or any Vice President, instruct the Trustee or any paying agent to call all or
any part of the Junior Subordinated Debentures for redemption and to give notice
of redemption in the manner set forth in this Section, such notice to be in the
name of the Company or in the name of the Trustee or the paying agent, as the
Trustee or such paying agent may deem advisable. In any case in which notice of
redemption is to be given by the Trustee or any such paying agent, the Company
shall deliver or cause to be delivered to, or permit to remain with, the Trustee
or such paying agent, as the case may be, such Securities Register, transfer
books or other records, or suitable copies or extracts therefrom, sufficient to
enable the Trustee or such paying agent to give any notice by mail that may be
required under the provisions of this Section.
3.5 PAYMENT UPON REDEMPTION.
(a) If the giving of notice of redemption shall have been completed as
above provided, the Junior Subordinated Debentures or portions of Junior
Subordinated Debentures to be redeemed specified in such notice shall become due
and payable on the date and at the place stated in such notice at the Redemption
Price (which includes interest accrued to the date fixed for redemption) and
interest on such Junior Subordinated Debentures or portions of Junior
Subordinated Debentures shall cease to accrue on and after the date fixed for
redemption, unless the Company shall default in the payment of such Redemption
Price with respect to any such Junior Subordinated Debentures or portions
thereof. On presentation and surrender of such Junior Subordinated Debentures on
or after the date fixed for redemption at the place of payment specified in the
notice, such Junior Subordinated Debentures shall be paid and redeemed at the
Redemption Price (which includes the interest accrued thereon to the date fixed
for redemption) (but if the date fixed for redemption is an Interest Payment
Date, the interest installment payable on such date shall be payable to the
Registered Holder at the close of business on the applicable record date
pursuant to Section 2.5(a)).
(b) Upon presentation of any Junior Subordinated Debenture that is to
be redeemed in part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Junior Subordinated Debenture is
presented shall deliver to the Holder thereof, at the expense of the Company, a
new Junior Subordinated Debenture or Junior Subordinated Debentures of
authorized denominations in principal amount equal to the unredeemed portion of
the Junior Subordinated Debenture so presented.
3.6 NO SINKING FUND. The Junior Subordinated Debentures are not
entitled to the benefit of any sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
4.1 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 Junior Subordinated
Debentures, to defer payments of interest by extending the interest payment
period of such Junior Subordinated Debentures for a period not exceeding 20
consecutive quarters (the "Extended Interest Payment Period"), during which
Extended Interest Payment Period no interest shall be due and payable; provided
that no Extended Interest Payment Period may extend beyond the Maturity Date. 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 4.1, will bear interest thereon at the Coupon Rate compounded
quarterly for each quarter of the Extended Interest Payment Period ("Compounded
Interest"). At the end of the Extended Interest Payment Period,
4.1-13
<PAGE> 19
the Company shall pay all interest accrued and unpaid on the Junior Subordinated
Debentures, including any Additional Sums and Compounded Interest (together,
"Deferred Interest") that shall be payable to the Holders of the Junior
Subordinated Debentures in whose names the Junior Subordinated Debentures are
registered in the Securities Register on the record date for the Interest
Payment Date coinciding with the end of the Extended Interest Payment Period.
Before the termination of any Extended Interest Payment Period, the Company may
further extend such period, provided that such period together with all such
further extensions thereof shall not exceed 20 consecutive quarters, or extend
beyond the Maturity Date. Upon the termination of any Extended Interest Payment
Period and upon 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.
4.2 NOTICE OF EXTENSION.
(a) If the Property Trustee is the only Registered Holder of the Junior
Subordinated Debentures 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 one Business Day before the earlier of (i) the next
succeeding date on which Distributions are payable, or (ii) the date the Trust
is required to give notice of the record date, or the date such Distributions
are payable, to the Preferred Securities holders or to the Nasdaq National
Market or other applicable self regulatory organization, if any, but in any
event at least one Business Day before such record date.
(b) If the Property Trustee is not the only Holder of the Junior
Subordinated Debentures at the time the Company selects an Extended Interest
Payment Period, the Company shall give the Holders of the Junior Subordinated
Debentures and the Trustee written notice of its selection of such Extended
Interest Payment Period at least one Business Day before the earlier of (i) the
next succeeding Interest Payment Date, or (ii) the date the Company is required
to give notice of the record or payment date of such interest payment to the
Holders of the Junior Subordinated Debentures or to the Nasdaq National Market
or other applicable self regulatory organization, if any.
(c) The quarter in which any notice is given pursuant to paragraph (a)
or paragraph (b) of this Section 4.2 shall be counted as one of the 20 quarters
permitted in the maximum Extended Interest Payment Period permitted under
Section 4.1.
4.3 LIMITATION OF TRANSACTIONS DURING EXTENSION. If: (i) the Company
shall exercise its right to defer payment of interest as provided in Section
4.1; or (ii) there shall have occurred any Event of Default, then the Company
shall be subject to the restrictions on payments set forth under Section 5.6.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
5.1 PAYMENT OF PRINCIPAL AND INTEREST. The Company will duly and
punctually pay or cause to be paid the principal of and interest on the Junior
Subordinated Debentures at the time and place and in the manner provided herein
and established with respect to such Junior Subordinated Debentures.
5.2 MAINTENANCE OF AGENCY. So long as any Junior Subordinated
Debentures remain Outstanding, the Company agrees to maintain an office or
agency in Englewood, Colorado, or at such other location or locations as may be
designated as provided in this Section 5.2, where (i) Junior Subordinated
Debentures may be presented for payment, (ii) Junior Subordinated Debentures may
be presented as hereinabove authorized for registration of transfer and
exchange, and (iii) notices and demands to or upon the Company in respect of the
Junior Subordinated Debentures and this Indenture may be given or served, such
designation to continue with respect to
4.1-14
<PAGE> 20
such office or agency until the Company shall, by written notice signed by its
Chief Executive Officer, its President or a Vice President and delivered to the
Trustee, designate some other office or agency for such purposes or any of them.
If at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, notices and demands.
5.3 PAYING AGENTS.
(a) If the Company shall appoint one or more paying agents for the
Junior Subordinated Debentures, other than the Trustee, the Company will cause
each such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of this
Section:
(i) that it will hold all sums held by it as such agent for
the payment of the principal of or interest on the Junior Subordinated
Debentures (whether such sums have been paid to it by the Company or by
any other obligor) in trust for the benefit of the Persons entitled
thereto;
(ii) that it will give the Trustee notice of any failure by
the Company (or by any other obligor) to make any payment of the
principal of or interest on the Junior Subordinated Debentures when the
same shall be due and payable;
(iii) that it will, at any time during the continuance of any
failure referred to in the preceding paragraph (a)(ii) above, upon the
written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such paying agent; and
(iv) that it will perform all other duties of paying agent as
set forth in this Indenture.
(b) If the Company shall act as its own paying agent with respect to
the Junior Subordinated Debentures, it will on or before each due date of the
principal of or interest on Junior Subordinated Debentures, set aside, segregate
and hold in trust for the benefit of the Persons entitled thereto a sum
sufficient to pay such principal or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided and
will promptly notify the Trustee of such action, or any failure (by it or any
other obligor) to take such action. Whenever the Company shall have one or more
paying agents for the Junior Subordinated Debentures, it will, prior to each due
date of the principal of or interest on the Junior Subordinated Debentures,
deposit with the paying agent a sum sufficient to pay the principal or interest
so becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal or interest, and (unless such paying agent is the
Trustee) the Company will promptly notify the Trustee of this action or failure
so to act.
(c) Notwithstanding anything in this Section to the contrary, (i) the
agreement to hold sums in trust as provided in this Section is subject to the
provisions of Section 13.5, and (ii) the Company may at any time, for the
purpose of obtaining the satisfaction and discharge of this Indenture or for any
other purpose, pay, or direct any paying agent to pay, to the Trustee all sums
held in trust by the Company or such paying agent, such sums to be held by the
Trustee upon the same terms and conditions as those upon which such sums were
held by the Company or such paying agent; and, upon such payment by any paying
agent to the Trustee, such paying agent shall be released from all further
liability with respect to such money.
5.4 APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE. The Company,
whenever necessary to avoid or fill a vacancy in the office of Trustee, will
appoint, in the manner provided in Section 9.10, a Trustee, so that there shall
at all times be a Trustee hereunder.
5.5 COMPLIANCE WITH CONSOLIDATION PROVISIONS. The Company will not,
while any of
4.1-15
<PAGE> 21
the Junior Subordinated Debentures remain Outstanding, consolidate with, or
merge into, or merge into itself, or sell or convey all or substantially all of
its property to any other company unless the provisions of Article Twelve hereof
are complied with.
5.6 RESTRICTIONS ON CERTAIN PAYMENTS. If at any time (i) there shall
have occurred any event of which the Company has actual knowledge that (a) with
the giving of notice or the lapse of time, or both, would constitute an Event of
Default and (b) in respect to which the Company shall not have taken reasonable
steps to cure, or (ii) the Company shall have given notice of its election of an
Extended Interest Payment Period as provided herein with respect to the Junior
Subordinated Debentures and shall not have rescinded such notice, or such
Extended Interest Payment Period, or any extension thereof, shall be continuing;
or (iii) while the Junior Subordinated Debentures are held by the Trust, the
Company shall be in default with respect to its payment of any obligation under
the Preferred Securities Guarantee, then the Company will not (1) 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 or (2)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company (including the Junior
Subordinated Debentures) that rank pari passu with or junior in interest to the
Junior Subordinated Debentures or make any guarantee payments with respect to
any guarantee by the Company of the debt securities of any Subsidiary of the
Company if such guarantee ranks pari passu or junior in interest to the Junior
Subordinated Debentures (other than (a) dividends or distributions in common
stock, (b) any declaration of a dividend in connection with the implementation
of a shareholders' rights plan, or the issuance of stock under any such plan in
the future or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Preferred Securities Guarantee and (d) 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).
5.7 COVENANTS AS TO THE TRUST. For so long as the Trust Securities of
the Trust remain outstanding, the Company will (i) maintain 100% direct or
indirect ownership of the Common Securities of the Trust; provided, however,
that any permitted successor of the Company under this Indenture may succeed to
the Company's ownership of the Common Securities, (ii) use its reasonable
efforts to cause the Trust (a) to remain a business trust, except in connection
with a distribution of Junior Subordinated Debentures, the redemption of all of
the Trust Securities of the Trust or certain mergers, consolidations or
amalgamations, each as permitted by the Trust Agreement, and (b) to otherwise
continue not to be treated as an association taxable as a corporation or
partnership for United States federal income tax purposes and (iii) to use its
reasonable efforts to cause each Holder of Trust Securities to be treated as
owning an individual beneficial interest in the Junior Subordinated Debentures.
If the Junior Subordinated Debentures are to be issued as a Global
Subordinated Debenture in connection with the distribution of the Junior
Subordinated Debentures to the holders of the Preferred Securities issued by the
Trust upon a Dissolution Event, the Company will use its best efforts to list
such Junior Subordinated Debentures on the Nasdaq National Market or on such
other exchange as the Preferred Securities may then be listed.
ARTICLE VI
SECURITYHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
6.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF SECURITYHOLDERS.
The Company will furnish or cause to be furnished to the Trustee (a) on each
regular record date (as defined in Section 2.5(a)) a list, in such form as the
Trustee may reasonably require, of the names and addresses of the Holders as of
such regular record date, provided that the Company shall not be obligated to
furnish or cause to furnish such list at any time that the list shall not differ
in any respect from the most recent list furnished to the Trustee by the Company
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; provided, however, that, in either case, no such list need be
furnished if the Trustee shall be the Securities Registrar.
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6.2 PRESERVATION OF INFORMATION; COMMUNICATIONS WITH SECURITYHOLDERS.
(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
contained in the most recent list furnished to it as provided in Section 6.1 and
as to the names and addresses of Holders received by the Trustee in its capacity
as Securities Registrar (if acting in such capacity).
(b) The Trustee may destroy any list furnished to it as provided in
Section 6.1 upon receipt of a new list so furnished.
(c) Securityholders may communicate as provided in Section 312(b) of
the Trust Indenture Act with other Securityholders with respect to their rights
under this Indenture or under the Junior Subordinated Debentures.
6.3 REPORTS BY THE COMPANY.
(a) The Company covenants and agrees to file with the Trustee, within
15 days after 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 the Commission may from
time to time by rules and regulations prescribe) that 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 the Commission, in accordance with the rules and regulations
prescribed from time to time by the Commission, such of the supplementary and
periodic information, documents and reports that may be required pursuant to any
applicable rules and regulations of the Commission.
(b) The Company covenants and agrees to file with the Trustee and the
Commission, in accordance with the rules and regulations prescribed from to time
by the Commission, such additional information, documents and reports with
respect to compliance by the 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, first-class
postage prepaid, or reputable over-night delivery service that provides for
evidence of receipt, to the Securityholders, as their names and addresses appear
upon the Securities 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 as may
be required by rules and regulations prescribed from time to time by the
Commission.
6.4 REPORTS BY THE TRUSTEE.
(a) Beginning January 31, 1999, on or before January 31 in each year in
which any of the Junior Subordinated Debentures are Outstanding, the Trustee
shall transmit by mail, first class postage prepaid, to the Securityholders, as
their names and addresses appear upon the Securities Register, a brief report
dated as of the preceding December 31, if and to the extent required under
Section 313(a) of the Trust Indenture Act.
(b) The Trustee shall comply with Section 313(b) and 313(c) of the
Trust Indenture Act.
(c) A copy of each such report shall, at the time of such transmission
to Securityholders, be filed by the Trustee with the Company, and also with the
Commission.
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<PAGE> 23
ARTICLE VII
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT
7.1 EVENTS OF DEFAULT.
(a) Whenever used herein, "Event of Default" means any one or more of
the following events that has occurred and is continuing:
(i) the Company defaults in the payment of any installment of
interest upon any of the Junior Subordinated Debentures, as and when
the same shall become due and payable, and continuance of such default
for a period of 30 days; provided, however, that a valid extension of
an interest payment period by the Company in accordance with the terms
of this Indenture shall not constitute a default in the payment of
interest for this purpose;
(ii) the Company defaults in the payment of the principal of any
of the Junior Subordinated Debentures as and when the same shall become
become due and payable whether at maturity, upon redemption, by
declaration or otherwise;
(iii) the Company fails to observe or perform any other of its
covenants or agreements hereunder with respect to the Junior
Subordinated Debentures for a period of 90 days after the date on which
written notice of such failure, requiring the same to be remedied and
stating that such notice is a "Notice of Default" hereunder, shall have
been given to the Company by the Trustee, by registered or certified
mail, or to the Company and the Trustee by the Holders of at least 25%
in principal amount of the Junior Subordinated Debentures at the time
Outstanding;
(iv) the Company pursuant to or within the meaning of any
Bankruptcy Law (1) commences a voluntary case, (2) consents to the
entry of an order for relief against it in an involuntary case, (3)
consents to the appointment of a custodian of it or for all or
substantially all of its property or (4) makes a general assignment for
the benefit of its creditors;
(v) a court of competent jurisdiction enters an order under any
Bankruptcy Law that (1) is for relief against the Company in an
involuntary case, (2) appoints a custodian of the Company for all or
substantially all of its property, or (3) orders the liquidation of the
Company, and the order or decree remains unstayed and in effect for 90
days; or
(vi) in the event Junior Subordinated Debentures are issued to the
Trust or a trustee of the Trust in connection with the issuance of
Trust Securities by the Trust, the Trust shall have voluntarily or
involuntarily dissolved, wound-up its business or otherwise terminated
its existence, except in connection with (1) the distribution of Junior
Subordinated Debentures to holders of Trust Securities in liquidation
of their interests in the Trust, (2) the redemption of all of the
outstanding Trust Securities of the Trust or (3) certain mergers,
consolidations or amalgamations, each as permitted by the Trust
Agreement.
(b) In each and every such case, unless the principal of all the Junior
Subordinated Debentures shall have already become due and payable, either the
Trustee or the Holders of not less than 25% in aggregate principal amount of the
Junior Subordinated Debentures then Outstanding hereunder, by notice in writing
to the Company (and to the Trustee if given by such Securityholders) may declare
the principal of all the Junior Subordinated Debentures to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, notwithstanding anything contained in this
Indenture or in the Junior Subordinated Debentures to the contrary.
(c) At any time after the principal of the Junior Subordinated
Debentures shall have been so declared
4.1-18
<PAGE> 24
due and payable, and before any judgment or decree for the payment of the moneys
due shall have been obtained or entered as hereinafter provided, the Holders of
a majority in aggregate principal amount of the Junior Subordinated Debentures
then Outstanding, by written notice to the Company and the Trustee, may rescind
and annul such declaration and its consequences if: (i) the Company has paid or
deposited with the Trustee a sum sufficient to pay all matured installments of
interest upon all the Junior Subordinated Debentures and the principal of any
and all Junior Subordinated Debentures that shall have become due otherwise than
by acceleration (with interest upon such principal and, to the extent that such
payment is enforceable under applicable law, upon overdue installments of
interest, at the rate per annum expressed in the Junior Subordinated Debentures
to the date of such payment or deposit) and the amount payable to the Trustee
under Section 9.6, and (ii) any and all Events of Default under this Indenture,
other than the nonpayment of principal on Junior Subordinated Debentures that
shall not have become due by their terms, shall have been remedied or waived as
provided in Section 7.6. Should the Holders fail to annul such declaration and
waive such default, then the holders of a majority in aggregate Liquidation
Amount of the Preferred Securities shall have such right.
No such rescission and annulment shall extend to or shall affect any
subsequent default or impair any right consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any right with
respect to Junior Subordinated Debentures under this Indenture and such
proceedings shall have been discontinued or abandoned because of such rescission
or annulment or for any other reason or shall have been determined adversely to
the Trustee, then and in every such case the Company and the Trustee shall be
restored respectively to their former positions and rights hereunder, and all
rights, remedies and powers of the Company and the Trustee shall continue as
though no such proceedings had been taken.
7.2 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
(a) The Company covenants that (i) in case it shall default in the
payment of any installment of interest on any of the Junior Subordinated
Debentures as and when the same shall have become due and payable, and such
default shall have continued for a period of 90 Business Days, or (ii) in case
it shall default in the payment of the principal of any of the Junior
Subordinated Debentures when the same shall have become due and payable, whether
upon maturity of the Junior Subordinated Debentures or upon redemption or upon
declaration or otherwise, then, upon demand of the Trustee, the Company will pay
to the Trustee, for the benefit of the Holders of the Junior Subordinated
Debentures, the whole amount that then shall have become due and payable on all
such Junior Subordinated Debentures for principal or interest, or both, as the
case may be, with interest upon the overdue principal and (to the extent that
payment of such interest is enforceable under applicable law and, if the Junior
Subordinated Debentures are held by the Trust or a trustee of the Trust, without
duplication of any other amounts paid by the Trust or trustee in respect
thereof) upon overdue installments of interest at the rate per annum expressed
in the Junior Subordinated Debentures; and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection, and
the amount payable to the Trustee under Section 9.6.
(b) If the Company shall fail to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or other obligor upon the Junior
Subordinated Debentures and collect the moneys adjudged or decreed to be payable
in the manner provided by law out of the property of the Company or other
obligor upon the Junior Subordinated Debentures, wherever situated.
(c) In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, readjustment, arrangement, composition or judicial proceedings
affecting the Company or the creditors or property of either, the Trustee shall
have power to intervene in such proceedings and take any action therein that may
be permitted by the
4.1-19
<PAGE> 25
court and shall (except as may be otherwise provided by law) be entitled to file
such proofs of claim and other papers and documents as may be necessary or
advisable in order to have the claims of the Trustee and of the Holders of
Junior Subordinated Debentures allowed for the entire amount due and payable by
the Company under this Indenture at the date of institution of such proceedings
and for any additional amount that may become due and payable by the Company
after such date, and to collect and receive any moneys or other property payable
or deliverable on any such claim, and to distribute the same after the deduction
of the amount payable to the Trustee under Section 9.6; and any receiver,
assignee or trustee in bankruptcy or reorganization is hereby authorized by each
of the Holders to make such payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments directly to such
Securityholders, to pay to the Trustee any amount due it under Section 9.6.
(d) All rights of action and of asserting claims under this Indenture
may be enforced by the Trustee without the possession of any of the Junior
Subordinated Debentures, or the production thereof at 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, after provision for payment to the Trustee of any
amounts due under Section 9.6, be for the ratable benefit of the Holders of the
Junior Subordinated Debentures.
In case of an Event of Default hereunder, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture, or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Junior Subordinated Debentures 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.
7.3 APPLICATION OF MONEYS COLLECTED. Any moneys collected by the
Trustee pursuant to this Article with respect to the Junior Subordinated
Debentures shall be applied in the following order, at the date or dates fixed
by the Trustee and, in case of the distribution of such moneys on account of
principal or interest, upon presentation of the Junior Subordinated Debentures,
and notation thereon the payment, if only partially paid, and upon surrender
thereof if fully paid:
FIRST: To the payment of costs and expenses of collection and of all
amounts payable to the Trustee under Section 9.6;
SECOND: To the payment of all Senior and Subordinated Debt of the
Company if and to the extent required by Article Sixteen; and
THIRD: To the payment of the amounts then due and unpaid upon Junior
Subordinated Debentures for principal and interest, in respect of which or for
the benefit of which such money has been collected, ratably, without preference
or priority of any kind, according to the amounts due and payable on such Junior
Subordinated Debentures for principal and interest, respectively.
7.4 LIMITATION ON SUITS. No Holder shall have any right by virtue of or
by availing any provision of this Indenture to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Indenture
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless (i) such Holder previously shall have given to the Trustee
written notice of an Event of Default and of the continuance thereof; (ii) the
Holders of not less than 25% in aggregate principal amount of the Junior
Subordinated Debentures then Outstanding shall have made written request upon
the Trustee to institute such action, suit or proceeding in its own
4.1-20
<PAGE> 26
name as trustee hereunder; (iii) such Holder or Holders shall have offered to
the Trustee such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby; and (iv) the Trustee
for 60 days after its receipt of such notice, request and offer of indemnity
shall have failed to institute any such action, suit or proceeding; and (v)
during such 60 day period, the Holders of a majority in principal amount of the
Junior Subordinated Debentures do not give the Trustee a direction inconsistent
with the request.
Notwithstanding any other provisions of this Indenture to the contrary,
the right of any Holder to receive payment of the principal of and interest on
the Junior Subordinated Debentures on or after the respective due dates (or in
the case of redemption, on the redemption date), or to institute suit for the
enforcement of any such payment on or after such respective dates or redemption
date, shall not be impaired or affected without the consent of such Holder; and
by accepting a Junior Subordinated Debenture hereunder it is expressly
understood, intended and covenanted by the Holder thereof with every other such
Holder and the Trustee, that no one or more Holders shall have any right in any
manner whatsoever by virtue of or by availing any provision of this Indenture to
affect, disturb or prejudice the rights of any other Holders, or to obtain or
seek to obtain priority over or preference to any such other Holders, 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 Junior Subordinated
Debentures. For the protection and enforcement of the provisions of this
Section, each and every Securityholder and the Trustee shall be entitled to such
relief as can be given either at law or in equity.
7.5 RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER.
(a) Except as otherwise provided in Section 7.2, all powers and
remedies given by this Article 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 Junior
Subordinated Debentures, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture or otherwise established with respect to such Junior Subordinated
Debentures.
(b) No delay or omission of the Trustee or of any Holder of any of the
Junior Subordinated Debentures to exercise any right or power accruing upon any
Event of Default occurring and continuing as aforesaid shall impair any such
right or power, or shall be construed to be a waiver of any such default or on
acquiescence therein; and, subject to the provisions of Section 7.4, every power
and remedy given by this Article or by law to the Trustee or the Securityholders
may be exercised from time to time, and as often as shall be deemed expedient,
by the Trustee or by the Securityholders.
7.6 CONTROL BY SECURITYHOLDERS. The Holders of a majority in aggregate
principal amount of the Junior Subordinated Debentures at the time Outstanding,
determined in accordance with Section 10.4, shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee;
provided, however, that such direction shall not be in conflict with any rule of
law or with this Indenture. Subject to the provisions of Section 9.1, the
Trustee shall have the right to decline to follow any such direction if the
Trustee in good faith shall, by a Responsible Officer or Officers of the
Trustee, determine that the proceeding so directed would involve the Trustee in
personal liability. The Holders of a majority in aggregate principal amount of
the Junior Subordinated Debentures at the time Outstanding affected thereby,
determined in accordance with Section 10.4, may on behalf of the Holders of all
of the Junior Subordinated Debentures waive any past default in the performance
of any of the covenants contained herein and its consequences, except (i) a
default in the payment of the principal of or interest on any of the Junior
Subordinated Debentures as and when the same shall become due by its terms
otherwise than by acceleration (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal has been
deposited with the Trustee in accordance with Section 7.1(c)), (ii) a default in
the covenants contained in Section 5.6 or (iii) in respect of a covenant or
provision hereof which under Article Eleven cannot be modified or amended
without the consent of the Holder of each Outstanding Junior Subordinated
Debenture affected; provided, however, that if the Junior Subordinated
Debentures are held by the Trust or a Trustee of the Trust, such waiver or
modification
4.1-21
<PAGE> 27
to such waiver shall not be effective until the Holders of a majority in
Liquidation Amount of Trust Securities of the Trust shall have consented to such
waiver or modification to such waiver; provided further, that if the consent of
the Holder of each Outstanding Junior Subordinated Debenture is required, such
waiver shall not be effective until each Holder of the Trust Securities of the
Trust shall have consented to such waiver. Upon any such waiver, the default
covered thereby shall be deemed to be cured for all purposes of this Indenture
and the Company, the Trustee and the Holders of the Junior Subordinated
Debentures shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
7.7 UNDERTAKING TO PAY COSTS. All parties to this Indenture agree, and
each Holder of any Junior Subordinated Debentures by such Holder's acceptance
thereof shall be deemed to have agreed, that any court may in its discretion
require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken or omitted by
it as Trustee, the filing by any party litigant in such suit of an undertaking
to pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, 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 shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Securityholder, or group of Securityholders, holding more than
10% in aggregate principal amount of the Outstanding Junior Subordinated
Debentures, or to any suit instituted by any Securityholder for the enforcement
of the payment of the principal of or interest on the Junior Subordinated
Debentures on or after the due dates thereof.
ARTICLE VIII
FORM OF JUNIOR SUBORDINATED DEBENTURE AND ORIGINAL ISSUE
8.1 FORM OF JUNIOR SUBORDINATED DEBENTURE. The Junior Subordinated
Debenture and the Trustee's Certificate of Authentication to be endorsed thereon
are to be substantially in the forms contained as Exhibit A to this Indenture,
attached hereto and incorporated herein by reference.
8.2 ORIGINAL ISSUE OF JUNIOR SUBORDINATED DEBENTURES. Junior
Subordinated Debentures in the aggregate principal amount of $12,371,150 may,
upon execution of this Indenture, be executed by the Company and delivered to
the Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver the Junior Subordinated Debentures to or upon the written order of the
Company, signed by its Chairman, its Vice Chairman, its Chief Executive Officer,
its President or any Vice President, without any further action by the Company.
ARTICLE IX
CONCERNING THE TRUSTEE
9.1 CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE.
(a) The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default that may have occurred, shall
undertake to perform with respect to the Junior Subordinated Debentures such
duties and only such duties as are specifically set forth in this Indenture, and
no implied covenants shall be read into this Indenture against the Trustee. In
case an Event of Default has occurred (that has not been cured or waived), the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
4.1-22
<PAGE> 28
(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:
(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 that by
any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirement of this Indenture;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a majority in
principal amount of the Junior Subordinated Debentures at the time
Outstanding 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; and
(iv) 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.
9.2 CERTAIN RIGHTS OF TRUSTEE. Except as otherwise provided in Section
9.1:
(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, approval, bond, security or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) Any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by a Board Resolution or an instrument
signed in the name of the Company by the Chief Executive Officer, the President
or any Vice President and by the Secretary or an Assistant Secretary or the
Chief Accounting Officer thereof (unless other evidence in respect thereof is
specifically prescribed herein);
(c) The Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted hereunder in
good faith and in reliance thereon;
(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
that may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligation, upon the occurrence of an Event
of Default (that has not been cured or waived) to exercise
4.1-23
<PAGE> 29
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;
(e) The Trustee shall not be liable for any action taken or omitted to
be taken by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture;
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, security, or
other papers or documents, unless requested in writing so to do by the Holders
of not less than a majority in principal amount of the Outstanding Junior
Subordinated Debentures (determined as provided in Section 10.4); 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 costs, expenses or
liabilities as a condition to so proceeding. The reasonable expense of every
such examination shall be paid by the Company or, if paid by the Trustee, shall
be repaid by the Company upon demand; 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 or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
9.3 TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF THE JUNIOR
SUBORDINATED DEBENTURES.
(a) The recitals contained herein and in the Junior Subordinated
Debentures shall be taken as the statements of the Company and the Trustee
assumes no responsibility for the correctness of the same.
(b) The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Junior Subordinated Debentures.
(c) The Trustee shall not be accountable for the use or application by
the Company of any of the Junior Subordinated Debentures or of the proceeds of
such Junior Subordinated Debentures, or for the use or application of any moneys
paid over by the Trustee in accordance with any provision of this Indenture, or
for the use or application of any moneys received by any paying agent other than
the Trustee.
9.4 MAY HOLD JUNIOR SUBORDINATED DEBENTURES. The Trustee or any paying
agent or Securities Registrar, in its individual or any other capacity, may
become the owner or pledgee of Junior Subordinated Debentures with the same
rights it would have if it were not Trustee, paying agent or Securities
Registrar.
9.5 MONEYS HELD IN TRUST. Subject to the provisions of Section 13.5,
all moneys received by the Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but
need not be segregated from other funds except to the extent required by law.
The Trustee shall be under no liability for interest on any moneys received by
it hereunder except such as it may agree with the Company to pay thereon.
9.6 COMPENSATION AND REIMBURSEMENT.
(a) The Company covenants and agrees to pay to the Trustee, and the
Trustee shall be entitled to, such reasonable compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust), as the Company and the Trustee may from time to time agree in
writing, for all services rendered by it in the execution of the trusts hereby
created and in the exercise and performance of any of the powers
4.1-24
<PAGE> 30
and duties hereunder of the Trustee, and, except as otherwise expressly provided
herein, 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 the Trustee (and its officers, agents, directors and
employees) for, and to hold it harmless against, any loss, liability or expense
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.
(b) The obligations of the Company under this Section 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
Junior Subordinated Debentures 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 the Junior Subordinated Debentures.
9.7 RELIANCE ON OFFICERS' CERTIFICATE. Except as otherwise provided in
Section 9.1, whenever in the administration of the provisions of this Indenture
the Trustee shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering or omitting to take any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted to be taken by
it under the provisions of this Indenture upon the faith thereof.
9.8 DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee has or
shall acquire any "conflicting interest" within the meaning of Section 310(b) of
the Trust Indenture Act, the Trustee and the Company shall in all respects
comply with the provisions of Section 310(b) of the Trust Indenture Act.
9.9 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times
be a Trustee with respect to the Junior Subordinated Debentures issued hereunder
which shall at all times be a corporation organized and doing business under the
laws of the United States of America or any state or territory thereof or of the
District of Columbia, or a corporation or other Person permitted to act as
trustee by the Commission, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least $50,000,000, and
subject to supervision or examination by federal, state, territorial, or
District of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section, 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, the Trustee shall resign
immediately in the manner and with the effect specified in Section 9.10.
9.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) The Trustee, or any successor hereafter appointed, may at any time
resign by giving written notice thereof to the Company and by transmitting
notice of resignation by mail, first-class postage prepaid, to the
Securityholders, as their names and addresses appear upon the Securities
Register. Upon receiving such notice of resignation, the Company shall promptly
appoint a successor trustee by written instrument, in duplicate, executed by
order of the Board of Directors, one copy of which instrument shall be delivered
to the resigning Trustee and one copy to the successor trustee. If no successor
trustee shall have been so appointed and have accepted appointment
4.1-25
<PAGE> 31
within 30 days after the mailing of such notice of resignation, 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
Junior Subordinated Debentures for at least six months may, subject to the
provisions of Section 7.7, on behalf of such Securityholder and all other
Holders, 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 one of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of
Section 9.8 after written request therefor by the Company or by any
Securityholder who has been a bona fide Holder of Junior Subordinated
Debentures for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.9 and shall fail to resign after written
request therefor by the Company or by any such Securityholder; or
(iii) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or commence a voluntary bankruptcy
proceeding, or a receiver of the Trustee or of its property shall be
appointed or consented to, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.7, unless the Trustee's duty to resign is stayed as
provided herein, any Securityholder who has been a bona fide Holder of Junior
Subordinated Debentures for at least six months may, on behalf of that Holder
and all other Holders, 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
Junior Subordinated Debentures at the time Outstanding may at any time remove
the Trustee by so notifying the Trustee and the Company and may appoint a
successor Trustee with the consent of the Company.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 9.11.
9.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor trustee, every
such successor trustee so appointed shall execute, acknowledge and deliver to
the Company and to the retiring Trustee an instrument accepting such
appointment, 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, trusts and
duties of the retiring Trustee; but, on the request of the Company or the
successor trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor trustee all the
rights, powers, and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor trustee all property and money held by
such retiring Trustee hereunder.
(b) Upon request of any such successor trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor trustee all such rights, powers and trusts referred
4.1-26
<PAGE> 32
to in paragraph (a) of this Section.
(c) No successor trustee shall accept its appointment unless at the
time of such acceptance such successor trustee shall be qualified and eligible
under this Article.
(d) Upon acceptance of appointment by a successor trustee as provided
in this Section, the Company shall transmit notice of the succession of such
trustee hereunder by mail, first-class postage prepaid, to the Securityholders,
as their names and addresses appear upon the Securities Register. If the Company
fails to transmit such notice within ten days after acceptance of appointment by
the successor trustee, the successor trustee shall cause such notice to be
transmitted at the expense of the Company.
9.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any
corporation into which the Trustee may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided that such corporation shall be
qualified and eligible under the provisions of this Article Nine, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. In case any
Junior Subordinated Debentures shall have been authenticated, but not delivered,
by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication and
deliver the Junior Subordinated Debentures so authenticated with the same effect
as if such successor Trustee had itself authenticated such Junior Subordinated
Debentures.
9.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY. The Trustee
shall comply with Section 311(a) of the Trust Indenture Act, excluding any
creditor relationship described in Section 311(b) of the Trust Indenture Act. A
Trustee who has resigned or been removed shall be subject to Section 311(a) of
the Trust Indenture Act to the extent included therein.
9.14 APPOINTMENT OF AUTHENTICATING AGENT. At any time when any of the
Junior Subordinated Debentures remain Outstanding, the Trustee may appoint an
Authenticating Agent or Agents which shall be authorized to act on behalf of the
Trustee to authenticate Junior Subordinated Debentures issued upon original
issuance, exchange, registration of transfer or partial redemption thereof or
pursuant to Section 2.8, and Junior Subordinated Debentures so authenticated
shall be entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Junior Subordinated Debentures by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the United
States of America, any state thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $10,000,000 and subject to supervision or examination
by federal or state authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the requirements of such
supervision or examining authority, for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent 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, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall
4.1-27
<PAGE> 33
be otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such notice of
resignation or upon such termination, or in case at any time such Authenticating
Agent shall cease to be eligible in accordance with the provisions of this
Section, the Trustee may appoint a successor Authenticating Agent which shall be
acceptable to the Company and shall mail written notice of such appointment by
first-class mail, postage prepaid, to all Securityholders as their names and
addresses appear in the Securities Register. Any successor Authenticating Agent
upon acceptance of its appointment hereunder shall become vested with all the
rights, powers and duties of its predecessor hereunder, with the like effect as
if originally named as an Authenticating Agent herein. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 9.6.
If an appointment is made pursuant to this Section, the Junior
Subordinated Debentures may have endorsed thereon, in lieu of the form of
certificate of authentication set forth in Section 8.1, a certificate of
authentication in the following form:
"This is one of the Junior Subordinated Debentures described in the
within mentioned Indenture."
------------------------------
As Trustee
By:
---------------------------
As Authenticating Agent
By:
---------------------------
Authorized Signature
ARTICLE X
CONCERNING THE SECURITYHOLDERS
10.1 EVIDENCE OF ACTION BY SECURITYHOLDERS. Whenever in this Indenture
it is provided that the Holders of a majority or specified percentage in
aggregate principal amount of the Junior Subordinated Debentures may take any
action (including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact that at the time
of taking any such action the Holders of such majority or specified percentage
have joined therein may be evidenced by any instrument or any number of
instruments of similar tenor executed by such Holders in Person or by agent or
proxy appointed in writing.
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
4.1-28
<PAGE> 34
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 Junior Subordinated Debentures have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other action, and for that purpose the Outstanding Junior Subordinated
Debentures 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
provisions of this Indenture not later than six months after the record date.
10.2 PROOF OF EXECUTION BY SECURITYHOLDERS. Subject to the provisions
of Section 6.1, proof of the execution of any instrument by a Securityholder
(such proof will not require notarization) or his agent or proxy and proof of
the holding by any Person of any of the Junior Subordinated Debentures shall be
sufficient if made in the following manner:
(a) The fact and date of the execution by any such Person of any
instrument may be proved in any reasonable manner acceptable to the Trustee.
(b) The ownership of Junior Subordinated Debentures shall be proved by
the Securities Register or by a certificate of the Securities Registrar thereof.
(c) The Trustee may require such additional proof of any matter
referred to in this Section as it shall deem necessary.
10.3 WHO MAY BE DEEMED OWNERS. Prior to the due presentment for
registration of transfer of any Junior Subordinated Debenture, the Company, the
Trustee, any paying agent and any Securities Registrar may deem and treat the
Person in whose name such Junior Subordinated Debenture shall be registered upon
the books of the Company as the absolute owner of such Junior Subordinated
Debenture (whether or not such Junior Subordinated Debenture shall be overdue
and notwithstanding any notice of ownership or writing thereon made by anyone
other than the Securities Registrar) for the purpose of receiving payment of or
on account of the principal of and (subject to Section 2.3) interest on such
Junior Subordinated Debenture and for all other purposes; and neither the
Company nor the Trustee nor any paying agent nor any Securities Registrar shall
be affected by any notice to the contrary.
10.4 CERTAIN JUNIOR SUBORDINATED DEBENTURES OWNED BY COMPANY
DISREGARDED. In determining whether the Holders of the requisite aggregate
principal amount of Junior Subordinated Debentures have concurred in any
direction, consent or waiver under this Indenture, the Junior Subordinated
Debentures that are owned by the Company or any other obligor on the Junior
Subordinated Debentures or by any Person directly or indirectly controlling or
controlled by or under common control with the Company or any other obligor on
the Junior Subordinated Debentures shall be disregarded and deemed not to be
Outstanding for the purpose of any such determination, except that for the
purpose of determining whether the Trustee shall be protected in relying on any
such direction, consent or waiver, only Junior Subordinated Debentures that the
Trustee actually knows are so owned shall be so disregarded. The Junior
Subordinated Debentures so owned that have been pledged in good faith may be
regarded as Outstanding for the purposes of this Section, if the pledgee shall
establish to the satisfaction of the Trustee the pledgee's right with respect to
such Junior Subordinated Debentures and that the pledgee is not a Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any such other obligor. In case of a dispute
as to such right, any decision by the Trustee taken upon the advice of counsel
shall be full protection to the Trustee.
10.5 ACTIONS BINDING ON FUTURE SECURITYHOLDERS. At any time prior to
(but not after) the evidencing to the Trustee, as provided in Section 10.1, of
the taking of any action by the Holders of the majority or percentage in
aggregate principal amount of the Junior Subordinated Debentures specified in
this Indenture in connection with such action, any Holder who is shown by the
evidence to have consented to such action may, by
4.1-29
<PAGE> 35
filing written notice with the Trustee, and upon proof of holding as provided in
Section 10.2, revoke such action so far as concerns such Holder's Junior
Subordinated Debentures. Except as aforesaid any such action taken by the Holder
shall be conclusive and binding upon such Holder and upon all future Holders and
owners of such Holder's Junior Subordinated Debentures, and of any Junior
Subordinated Debentures issued in exchange therefor, on registration of transfer
thereof or in place thereof, irrespective of whether or not any notation in
regard thereto is made upon such Junior Subordinated Debentures. Any action
taken by the Holders of the majority or percentage in aggregate principal amount
of the Junior Subordinated Debentures specified in this Indenture in connection
with such action shall be conclusively binding upon the Company, the Trustee and
the Holders of all the Junior Subordinated Debentures.
ARTICLE XI
SUPPLEMENTAL INDENTURES
11.1 SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF SECURITYHOLDERS. In
addition to any supplemental indenture otherwise authorized by this Indenture,
the Company and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as then in effect), without the consent of
the Securityholders, for one or more of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency herein, or in the
Junior Subordinated Debentures, provided that any such action does not
materially adversely affect the interests of the Holders or the holders of the
Preferred Securities so long as they remain outstanding;
(b) to comply with Article Twelve;
(c) to provide for uncertificated Junior Subordinated Debentures in
addition to or in place of certificated Junior Subordinated Debentures;
(d) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company;
(e) to add to, delete from, or revise the conditions, limitations, and
restrictions on the authorized amount, terms, or purposes of issue,
authentication, and delivery of Junior Subordinated Debentures, as herein set
forth;
(f) to make any change that does not adversely affect the rights of any
Securityholder in any material respect; or
(g) to establish the form of any certifications required to be
furnished pursuant to the terms of this Indenture or to add to the rights of the
Holders.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into any such supplemental indenture
that affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.
Any supplemental indenture authorized by the provisions of this Section
may be executed by the Company and the Trustee without the consent of the
Holders of any of the Junior Subordinated Debentures at the time Outstanding,
notwithstanding any of the provisions of Section 11.2.
11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS. With the
consent (evidenced as provided in Section 10.1) of the Holders of not less than
a majority in aggregate principal amount of
4.1-30
<PAGE> 36
the Junior Subordinated Debentures at the time Outstanding, the Company, when
authorized by Board Resolutions, and the Trustee may from time to time and at
any time enter into an indenture or indentures supplemental hereto (which shall
conform to the provisions of the Trust Indenture Act as then in effect) for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of any supplemental indenture or of
modifying in any manner not covered by Section 11.1 the rights of the Holders of
the Junior Subordinated Debentures under this Indenture; provided, however, that
no such supplemental indenture shall without the consent of the Holders of each
Junior Subordinated Debenture then Outstanding, (i) change (except as expressly
provided herein pursuant to Section 2.2) the stated maturity of the Junior
Subordinated Debentures or reduce the principal amount thereof; or reduce the
rate or extend (except as expressly provided herein pursuant to Section 4.1) the
time of payment of interest thereon; or (ii) reduce the percentage of principal
amount of Junior Subordinated Debentures, the Holders of which are required to
consent to any such supplemental indenture; provided, further, that if the
Junior Subordinated Debentures are held by the Trust or a trustee of the Trust,
such supplemental indenture shall not be effective until the holders of a
majority in aggregate Liquidation Amount of Preferred Securities shall have
consented to such supplemental indenture; provided further, that if the consent
of the Holder of each Outstanding Junior Subordinated Debenture is required,
such supplemental indenture shall not be effective until each Holder of the
Trust Securities shall have consented to such supplemental indenture.
It shall not be necessary for the consent of the Securityholders to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such consent shall approve the substance thereof.
11.3 EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article or of Section
12.1, this Indenture shall be and be deemed to be modified and amended in
accordance therewith.
11.4 JUNIOR SUBORDINATED DEBENTURES AFFECTED BY SUPPLEMENTAL
INDENTURES. Junior Subordinated Debentures, affected by a supplemental
indenture, authenticated and delivered after the execution of such supplemental
indenture pursuant to the provisions of this Article or of Section 12.1, may
bear a notation in form approved by the Company, as to any matter provided for
in such supplemental indenture. If the Company shall so determine, new Junior
Subordinated Debentures so modified as to conform, in the opinion of the Board
of Directors, to any modification of this Indenture contained in any such
supplemental indenture may be prepared by the Company, authenticated by the
Trustee and delivered in exchange for the Junior Subordinated Debentures then
Outstanding.
11.5 EXECUTION OF SUPPLEMENTAL INDENTURES. Upon the request of the
Company, accompanied by Board Resolutions authorizing the execution of any such
supplemental indenture, and upon the filing with the Trustee of evidence of the
consent of Securityholders required to consent thereto 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. The Trustee, subject to the provisions of Section 9.1, may receive an
Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant to this Article is authorized or permitted by, and conforms
to, the terms of this Article and that it is proper for the Trustee under the
provisions of this Article to join in the execution thereof.
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, setting forth in
general terms the substance of such supplemental indenture, to the
Securityholders as their names and addresses appear upon the Securities
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.
4.1-31
<PAGE> 37
ARTICLE XII
SUCCESSOR CORPORATION
12.1 COMPANY MAY CONSOLIDATE, ETC. The Company shall not consolidate
with or merge into any other Person or convey, transfer or lease its properties
and assets substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless (i) in
case the Company consolidates with or merges into another Person or conveys or
transfers its properties and assets substantially as an entirety to any Person,
the successor Person is organized under the laws of the United States or any
state or the District of Columbia, and such successor Person expressly assumes
the Company's obligations on the Junior Subordinated Debentures issued under
this Indenture; (ii) immediately after giving effect thereto, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing; and (iii) such
successor Person expressly assumes the due and punctual performance and
observance of all the covenants and conditions of this Indenture to be kept and
performed by the Company by executing and delivering a supplemental indenture in
form and substance satisfactory to the Trustee.
12.2 SUCCESSOR SUBSTITUTED.
(a) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition and upon the assumption by the successor Person 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
interest on all of the Junior Subordinated Debentures Outstanding and the due
and punctual performance of all of the covenants and conditions of this
Indenture to be performed 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
as the Company herein, and thereupon the predecessor corporation shall be
relieved of all obligations and covenants under this Indenture and the Junior
Subordinated Debentures.
(b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and form (but not in
substance) may be made in the Junior Subordinated Debentures thereafter to be
issued as may be appropriate.
12.3 EVIDENCE OF CONSOLIDATION, ETC., TO TRUSTEE. The Trustee,
subject to the provisions of Section 9.1, may receive an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale, conveyance,
transfer or other disposition, and any such assumption, comply with the
provisions of this Article.
ARTICLE XIII
SATISFACTION AND DISCHARGE
13.1 SATISFACTION AND DISCHARGE OF INDENTURE. If at any time: (a) the
Company shall have delivered to the Trustee for cancellation all Junior
Subordinated Debentures theretofore authenticated (other than any Junior
Subordinated Debentures that shall have been destroyed, lost or stolen and that
shall have been replaced or paid as provided in Section 2.8) and Junior
Subordinated Debentures for whose payment money or Governmental Obligations have
theretofore been deposited in trust or segregated and held in trust by the
Company (and thereupon repaid to the Company or discharged from such trust, as
provided in Section 13.5); or (b) all such Junior Subordinated Debentures not
theretofore delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit or cause to be deposited with the Trustee as trust funds the entire
amount in moneys or Governmental Obligations sufficient or a combination thereof
sufficient, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay at maturity or upon redemption all Junior Subordinated
Debentures not theretofore delivered to the Trustee for cancellation, including
4.1-32
<PAGE> 38
principal and interest due or to become due to such date of maturity or date
fixed for redemption, as the case may be, and if the Company shall also pay or
cause to be paid all other sums payable hereunder by the Company; then this
Indenture shall thereupon cease to be of further effect except for the
provisions of Sections 2.2, 2.3, 2.4, 2.5, 4.1, 4.2, 4.3 and 9.10, that shall
survive until the date of maturity or redemption date, as the case may be, and
Sections 9.6 and 13.5, that shall survive to such date and thereafter, and the
Trustee, on demand of the Company and at the cost and expense of the Company,
shall execute proper instruments acknowledging satisfaction of and discharging
this Indenture.
13.2 DISCHARGE OF OBLIGATIONS. If at any time all such Junior
Subordinated Debentures not theretofore delivered to the Trustee for
cancellation or that have not become due and payable as described in Section
13.1 shall have been paid by the Company by depositing irrevocably with the
Trustee, as trust funds, moneys or an amount of Governmental Obligations
sufficient to pay at maturity or upon redemption all such Junior Subordinated
Debentures not theretofore delivered to the Trustee for cancellation, including
principal and interest due or to become due to such date of maturity or date
fixed for redemption, as the case may be, and if the Company shall also pay or
cause to be paid all other sums payable hereunder by the Company, then after the
date such moneys or Governmental Obligations, as the case may be, are deposited
with the Trustee the obligations of the Company under this Indenture shall cease
to be of further effect except for the provisions of Sections 2.2, 2.3, 2.4,
2.5, 4.1, 4.2, 4.3, 9.6, 9.10 and 13.5 hereof that shall survive until such
Junior Subordinated Debentures shall mature and be paid. Thereafter, Sections
9.6 and 13.5 shall survive.
13.3 DEPOSITED MONEYS TO BE HELD IN TRUST. All monies or Governmental
Obligations deposited with the Trustee pursuant to Sections 13.1 or 13.2 shall
be held in trust and shall be available for payment as due, either directly or
through any paying agent (including the Company acting as its own paying agent),
to the Holders of the Junior Subordinated Debentures for the payment or
redemption of which such moneys or Governmental Obligations have been deposited
with the Trustee.
13.4 PAYMENT OF MONIES HELD BY PAYING AGENTS. In connection with the
satisfaction and discharge of this Indenture all moneys or Governmental
Obligations then held by any paying agent under the provisions of this Indenture
shall, upon demand of the Company, be paid to the Trustee and thereupon such
paying agent shall be released from all further liability with respect to such
moneys or Governmental Obligations.
13.5 REPAYMENT TO COMPANY. Any monies or Governmental Obligations
deposited with any paying agent or the Trustee, or then held by the Company in
trust for payment of principal of or interest on the Junior Subordinated
Debentures that are not applied but remain unclaimed by the Holders of such
Junior Subordinated Debentures for at least two years after the date upon which
the principal of or interest on such Junior Subordinated Debentures shall have
respectively become due and payable, shall be repaid to the Company on
________________ of each year or (if then held by the Company) shall be
discharged from such trust; and thereupon the paying agent and the Trustee shall
be released from all further liability with respect to such moneys or
Governmental Obligations, and the Holder of any of the Junior Subordinated
Debentures entitled to receive such payment shall thereafter, as an unsecured
general creditor, look only to the Company for the payment thereof.
ARTICLE XIV
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
14.1 NO RECOURSE. No recourse under or upon any obligation, covenant or
agreement of this Indenture, or of any Junior Subordinated Debenture, or for any
claim based thereon or otherwise in respect thereof, shall be had against any
incorporator, stockholder, officer or director as such, past, present or future,
of the Company or of any predecessor or successor corporation, either directly
or through the Company or any such predecessor or successor corporation, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly understood that this
Indenture and the obligations issued
4.1-33
<PAGE> 39
hereunder are solely corporate obligations, and that no such personal liability
whatever shall attach to, or is or shall be incurred by, the incorporators,
stockholders, officers or directors as such, of the Company or of any
predecessor or successor corporation, or any of them, because of the creation of
the indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Junior
Subordinated Debentures or implied therefrom; and that any and all such personal
liability of every name and nature, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims against,
every such incorporator, stockholder, officer or director as such, because of
the creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Junior Subordinated Debentures or implied therefrom, are hereby expressly
waived and released as a condition of, and as a consideration for, the execution
of this Indenture and the issuance of such Junior Subordinated Debentures.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 EFFECT ON SUCCESSORS AND ASSIGNS. All the covenants, stipulations,
promises and agreements in this Indenture contained by or on behalf of the
Company or the Trustee shall bind their respective successors and assigns,
whether so expressed or not.
15.2 ACTIONS BY SUCCESSOR. Any act or proceeding by any provision of
this Indenture authorized or required to be done or performed by any board,
committee or officer of the Company shall and may be done and performed with
like force and effect by the corresponding board, committee or officer of any
corporation that shall at the time be the lawful sole successor of the Company.
15.3 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 and as to any successor corporation.
15.4 NOTICES. Except as otherwise expressly provided herein any notice
or demand that by any provision of this Indenture is required or permitted to be
given or served by the Trustee or by the Holders of Junior Subordinated
Debentures to or on the Company may be given or served by being deposited
first-class postage prepaid in a post-office letterbox addressed (until another
address is filed in writing by the Company with the Trustee), as follows: c/o
MegaBank Financial Corporation, 8100 East Arapahoe Road, Englewood, Colorado
80112, Attention: Chief Executive Officer. Any notice, election, request or
demand by the Company or 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 Corporate Trust Office of the Trustee.
15.5 GOVERNING LAW. This Indenture and each Junior Subordinated
Debenture shall be deemed to be a contract made under the internal laws of the
State of Colorado and for all purposes shall be construed in accordance with the
laws of said state, provided that the immunities and the standard of care of the
Trustee shall be governed by Delaware law.
15.6 TREATMENT OF JUNIOR SUBORDINATED DEBENTURES AS DEBT. It is
intended that the Junior Subordinated Debentures will be treated as indebtedness
and not as equity for federal income tax purposes. The provisions of this
Indenture shall be interpreted to further this intention.
15.7 COMPLIANCE CERTIFICATES AND OPINIONS.
(a) 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 all conditions
precedent provided for in this Indenture relating to the proposed action have
been complied with and an
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<PAGE> 40
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent have been complied with, except that in the case of any
such application or demand as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or demand, no additional certificate or opinion need be
furnished.
(b) Every certificate or opinion delivered to the Trustee with respect
to compliance with a condition or covenant in this Indenture 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, such Person has made such examination or investigation as is
necessary to enable such Person 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.
15.8 PAYMENTS ON BUSINESS DAYS. In any case where the date of maturity
of interest or principal of the Junior Subordinated Debentures or the date of
redemption of the Junior Subordinated Debentures shall not be a Business Day,
then payment of interest or principal will be made on the next succeeding
Business Day (without any additional interest or other payment in respect of any
such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on the date such
payment was originally payable.
15.9 CONFLICT WITH TRUST INDENTURE ACT. If and to the extent that any
provision of this Indenture limits, qualifies or conflicts with the duties
imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
15.10 COUNTERPARTS. This Indenture may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
15.11 SEPARABILITY. In case any one or more of the provisions contained
in this Indenture or in the Junior Subordinated Debentures shall for any reason
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Indenture or of the Junior Subordinated Debentures, but this Indenture and the
Junior Subordinated Debentures shall be construed as if such invalid or illegal
or unenforceable provision had never been contained herein or therein.
15.12 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, this 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 hereto.
15.13 ACKNOWLEDGMENT OF RIGHTS. The Company acknowledges that, with
respect to any Junior Subordinated Debentures held by the Trust or a trustee of
the Trust, if the Property Trustee of the Trust fails to enforce its rights
under this Indenture as the Holder of the Junior Subordinated Debentures held as
the assets of the Trust, any holder of Preferred 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 interest or principal on
the Junior Subordinated Debentures on the date such interest or principal is
otherwise payable (or in the case of redemption, on the redemption date), the
Company acknowledges that a holder of Preferred Securities may directly
institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the Junior Subordinated Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Preferred
Securities of such
4.1-35
<PAGE> 41
holder on or after the respective due date specified in the Junior Subordinated
Debentures. This Section 15.13 may not be amended without the prior written
consent of the holders of all of the Preferred Securities.
ARTICLE XVI
SUBORDINATION OF JUNIOR SUBORDINATED DEBENTURES
16.1 AGREEMENT TO SUBORDINATE. The Company covenants and agrees, and
each Holder of Junior Subordinated Debentures issued hereunder by such Holder's
acceptance thereof likewise covenants and agrees, that all Junior Subordinated
Debentures shall be issued subject to the provisions of this Article Sixteen;
and each Holder, 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 and interest on all
Junior Subordinated Debentures issued hereunder shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right of payment to
the prior payment in full of all Senior and Subordinated Debt, whether
outstanding at the date of this Indenture or thereafter incurred.
No provision of this Article Sixteen shall prevent the occurrence of
any default or Event of Default hereunder.
16.2 DEFAULT ON SENIOR AND SUBORDINATED DEBT. 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 and Subordinated Debt
of the Company or in the event that the maturity of any Senior and Subordinated
Debt of the Company has been accelerated because of a default, then, in either
case, no payment shall be made by the Company with respect to the principal of
or interest on the Junior Subordinated Debentures.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 16.2, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior and
Subordinated Debt or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior and
Subordinated Debt may have been issued, as their respective interests may
appear, but only to the extent that the holders of the Senior and Subordinated
Debt (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 the Senior and Subordinated Debt and only the amounts specified in such
notice to the Trustee shall be paid to the holders of Senior and Subordinated
Debt.
16.3 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
amounts due upon all Senior and Subordinated Debt 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 or
interest on the Junior Subordinated Debentures; 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 Holders or the Trustee would be entitled to
receive from the Company, except for the provisions of this Article Sixteen,
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 Holders or by the Trustee under the Indenture if received by them or
it, directly to the holders of Senior and Subordinated Debt of the Company (pro
rata to such holders on the basis of the respective amounts of Senior and
Subordinated Debt 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 and
Subordinated Debt may have been issued, as their
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<PAGE> 42
respective interests may appear, to the extent necessary to pay such Senior and
Subordinated Debt 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 and
Subordinated Debt, before any payment or distribution is made to the Holders 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 and Subordinated Debt of the Company 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 and Subordinated Debt or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior and
Subordinated Debt may have been issued, and their respective interests may
appear, as calculated by the Company, for application to the payment of all
Senior and Subordinated Debt of the Company, as the case may be, remaining
unpaid to the extent necessary to pay such Senior and Subordinated Debt 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 and
Subordinated Debt.
For purposes of this Article Sixteen, 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 Sixteen with
respect to the Junior Subordinated Debentures to the payment of all Senior and
Subordinated Debt of the Company, as the case may be, that may at the time be
outstanding, provided that (i) such Senior and Subordinated Debt 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 and Subordinated
Debt 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 corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article Twelve of this Indenture shall not
be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 16.3 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions stated
in Article Twelve of this Indenture. Nothing in Section 16.2 or in this Section
16.3 shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 9.6 of this Indenture.
16.4 SUBROGATION. Subject to the payment in full of all Senior and
Subordinated Debt of the Company, the rights of the Holders of the Junior
Subordinated Debentures shall be subrogated to the rights of the holders of such
Senior and Subordinated Debt to receive payments or distributions of cash,
property or securities of the Company, as the case may be, applicable to such
Senior and Subordinated Debt until the principal of and interest on the Junior
Subordinated Debentures shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Senior and
Subordinated Debt of any cash, property or securities to which the Holders of
the Junior Subordinated Debentures or the Trustee would be entitled except for
the provisions of this Article Sixteen, and no payment over pursuant to the
provisions of this Article Sixteen to or for the benefit of the holders of such
Senior and Subordinated Debt by Holders of the Junior Subordinated Debentures or
the Trustee, shall, as between the Company, its creditors other than holders of
Senior and Subordinated Debt of the Company, and the Holders of the Junior
Subordinated Debentures, be deemed to be a payment by the Company to or on
account of such Senior and Subordinated Debt. It is understood that the
provisions of this Article Sixteen are and are intended solely for the purposes
of defining the relative rights of the Holders of the Junior Subordinated
Debentures, on the one hand, and the holders of such Senior and Subordinated
Debt on the other hand.
Nothing contained in this Article Sixteen or elsewhere in this
Indenture or in the Junior Subordinated Debentures is intended to or shall
impair, as between the Company, its creditors other than the holders of Senior
and Subordinated Debt of the Company, and the Holders of the Junior Subordinated
Debentures, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Junior Subordinated Debentures the
4.1-37
<PAGE> 43
principal of and interest on the Junior Subordinated Debentures as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the Holders of the Junior Subordinated
Debentures and creditors of the Company, other than the holders of Senior and
Subordinated Debt of the Company, nor shall anything herein or therein prevent
the Trustee or the Holder of any Junior Subordinated Debenture from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article Sixteen of the
holders of such Senior and Subordinated Debt 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 Sixteen, the Trustee, subject to the provisions of Section 9.1,
and the Holders of the Junior Subordinated Debentures shall be entitled to
conclusively rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, delivered to the Trustee or to the Holders of the
Junior Subordinated Debentures, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of Senior and
Subordinated Debt 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 Sixteen.
16.5 TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder of Junior
Subordinated Debentures by such Holder's acceptance thereof authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Sixteen and appoints the Trustee such Holder's attorney-in-fact for any
and all such purposes.
16.6 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 Junior Subordinated Debentures pursuant to the provisions of this
Article Sixteen. Notwithstanding the provisions of this Article Sixteen 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 Junior Subordinated
Debentures pursuant to the provisions of this Article Sixteen, 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 and Subordinated Debt or from
any trustee therefor; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Section 9.1, shall be entitled in all
respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 16.6 at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of or interest on any Junior Subordinated Debenture),
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purposes for which they were received, and shall not be affected by any
notice to the contrary that may be received by it within two Business Days prior
to such date.
The Trustee, subject to the provisions of Section 9.1, shall be
entitled to conclusively rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior and Subordinated Debt of
the Company (or a trustee on behalf of such holder), to establish that such
notice has been given by a holder of such Senior and Subordinated Debt 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 and Subordinated Debt to
participate in any payment or distribution pursuant to this Article Sixteen, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior and Subordinated
Debt 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 Sixteen, 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.
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<PAGE> 44
16.7 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR AND SUBORDINATED DEBT.
The Trustee in its individual capacity shall be entitled to all the rights set
forth in this Article Sixteen in respect of any Senior and Subordinated Debt at
any time held by it, to the same extent as any other holder of Senior and
Subordinated Debt, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.
With respect to the holders of Senior and Subordinated Debt 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 Sixteen,
and no implied covenants or obligations with respect to the holders of such
Senior and Subordinated Debt 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 and Subordinated Debt and, subject to the provisions of
Section 9.1, the Trustee shall not be liable to any holder of such Senior and
Subordinated Debt if it shall pay over or deliver to Holders of Junior
Subordinated Debentures, the Company or any other Person money or assets to
which any holder of such Senior and Subordinated Debt shall be entitled by
virtue of this Article Sixteen or otherwise.
16.8 SUBORDINATION MAY NOT BE IMPAIRED. No right of any present or
future holder of any Senior and Subordinated Debt 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 or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company 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 and Subordinated Debt of the Company may, at any time and
from time to time, without the consent of or notice to the Trustee or the
Holders of the Junior Subordinated Debentures, without incurring responsibility
to the Holders of the Junior Subordinated Debentures and without impairing or
releasing the subordination provided in this Article Sixteen or the obligations
hereunder of the Holders of the Junior Subordinated Debentures to the holders of
such Senior and Subordinated Debt, 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 and Subordinated Debt, or otherwise amend or
supplement in any manner such Senior and Subordinated Debt or any instrument
evidencing the same or any agreement under which such Senior and Subordinated
Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing such Senior and Subordinated
Debt; (iii) release any Person liable in any manner for the collection of such
Senior and Subordinated Debt; and (iv) exercise or refrain from exercising any
rights against the Company and any other Person.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
MEGABANK FINANCIAL CORPORATION
By:
----------------------------------------
Name: Thomas R. Kowalski
Title: Chairman and Chief Executive Officer
WILMINGTON TRUST COMPANY, AS TRUSTEE
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
4.1-39
<PAGE> 45
STATE OF COLORADO )
) ss:
CITY AND COUNTY OF DENVER )
On the _______ day of ____________, 1998, before me personally came
Thomas R. Kowalski, to me known, who, being by me duly sworn, did depose and say
that he is the Chairman and Chief Executive Officer of MEGABANK FINANCIAL
CORPORATION, one of the corporations described in and which executed the above
instrument; and that he signed his name thereto on behalf of said corporation by
authority of the Board of Directors of said corporation.
Witness my hand and official seal:
---------------------------------------------
Notary Public
My Commission Expires:
-----------------------
STATE OF )
) ss:
COUNTY OF )
On the _______ day of___________, 1998, before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that he/she is the _______________________ of WILMINGTON TRUST COMPANY, one
of the corporations described in and which executed the above instrument; and
that he/she signed his/her name thereto on behalf of said corporation by
authority of the Board of Directors of said corporation.
Witness my hand and official seal:
---------------------------------------------
Notary Public
My Commission Expires:
-----------------------
4.1-40
<PAGE> 46
EXHIBIT A
(FORM OF FACE OF JUNIOR SUBORDINATED DEBENTURE)
This Junior Subordinated Debenture is a Global Subordinated Debenture
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 Junior Subordinated
Debenture is exchangeable for Junior Subordinated Debentures 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 Junior
Subordinated Debenture (other than a transfer of this Junior Subordinated
Debenture 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 such limited circumstances.
Unless this Junior Subordinated Debenture is presented by an authorized
representative of Wilmington Trust Company (Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-0001) to the issuer or its agent for
registration of transfer, exchange or payment, and any Junior Subordinated
Debenture issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of Wilmington Trust Company (and any
payment hereon is made to Cede & Co. or to such other entity as is requested by
an authorized representative of Wilmington Trust Company), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch the registered owner hereof, Cede & Co., has an interest herein.
Registered Principal Amount
Registered No. $12,371,150
-----------------
CUSIP No.
------------------
MEGABANK FINANCIAL CORPORATION
____% JUNIOR SUBORDINATED DEBENTURE
DUE ________________, 2028
MegaBank Financial Corporation, a Colorado corporation (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to Wilmington Trust
Company or registered assigns, the principal sum of Twelve Million Three Hundred
Seventy-One Thousand One Hundred Fifty Dollars ($12,371,150) on
________________, 2028 (which date may be shortened as provided in the
Indenture, the "Stated Maturity"), and to pay interest on said principal sum
from ________________, 1998, or from the most recent interest payment date (each
such date, an "Interest Payment Date") to which interest has been paid or duly
provided for, quarterly (subject to deferral as set forth herein) in arrears on
the 15th day of January, April, July and October in each year commencing April
15, 1998, at the rate of ____% per annum until the principal hereof shall have
become due and payable, and on any overdue principal and (without duplication
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 quarterly. The amount of each interest payment due with respect to
the Junior Subordinated Debentures will include amounts accrued through the date
the interest payment is due. 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. In the event that any date on which interest is payable on this Junior
Subordinated Debenture is not a Business Day (as defined in the Indenture), then
payment of interest payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. The
4.1A-1
<PAGE> 47
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 Junior Subordinated Debenture (or one or more
Predecessor Junior Subordinated Debentures, as defined in the Indenture) is
registered at the close of business on the regular record date for such interest
installment, which shall be the close of business on the business day next
preceding such Interest Payment Date unless otherwise provided in the Indenture.
The principal of and the interest on this Junior Subordinated Debenture shall be
payable at the office or agency of the Trustee (as defined in the Indenture)
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 check mailed to the Registered Holder (as defined in
the Indenture) at such address as shall appear in the Securities Register (as
defined in the Indenture). Notwithstanding the foregoing, so long as the Holder
of this Junior Subordinated Debenture is the Property Trustee (as defined in the
Indenture), the payment of the principal of and interest on this Junior
Subordinated Debenture will be made at such place and to such account as may be
designated by the Property Trustee.
The Stated Maturity may be shortened at any time by the Company to any
date not earlier than ________________, 2003, subject to the Company having
received prior approval of the Federal Reserve (as defined in the Indenture) if
then required under applicable capital guidelines or policies of the Federal
Reserve.
The indebtedness evidenced by this Junior Subordinated Debenture is, to
the extent provided in the Indenture, subordinate and junior in right of payment
to the prior payment in full of all Senior and Subordinated Debt (as defined in
the Indenture), and this Junior Subordinated Debenture is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Junior
Subordinated Debenture, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the Trustee on his or her behalf
to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination so provided and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each Holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior and Subordinated Debt, whether now outstanding or hereafter incurred, and
waives reliance by each such holder upon said provisions.
This Junior Subordinated Debenture shall not be entitled to any benefit
under the Indenture, 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.
The provisions of this Junior Subordinated Debenture are continued on
the reverse side hereof and such continued provisions shall for all purposes
have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated: MEGABANK FINANCIAL CORPORATION
---------------------
By:
--------------------------------------
Name: Thomas R. Kowalski
Title: Chairman and Chief Executive Officer
ATTEST:
By:
-----------------------------------------
Name:
Title: Secretary
4.1A-2
<PAGE> 48
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Junior Subordinated Debentures described in the
within-mentioned Indenture.
Dated: WILMINGTON TRUST COMPANY, as Trustee
-----------------------
By:
-------------------------------------
Authorized Signature
4.1A-3
<PAGE> 49
[FORM OF REVERSE OF JUNIOR SUBORDINATED DEBENTURE]
____% JUNIOR SUBORDINATED DEBENTURE
(CONTINUED)
This Junior Subordinated Debenture is one of the junior subordinated
debentures of the Company (herein sometimes referred to as the "Junior
Subordinated Debentures"), specified in the Indenture, all issued under and
pursuant to a Subordinated Indenture dated as of ________________, 1998 (the
"Indenture") duly executed and delivered between the Company and Wilmington
Trust Company, as Trustee (the "Trustee"), to which Indenture reference is
hereby made for a description of the rights, limitations of rights, obligations,
duties and immunities thereunder of the Trustee, the Company and the Holders of
the Junior Subordinated Debentures. The Junior Subordinated Debentures are
limited in aggregate principal amount as specified in the Indenture.
Because of the occurrence and continuation of a Special Event (as
defined in the Indenture), in certain circumstances, this Junior Subordinated
Debenture may become due and payable at the option of the Company at the
principal amount together with any interest accrued thereon (the "Redemption
Price"). The Redemption Price shall be paid prior to 2:00 p.m. Denver, Colorado
time, on the date of such redemption or at such earlier time as the Company
determines.
The Company shall have the right to redeem this Junior Subordinated
Debenture at the option of the Company, in whole or in part, from time to time,
on or after ________________, 2003, at a redemption price equal to 100% of the
principal amount to be redeemed plus any accrued but unpaid interest thereon to
the date of such redemption. Any redemption pursuant to this paragraph will be
made upon not less than 30 days nor more than 60 days notice. If the Junior
Subordinated Debentures are only partially redeemed by the Company pursuant to
this paragraph, the Junior Subordinated Debentures 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 Junior Subordinated Debentures are registered as a
Global Subordinated Debenture (as defined in the Indenture), the Depositary (as
defined in the Indenture) shall determine the principal amount of such Junior
Subordinated Debentures held by each Junior Subordinated Debenture Holder to be
redeemed in accordance with its procedures.
In the event of redemption of this Junior Subordinated Debenture in
part only, a new Junior Subordinated Debenture for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.
In case an Event of Default (as defined in the Indenture), shall have
occurred and be continuing, the principal of all of the Junior Subordinated
Debentures may be declared, and upon such declaration shall become, due and
payable, in the manner, with the effect and subject to the conditions provided
in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Junior Subordinated Debentures 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 any supplemental indenture or of
modifying in any manner the rights of the Holders of the Junior Subordinated
Debentures; provided, however, that no such supplemental indenture shall (i)
change the stated maturity of the Junior Subordinated Debentures except as
provided in the Indenture, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon, without the consent of
the Holder of each Junior Subordinated Debenture so affected, or (ii) reduce the
aforesaid percentage of Junior Subordinated Debentures, the Holders of which are
required to consent to any such supplemental indenture, without the consent of
the Holders of each Junior Subordinated Debenture then Outstanding and affected
thereby. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Junior Subordinated Debentures at
the time Outstanding, on behalf of all of the Holders of the Junior Subordinated
Debentures, to waive any past default in the performance of any of the covenants
4.1A-4
<PAGE> 50
contained in the Indenture, or established pursuant to the Indenture, and its
consequences, except a default in the payment of the principal of or interest on
any of the Junior Subordinated Debentures. Any such consent or waiver by the
registered Holder of this Junior Subordinated Debenture (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such Holder and
upon all future Holders and owners of this Junior Subordinated Debenture and of
any Junior Subordinated Debenture 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 Junior Subordinated
Debenture.
No reference herein to the Indenture and no provision of this Junior
Subordinated Debenture or of the Indenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of and
interest on this Junior Subordinated Debenture at the time and place and at the
rate and in the money herein prescribed.
The Company shall have the right at any time during the term of the
Junior Subordinated Debentures and from time to time to extend the interest
payment period of such Junior Subordinated Debentures for up to 20 consecutive
quarters (an "Extended Interest Payment Period"), 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 Junior Subordinated Debentures 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 extend such Extended Interest Payment Period, provided that such
Extended Interest Payment Period together with all such further extensions
thereof shall not exceed 20 consecutive quarters or extend beyond the Stated
Maturity. At the termination of any such Extended Interest Payment Period and
upon the payment of all accrued and unpaid interest and any additional amounts
then due, the Company may commence a new Extended Interest Payment Period.
The Company has agreed that if at any time (i) there shall have
occurred any event of which the Company has actual knowledge that (a) with the
giving of notice or the lapse of time, or both, would constitute an Event of
Default and (b) in respect to which the Company shall not have taken reasonable
steps to cure, or (ii) the Company shall have given notice of its election of an
Extended Interest Payment Period as provided herein and shall not have rescinded
such notice, or such Extended Interest Payment Period, or any extension thereof,
shall be continuing; or (iii) while the Junior Subordinated Debentures are held
by the Trust, the Company shall be in default with respect to its payment of any
obligation under the Preferred Securities Guarantee, then the Company will not
(1) 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 or (2) make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of the Company (including
the Junior Subordinated Debentures) that rank pari passu with or junior in
interest to the Junior Subordinated Debentures or make any guarantee payments
with respect to any guarantee by the Company of the debt securities of any
subsidiary of the Company if such guarantee ranks pari passu or junior in
interest to the Junior Subordinated Debentures (other than (a) dividends or
distributions in common stock, (b) any declaration of a dividend in connection
with the implementation of a shareholders' rights plan, or the issuance of stock
under any such plan in the future or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Preferred Securities Guarantee
and (d) 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).
As provided in the Indenture and subject to certain limitations therein
set forth, this Junior Subordinated Debenture is transferable by the registered
Holder hereof on the Securities Register of the Company, upon surrender of this
Junior Subordinated Debenture for registration of transfer at the office or
agency of the Trustee accompanied by a written instrument or instruments of
transfer in form satisfactory to the Company or the Trustee duly executed by the
registered Holder hereof or such Holder's attorney duly authorized in writing,
and thereupon one or more new Junior Subordinated Debentures of authorized
denominations and for the same aggregate principal amount 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.
4.1A-5
<PAGE> 51
Prior to due presentment for registration of transfer of this Junior
Subordinated Debenture, the Company, the Trustee, any paying agent and the
Securities Registrar (as defined in the Indenture) may deem and treat the
Registered Holder hereof as the absolute owner hereof (whether or not this
Junior Subordinated Debenture shall be overdue and notwithstanding any notice of
ownership or writing hereon made by anyone other than the Securities Registrar)
for the purpose of receiving payment of or on account of the principal hereof
and interest due hereon and for all other purposes, and neither the Company nor
the Trustee nor any paying agent nor any Securities Registrar shall be affected
by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Junior Subordinated Debenture, 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 corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issuance
hereof, expressly waived and released.
The Junior Subordinated Debentures are issuable only in registered form
without coupons in denominations of $10 and any integral multiple thereof. This
Global Subordinated Debenture is exchangeable for Junior Subordinated Debentures
in definitive form only under certain limited circumstances set forth in the
Indenture. Junior Subordinated Debentures so issued are issuable only in
registered form without coupons in denominations of $10 and any integral
multiple thereof.
All terms used in this Junior Subordinated Debenture that are defined
in the Indenture shall have the meanings assigned to them in the Indenture.
4.1A-6
<PAGE> 1
EXHIBIT 4.3
CERTIFICATE OF TRUST
OF
MB CAPITAL I
This Certificate of Trust of MB Capital I (the "Trust"), dated
December ___, 1997, is being duly executed and filed by Wilmington Trust
Company, a Delaware banking corporation, as trustee, to form a business trust
under the Delaware Business Trust Act (12 Del. C. Section 3801 et seq.).
1. NAME. The name of the business trust formed hereby is MB Capital I.
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attn:
Corporate Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon its
filing.
IN WITNESS WHEREOF, the undersigned, being the trustee of the Trust,
has executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY,
as Trustee
By:
-----------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.4
TRUST AGREEMENT
TRUST AGREEMENT, dated as of December ____, 1997, by and between
MegaBank Financial Corporation, a Colorado corporation, as "Depositor," and
Wilmington Trust Company, a Delaware banking corporation, as "Trustee."
Section 1. The Trust. The trust created hereby shall be known as MB
Capital I (the "Trust"), in which name the Trustee, or the Depositor to the
extent provided herein, may conduct the business of the Trust, make and execute
contracts, and sue and be sued.
Section 2. The Trust Estate. The Depositor hereby assigns,
transfers, conveys and sets over to the Trustee the sum of $10.00. The Trustee
hereby acknowledges receipt of such amount in trust from the Depositor, which
amount shall constitute the initial trust estate. The Trustee hereby declares
that it will hold the trust estate in trust for the Depositor. It is the
intention of the parties hereto that the Trust created hereby constitute a
business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
Section 3801, et seq. (the "Business Trust Act"), and that this document
constitute the governing instrument of the Trust. The Trustee is hereby
authorized and directed to execute and file a certificate of trust with the
Delaware Secretary of State in accordance with the provisions of the Business
Trust Act.
Section 3. Amended and Restated Trust Agreement. The Depositor, the
Trustee and certain other parties will enter into an amended and restated Trust
Agreement, satisfactory to each such party and substantially in the form to be
included as an exhibit to the 1933 Act Registration Statement (as defined
below), to provide for the contemplated operation of the Trust created hereby
and the issuance of the Preferred Securities (as defined below) and common
securities of the Trust to be referred to therein. Prior to the execution and
delivery of such amended and restated Trust Agreement, the Trustee shall not
have any duty or obligation hereunder or with respect to the trust estate,
except as otherwise required by applicable law or as may be necessary to obtain
prior to such execution and delivery any licenses, consents or approvals
required by applicable law or otherwise.
Section 4. Certain Authorizations. The Depositor and the Trustee
hereby authorize and direct the Depositor, as the sponsor of the Trust, (i) to
file with the Securities and Exchange Commission (the "Commission") and
execute, in each case on behalf of the Trust, (a) the Registration Statement on
Form SB-2 (the "1933 Act Registration Statement"), including any pre-effective
or post-effective amendments to such 1933 Act Registration Statement (including
the prospectus and exhibits contained therein), relating to the registration
under the Securities Act of 1933, as amended, of the preferred securities of
the Trust (the "Preferred Securities") and certain other securities of the
Depositor and (b) a Registration Statement on Form 8-A (including all
pre-effective and post-effective amendments thereto) relating to the
registration of the Preferred Securities of the Trust under the Securities
Exchange Act of 1934, as amended; (ii) to file with the National Association of
Securities Dealers, Inc. (the "NASD") and execute on behalf of the Trust a
listing application or applications and all other applications, statements,
certificates, agreements and other instruments as shall be necessary or
desirable to cause the Preferred Securities to be listed on the NASD's Nasdaq
National Market; (iii) to file and execute on behalf of the Trust such
applications, reports, surety bonds, irrevocable consents, appointments of
attorney for service of process and other papers and documents as the
Depositor, on behalf of the Trust, may deem necessary or desirable to register
the Preferred Securities under the securities or "Blue Sky" laws; and (iv) to
execute on behalf of the Trust such Underwriting Agreements with one or more
underwriters relating to the offering of the Preferred Securities as the
Depositor, on behalf of the Trust, may deem necessary or desirable. In the
event that any filing referred to in clauses (i), (ii) and (iii) above is
required by the rules and regulations of the Commission, the NASD or state
securities or "Blue Sky" laws to be executed on behalf of the Trust by a
Trustee, the
<PAGE> 2
Depositor and any Trustee appointed pursuant to Section 6 hereof are hereby
authorized to join in any such filing and to execute on behalf of the Trust any
and all of the foregoing.
Section 5. Counterparts. This Trust Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
Section 6. Trustee. The number of Trustees initially shall be one
and thereafter the number of Trustees shall be such number as shall be fixed
from time to time by a written instrument signed by the Depositor, which may
increase or decrease the number of Trustees; provided, however, that to the
extent required by the Business Trust Act, one Trustee shall be either 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 and otherwise meets the requirements of applicable Delaware law.
Subject to the foregoing, the Depositor is entitled to appoint or remove
without cause any Trustee at any time. The Trustee may resign upon thirty
days' prior notice to the Depositor.
Section 7. Governing Law. This Trust Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware (without
regard to conflicts of law of principles).
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the day and year first above written.
MEGABANK FINANCIAL CORPORATION
as Depositor
By: /s/ THOMAS R. KOWALSKI
-----------------------------------------
Thomas R. Kowalski
Chairman and Chief Executive Officer
WILMINGTON TRUST COMPANY,
as Trustee
By:
-----------------------------------------
Name:
Title:
-2-
<PAGE> 1
EXHIBIT 4.5
MB CAPITAL I
AMENDED AND RESTATED
TRUST AGREEMENT
AMONG
MEGABANK FINANCIAL CORPORATION, AS DEPOSITOR
WILMINGTON TRUST COMPANY, AS PROPERTY TRUSTEE
WILMINGTON TRUST COMPANY, AS DELAWARE TRUSTEE
AND
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF _________________, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I.
DEFINED TERMS 1
SECTION 101. DEFINITIONS 1
ARTICLE II.
ESTABLISHMENT OF THE TRUST 8
SECTION 201. NAME 8
SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS 8
SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL
EXPENSES 8
SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES 8
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE
OF JUNIOR SUBORDINATED DEBENTURES 8
SECTION 206. DECLARATION OF TRUST 8
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS 9
SECTION 208. ASSETS OF TRUST 11
SECTION 209. TITLE TO TRUST PROPERTY 11
ARTICLE III.
PAYMENT ACCOUNT 12
SECTION 301. PAYMENT ACCOUNT 12
ARTICLE IV.
DISTRIBUTIONS; REDEMPTION 12
SECTION 401. DISTRIBUTIONS 12
SECTION 402. REDEMPTION 13
SECTION 403. SUBORDINATION OF COMMON SECURITIES 14
SECTION 404. PAYMENT PROCEDURES 15
SECTION 405. TAX RETURNS AND REPORTS 15
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST 15
SECTION 407. PAYMENTS UNDER INDENTURE 15
ARTICLE V.
TRUST SECURITIES CERTIFICATES 15
SECTION 501. INITIAL OWNERSHIP 15
SECTION 502. THE TRUST SECURITIES CERTIFICATES 15
SECTION 503. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES 15
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF CAPITAL
SECURITIES CERTIFICATES 16
SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES 16
SECTION 506. PERSONS DEEMED SECURITYHOLDERS 17
SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES 17
SECTION 508. MAINTENANCE OF OFFICE OR AGENCY 17
SECTION 509. APPOINTMENT OF PAYING AGENT 17
SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR 18
SECTION 511. BOOK-ENTRY PREFERRED SECURITIES CERTIFICATES; COMMON
SECURITIES CERTIFICATE 18
</TABLE>
4.5-i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 512. NOTICES TO CLEARING AGENCY 18
SECTION 513. DEFINITIVE PREFERRED SECURITIES CERTIFICATES 19
SECTION 514. RIGHTS OF SECURITYHOLDERS 19
ARTICLE VI.
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING 20
SECTION 601. LIMITATIONS ON VOTING RIGHTS 20
SECTION 602. NOTICE OF MEETINGS 20
SECTION 603. MEETINGS OF HOLDERS OF PREFERRED SECURITIES 21
SECTION 604. VOTING RIGHTS 21
SECTION 605. PROXIES, ETC. 21
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT 21
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES 21
SECTION 608. ACTS OF SECURITYHOLDERS 21
SECTION 609. INSPECTION OF RECORDS 22
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES 22
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND THE
PROPERTY TRUSTEE 22
SECTION 702. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE BANK
AND THE DELAWARE TRUSTEE 23
SECTION 703. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR 24
ARTICLE VIII.
THE TRUSTEES 24
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES 24
SECTION 802. CERTAIN NOTICES 25
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE 26
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES 27
SECTION 805. MAY HOLD SECURITIES 27
SECTION 806. COMPENSATION; INDEMNITY; FEES 27
SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES 28
SECTION 808. CONFLICTING INTERESTS 28
SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE 28
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR 29
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR 31
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS 31
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST 31
SECTION 814. REPORTS BY PROPERTY TRUSTEE 31
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE 32
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT 32
SECTION 817. NUMBER OF TRUSTEES 32
SECTION 818. DELEGATION OF POWER 32
SECTION 819. VOTING 32
ARTICLE IX.
TERMINATION, LIQUIDATION AND MERGER 33
SECTION 901. TERMINATION UPON EXPIRATION DATE 33
SECTION 902. EARLY TERMINATION 33
SECTION 903. TERMINATION 33
</TABLE>
4.5-ii
<PAGE> 4
<TABLE>
<S> <C>
SECTION 904. LIQUIDATION 33
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS
OF THE TRUST 34
ARTICLE X.
MISCELLANEOUS PROVISIONS 35
SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS 35
SECTION 1002. AMENDMENT35
SECTION 1003. SEPARABILITY 36
SECTION 1004. GOVERNING LAW 36
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY 36
SECTION 1006. SUCCESSORS 36
SECTION 1007. HEADINGS 36
SECTION 1008. REPORTS, NOTICES AND DEMANDS 37
SECTION 1009. AGREEMENT NOT TO PETITION 37
SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT 37
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE
AND INDENTURE 38
</TABLE>
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depository Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Expense Agreement
Exhibit E Form of Preferred Securities Certificate
4.5-iii
<PAGE> 5
AMENDED AND RESTATED TRUST AGREEMENT, dated as of _________________,
1998, among (i) MegaBank Financial Corporation, a Colorado corporation
(including any successors or assigns, the "Depositor"), (ii) Wilmington Trust
Company, a Delaware banking corporation duly organized and existing under the
laws of the State of Delaware, as property trustee (the "Property Trustee" and,
in its separate corporate capacity and not in its capacity as Property Trustee,
the "Bank"), (iii) Wilmington Trust Company, a Delaware banking corporation
duly organized and existing under the laws of the State of Delaware, as
Delaware trustee (the "Delaware Trustee," and, in its separate corporate
capacity and not in its capacity as Delaware Trustee, the "Delaware Bank"),
(iv) Thomas R. Kowalski, an individual, Susan A. Putland, an individual, and
___________________ an individual, each of whose address is c/o MegaBank
Financial Corporation (each an "Administrative Trustee" and collectively the
"Administrative Trustees") (the Property Trustee, the Delaware Trustee and the
Administrative Trustees referred to collectively as the "Trustees") and (v) the
several Holders, as hereinafter defined.
WITNESSETH:
WHEREAS, the Depositor and the Delaware Trustee have heretofore duly
declared and established MB Capital I, a business trust (the "Trust"), pursuant
to the Delaware Business Trust Act by the entering into of that certain Trust
Agreement, dated as of _______________, 1997 (the "Original Trust Agreement"),
and by the execution and filing by the Delaware Trustee with the Secretary of
State of the State of Delaware of the Certificate of Trust, filed on
______________, 1997, the form of which is attached as EXHIBIT A; and
WHEREAS, the Depositor and the Delaware Trustee desire to amend and
restate the Original Trust Agreement in its entirety as set forth herein to
provide for, among other things, (i) the issuance of the Common Securities (as
defined below) by the Trust to the Depositor, (ii) the issuance and sale of the
Preferred Securities (as defined below) by the Trust pursuant to the
Underwriting Agreement, (iii) the acquisition by the Trust from the Depositor
of all of the right, title and interest in the Junior Subordinated Debentures
(as defined below), (iv) the appointment of the Property Trustee, and (v) the
appointment of the Administrative Trustees;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other parties
and for the benefit of the Securityholders, hereby amends and restates the
Original Trust Agreement in its entirety and agrees as follows:
ARTICLE I.
DEFINED TERMS
SECTION 101. DEFINITIONS. For all purposes of this Trust Agreement,
except as otherwise expressly provided or unless the context otherwise
requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
4.5-1
<PAGE> 6
"Accelerated Maturity Date" has the meaning set forth in Section 2.2 of
the Indenture.
"Act" has the meaning specified in Section 608.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of additional interest
accrued on interest in arrears and paid by the Depositor on a Like Amount of
Junior Subordinated Debentures for such period.
"Additional Sums" has the meaning specified in Section 2.5 of the
Indenture.
"Administrative Trustee" means each of Thomas R. Kowalski, Susan A.
Putland, and __________________, solely in such person's capacity as
Administrative Trustee of the Trust formed and continued hereunder and not in
such person's individual capacity, or such Administrative Trustee's successor
in interest in such capacity, or any successor Administrative Trustee appointed
as herein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction
in the premises adjudging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking liquidation or reorganization of or in
respect of such Person under the Federal Bankruptcy Code or any other similar
applicable federal or state law, and the continuance of any such decree or
order unvacated and unstayed for a period of 90 days; or the commencement of an
involuntary case under the Federal Bankruptcy Code in respect of such Person,
which shall continue undismissed for a period of 90 days or entry of an order
for relief in such case; or the entry of a decree or order of a court having
jurisdiction in the premises for the appointment on the ground of insolvency or
bankruptcy of a receiver, custodian, liquidator, trustee or assignee in
bankruptcy or insolvency of such Person or of its property, or for the winding
up or liquidation of its affairs, and such decree or order shall have remained
in force unvacated and unstayed for a period of 90 days; or
(b) the institution by such Person of proceedings to be
adjudicated a voluntary bankrupt, or the consent by such Person to the filing
of a bankruptcy proceeding against it, or the filing by such Person of a
petition or answer or consent seeking liquidation or reorganization under the
Federal Bankruptcy Code or other similar applicable federal or state law, or
the consent by such Person to the filing of any such petition or to the
appointment on the ground of insolvency or bankruptcy of a receiver or
custodian or liquidator or trustee or assignee in bankruptcy or insolvency of
such Person or of its property, or such Person shall make a general assignment
for the benefit of creditors.
"Bankruptcy Laws" has the meaning specified in Section 1009.
"Book-Entry Preferred Securities Certificates" means certificates
representing Preferred Securities issued in global, fully registered form to
the Clearing Agency as described in Section 511.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in the State of Colorado are authorized or
required by law or executive order to remain closed, or (c) a day on which
4.5-2
<PAGE> 7
the Property Trustee's Corporate Trust Office or the Corporate Trust Office of
the Debenture Trustee is closed for business.
"Certificate Depository Agreement" means the agreement among the
Trust, the Depositor and The Depository Trust Company, as the initial Clearing
Agency, dated as of the Closing Date, relating to the Trust Securities
Certificates, substantially in the form attached as EXHIBIT B, as the same may
be amended and supplemented from time to time.
"Certificate of Trust" means, as stated in the recitals to this Trust
Agreement, the certificate of trust filed with the Secretary of State of the
State of Delaware with respect to the Trust, in the form attached as EXHIBIT A,
as the same may be amended or restated from time to time.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. The Depositary Trust Company will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this Trust Agreement such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties at such time.
"Common Security" means a common undivided beneficial interest in the
assets of the Trust, having a Liquidation Amount of $10 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as EXHIBIT
C.
"Corporate Trust Office" means the principal corporate trust office of
the Property Trustee located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware, 19890-0001, Attn: Corporate Trust Administration.
"Debenture Event of Default" means an "Event of Default" as defined in
the Indenture.
"Debenture Redemption Date" means, with respect to any Junior
Subordinated Debentures to be redeemed under the Indenture, the date fixed for
redemption under the Indenture.
"Debenture Trustee" means Wilmington Trust Company, a Delaware banking
corporation organized under the laws of the State of Delaware and any successor
thereto, as trustee under the Indenture.
"Definitive Preferred Securities Certificates" means either or both
(as the context requires) of (a) Preferred Securities Certificates issued as
Book-Entry Preferred Securities Certificates as provided in Section 511(a), and
(b) Preferred Securities Certificates issued in certificated, fully registered
form as provided in Section 513.
"Delaware Bank" has the meaning specified in the preamble to this
Trust Agreement.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Delaware Code
4.5-3
<PAGE> 8
Sections 3801 et. seq. as it may be amended from time to time.
"Delaware Trustee" means the commercial bank or trust company
identified as the "Delaware Trustee" in the preamble to this Trust Agreement
solely in its capacity as Delaware Trustee of the Trust formed and continued
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor Delaware Trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 401(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 401.
"Event of Default" means any one of the following events that shall
have occurred and be continuing (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust in the payment of any Distribution when
it becomes due and payable, and continuation of such default for a period of 30
days; or
(c) default by the Trust in the payment of any Redemption Price of
any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Property Trustee in this Trust
Agreement (other than a covenant or warranty, a default in the performance of
which or the breach of which is dealt with in clause (b) or (c), above) and
continuation of such default or breach for a period of 60 days after there has
been given, by registered or certified mail, to the defaulting Property Trustee
by the Holders of at least 25% in aggregate Liquidation Amount of the
Outstanding Preferred Securities a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the
Property Trustee and the failure by the Depositor to appoint a successor
Property Trustee within 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
EXHIBIT D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 901.
"Extension Period" means the "Extended Interest Payment Period" as defined in
the Indenture.
"Global Subordinated Debenture" has the meaning specified in the
Indenture.
"Guarantee" means the Preferred Securities Guarantee Agreement
executed and delivered by the Depositor and Wilmington Trust Company as
trustee, contemporaneously with the execution and delivery of this Trust
Agreement, for the benefit of the Holders of the Preferred Securities, as
amended from time to time.
4.5-4
<PAGE> 9
"Holder" means a Securityholder.
"Indenture" means the Subordinated Indenture, dated as of
_________________, 1998, between the Depositor and the Debenture Trustee, as
trustee, as amended or supplemented from time to time.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Junior Subordinated Debentures" means the $12,371,150 aggregate
principal amount of the Depositor's ____% Junior Subordinated Debentures due
2028, issued pursuant to the Indenture.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Junior Subordinated Debentures to be contemporaneously redeemed in
accordance with the Indenture and the proceeds of which will be used to pay the
Redemption Price of such Trust Securities and (b) with respect to a
distribution of Junior Subordinated Debentures to Holders of Trust Securities
in connection with a termination or liquidation of the Trust, Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the Holder to whom such Junior Subordinated
Debentures are distributed.
"Liquidation Amount" means the stated amount of $10 per Trust
Security.
"Liquidation Date" means the date on which Junior Subordinated
Debentures are to be distributed to Holders of Trust Securities in connection
with a termination and liquidation of the Trust pursuant to Section 904(a).
"Liquidation Distribution" has the meaning specified in Section
904(d).
"Maturity Date" has the meaning set forth in Section 2.2 of the
Indenture.
"Officers' Certificate" means a certificate signed by the Chief
Executive Officer, the President or a Vice President and by the Chief
Accounting Officer or the Controller or an Assistant Controller or the
Secretary or an Assistant Secretary, of the Depositor, and delivered to the
appropriate Trustee. One of the officers signing an Officers' Certificate
given pursuant to Section 816 shall be the principal executive, financial or
accounting officer of the Depositor. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this Trust
Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
4.5-5
<PAGE> 10
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee, the Delaware Trustee or the
Depositor, but not an employee of any thereof, and who shall be reasonably
acceptable to the Property Trustee.
"Original Trust Agreement" has the meaning specified in the recitals
to this Trust Agreement.
"Outstanding," when used with respect to Preferred Securities, means,
as of the date of determination, all Preferred Securities theretofore executed
and delivered under this Trust Agreement, except:
(a) Preferred Securities theretofore canceled by the Property
Trustee or delivered to the Property Trustee for cancellation;
(b) Preferred Securities for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Property Trustee
or any Paying Agent for the Holders of such Preferred Securities; provided
that, if such Preferred Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Trust Agreement; and
(c) Preferred Securities which have been paid or in exchange for
or in lieu of which other Preferred Securities have been executed and delivered
pursuant to Sections 504, 505, 511 and 513; provided, however, that in
determining whether the Holders of the requisite Liquidation Amount of the
Outstanding Preferred Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Preferred Securities owned by
the Depositor, any Trustee or any Affiliate of the Depositor or any Trustee
shall be disregarded and deemed not to be Outstanding, except that (i) in
determining whether any Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Preferred Securities that such Trustee knows to be so owned shall be so
disregarded and (ii) the foregoing shall not apply at any time when all of the
Outstanding Preferred Securities are owned by the Depositor, one or more of the
Trustees and/or any such Affiliate. Preferred Securities so owned which have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Administrative Trustees the pledgee's
right as to such Preferred Securities so owned.
"Owner" means each Person who is the beneficial owner of a Book-Entry
Preferred Securities Certificate as reflected in the records of the Clearing
Agency or, if a Clearing Agency Participant is not the Owner, then as reflected
in the records of a Person maintaining an account with such Clearing Agency
(directly or indirectly, in accordance with the rules of such Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 509 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its trust
department for the benefit of the Securityholders in which all amounts paid in
respect of the Junior Subordinated Debentures will be held and from which the
Property Trustee shall make payments to the Securityholders in accordance with
Sections 401 and 402.
"Person" means any individual, corporation, partnership, joint
venture, trust, limited liability company or corporation, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the
assets of the Trust, designated "____% Cumulative Preferred Securities," having
a Liquidation Amount of $10 and having the rights provided therefor in this
Trust Agreement, including the right to receive Distributions and a Liquidation
Distribution as provided herein.
"Preferred Securities Certificate" means a certificate evidencing
ownership of Preferred Securities,
4.5-6
<PAGE> 11
substantially in the form attached as EXHIBIT E.
"Property Trustee" means the commercial bank or trust company
identified as the "Property Trustee" in the preamble to this Trust Agreement
solely in its capacity as Property Trustee of the Trust heretofore formed and
continued hereunder and not in its individual capacity, or its successor in
interest in such capacity, or any successor Property Trustee appointed as
herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the Maturity Date
of the Junior Subordinated Debentures shall be a Redemption Date for a Like
Amount of Trust Securities.
"Redemption Price" means, with respect to any Trust Security to be
redeemed, the Liquidation Amount of such Trust Security, plus accumulated and
unpaid Distributions to the Redemption Date allocated on a pro rata basis
(based on Liquidation Amounts) among the Trust Securities to be redeemed.
"Relevant Trustee" shall have the meaning specified in Section 810.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 504.
"Securityholder" means a Person in whose name a Trust Security or
Securities is registered in the Securities Register; any such Person is a
beneficial owner within the meaning of the Delaware Business Trust Act.
"Trust" means MB Capital I, the Delaware business trust continued
hereby and which was created as stated in the recitals to this Trust
Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including all exhibits hereto, including, for all
purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment or
supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this Trust Agreement was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after
such date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Junior Subordinated Debentures, (b) the
rights of the Property Trustee under the Guarantee, (c) any cash on deposit in,
or owing to, the Payment Account and (d) all proceeds and rights in respect of
the foregoing and any other property and assets for the time being held or
deemed to be held by the Property Trustee pursuant to the trusts of this Trust
Agreement.
"Trust Security" means any one of the Common Securities or the
Preferred Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trustee" or "Trustees" means, individually or collectively, any of
the Property Trustee, the Delaware Trustee and the Administrative Trustees.
"Underwriting Agreement" means the Underwriting Agreement dated as of
_______________, 1998, among the Trust, the Depositor and the underwriters
named therein.
4.5-7
<PAGE> 12
ARTICLE II.
ESTABLISHMENT OF THE TRUST
SECTION 201. NAME. The Trust created pursuant to the Certificate of
Trust and continued hereby shall continue to be known as "MB Capital I," as
such name may be modified from time to time by the Administrative Trustees
following written notice to the Holders of Trust Securities and the other
Trustees, in which name the Trustees may engage in the transactions
contemplated hereby, make and execute contracts and other instruments on behalf
of the Trust and sue and be sued.
SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF
BUSINESS. The address of the Delaware Trustee in the State of Delaware is c/o
Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware 19890,
Attention: Corporate Trust Administration, or such other address in the State
of Delaware as the Delaware Trustee may designate by written notice to the
Securityholders and the Depositor. The principal executive office of the Trust
is c/o MegaBank Financial Corporation, 8100 East Arapahoe Road, Englewood,
Colorado 80112.
SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL
EXPENSES. The Trustees acknowledge receipt in trust from the Depositor in
connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Trust as they arise or shall, upon request of any Trustee,
promptly reimburse such Trustee for any such expenses paid by such Trustee.
The Depositor shall make no claim upon the Trust Property for the payment of
such expenses.
SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES. On
______________, 1998, the Depositor and an Administrative Trustee, on behalf of
the Trust and pursuant to the Original Trust Agreement, executed and delivered
the Underwriting Agreement. Contemporaneously with the execution and delivery
of this Trust Agreement, an Administrative Trustee, on behalf of the Trust,
shall execute in accordance with Section 502 and deliver, in accordance with
the Underwriting Agreement, a Preferred Securities Certificate, registered in
the name of the nominee of the initial Clearing Agency, in an aggregate amount
of Preferred Securities having an aggregate Liquidation Amount of $12,000,000
against receipt of the aggregate purchase price of such Preferred Securities of
$12,000,000, which amount such Administrative Trustee shall promptly deliver
to the Property Trustee.
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND
PURCHASE OF JUNIOR SUBORDINATED DEBENTURES. Contemporaneously with the
execution and delivery of this Trust Agreement, an Administrative Trustee, on
behalf of the Trust, shall execute in accordance with Section 502 and deliver
to the Depositor a Common Securities Certificate, registered in the name of the
Depositor, in an aggregate amount of Common Securities having an aggregate
Liquidation Amount of $371,150 against payment by the Depositor of such amount.
Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust,
shall subscribe to and purchase from the Depositor Junior Subordinated
Debentures, registered in the name of the Property Trustee on behalf of the
Trust and having an aggregate principal amount equal to $12,371,150, and, in
satisfaction of the purchase price for such Junior Subordinated Debentures, the
Property Trustee, on behalf of the Trust, shall deliver to the Depositor the
sum of $12,371,150.
SECTION 206. DECLARATION OF TRUST. The exclusive purposes and
functions of the Trust are (a) to issue and sell Trust Securities and use the
proceeds from such sale to acquire the Junior Subordinated Debentures, and (b)
to engage in those activities necessary, convenient or incidental thereto. The
Depositor hereby appoints the Trustees as trustees of the Trust, to have all
the rights, powers and duties to the extent set forth herein, and the Trustees
hereby accept such appointment. The Property Trustee hereby declares that it
will hold the Trust Property in trust upon and subject to the conditions set
forth herein for the benefit of the Securityholders. The Administrative
Trustees shall have all rights, powers and duties set forth herein and in
accordance with applicable law with respect to accomplishing the purposes of
the Trust. The Delaware Trustee shall not be entitled to exercise any powers,
nor
4.5-8
<PAGE> 13
shall the Delaware Trustee have any of the duties and responsibilities, of the
Property Trustee or the Administrative Trustees set forth herein. The Delaware
Trustee shall be one of the Trustees of the Trust for the sole and limited
purpose of fulfilling the requirements of Section 3807 of the Delaware Business
Trust Act.
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
(a) The Trustees shall conduct the affairs of the Trust in
accordance with the terms of this Trust Agreement. Subject to the limitations
set forth in paragraph (b) of this Section and Article VIII, and in accordance
with the following provisions (i) and (ii), the Administrative Trustees shall
have the authority to enter into all transactions and agreements determined by
the Administrative Trustees to be appropriate in exercising the authority,
express or implied, otherwise granted to the Administrative Trustees under this
Trust Agreement, and to perform all acts in furtherance thereof, including
without limitation, the following:
(i) As among the Trustees, each Administrative Trustee,
acting singly or jointly, shall have the power and authority to act on
behalf of the Trust with respect to the following matters:
(A) the issuance and sale of the Trust
Securities;
(B) to cause the Trust to enter into, and to
execute, deliver and perform on behalf of the Trust, the
Expense Agreement and the Certificate Depository Agreement and
such other agreements or documents as may be necessary or
desirable in connection with the purposes and function of the
Trust;
(C) assisting in the registration of the
Preferred Securities under the Securities Act of 1933, as
amended, and under state securities or blue sky laws, and the
qualification of this Trust Agreement as a trust indenture
under the Trust Indenture Act;
(D) assisting in the listing of the Preferred
Securities upon the Nasdaq National Market or such securities
exchange or exchanges as shall be determined by the Depositor
and, if required, the registration of the Preferred Securities
under the Securities Exchange Act of 1934, as amended, and the
preparation and filing of all periodic and other reports and
other documents pursuant to the foregoing;
(E) the sending of notices (other than notices of
default) and other information regarding the Trust Securities
and the Junior Subordinated Debentures to the Securityholders
in accordance with this Trust Agreement;
(F) the appointment of a Paying Agent,
authenticating agent and Securities Registrar in accordance
with this Trust Agreement;
(G) to the extent provided in this Trust
Agreement, the winding up of the affairs of and liquidation of
the Trust and the preparation, execution and filing of the
certificate of cancellation with the Secretary of State of the
State of Delaware;
(H) to take all action that may be necessary or
appropriate for the preservation and the continuation of the
Trust's valid existence, rights, franchises and privileges as
a statutory business trust under the laws of the State of
Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the
Holders of the Preferred Securities or to enable the Trust to
effect the purposes for which the Trust was created; and
(I) the taking of any action incidental to the
foregoing as the Administrative Trustees
4.5-9
<PAGE> 14
may from time to time determine is necessary or advisable to
give effect to the terms of this Trust Agreement for the
benefit of the Securityholders (without consideration of the
effect of any such action on any particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall
have the power, duty and authority to act on behalf of the Trust with
respect to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Junior Subordinated
Debentures;
(C) the collection of interest, principal and any
other payments made in respect of the Junior Subordinated
Debentures in the Payment Account;
(D) the distribution of amounts owed to the
Securityholders in respect of the Trust Securities in
accordance with the terms of this Trust Agreement;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Junior Subordinated Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the Junior
Subordinated Debentures to the Securityholders in accordance
with this Trust Agreement;
(G) the distribution of the Trust Property in
accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust
Agreement, the winding up of the affairs of and liquidation of
the Trust;
(I) after an Event of Default the taking of any
action incidental to the foregoing as the Property Trustee may
from time to time determine is necessary or advisable to give
effect to the terms of this Trust Agreement and protect and
conserve the Trust Property for the benefit of the
Securityholders (without consideration of the effect of any
such action on any particular Securityholder);
(J) so long as the Property Trustee is the
Securities Registrar, registering transfers of the Trust
Securities in accordance with this Trust Agreement; and
(K) except as otherwise provided in this Section
207(a)(ii), the Property Trustee shall have none of the
duties, liabilities, powers or the authority of the
Administrative Trustees set forth in Section 207(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust
(or the Trustees acting on behalf of the Trust) shall not undertake any
business, activities or transaction except as expressly provided herein or
contemplated hereby. In particular, the Trustees shall not (i) acquire any
investments or engage in any activities not authorized by this Trust Agreement,
(ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise
dispose of any of the Trust Property or interests therein, including to
Securityholders, except as expressly provided herein, (iii) take any action
that would cause the Trust to fail or cease to qualify as a "grantor trust" for
United States federal income tax purposes, (iv) incur any indebtedness for
borrowed money or issue any other debt or (v) take or consent to any action
that would result in the placement of a Lien on any of the Trust Property. The
Administrative Trustees shall
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<PAGE> 15
defend all claims and demands of all Persons at any time claiming any Lien on
any of the Trust Property adverse to the interest of the Trust or the
Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred
Securities, the Depositor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the
date of this Trust Agreement are hereby ratified and confirmed in all
respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on the appropriate form in relation to the Preferred
Securities and the Junior Subordinated Debentures, including any
amendments thereto;
(ii) the determination of the states in which to take
appropriate action to qualify or register for sale all or part of the
Preferred Securities and to do any and all such acts, other than
actions which must be taken by or on behalf of the Trust, and advise
the Trustees of actions they must take on behalf of the Trust, and
prepare for execution and filing any documents to be executed and
filed by the Trust or on behalf of the Trust, as the Depositor deems
necessary or advisable in order to comply with the applicable laws of
any such states;
(iii) the preparation for filing by the Trust and execution
on behalf of the Trust of an application to the Nasdaq National Market
or a national stock exchange or other organizations for listing upon
notice of issuance of any Preferred Securities and to file or cause an
Administrative Trustee to file thereafter with such exchange or
organization such notifications and documents as may be necessary from
time to time;
(iv) if required, the preparation for filing by the Trust
with the Commission and the execution on behalf of the Trust of a
registration statement on Form 8-A relating to the registration of the
Preferred Securities under Section 12(b) or 12(g) of the Exchange Act,
including any amendments thereto;
(v) the negotiation of the terms of, and the execution
and delivery of, the Underwriting Agreement providing for the sale of
the Preferred Securities; and
(vi) the taking of any other actions necessary or
desirable to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the affairs of
the Trust and to operate the Trust so that the Trust will not be deemed to be
an "investment company" required to be registered under the Investment Company
Act, will be classified as a "grantor trust" and not as an association taxable
as a corporation for United States federal income tax purposes and so that the
Junior Subordinated Debentures will be treated as indebtedness of the Depositor
for United States federal income tax purposes. In this connection, subject to
Section 1002, the Depositor and the Administrative Trustees are authorized to
take any action, not inconsistent with applicable law or this Trust Agreement,
that each of the Depositor and the Administrative Trustees determines in their
discretion to be necessary or desirable for such purposes.
SECTION 208. ASSETS OF TRUST. The assets of the Trust shall consist
of the Trust Property.
SECTION 209. TITLE TO TRUST PROPERTY. Legal title to all Trust
Property shall be vested at all times in the Property Trustee (in its capacity
as such) and shall be held and administered by the Property Trustee for the
benefit of the Securityholders in accordance with this Trust Agreement.
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<PAGE> 16
ARTICLE III.
PAYMENT ACCOUNT
SECTION 301. PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making deposits and
withdrawals from the Payment Account in accordance with this Trust Agreement.
All monies and other property deposited or held from time to time in the
Payment Account shall be held by the Property Trustee in the Payment Account
for the exclusive benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments provided for
herein.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on, and any
other payments or proceeds with respect to, the Junior Subordinated Debentures.
Amounts held in the Payment Account shall not be invested by the Property
Trustee pending distribution thereof.
ARTICLE IV.
DISTRIBUTIONS; REDEMPTION
SECTION 401. DISTRIBUTIONS.
(a) Distributions on the Trust Securities shall be cumulative, and
will accumulate whether or not there are funds of the Trust available for the
payment of Distributions. Distributions shall accumulate from
_________________, 1998, and, except during any Extension Period with respect
to the Junior Subordinated Debentures, shall be payable quarterly in arrears on
the 15th day of January, April, July, and October in each year, commencing
April 15, 1998. The amount of each Distribution due with respect to the Trust
Securities will include amounts accrued through the date the Distribution
payment is due. If any date on which a Distribution is otherwise payable on
the Trust Securities is not a Business Day, then the payment of such
Distribution shall be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year, payment of
such Distribution shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date (each date on
which Distributions are payable in accordance with this Section 401(a) a
"Distribution Date").
(b) The Trust Securities represent undivided beneficial interests
in the Trust Property, and, as a practical matter, the Distributions on the
Trust Securities shall be payable at a rate of ____% per annum of the
Liquidation Amount of the Trust Securities. The amount of Distributions
payable for any full period shall be computed on the basis of a 360-day year of
twelve 30-day months. The amount of Distributions for any partial period shall
be computed on the basis of the number of days elapsed in a 360-day year of
twelve 30-day months. During any Extension Period with respect to the Junior
Subordinated Debentures, Distributions on the Preferred Securities will be
deferred for a period equal to the Extension Period. The amount of
Distributions payable for any period shall include the Additional Amounts, if
any.
(c) Distributions on the Trust Securities shall be made by the
Property Trustee solely from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand and
immediately available in the Payment Account for the payment of such
Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
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<PAGE> 17
shall be one Business Day prior to such Distribution Date; provided, however,
that in the event that the Preferred Securities do not remain in
book-entry-only form, the relevant record date shall be the 1st day of the
month in which the relevant Distribution Date occurs.
SECTION 402. REDEMPTION.
(a) On each Debenture Redemption Date and on the Maturity Date of
the Junior Subordinated Debentures, the Trust will be required to redeem a Like
Amount of Trust Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60
days prior to the Redemption Date to each Holder of Trust Securities to be
redeemed, at such Holder's address appearing in the Securities Register. The
Property Trustee shall have no responsibility for the accuracy of any CUSIP
number contained in such notice. All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are
to be redeemed, the identification and the aggregate Liquidation
Amount of the particular Trust Securities to be redeemed; and
(v) that on the Redemption Date the Redemption Price will
become due and payable upon each such Trust Security to be redeemed
and that Distributions thereon will cease to accumulate on and after
said date.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Junior Subordinated Debentures. Redemptions of the Trust
Securities shall be made and the Redemption Price shall be payable on each
Redemption Date only to the extent that the Trust has immediately available
funds then on hand and available in the Payment Account for the payment of such
Redemption Price.
(d) If the Property Trustee gives a notice of redemption in
respect of any Preferred Securities, then, by 12:00 noon, Denver time, on the
Redemption Date, subject to Section 402(c), the Property Trustee will, so long
as the Preferred Securities are in book-entry-only form, deposit with the
Clearing Agency for the Preferred Securities funds sufficient to pay the
applicable Redemption Price and will give such Clearing Agency irrevocable
instructions and authority to pay the Redemption Price to the Holders thereof.
If the Preferred Securities are no longer in book-entry-only form, the Property
Trustee, subject to Section 402(c), will deposit with the Paying Agent funds
sufficient to pay the applicable Redemption Price and will give the Paying
Agent irrevocable instructions and authority to pay the Redemption Price to the
Holders thereof upon surrender of their Preferred Securities Certificates.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Trust Securities called for redemption shall be payable
to the Holders of such Trust Securities as they appear on the Securities
Register for the Trust Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of
Securityholders holding Trust Securities so called for redemption will cease,
except the right of such Securityholders to receive the Redemption Price, but
without interest on such Redemption Price, and such Securities will cease to be
Outstanding. In the event that any date on which any Redemption Price is
payable is not a Business Day, then payment of the Redemption Price payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will
be made on the immediately preceding Business Day, in each case, with
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<PAGE> 18
the same force and effect as if made on such date. In the event that payment
of the Redemption Price in respect of any Trust Securities called for
redemption is improperly withheld or refused and not paid either by the Trust
or by the Depositor pursuant to the Guarantee, Distributions on such Trust
Securities will continue to accumulate, at the then applicable rate, from the
Redemption Date originally established by the Trust for such Trust Securities
to the date such Redemption Price is actually paid, in which case the actual
payment date will be the date fixed for redemption for purposes of calculating
the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall
be made to the record Holders thereof as they appear on the Securities Register
for the Trust Securities on the relevant record date, which shall be one
Business Day prior to the relevant Redemption Date; provided, however, that in
the event that the Preferred Securities do not remain in book-entry-only form,
the relevant record date shall be the date fifteen days prior to the relevant
Redemption Date.
(f) Subject to Section 403(a), if less than all the Outstanding
Trust Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities. The particular Preferred Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption Date by the
Property Trustee from the outstanding Preferred Securities not previously
called for redemption, by such method (including, without limitation, by lot)
as the Property Trustee shall deem fair and appropriate and which may provide
for the selection for redemption of portions (equal to $10 or an integral
multiple of $10 in excess thereof) of the Liquidation Amount of Preferred
Securities of a denomination larger than $10. The Property Trustee shall
promptly notify the Securities Registrar in writing of the Preferred Securities
selected for redemption and, in the case of any Preferred Securities selected
for partial redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of this Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Preferred Securities shall relate, in
the case of any Preferred Securities redeemed or to be redeemed only in part,
to the portion of the Liquidation Amount of Preferred Securities which has been
or is to be redeemed.
SECTION 403. SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 402(f), pro rata among the Common
Securities and the Preferred Securities based on the Liquidation Amount of the
Trust Securities; provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of
Default shall have occurred and be continuing, no payment of any Distribution
(including Additional Amounts, if applicable) on, or Redemption Price of, any
Common Security, and no other payment on account of the redemption, liquidation
or other acquisition of Common Securities, shall be made unless payment in full
in cash of all accumulated and unpaid Distributions (including Additional
Amounts, if applicable) on all Outstanding Preferred Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the Redemption Price the full amount of such Redemption Price on all
Outstanding Preferred Securities then called for redemption, shall have been
made or provided for, and all funds immediately available to the Property
Trustee shall first be applied to the payment in full in cash of all
Distributions (including Additional Amounts, if applicable) on, or the
Redemption Price of, Preferred Securities then due and payable.
(b) In the case of the occurrence of any Event of Default
resulting from a Debenture Event of Default, the Holder of Common Securities
will be deemed to have waived any right to act with respect to any such Event
of Default under this Trust Agreement until the effect of all such Events of
Default with respect to the Preferred Securities shall have been cured, waived
or otherwise eliminated. Until any such Event of Default under this Trust
Agreement with respect to the Preferred Securities shall have been so cured,
waived or otherwise eliminated, the Property Trustee shall act solely on behalf
of the Holders of the Preferred Securities and not the Holder of the Common
Securities, and only the Holders of the Preferred Securities will have the
right to direct the Property Trustee to act on their behalf.
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<PAGE> 19
SECTION 404. PAYMENT PROCEDURES. Payments of Distributions
(including Additional Amounts, if applicable) in respect of the Preferred
Securities shall be made by check mailed to the address of the Person entitled
thereto as such address shall appear on the Securities Register or, if the
Preferred Securities are held by a Clearing Agency, such Distributions shall be
made to the Clearing Agency in immediately available funds, which shall credit
the relevant Persons' accounts at such Clearing Agency on the applicable
Distribution Dates. Payments in respect of the Common Securities shall be made
in such manner as shall be mutually agreed between the Property Trustee and the
Holder of the Common Securities.
SECTION 405. TAX RETURNS AND REPORTS. The Administrative Trustees
shall prepare (or cause to be prepared), at the Depositor's expense, and file
all United States federal, state and local tax and information returns and
reports required to be filed by or in respect of the Trust. In this regard,
the Administrative Trustees shall (a) prepare and file (or cause to be prepared
and filed) the appropriate Internal Revenue Service Form required to be filed
in respect of the Trust in each taxable year of the Trust and (b) prepare and
furnish (or cause to be prepared and furnished) to each Securityholder the
appropriate Internal Revenue Service form required to be furnished to such
Securityholder or the information required to be provided on such form. The
Administrative Trustees shall provide the Depositor with a copy of all such
returns and reports promptly after such filing or furnishing. The Property
Trustee shall comply with United States federal withholding and backup
withholding tax laws and information reporting requirements with respect to any
payments to Securityholders under the Trust Securities.
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST. Upon
receipt under the Junior Subordinated Debentures of Additional Sums, the
Property Trustee, at the direction of an Administrative Trustee or the
Depositor, shall promptly pay any taxes, duties or governmental charges of
whatsoever nature (other than withholding taxes) imposed on the Trust by the
United States or any other taxing authority.
SECTION 407. PAYMENTS UNDER INDENTURE. Any amount payable hereunder
to any Holder of Preferred Securities shall be reduced by the amount of any
corresponding payment such Holder has directly received under the Indenture
pursuant to Section 514(b) or (c) hereof.
ARTICLE V.
TRUST SECURITIES CERTIFICATES
SECTION 501. INITIAL OWNERSHIP. Upon the creation of the Trust and
the contribution by the Depositor pursuant to Section 203 and until the
issuance of the Trust Securities, and at any time during which no Trust
Securities are outstanding, the Depositor shall be the sole beneficial owner of
the Trust.
SECTION 502. THE TRUST SECURITIES CERTIFICATES. The Preferred
Securities Certificates shall be issued in minimum denominations of $10
Liquidation Amount and integral multiples of $10 in excess thereof, and the
Common Securities Certificates shall be issued in denominations of $10
Liquidation Amount and integral multiples of $10 in excess thereof. The Trust
Securities Certificates shall be executed on behalf of the Trust by manual
signature of at least one Administrative Trustee. Trust Securities
Certificates bearing the manual signatures of individuals who were, at the time
when such signatures shall have been affixed, authorized to sign on behalf of
the Trust, shall be validly issued and entitled to the benefits of this Trust
Agreement, notwithstanding that such individuals or any of them shall have
ceased to be so authorized prior to the delivery of such Trust Securities
Certificates or did not hold such offices at the date of delivery of such Trust
Securities Certificates. A transferee of a Trust Securities Certificate shall
become a Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Sections 504, 511
and 513.
SECTION 503. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES.
On the Closing Date, the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation
4.5-15
<PAGE> 20
Amount as provided in Sections 204 and 205, to be executed on behalf of the
Trust by at least one of the Administrative Trustees and delivered to or upon
the written order of the Depositor, signed by its Chief Executive Officer, its
President, or any Vice President without further corporate action by the
Depositor, in authorized denominations.
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED
SECURITIES CERTIFICATES. The Depositor shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 508, a register or registers
for the purpose of registering Trust Securities Certificates and transfers and
exchanges of Preferred Securities Certificates (herein referred to as the
"Securities Register") in which the registrar designated by the Depositor (the
"Securities Registrar"), subject to such reasonable regulations as it may
prescribe, shall provide for the registration of Preferred Securities
Certificates and Common Securities Certificates (subject to Section 510 in the
case of the Common Securities Certificates) and registration of transfers and
exchanges of Preferred Securities Certificates as herein provided. The
Property Trustee shall be the initial Securities Registrar.
Upon surrender for registration of transfer of any Preferred
Securities Certificate at the office or agency maintained pursuant to Section
508, the Administrative Trustees or any one of them shall execute and deliver,
in the name of the designated transferee or transferees, one or more new
Preferred Securities Certificates in authorized denominations of a like
aggregate Liquidation Amount dated the date of execution by such Administrative
Trustee or Trustees. The Securities Registrar shall not be required to
register the transfer of any Preferred Securities that have been called for
redemption. At the option of a Holder, Preferred Securities Certificates may
be exchanged for other Preferred Securities Certificates in authorized
denominations of the same class and of a like aggregate Liquidation Amount upon
surrender of the Preferred Securities Certificates to be exchanged at the
office or agency maintained pursuant to Section 508.
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Property Trustee and the
Securities Registrar duly executed by the Holder or such Holder's attorney duly
authorized in writing. Each Preferred Securities Certificate surrendered for
registration of transfer or exchange shall be canceled and subsequently
disposed of by the Property Trustee in accordance with its customary practice.
The Trust shall not be required to (i) issue, register the transfer of, or
exchange any Preferred Securities during a period beginning at the opening of
business 15 calendar days before the date of mailing of a notice of redemption
of any Preferred Securities called for redemption and ending at the close of
business on the day of such mailing or (ii) register the transfer of or
exchange any Preferred Securities so selected for redemption, in whole or in
part, except the unredeemed portion of any such Preferred Securities being
redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar may
require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer or exchange of Preferred
Securities Certificates.
SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES. If (a) any mutilated Trust Securities Certificate shall be
surrendered to the Securities Registrar, or if the Securities Registrar shall
receive evidence to its satisfaction of the destruction, loss or theft of any
Trust Securities Certificate and (b) there shall be delivered to the Securities
Registrar and the Administrative Trustees such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Trust Securities Certificate shall have been acquired by a bona fide
purchaser, the Administrative Trustees, or any one of them, on behalf of the
Trust shall execute and make available for delivery, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Trust Securities Certificate,
a new Trust Securities Certificate of like class, tenor and denomination. In
connection with the issuance of any new Trust Securities Certificate under this
Section, the Administrative Trustees or the Securities Registrar may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection therewith. Any duplicate Trust Securities
Certificate issued pursuant to this Section shall constitute conclusive
evidence of an undivided beneficial interest in
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<PAGE> 21
the assets of the Trust, as if originally issued, whether or not the lost,
stolen or destroyed Trust Securities Certificate shall be found at any time.
SECTION 506. PERSONS DEEMED SECURITYHOLDERS. The Trustees, the
Paying Agent and the Securities Registrar shall treat the Person in whose name
any Trust Securities Certificate shall be registered in the Securities Register
as the owner of such Trust Securities Certificate for the purpose of receiving
Distributions and for all other purposes whatsoever, and neither the Trustees
nor the Securities Registrar shall be bound by any notice to the contrary.
SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES.
At any time when the Property Trustee is not also acting as the Securities
Registrar, the Administrative Trustees or the Depositor shall furnish or cause
to be furnished to the Property Trustee (a) semi-annually on or before January
15 and July 15 in each year, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Securityholders as of the
most recent regular record date (as provided in Section 401(d)) and (b)
promptly after receipt by any Administrative Trustee or the Depositor of a
request therefor from the Property Trustee, such other information as the
Property Trustee may reasonably require in order to enable the Property Trustee
to discharge its obligations under this Trust Agreement, in each case to the
extent such information is in the possession or control of the Administrative
Trustees or the Depositor and is not identical to a previously supplied list or
has not otherwise been received by the Property Trustee in its capacity as
Securities Registrar. The rights of Securityholders to communicate with other
Securityholders with respect to their rights under this Trust Agreement or
under the Trust Securities, and the corresponding rights of the Trustee shall
be as provided in the Trust Indenture Act. Each Holder, by receiving and
holding a Trust Securities Certificate, and each Owner shall be deemed to have
agreed not to hold the Depositor, the Property Trustee or the Administrative
Trustees accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
SECTION 508. MAINTENANCE OF OFFICE OR AGENCY. The Administrative
Trustees shall maintain an office or offices or agency or agencies where
Preferred Securities Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustees in
respect of the Trust Securities Certificates may be served. The Administrative
Trustees initially designate the principal corporate trust office of the
Property Trustee, Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890-0001, Attn: Corporate Trust Administration, as the principal
corporate trust office for such purposes. The Administrative Trustees shall
give prompt written notice to the Depositor and to the Securityholders of any
change in the location of the Securities Register or any such office or agency.
SECTION 509. APPOINTMENT OF PAYING AGENT. The Paying Agent shall
make Distributions to Securityholders from the Payment Account and shall report
the amounts of such Distributions to the Property Trustee and the
Administrative Trustees. Any Paying Agent shall have the revocable power to
withdraw funds from the Payment Account for the purpose of making the
Distributions referred to above. The Administrative Trustees may revoke such
power and remove the Paying Agent if such Trustees determine in their sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Trust Agreement in any material respect. The Paying Agent shall
initially be the Property Trustee, and any co-paying agent chosen by the
Property Trustee, and acceptable to the Administrative Trustees and the
Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustees, the
Property Trustee and the Depositor. In the event that the Property Trustee
shall no longer be the Paying Agent or a successor Paying Agent shall resign or
its authority to act be revoked, the Administrative Trustees shall appoint a
successor that is acceptable to the Property Trustee and the Depositor to act
as Paying Agent (which shall be a bank or trust company). The Administrative
Trustees shall cause such successor Paying Agent or any additional Paying Agent
appointed by the Administrative Trustees to execute and deliver to the Trustees
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Trustees that as Paying Agent, such successor Paying Agent
or additional Paying Agent will hold all sums, if any, held by it for payment
to the Securityholders in trust for the benefit of the Securityholders entitled
thereto until such sums shall be paid to such Securityholders. The Paying
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<PAGE> 22
Agent shall return all unclaimed funds to the Property Trustee and upon removal
of a Paying Agent such Paying Agent shall also return all funds in its
possession to the Property Trustee. The provisions of Sections 801, 803 and
806 shall apply to the Property Trustee also in its role as Paying Agent, for
so long as the Property Trustee shall act as Paying Agent and, to the extent
applicable, to any other Paying Agent appointed hereunder. Any reference in
this Agreement to the Paying Agent shall include any co-paying agent unless the
context requires otherwise.
SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR. On the
Closing Date, the Depositor shall acquire and retain beneficial and record
ownership of the Common Securities. To the fullest extent permitted by law,
any attempted transfer of the Common Securities (other than a transfer in
connection with a merger or consolidation of the Depositor into another
corporation pursuant to Section 12.1 of the Indenture) shall be void. The
Administrative Trustees shall cause each Common Securities Certificate issued
to the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT
TRANSFERABLE".
SECTION 511. BOOK-ENTRY PREFERRED SECURITIES CERTIFICATES; COMMON SECURITIES
CERTIFICATE.
(a) The Preferred Securities Certificates, upon original issuance,
will be issued in the form of a typewritten Preferred Securities Certificate or
Certificates representing Book-Entry Preferred Securities Certificates, to be
delivered to or held on behalf of The Depository Trust Company, the initial
Clearing Agency, by, or on behalf of, the Trust. Such Book-Entry Preferred
Securities Certificate or Certificates shall initially be registered on the
Securities Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no beneficial owner will receive a Definitive Preferred
Securities Certificate representing such beneficial owner's interest in such
Preferred Securities, except as provided in Section 513. Unless and until
Definitive Preferred Securities Certificates have been issued to beneficial
owners pursuant to Section 513:
(i) the provisions of this Section 511(a) shall be in
full force and effect;
(ii) the Securities Registrar, the Paying Agent and the
Trustees shall be entitled to deal with the Clearing Agency for all
purposes of this Trust Agreement relating to the Book-Entry Preferred
Securities Certificates (including the payment of the Liquidation
Amount of and Distributions on the Book-Entry Preferred Securities) as
the sole Holder of Book-Entry Preferred Securities and shall have no
obligations to the Owners thereof;
(iii) to the extent that the provisions of this Section 511
conflict with any other provisions of this Trust Agreement, the
provisions of this Section 511 shall control; and
(iv) the rights of the Owners of the Book-Entry Preferred
Securities Certificates shall be exercised only through the Clearing
Agency and shall be limited to those established by law and agreements
between such Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Certificate Depository Agreement,
unless and until Definitive Preferred Securities Certificates are
issued pursuant to Section 513, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and will
receive and transmit payments on the Preferred Securities to such
Clearing Agency Participants. Any Clearing Agency designated pursuant
hereto will not be deemed an agent of the Trustees for any purpose.
(b) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
SECTION 512. NOTICES TO CLEARING AGENCY. To the extent that a notice
or other communication to the Owners is required under this Trust Agreement,
unless and until Definitive Preferred Securities Certificates shall have been
issued to Owners pursuant to Section 513, the Trustees shall give all such
notices and
4.5-18
<PAGE> 23
communications specified herein to be given to Owners to the Clearing Agency,
and shall have no obligations to the Owners.
SECTION 513. DEFINITIVE PREFERRED SECURITIES CERTIFICATES. If (a)
the Depositor advises the Trustees in writing that the Clearing Agency is no
longer willing or able to properly discharge its responsibilities with respect
to the Preferred Securities Certificates, and the Depositor is unable to locate
a qualified successor, (b) the Depositor at its option advises the Trustees in
writing that it elects to terminate the book-entry system through the Clearing
Agency, or (c) after the occurrence of a Debenture Event of Default, Owners of
Preferred Securities Certificates representing beneficial interests aggregating
at least a majority of the Liquidation Amount advise the Property Trustee in
writing that the continuation of a book-entry system through the Clearing
Agency is no longer in the best interests of the Owners of Preferred Securities
Certificates, then the Property Trustee shall notify the Clearing Agency, and
the Clearing Agency shall notify all Owners of Preferred Securities
Certificates, of the occurrence of any such event and of the availability of
the Definitive Preferred Securities Certificates to Owners of such class or
classes, as applicable, requesting the same. Upon surrender to the Property
Trustee of the typewritten Preferred Securities Certificate or Certificates
representing the Book-Entry Preferred Securities Certificates by the Clearing
Agency, accompanied by registration instructions, the Administrative Trustees,
or any one of them, shall execute the Definitive Preferred Securities
Certificates in accordance with the instructions of the Clearing Agency.
Neither the Securities Registrar nor the Trustees shall be liable for any delay
in delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Preferred Securities Certificates, the Trustees shall recognize the Holders of
the Definitive Preferred Securities Certificates as Securityholders. The
Definitive Preferred Securities Certificates shall be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrative Trustees, as evidenced by the execution thereof by the
Administrative Trustees or any one of them.
SECTION 514. RIGHTS OF SECURITYHOLDERS.
(a) The legal title to the Trust Property is vested exclusively in
the Property Trustee (in its capacity as such) in accordance with Section 209,
and the Securityholders shall not have any right or title therein other than
the undivided beneficial interest in the assets of the Trust conferred by their
Trust Securities and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust
Securities shall have no preemptive or similar rights. When issued and
delivered to Holders of the Preferred Securities against payment of the
purchase price therefor, the Preferred Securities will be fully paid and
nonassessable interests in the Trust. The Holders of the Preferred Securities,
in their capacities as such, shall be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware.
(b) For so long as any Preferred Securities remain Outstanding,
if, upon a Debenture Event of Default, the Debenture Trustee fails or the
holders of not less than 25% in principal amount of the outstanding Junior
Subordinated Debentures fail to declare the principal of all of the Junior
Subordinated Debentures to be immediately due and payable, the Holders of at
least 25% in Liquidation Amount of the Preferred Securities then Outstanding
shall have such right by a notice in writing to the Depositor and the Debenture
Trustee; and upon any such declaration such principal amount of and the accrued
interest on all of the Junior Subordinated Debentures shall become immediately
due and payable, provided that the payment of principal and interest on such
Junior Subordinated Debentures shall remain subordinated to the extent provided
in the Indenture. If, as a result of a Debenture Event of Default, the
Debenture Trustee or the holders of not less than 25% in aggregate outstanding
principal amount of the Junior Subordinated Debentures have declared the Junior
Subordinated Debentures due and payable and if such default has been cured and
a sum sufficient to pay all matured installments due (otherwise than by
acceleration) under the Junior Subordinated Debentures has been deposited with
the Debenture Trustee, then (if the holders of not less than a majority in
aggregate outstanding principal amount of Junior Subordinated Debentures have
not annulled such declaration and waived such default) the Holders of a
majority in aggregate Liquidation Amount of the Preferred
4.5-19
<PAGE> 24
Securities may annul such declaration and waive such default.
(c) For so long as any Preferred Securities remain outstanding,
upon a Debenture Event of Default arising from the failure to pay interest or
principal on the Junior Subordinated Debentures, the Holders of any Preferred
Securities then Outstanding shall, to the fullest extent permitted by law, have
the right to directly institute proceedings for enforcement of payment to such
Holders of principal of or interest on the Junior Subordinated Debentures
having a principal amount equal to the Liquidation Amount of the Preferred
Securities of such Holders.
ARTICLE VI.
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 601. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section, in Sections 514, 810 and
1002 and in the Indenture and as otherwise required by law, no Holder of
Preferred Securities shall have any right to vote or in any manner otherwise
control the administration, operation and management of the Trust or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Trust Securities Certificates, be construed so as
to constitute the Securityholders from time to time as partners or members of
an association.
(b) So long as any Junior Subordinated Debentures are held by the
Property Trustee, the Trustees shall not (i) direct the time, method and place
of conducting any proceeding for any remedy available to the Debenture Trustee,
or executing any trust or power conferred on the Debenture Trustee with respect
to such Junior Subordinated Debentures, (ii) waive any past default which is
waivable under Article Seven of the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Junior
Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, where such consent shall be required, without, in each
case, obtaining the prior approval of the Holders of at least a majority in
Liquidation Amount of all Outstanding Preferred Securities; provided, however,
that where a consent under the Indenture would require the consent of each
holder of outstanding Junior Subordinated Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior written
consent of each Holder of Preferred Securities. The Trustees shall not revoke
any action previously authorized or approved by a vote of the Holders of the
Outstanding Preferred Securities, except by a subsequent vote of the Holders of
the Outstanding Preferred Securities. The Property Trustee shall notify each
Holder of the Outstanding Preferred Securities of any notice of default
received from the Debenture Trustee with respect to the Junior Subordinated
Debentures. In addition to obtaining the foregoing approvals of the Holders of
the Preferred Securities, prior to taking any of the foregoing actions, the
Trustees shall, at the expense of the Depositor, obtain an Opinion of Counsel
experienced in such matters to the effect that the Trust will continue to be
classified as a grantor trust and not as an association taxable as a
corporation for United States federal income tax purposes on account of such
action.
(c) If any proposed amendment to the Trust Agreement provides for,
or the Trustees otherwise propose to effect, (i) any action that would
adversely affect in any material respect the powers, preferences or special
rights of the Preferred Securities, whether by way of amendment to the Trust
Agreement or otherwise, or (ii) the dissolution, winding-up or termination of
the Trust, other than pursuant to the terms of this Trust Agreement, then the
Holders of Outstanding Preferred Securities as a class will be entitled to vote
on such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of the Holders of at least a majority in
Liquidation Amount of the Outstanding Preferred Securities. No amendment to
this Trust Agreement may be made if, as a result of such amendment, the Trust
would cease to be classified as a grantor trust or would be classified as an
association taxable as a corporation for United States federal income tax
purposes.
SECTION 602. NOTICE OF MEETINGS. Notice of all meetings of the
Holders of Preferred Securities, stating the time, place and purpose of the
meeting, shall be given by the Property Trustee pursuant to Section 1008
4.5-20
<PAGE> 25
to each Holder of Preferred Securities of record, at such Securityholder's
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be
so considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
SECTION 603. MEETINGS OF HOLDERS OF PREFERRED SECURITIES. No annual
meeting of Securityholders is required to be held. The Administrative
Trustees, however, shall call a meeting of Securityholders to vote on any
matter upon the written request of the Holders of 25% of the Outstanding
Preferred Securities (based upon their aggregate Liquidation Amount) and the
Administrative Trustees or the Property Trustee may, at any time in their
discretion, call a meeting of Holders of the Preferred Securities to vote on
any matters as to which the Holders of the Preferred Securities are entitled to
vote.
Holders of record of 50% of the Outstanding Preferred Securities
(based upon their aggregate Liquidation Amount), present in person or by proxy,
shall constitute a quorum at any meeting of such Securityholders.
If a quorum is present at a meeting, an affirmative vote by the
Holders of record present, in person or by proxy, holding more than a majority
of the Preferred Securities (based upon their aggregate Liquidation Amount)
held by the Holders of Preferred Securities of record present, either in person
or by proxy, at such meeting shall constitute the action of the Holders of the
Preferred Securities, unless this Trust Agreement requires a greater number of
affirmative votes.
SECTION 604. VOTING RIGHTS. Securityholders shall be entitled to one
vote for each $10 of Liquidation Amount represented by their Trust Securities
in respect of any matter as to which such Securityholders are entitled to vote.
SECTION 605. PROXIES, ETC. At any meeting of Securityholders, any
Securityholder entitled to vote thereat may vote by proxy, provided that no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Administrative Trustees, or with such other officer or agent of the
Trust as the Administrative Trustees may direct, for verification prior to the
time at which such vote shall be taken. When Trust Securities are held jointly
by several persons, any one of them may vote at any meeting in person or by
proxy in respect of such Trust Securities, but if more than one of them shall
be present at such meeting in person or by proxy, and such joint owners or
their proxies so present disagree as to any vote to be cast, such vote shall
not be received in respect of such Trust Securities. A proxy purporting to be
executed by or on behalf of a Securityholder shall be deemed valid unless
challenged at or prior to its exercise, and, the burden of proving invalidity
shall rest on the challenger. No proxy shall be valid more than three years
after its date of execution.
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT. Any action
which may be taken by Securityholders at a meeting may be taken without a
meeting if Securityholders holding more than a majority of all Outstanding
Trust Securities (based upon their aggregate Liquidation Amount) entitled to
vote in respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent to the
action in writing (based upon their aggregate Liquidation Amount).
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES. For the
purposes of determining the Securityholders who are entitled to notice of and
to vote at any meeting or by written consent, or to participate in any
distribution on the Trust Securities in respect of which a record date is not
otherwise provided for in this Trust Agreement, or for the purpose of any other
action, the Administrative Trustees may from time to time fix a date, not more
than 90 days prior to the date of any meeting of Securityholders or the payment
of any distribution or other action, as the case may be, as a record date for
the determination of the identity of the Securityholders of record for such
purposes.
SECTION 608. ACTS OF SECURITYHOLDERS. Any request, demand,
authorization, direction, notice,
4.5-21
<PAGE> 26
consent, waiver or other action provided or permitted by this Trust Agreement
to be given, made or taken by Securityholders or Owners may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Securityholders or Owners in person or by an agent duly appointed in
writing; and, except as otherwise expressly provided herein, such action shall
become effective when such instrument or instruments are delivered to an
Administrative Trustee. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Securityholders or Owners signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Trust Agreement and (subject
to Section 801) conclusive in favor of the Trustees, if made in the manner
provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him or her the execution thereof.
Where such execution is by a signer acting in a capacity other than such
signer's individual capacity, such certificate or affidavit shall also
constitute sufficient proof of such signer's authority. The fact and date of
the execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which any Trustee
receiving the same deems sufficient.
The ownership of Preferred Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every
future Securityholder of the same Trust Security and the Securityholder of
every Trust Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustees or the Trust in reliance thereon, whether
or not notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do
so with regard to all or any part of the Liquidation Amount of such Trust
Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any part of such Liquidation
Amount.
A Holder of Preferred Securities may institute a legal proceeding
directly against the Depositor under the Guarantee to enforce its rights under
the Guarantee without first instituting a legal proceeding against the
Guarantee Trustee (as defined in the Guarantee), the Trust or any Person.
SECTION 609. INSPECTION OF RECORDS. Upon reasonable notice to the
Administrative Trustees and the Property Trustee, the records of the Trust
shall be open to inspection by Securityholders during normal business hours for
any purpose reasonably related to such Securityholder's interest as a
Securityholder.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND THE PROPERTY
TRUSTEE. The Bank, in its separate corporate capacity and as Property Trustee,
as of the date hereof, and each successor Property Trustee at the time of the
successor Property Trustee's acceptance of its appointment as Property Trustee
hereunder (the term "Bank" being used hereafter in this Article VII to refer to
such successor Property Trustee in its separate corporate capacity and as
Property Trustee), hereby represents and warrants (as applicable) for the
benefit of the Depositor and the Securityholders that:
(a) the Bank is a Delaware banking corporation duly organized,
validly existing and in good standing
4.5-22
<PAGE> 27
under the laws of the State of Delaware;
(b) the Bank has full corporate power, authority and legal right
to execute, deliver and perform its obligations under this Trust Agreement and
has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Bank and constitutes the valid and legally binding agreement
of the Bank enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles;
(d) the execution, delivery and performance by the Bank of this
Trust Agreement has been duly authorized by all necessary corporate or other
action on the part of the Bank and does not require any approval of the
stockholders of the Bank and such execution, delivery and performance will not
(i) violate the Bank's charter or by-laws, (ii) violate any provision of, or
constitute, with or without notice or lapse of time, a default under, or result
in the creation or imposition of, any Lien on any properties included in the
Trust Property pursuant to the provisions of, any indenture, mortgage, credit
agreement, license or other agreement or instrument to which the Bank is a
party or by which it is bound, or (iii) violate any law, governmental rule or
regulation of the United States or the State of Delaware, as the case may be,
governing the banking or trust powers of the Bank, or any order, judgment or
decree applicable to the Bank;
(e) neither the authorization, execution or delivery by the Bank
of this Trust Agreement nor the consummation of any of the transactions by the
Bank contemplated herein or therein requires the consent or approval of, the
giving of notice to, the registration with or the taking of any other action
with respect to, any governmental authority or agency under any existing law of
the State of Delaware governing the banking or trust powers of the Bank; and
(f) there are no proceedings pending or, to the best of the Bank's
knowledge, threatened against or affecting the Bank in any court or before any
governmental authority, agency or arbitration board or tribunal which,
individually or in the aggregate, would materially and adversely affect the
Trust or would question the right, power and authority of the Bank to enter
into or perform its obligations as one of the Trustees under this Trust
Agreement.
SECTION 702. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE BANK AND
THE DELAWARE TRUSTEE. The Delaware Bank in its corporate capacity and as
Delaware Trustee, as of the date hereof, and each successor Delaware Trustee at
the time of the successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee hereunder (the term "Delaware Bank" being used hereafter in
this Article VIII to refer to such successor Delaware Trustee in its separate
corporate capacity and as Delaware Trustee), hereby represents and warrants (as
applicable) for the benefit of the Depositor and the Securityholders that:
(a) the Delaware Bank is a Delaware banking corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware;
(b) the Delaware Bank has full corporate power, authority and
legal right to execute, deliver and perform its obligations under this Trust
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Delaware Bank and constitutes the valid and legally binding
agreement of the Delaware Bank enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
4.5-23
<PAGE> 28
(d) the execution, delivery and performance by the Delaware Bank
of this Trust Agreement has been duly authorized by all necessary corporate or
other action on the part of the Delaware Bank and does not require any approval
of the stockholders of the Delaware Bank and such execution, delivery and
performance will not (i) violate the Delaware Bank's charter or by-laws, (ii)
violate any provision of, or constitute, with or without notice or lapse of
time, a default under, or result in the creation or imposition of, any Lien on
any properties included in the Trust Property pursuant to the provisions of,
any indenture, mortgage, credit agreement, license or other agreement or
instrument to which the Delaware Bank is a party or by which it is bound, or
(iii) violate any law, governmental rule or regulation of the United States or
the State of Delaware, as the case may be, governing the banking or trust
powers of the Delaware Bank, or any order, judgment or decree applicable to the
Delaware Bank;
(e) neither the authorization, execution or delivery by the
Delaware Bank of this Trust Agreement nor the consummation of any of the
transactions by the Delaware Bank contemplated herein or therein requires the
consent or approval of, the giving of notice to, the registration with or the
taking of any other action with respect to, any governmental authority or
agency under any existing law of the State of Delaware governing the banking or
trust powers of the Delaware Bank; and
(f) there are no proceedings pending or, to the best of the
Delaware Bank's knowledge, threatened against or affecting the Delaware Bank in
any court or before any governmental authority, agency or arbitration board or
tribunal which, individually or in the aggregate, would materially and
adversely affect the Trust or would question the right, power and authority of
the Delaware Bank to enter into or perform its obligations as one of the
Trustees under this Trust Agreement.
SECTION 703. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR. The
Depositor hereby represents and warrants for the benefit of the Securityholders
that:
(a) the Trust Securities Certificates issued on the Closing Date
on behalf of the Trust have been duly authorized and will have been duly and
validly executed, issued and delivered by the Administrative Trustees pursuant
to the terms and provisions of, and in accordance with the requirements of,
this Trust Agreement and the Securityholders will be, as of such date, entitled
to the benefits of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable
by the Trust (or the Trustees on behalf of the Trust) under the laws of the
State of Delaware or any political subdivision thereof in connection with the
execution, delivery and performance by the Bank, the Property Trustee, the
Delaware Bank or the Delaware Trustee, as the case may be, of this Trust
Agreement.
ARTICLE VIII.
THE TRUSTEES
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Trust Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. No Administrative Trustee nor the Delaware Trustee shall be liable for
such Trustee's acts or omissions hereunder except as a result of such Trustee's
own gross negligence or willful misconduct. The Property Trustee's liability
shall be determined under the Trust Indenture Act. Whether or not therein
expressly so provided, every provision of this Trust Agreement relating to the
conduct or affecting the liability of or affording protection to the Trustees
shall be subject to the provisions of this Section. To the extent that,
4.5-24
<PAGE> 29
at law or in equity, the Delaware Trustee or an Administrative Trustee has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to the Securityholders, the Delaware Trustee or such Administrative
Trustee shall not be liable to the Trust or to any Securityholder for such
Trustee's good faith reliance on the provisions of this Trust Agreement. The
provisions of this Trust Agreement, to the extent that they restrict the duties
and liabilities of the Delaware Trustee or the Administrative Trustees
otherwise existing at law or in equity, are agreed by the Depositor and the
Securityholders to replace such other duties and liabilities of the Delaware
Trustee and the Administrative Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and
proceeds from the Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to enable the Property
Trustee or a Paying Agent to make payments in accordance with the terms hereof.
Each Securityholder, by such Securityholder's acceptance of a Trust Security,
agrees that such Securityholder will look solely to the revenue and proceeds
from the Trust Property to the extent legally available for distribution to
such Securityholder as herein provided and that the Trustees are not personally
liable to such Securityholder for any amount distributable in respect of any
Trust Security or for any other liability in respect of any Trust Security.
This Section 801(b) does not limit the liability of the Trustees expressly set
forth elsewhere in this Trust Agreement or, in the case of the Property
Trustee, in the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any
error of judgment made in good faith by an authorized officer of the
Property Trustee, unless it shall be proved that the Property Trustee
was negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
majority in Liquidation Amount of the Trust Securities relating to the
time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Junior
Subordinated Debentures and the Payment Account shall be to deal with
such Property in a similar manner as the Property Trustee deals with
similar property for its own account, subject to the protections and
limitations on liability afforded to the Property Trustee under this
Trust Agreement and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
with the Depositor and money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the
Payment Account maintained by the Property Trustee pursuant to Section
301 and except to the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Depositor with their respective duties under this Trust Agreement, nor
shall the Property Trustee be liable for the negligence, default or
misconduct of the Administrative Trustees or the Depositor.
SECTION 802. CERTAIN NOTICES.
(a) Within five Business Days after the occurrence of any Event of
Default actually known to the Property Trustee, the Property Trustee shall
transmit, in the manner and to the extent provided in Section 1008, notice
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<PAGE> 30
of such Event of Default to the Securityholders, the Administrative Trustees
and the Depositor, unless such Event of Default shall have been cured or
waived. For purposes of this Section the term "Event of Default" means any
event that is, or after notice or lapse of time or both would become, an Event
of Default.
(b) The Administrative Trustees shall transmit, to the
Securityholders in the manner and to the extent provided in Section 1008,
notice of the Depositor's election to begin or further extend an Extension
Period on the Junior Subordinated Debentures (unless such election shall have
been revoked) within the time specified for transmitting such notice to the
holders of the Junior Subordinated Debentures pursuant to the Indenture as
originally executed.
(c) In the event the Depositor elects to accelerate the Maturity
Date in accordance with Section 2.2 of the Indenture, the Property Trustee
shall give notice to each Holder of Trust Securities of the acceleration of the
Maturity Date and the Accelerated Maturity Date not later than five Business
Days after the Property Trustee receives the notice provided in Section 2.2(c)
of the Indenture.
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE. Subject to the
provisions of Section 801:
(a) the Property Trustee may rely and shall be protected in acting
or refraining from acting in good faith upon any resolution, Opinion of
Counsel, certificate, written representation of a Holder or transferee,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action or
(ii) in construing any of the provisions of this Trust Agreement the Property
Trustee finds the same ambiguous or inconsistent with other provisions
contained herein or (iii) the Property Trustee is unsure of the application of
any provision of this Trust Agreement, then, except as to any matter as to
which the Holders of the Preferred Securities are entitled to vote under the
terms of this Trust Agreement, the Property Trustee shall deliver a notice to
the Depositor requesting written instructions of the Depositor as to the course
of action to be taken and the Property Trustee shall take such action, or
refrain from taking such action, as the Property Trustee shall be instructed in
writing to take, or to refrain from taking, by the Depositor; provided,
however, that if the Property Trustee does not receive such instructions of the
Depositor within 10 Business Days after it has delivered such notice, or such
reasonably shorter period of time set forth in such notice (which to the extent
practicable shall not be less than two Business Days), it may, but shall be
under no duty to, take or refrain from taking such action not inconsistent with
this Trust Agreement as it shall deem advisable and in the best interests of
the Securityholders, in which event the Property Trustee shall have no
liability except for its own bad faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced
by an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence
of bad faith on its part, request and conclusively rely upon an Officer's
Certificate which, upon receipt of such request, shall be promptly delivered by
the Depositor or the Administrative Trustees;
(e) the Property Trustee shall have no duty 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 reregistration thereof;
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(f) the Property Trustee may consult with counsel of its choice
and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon and in accordance with such advice (such
counsel may be counsel to the Depositor 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 Trust Agreement
from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Trust Agreement at the request
or direction of any of the Securityholders pursuant to this Trust Agreement,
unless such Securityholders shall have offered to the Property Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other
paper or document, unless requested in writing to do so by one or more
Securityholders, but the Property Trustee may make such further inquiry or
investigation into such facts or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys, provided that the Property Trustee shall be responsible
for its own negligence or recklessness with respect to selection of any agent
or attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with respect
to enforcing any remedy or right or taking any other action hereunder, the
Property Trustee (i) may request instructions from the Holders of the Trust
Securities which instructions may only be given by the Holders of the same
proportion in Liquidation Amount of the Trust Securities as would be entitled
to direct the Property Trustee under the terms of the Trust Securities in
respect of such remedy, right or action, (ii) may refrain from enforcing such
remedy or right or taking such other action until such instructions are
received, and (iii) shall be protected in acting in accordance with such
instructions; and
(k) except as otherwise expressly provided by this Trust
Agreement, the Property Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Trust Agreement. No
provision of this Trust Agreement shall be deemed to impose any duty or
obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Trust Securities Certificates shall be
taken as the statements of the Trust, and the Trustees do not assume any
responsibility for their correctness. The Trustees (as such) shall not be
accountable for the use or application by the Depositor of the proceeds of the
Junior Subordinated Debentures.
SECTION 805. MAY HOLD SECURITIES. Any Trustee or any other agent of
any Trustee or the Trust, in its individual or any other capacity, may become
the owner or pledgee of Trust Securities and, subject to Sections 808 and 813
and except as provided in the definition of the term "Outstanding" in Article
I, may otherwise deal with the Trust with the same rights it would have if it
were not a Trustee or such other agent.
SECTION 806. COMPENSATION; INDEMNITY; FEES. The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable
compensation for all services rendered by them
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hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse
the Trustees upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any provision of
this Trust Agreement (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to such Trustee's negligence,
bad faith or willful misconduct (or, in the case of the Administrative Trustees
or the Delaware Trustee, any such expense, disbursement or advance as may be
attributable to its, his or her gross negligence, bad faith or willful
misconduct); and
(c) to indemnify each of the Trustees or any predecessor Trustee
for, and to hold the Trustees harmless against, any loss, damage, claim,
liability, penalty or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
this Trust Agreement, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder, except any such cost or expense as
may be attributable to such Trustee's negligence, bad faith or willful
misconduct (or, in the case of the Administrative Trustees or the Delaware
Trustee, any such cost or expense as may be attributable to its, his or her
gross negligence, bad faith or willful misconduct).
No Trustee may claim any Lien on any Trust Property as a result of any
amount due pursuant to this Section 806.
SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF
TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that
is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If any such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of its supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Property Trustee with
respect to the Trust Securities shall cease to be eligible in accordance with
the provisions of this Section, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article.
(b) There shall at all times be one or more Administrative
Trustees hereunder with respect to the Trust Securities. Each Administrative
Trustee shall be either a natural person who is at least 21 years of age or a
legal entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to
the Trust Securities. The Delaware Trustee shall either be (i) a natural
person who is at least 21 years of age and a resident of the State of Delaware
or (ii) a legal entity with its principal place of business in the State of
Delaware and that otherwise meets the requirements of applicable Delaware law
that shall act through one or more persons authorized to bind such entity.
SECTION 808. CONFLICTING INTERESTS. If the Property Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Property Trustee shall either eliminate such interest or resign, to
the extent and in the manner provided by, and subject to the provisions of, the
Trust Indenture Act and this Trust Agreement.
SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE. Unless an Event of
Default shall have occurred and be continuing, at any time or times, for the
purpose of meeting the legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the Trust Property may at the time be
located, the Depositor and the Administrative Trustees shall have power to
appoint, and upon the written request of the Property Trustee,
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the Depositor and the Administrative Trustees shall for such purpose join with
the Property Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to appoint, one or more Persons
approved by the Property Trustee either to act as co-trustee, jointly with the
Property Trustee, of all or any part of such Trust Property, or to the extent
required by law to act as separate trustee of any such property, in either case
with such powers as may be provided in the instrument of appointment, and to
vest in such Person or Persons in the capacity aforesaid, any property, title,
right or power deemed necessary or desirable, subject to the other provisions
of this Section. If the Depositor and the Administrative Trustees do not join
in such appointment within 15 days after the receipt by them of a request so to
do, or in case a Debenture Event of Default has occurred and is continuing, the
Property Trustee alone shall have power to make such appointment. Any
co-trustee or separate trustee appointed pursuant to this Section shall either
be (i) a natural person who is at least 21 years of age and a resident of the
United States or (ii) a legal entity with its principal place of business in
the United States that shall act through one or more persons authorized to bind
such entity.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged, and
delivered by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed and delivered and all
rights, powers, duties and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustees specified hereunder, shall be
exercised, solely by such Trustees and not by such co-trustee or separate
trustee.
(b) The rights, powers, duties and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by
the Property Trustee or by the Property Trustee and such co-trustee or separate
trustee jointly, as shall be provided in the instrument appointing such
co-trustee or separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the Property
Trustee shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and performed by
such co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept the
resignation of or remove any co-trustee or separate trustee appointed under
this Section, and, in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee shall have power to accept the resignation of,
or remove, any such co-trustee or separate trustee without the concurrence of
the Depositor. Upon the written request of the Property Trustee, the Depositor
shall join with the Property Trustee in the execution, delivery and performance
of all instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee so
resigned or removed may be appointed in the manner provided in this Section
809.
(d) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Property Trustee or
any other trustee hereunder.
(e) The Property Trustee shall not be liable by reason of any act
of a co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. No
resignation
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or removal of any Trustee (the "Relevant Trustee") and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 811.
Subject to the immediately preceding paragraph, the Relevant Trustee
may resign at any time with respect to the Trust Securities by giving written
notice thereof to the Securityholders. If the instrument of acceptance by the
successor Trustee required by Section 811 shall not have been delivered to the
Relevant Trustee within 30 days after the giving of such notice of resignation,
the Relevant Trustee may petition, at the expense of the Depositor, any court
of competent jurisdiction for the appointment of a successor Trustee with
respect to the Trust Securities.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Holder of the
Common Securities. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of the Preferred Securities, delivered to such Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee may
be removed by the Holder of the Common Securities at any time. In no event
will the Holders of the Preferred Securities have the right to vote to appoint,
remove or replace the Administrative Trustees.
If the Relevant Trustee shall resign, be removed or become incapable
of acting as Trustee, or if a vacancy shall occur in the office of such
Relevant Trustee for any cause, at a time when no Debenture Event of Default
shall have occurred and be continuing, the Holder of the Common Securities, by
Act of the Holder of the Common Securities delivered to the retiring Relevant
Trustee, shall promptly appoint a successor Trustee or Trustees with respect to
the Trust Securities and the Trust, and the successor Trustee shall comply with
the applicable requirements of Section 811. If the Property Trustee or the
Delaware Trustee shall resign, be removed or become incapable of continuing to
act as the Property Trustee or the Delaware Trustee, as the case may be, at a
time when a Debenture Event of Default shall have occurred and is continuing,
the Holders of the Preferred Securities by Act of the Holders of a majority in
Liquidation Amount of the Preferred Securities then Outstanding delivered to
the retiring Relevant Trustee, shall promptly appoint a successor Trustee or
Trustees with respect to the Trust Securities and the Trust, and such successor
Trustee shall comply with the applicable requirements of Section 811. If an
Administrative Trustee shall resign, be removed or become incapable of acting
as Administrative Trustee, at a time when a Debenture Event of Default shall
have occurred and be continuing, the Holder of the Common Securities, by Act of
the Holder of the Common Securities delivered to an Administrative Trustee,
shall promptly appoint a successor Administrative Trustee or Administrative
Trustees with respect to the Trust Securities and the Trust, and such successor
Administrative Trustee or Administrative Trustees shall comply with the
applicable requirements of Section 811. If no successor Trustee with respect
to the Trust Securities shall have been so appointed by the Holder of the
Common Securities or the Holders of the Preferred Securities and accepted
appointment in the manner required by Section 811, any Securityholder who has
been a Securityholder for at least six months may, on behalf of such
Securityholder and all others similarly situated, petition a court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Trust Securities.
The Property Trustee shall give notice of each resignation and each
removal of a Relevant Trustee and each appointment of a successor Trustee to
all Securityholders in the manner provided in Section 1008 and shall give
notice to the Depositor. Each notice shall include the name of the successor
Trustee and the address of its Corporate Trust office if it is the Property
Trustee.
Subject to the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes, in the opinion of the Depositor, incompetent
or incapacitated, the vacancy created by such death, incompetence or incapacity
may be filled by (a) the unanimous act of remaining Administrative Trustees if
there are at least two of them or (b) otherwise by the Depositor (with the
successor in each case being a Person who satisfies the eligibility requirement
for Administrative Trustees or the Delaware Trustee, as the case may be, set
forth in Section 807).
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SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. In case of the
appointment hereunder of a successor Trustee with respect to the Trust
Securities and the Trust, the retiring Relevant Trustee and each successor
Trustee with respect to the Trust Securities shall execute and deliver an
instrument hereto wherein each successor Trustee shall accept such appointment
and which shall contain such provisions as shall be necessary or desirable to
transfer and confirm to, and to vest in, each successor Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust, and upon the execution and delivery of such
instrument, the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee with
respect to the Trust Securities and the Trust; but, on request of the Trust or
any successor Trustee such retiring Relevant Trustee shall duly assign,
transfer and deliver to such successor Trustee all Trust Property, all proceeds
thereof and money held by such retiring Relevant Trustee hereunder with respect
to the Trust Securities and the Trust.
Upon request of any such successor Trustee, the Trust shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in the
immediately preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS. Any Person into which the Property Trustee, the Delaware Trustee or
any Administrative Trustee that is not a natural person may be merged or
converted or with which it may be consolidated, or any Person resulting from
any merger, conversion or consolidation to which such Relevant Trustee shall be
a party, or any corporation succeeding to all or substantially all the
corporate trust business of such Relevant Trustee, shall be the successor of
such Relevant Trustee hereunder, provided such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR
TRUST. If and when the Property Trustee or the Delaware Trustee shall be or
become a creditor of the Depositor or the Trust (or any other obligor upon the
Junior Subordinated Debentures or the Trust Securities), the Property Trustee
or the Delaware Trustee, as the case may be, shall be subject to and shall take
all actions necessary in order to comply with the provisions of the Trust
Indenture Act regarding the collection of claims against the Depositor or Trust
(or any such other obligor).
SECTION 814. REPORTS BY PROPERTY TRUSTEE.
(a) Not later than January 31 of each year commencing with January
31, 1999, the Property Trustee shall transmit to all Securityholders in
accordance with Section 1008, and to the Depositor, a brief report dated as of
the preceding December 31 with respect to:
(i) its eligibility under Section 807 or, in lieu
thereof, if to the best of its knowledge it has continued to be
eligible under said Section, a written statement to such effect; and
(ii) any change in the property and funds in its
possession as Property Trustee since the date of its last report and
any action taken by the Property Trustee in the performance of its
duties hereunder which it has not previously reported and which in its
opinion materially affects the Trust Securities.
(b) In addition the Property Trustee shall transmit to
Securityholders such reports concerning the Property Trustee and its actions
under this Trust Agreement as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant thereto.
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(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with each national
securities exchange or other organization upon which the Trust Securities may
be listed, with the Commission and with the Depositor.
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE. The Depositor and the
Administrative Trustees on behalf of the Trust shall provide to the Property
Trustee such documents, reports and information as required by Section 314 of
the Trust Indenture Act (if any) and the compliance certificate required by
Section 314(a) of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each
of the Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with the conditions
precedent, if any, provided for in this Trust Agreement that relate to any of
the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) of the Trust Indenture Act shall be given in the form of an Officers'
Certificate.
SECTION 817. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five, provided that the Holder
of the Common Securities by written instrument may increase or decrease the
number of Administrative Trustees. The Property Trustee and the Delaware
Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the
number of Administrative Trustees is not reduced pursuant to Section 817(a), or
if the number of Trustees is increased pursuant to Section 817(a), a vacancy
shall occur. The vacancy shall be filled with a Trustee appointed in
accordance with Section 810.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul the Trust. Whenever a vacancy in the number of Administrative
Trustees shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 810, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Trust Agreement.
SECTION 818. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purpose of executing any documents
contemplated in Section 207(a)(i); and
(b) The Administrative Trustees shall have power to delegate from
time to time to such of their number or to the Depositor the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Administrative Trustees or otherwise as the Administrative
Trustees may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.
SECTION 819. VOTING. Except as otherwise provided in this Trust
Agreement, the consent or approval of the Administrative Trustees shall require
consent or approval by not less than a majority of the Administrative Trustees,
unless there are only two, in which case both must consent.
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ARTICLE IX.
TERMINATION, LIQUIDATION AND MERGER
SECTION 901. TERMINATION UPON EXPIRATION DATE. Unless earlier
dissolved, the Trust shall automatically dissolve on ____________________, 2029
(the "Expiration Date") subject to distribution of the Trust Property in
accordance with Section 904.
SECTION 902. EARLY TERMINATION. The first to occur of any of the
following events is an "Early Termination Event":
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b) delivery of written direction to the Property Trustee by the
Depositor at any time (which direction is wholly optional and within the
discretion of the Depositor) to dissolve the Trust and distribute the Junior
Subordinated Debentures to Securityholders in exchange for the Preferred
Securities in accordance with Section 904;
(c) the redemption of all of the Preferred Securities in
connection with the redemption of all of the Junior Subordinated Debentures;
and
(d) an order for dissolution of the Trust shall have been entered
by a court of competent jurisdiction.
SECTION 903. TERMINATION. The respective obligations and
responsibilities of the Trustees and the Trust created and continued hereby
shall terminate upon the latest to occur of the following: (a) the distribution
by the Property Trustee to Securityholders upon the liquidation of the Trust
pursuant to Section 904, or upon the redemption of all of the Trust Securities
pursuant to Section 402, of all amounts required to be distributed hereunder
upon the final payment of the Trust Securities; (b) the payment of any expenses
owed by the Trust; (c) the discharge of all administrative duties of the
Administrative Trustees, including the performance of any tax reporting
obligations with respect to the Trust or the Securityholders, and (d) the
filing of a certificate of cancellation by the Administrative Trustee under the
Delaware Business Trust Act.
SECTION 904. LIQUIDATION.
(a) If an Early Termination Event specified in clause (a), (b), or
(d) of Section 902 occurs or upon the Expiration Date, the Trust shall be
liquidated by the Trustees as expeditiously as the Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, to each Securityholder a Like Amount of
Junior Subordinated Debentures, subject to Section 904(d). Notice of
liquidation shall be given by the Property Trustee by first-class mail, postage
prepaid, mailed not later than 30 nor more than 60 days prior to the
Liquidation Date to each Holder of Trust Securities at such Holder's address
appearing in the Securities Register. All notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the
Trust Securities will no longer be deemed to be Outstanding and any
Trust Securities Certificates not surrendered for exchange will be
deemed to represent a Like Amount of Junior Subordinated Debentures;
and
(iii) provide such information with respect to the
mechanics by which Holders may exchange Trust Securities certificates
for Junior Subordinated Debentures, or if Section 904(d) applies
receive a Liquidation Distribution, as the Administrative Trustees or
the Property Trustee shall deem appropriate.
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(b) Except where Section 902(c) or 904(d) applies, in order to
effect the liquidation of the Trust and distribution of the Junior Subordinated
Debentures to Securityholders, the Property Trustee shall establish a record
date for such distribution (which shall be not more than 45 days prior to the
Liquidation Date) and, either itself acting as exchange agent or through the
appointment of a separate exchange agent, shall establish such procedures as it
shall deem appropriate to effect the distribution of Junior Subordinated
Debentures in exchange for the Outstanding Trust Securities Certificates.
(c) Except where Section 902(c) or 904(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates (or, at the election of the Depositor a Global
Subordinated Debenture, subject to the provisions of the Indenture)
representing a Like Amount of Junior Subordinated Debentures will be issued to
Holders of Trust Securities Certificates upon surrender of such certificates to
the Administrative Trustees or their agent for exchange, (iii) the Depositor
shall use its reasonable efforts to have the Junior Subordinated Debentures
listed on the Nasdaq National Market or on such other securities exchange or
other organization as the Preferred Securities may then be listed or traded,
(iv) any Trust Securities Certificates not so surrendered for exchange will be
deemed to represent a Like Amount of Junior Subordinated Debentures, accruing
interest at the rate provided for in the Junior Subordinated Debentures from
the last Distribution Date on which a Distribution was made on such Trust
Securities Certificates until such certificates are so surrendered (and until
such certificates are so surrendered, no payments of interest or principal will
be made to Holders of Trust Securities Certificates with respect to such Junior
Subordinated Debentures) and (v) all rights of Securityholders holding Trust
Securities will cease, except the right of such Securityholders to receive
Junior Subordinated Debentures upon surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of
this Section 904, whether because of an order for dissolution entered by a
court of competent jurisdiction or otherwise, distribution of the Junior
Subordinated Debentures in the manner provided herein is determined by the
Property Trustee not to be practical, the Trust Property shall be liquidated,
and the Trust shall be dissolved, wound-up or terminated, by the Property
Trustee in such manner as the Property Trustee determines. In such event, on
the date of the dissolution, winding-up or other termination of the Trust,
Securityholders will be entitled to receive out of the assets of the Trust
available for distribution to Securityholders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an amount
equal to the Liquidation Amount per Trust Security plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If, upon any such dissolution, winding-up or
termination, the Liquidation Distribution can be paid only in part because the
Trust has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then, subject to the next succeeding sentence, the
amounts payable by the Trust on the Trust Securities shall be paid on a pro
rata basis (based upon Liquidation Amounts). The Holder of the Common
Securities will be entitled to receive Liquidation Distributions upon any such
dissolution, winding-up or termination pro rata (determined as aforesaid) with
Holders of Preferred Securities, except that, if a Debenture Event of Default
has occurred and is continuing, the Preferred Securities shall have a priority
over the Common Securities.
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS
OF THE TRUST. The Trust may not merge with or into, consolidate, amalgamate,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except
pursuant to this Section 905. At the request of the Depositor, with the
consent of the Administrative Trustees and without the consent of the Holders
of the Preferred Securities, the Property Trustee or the Delaware Trustee, the
Trust may merge with or into, consolidate, amalgamate, be replaced by or
convey, transfer or lease its properties and assets substantially as an
entirety to a trust organized as such under the laws of any state; provided,
that (i) such successor entity either (a) expressly assumes all of the
obligations of the Trust with respect to the Preferred Securities or (b)
substitutes for the Preferred Securities other securities having substantially
the same terms as the Preferred Securities (the "Successor Securities") so long
as the Successor Securities rank the same as the Preferred Securities rank in
priority with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) the Depositor expressly appoints a trustee of
such successor entity possessing substantially the same powers and duties as
the Property
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<PAGE> 39
Trustee as the holder of the Junior Subordinated Debentures, (iii) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the Holders of
the Preferred Securities (including any Successor Securities) in any material
respect, (iv) such successor entity has a purpose identical to that of the
Trust, (v) the Successor Securities will be listed or traded on any national
securities exchange or other organization on which the Preferred Securities may
then be listed, (vi) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Depositor has received an
Opinion of Counsel experienced in such matters to the effect that (a) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not adversely affect the rights, preferences and privileges of the Holders
of the Preferred Securities (including any Successor Securities) in any
material respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such
successor entity will be required to register as an "investment company" under
the Investment Company Act and (vii) the Depositor owns all of the Common
Securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee. Notwithstanding the foregoing, the Trust shall not, except
with the consent of Holders of 100% in Liquidation Amount of the Preferred
Securities, consolidate, amalgamate, merge with or into, or be replaced by or
convey, transfer or lease its properties and assets substantially as an
entirety to any other Person or permit any other Person to consolidate,
amalgamate, merge with or into, or replace it, if such consolidation,
amalgamation, merger or replacement would cause the Trust or the successor
entity to be classified as other than a grantor trust for United States federal
income tax purposes.
ARTICLE X.
MISCELLANEOUS PROVISIONS
SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS. The death or
incapacity of any Person having an interest, beneficial or otherwise, in Trust
Securities shall not operate to terminate this Trust Agreement, nor entitle the
legal representatives or heirs of such Person, to claim an accounting, take any
action or bring any proceeding in any court for a partition or winding-up of
the arrangements contemplated hereby, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
SECTION 1002. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the
Trustees and the Depositor, without the consent of any Securityholders, (i) as
provided in Section 811 with respect to acceptance of appointment by a
successor Trustee, (ii) to cure any ambiguity, correct or supplement any
provision herein or therein which may be inconsistent with any other provision
herein or therein, or to make any other provisions with respect to matters or
questions arising under this Trust Agreement, that shall not be inconsistent
with the other provisions of this Trust Agreement, or (iii) to modify,
eliminate or add to any provisions of this Trust Agreement to such extent as
shall be necessary to ensure that the Trust will be classified for United
States federal income tax purposes as a grantor trust at all times that any
Trust Securities are Outstanding or to ensure that the Trust will not be
required to register as an "investment company" under the Investment Company
Act; provided, however, that in the case of clause (ii), such action shall not
adversely affect in any material respect the interests of any Securityholder,
and any amendments of this Trust Agreement shall become effective when notice
thereof is given to the Securityholders.
(b) Except as provided in Section 601(c) or Section 1002(c)
hereof, any provision of this Trust Agreement may be amended by the Trustees
and the Depositor (i) with the consent of Securityholders representing not less
than a majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding and (ii) upon receipt by the Trustees of an Opinion of Counsel to
the effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment 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 of an "investment company" under the Investment Company
Act.
4.5-35
<PAGE> 40
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 603 or 606 hereof), this
Trust Agreement may not be amended to (i) change the amount or timing of any
distribution on the Trust Securities or otherwise adversely affect the amount
of any distribution required to be made in respect of the Trust Securities as
of a specified date or (ii) restrict the right of a Securityholder to institute
suit for the enforcement of any such payment on or after such date;
notwithstanding any other provision herein, without the unanimous consent of
the Securityholders (such consent being obtained in accordance with Section 603
or 606 hereof), this paragraph (c) of this Section 1002 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement,
no Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an "investment company" under the Investment Company Act or to fail
or cease to be classified as a grantor trust for United States federal income
tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Depositor, this Trust Agreement may not be
amended in a manner which imposes any additional obligation on the Depositor.
(f) In the event that any amendment to this Trust Agreement is
made, the Administrative Trustees shall promptly provide to the Depositor a
copy of such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement which affects its
own rights, duties or immunities under this Trust Agreement. The Property
Trustee shall be entitled to receive an Opinion of Counsel and an Officers'
Certificate stating that any amendment to this Trust Agreement is in compliance
with this Trust Agreement.
SECTION 1003. SEPARABILITY. In case any provision in this Trust
Agreement or in the Trust Securities Certificates shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 1004. GOVERNING LAW. THIS TRUST AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH
RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE (WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES).
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY. If the date fixed
for any payment on any Trust Security shall be a day that is not a Business
Day, then such payment need not be made on such date but may be made on the
next succeeding day which is a Business Day (except as otherwise provided in
Sections 401(a) and 402(d)), with the same force and effect as though made on
the date fixed for such payment, and no Distribution shall accumulate thereon
for the period after such date.
SECTION 1006. SUCCESSORS. This Trust Agreement shall be binding upon
and shall inure to the benefit of any successor to the Depositor, the Trust or
the Relevant Trustee(s), including any successor by operation of law. Except
in connection with a consolidation, merger or sale involving the Depositor that
is permitted under Article Twelve of the Indenture and pursuant to which the
assignee agrees in writing to perform the Depositor's obligations hereunder,
the Depositor shall not assign its obligations hereunder.
SECTION 1007. HEADINGS. The Article and Section headings are for
convenience only and shall not affect the construction of this Trust Agreement.
4.5-36
<PAGE> 41
SECTION 1008. REPORTS, NOTICES AND DEMANDS. Any report, notice,
demand or other communication which by any provision of this Trust Agreement is
required or permitted to be given or served to or upon any Securityholder or
the Depositor may be given or served in writing by deposit thereof, first-class
postage prepaid, in the United States mail, hand delivery or facsimile
transmission, in each case, addressed, (a) in the case of a Holder of Preferred
Securities, to such Securityholder as such Securityholder's name and address
may appear on the Securities Register; and (b) in the case of the Holder of the
Common Securities or the Depositor, to MegaBank Financial Corporation, 8100
East Arapahoe Road, Englewood, Colorado 80112, Attention: Chief Executive
Officer; Facsimile No.: (303) 741-4473. Any notice to the Holders of the
Preferred Securities shall also be given to such Owners as have, within two
years preceding the giving of such notice, filed their names and addresses with
the Property Trustee for that purpose. Such notice, demand or other
communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee or the Administrative Trustees shall be given
in writing addressed (until another address is published by the Trust) as
follows: (a) with respect to the Property Trustee to Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration; (b) with respect to the Delaware
Trustee, to Wilmington Trust Company, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration; and (c) with respect to the Administrative Trustees, to them at
the address above for notices to the Depositor, marked "Attention:
Administrative Trustees of MB Capital I Trust." Such notice, demand or other
communication to or upon the Trust or the Property Trustee shall be deemed to
have been sufficiently given or made only upon actual receipt of the writing by
the Trust or the Property Trustee.
SECTION 1009. AGREEMENT NOT TO PETITION. Each of the Trustees and
the Depositor agree for the benefit of the Securityholders that, until at least
one year and one day after the Trust has been terminated in accordance with
Article IX, they shall not file, or join in the filing of, a petition against
the Trust under any bankruptcy, insolvency, reorganization or other similar law
(including, without limitation, the United States Bankruptcy Code)
(collectively, "Bankruptcy Laws") or otherwise join in the commencement of any
proceeding against the Trust under any Bankruptcy Law. In the event the
Depositor takes action in violation of this Section 1009, the Property Trustee
agrees, for the benefit of Securityholders, that at the expense of the
Depositor (which expense shall be paid prior to the filing), it shall file an
answer with the bankruptcy court or otherwise properly contest the filing of
such petition by the Depositor against the Trust or the commencement of such
action and raise the defense that the Depositor has agreed in writing not to
take such action and should be stopped and precluded therefrom. The provisions
of this Section 1009 shall survive the termination of this Trust Agreement.
SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall,
to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a
trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Trust
Agreement by any of the provisions of the Trust Indenture Act, such required
provision shall control. If any provision of this Trust Agreement modifies or
excludes any provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to this Trust Agreement
as so modified or to be excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Trust Securities as equity
securities representing undivided beneficial interests in the assets of the
Trust.
4.5-37
<PAGE> 42
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND
INDENTURE.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY
SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE
UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A
BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF
THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER
TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF
THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF
THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE
TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS.
MEGABANK FINANCIAL CORPORATION,
as Depositor
By:
------------------------------------------------
Thomas R. Kowalski, Chairman and
Chief Executive Officer
WILMINGTON TRUST COMPANY,
as Property Trustee
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
---------------------------------------------------
Thomas R. Kowalski, as Administrative Trustee
---------------------------------------------------
Susan A. Putland, as Administrative Trustee
---------------------------------------------------
,as Administrative Trustee
-------------------
4.5-38
<PAGE> 43
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER NUMBER OF SECURITIES
**1** 37,115
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
MB CAPITAL I
____% Common Securities
(liquidation amount $10 per Common Security)
MB CAPITAL I, a statutory business trust created under the laws of the
State of Delaware (the "Trust"), hereby certifies that MegaBank Financial
Corporation (the "Holder") is the registered owner of Thirty-Seven Thousand One
Hundred Fifteen (37,115) securities of the Trust representing undivided
beneficial interests in the assets of the Trust and designated the ____% Common
Securities (liquidation amount $10 per Common Security) (the "Common
Securities"). In accordance with Section 510 of the Trust Agreement (as defined
below), the Common Securities are not transferable and any attempted transfer
hereof shall be void. The designations, rights, privileges, restrictions,
preferences, and other terms and provisions of the Common Securities are set
forth in, and this certificate and the Common Securities represented hereby are
issued and shall in all respects be subject to the terms and provisions of, the
Amended and Restated Trust Agreement of the Trust dated as of _________________,
1998, as the same may be amended from time to time (the "Trust Agreement"),
including the designation of the terms of Common Securities as set forth
therein. The Trust will furnish a copy of the Trust Agreement to the Holder
without charge upon written request to the Trust at its principal place of
business or registered office. Upon receipt of this certificate, the Holder is
bound by the Trust Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust
has executed this certificate this ____ day of ______________, 1998.
MB CAPITAL I
By:
----------------------------------
Thomas R. Kowalski
Administrative Trustee
4.5C-1
<PAGE> 44
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT dated as of _________________, 1998, between MegaBank
Financial Corporation, a Colorado corporation (the "Company"), and MB Capital
I, a Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to, and receive ____% Junior Subordinated Debentures due 2028 (the
"Junior Subordinated Debentures") from, the Company and to issue and sell ____%
Cumulative Preferred Securities (the "Preferred Securities") with such powers,
preferences and special rights and restrictions as are set forth in the Amended
and Restated Trust Agreement of the Trust dated as of _________________, 1998,
as the same may be amended from time to time (the "Trust Agreement"); and
WHEREAS, the Company will directly or indirectly own all of the Common
Securities of the Trust and will issue the Junior Subordinated Debentures.
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase the Company hereby agrees shall benefit
the Company and which purchase the Company acknowledges will be made in
reliance upon the execution and delivery of this Agreement, the Company,
including in its capacity as holder of the Common Securities, and the Trust
hereby agree as follows:
ARTICLE I
SECTION 1.1. GUARANTEE BY THE COMPANY. Subject to the terms and
conditions hereof, the Company, including in its capacity as holder of the
Common Securities, hereby irrevocably and unconditionally guarantees to each
person or entity to whom the Trust is now or hereafter becomes indebted or
liable (the "Beneficiaries") the full payment, when and as due, of any and all
Obligations (as hereinafter defined) to such Beneficiaries. As used herein,
"Obligations" means any costs, expenses or liabilities of the Trust other than
obligations of the Trust to pay to holders of any Preferred Securities or other
similar interests in the Trust the amounts due such holders pursuant to the
terms of the Preferred Securities or such other similar interests, as the case
may be. This Agreement is intended to be for the benefit of, and to be
enforceable by, all such Beneficiaries, whether or not such Beneficiaries have
received notice hereof.
SECTION 1.2. TERM OF AGREEMENT. This Agreement shall terminate and be
of no further force and effect upon the later of (a) the date on which full
payment has been made of all amounts payable to all holders of all the
Preferred Securities (whether upon redemption, liquidation, exchange or
otherwise) and (b) the date on which there are no Beneficiaries remaining;
provided, however, that this Agreement shall continue to be effective or shall
be reinstated, as the case may be, if at any time any holder of Preferred
Securities or any Beneficiary must restore payment of any sums paid under the
Preferred Securities, under any Obligation, under the Preferred Securities
Guarantee Agreement dated the date hereof by the Company and Wilmington Trust
Company as guarantee trustee or under this Agreement, for any reason
whatsoever. This Agreement is continuing, irrevocable, unconditional and
absolute.
SECTION 1.3. WAIVER OF NOTICE. The Company hereby waives notice of
acceptance of this Agreement and of any Obligation to which it applies or may
apply, and the Company hereby waives presentment, demand for payment, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 1.4. NO IMPAIRMENT. The obligations, covenants, agreements
and duties of the Company under this Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
4.5D-1
<PAGE> 45
(a) the extension of time for the payment by the Trust of all or
any portion of the Obligations or for the performance of any other obligation
under, arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the part
of the Beneficiaries to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind;
or
(c) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Trust or any of the
assets of the Trust.
The Beneficiaries shall not be obligated to give notice to, or obtain
the consent of, the Company with respect to the happening of any of the
foregoing.
SECTION 1.5. ENFORCEMENT. A Beneficiary may enforce this Agreement
directly against the Company, and the Company waives any right or remedy to
require that any action be brought against the Trust or any other person or
entity before proceeding against the Company.
ARTICLE II
SECTION 2.1. BINDING EFFECT. All guarantees and agreements contained
in this Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the
Beneficiaries.
SECTION 2.2. AMENDMENT. So long as there remains any Beneficiary or
any Preferred Securities are outstanding, this Agreement shall not be modified
or amended in any manner adverse to such Beneficiary or to the holders of the
Preferred Securities.
SECTION 2.3. NOTICES. Any notice, request or other communication
required or permitted to be given hereunder shall be given in writing by
delivering the same by facsimile transmission (confirmed by mail), telex, or by
registered or certified mail, addressed as follows (and if so given, shall be
deemed given when mailed or upon receipt of an answer back, if sent by telex):
MB Capital I
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Facsimile No.: (302) 651-1576
Attention: Corporate Trust Administration
MegaBank Financial Corporation
8100 East Arapahoe Road
Englewood, Colorado 80112
Facsimile No.: (303) 741-4473
Attention: Chief Executive Officer
SECTION 2.4. GOVERNING LAW. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of Colorado
(without regard to conflict of laws principles).
4.5D-2
<PAGE> 46
THIS AGREEMENT is executed as of the day and year first above written.
MEGABANK FINANCIAL CORPORATION,
By:
-------------------------------------------
Thomas R. Kowalski, Chairman and
Chief Executive Officer
MB CAPITAL I
By:
-------------------------------------------
Susan A. Putland, Administrative Trustee
4.5D-3
<PAGE> 47
EXHIBIT E
This Preferred Security is a Book-Entry Preferred Securities
Certificate within the meaning of the Trust Agreement hereinafter referred to
and is registered in the name of The Depository Trust Company, a New York
corporation (the "Depositary") or a nominee of the Depositary. This Preferred
Security is exchangeable for Preferred Securities registered in the name of a
person other than the Depositary or its nominee only in the limited
circumstances described in the Trust Agreement (as defined below) and no
transfer of this Preferred Security (other than a transfer of this Preferred
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 Preferred Security is presented by an authorized
representative of the Depositary to MB Capital I or its agent for registration
of transfer, exchange or payment, and any Preferred Security issued is
registered in the name of Cede & Co., or such other name as requested by an
authorized representative of the Depositary (and any payment hereon is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of the Depositary), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co. has an interest herein.
Certificate Number Number of Preferred Securities
**1** 1,200,000
CUSIP NO.
-------------------
Certificate Evidencing Preferred Securities
of
MB Capital I
____% Cumulative Preferred Securities
(liquidation amount $10 per Preferred Security)
MB CAPITAL I, a statutory business trust created under the laws of the
State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the
"Holder") is the registered owner of One Million Two Hundred Thousand
(1,200,000) preferred securities of the Trust representing undivided beneficial
interests in the assets of the Trust and designated the ____% Cumulative
Preferred Securities (liquidation amount $10 per Preferred Security) (the
"Preferred Securities"). The Preferred Securities are transferable on the
books and records of the Trust, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form for
transfer as provided in Section 504 of the Trust Agreement (as defined below).
The designations, rights, privileges, restrictions, preferences, and other
terms and provisions of the Preferred Securities are set forth in, and this
certificate and the Preferred Securities represented hereby are issued and
shall in all respects be subject to the terms and provisions of, the Amended
and Restated Trust Agreement of the Trust dated as of _________________, 1998,
as the same may be amended from time to time (the "Trust Agreement"), including
the designation of the terms of Preferred Securities as set forth therein. The
Holder is entitled to the benefits of the Preferred Securities Guarantee
Agreement entered into by MegaBank Financial Corporation, a Colorado
corporation, and Wilmington Trust Company, as guarantee trustee, dated as of
_________________, 1998 (the "Guarantee"), to the extent provided therein. The
Trust will furnish a copy of the Trust Agreement and the Guarantee to the
Holder without charge upon written request to the Trust at its principal place
of business or registered office. Upon receipt of this certificate, the Holder
is bound by the Trust Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust
has executed this certificate this ____ day of __________________, 1998.
MB CAPITAL I
By:
----------------------------------
Thomas R. Kowalski,
Administrative Trustee
4.5E-1
<PAGE> 1
EXHIBIT 4.7
PREFERRED SECURITIES GUARANTEE AGREEMENT
MEGABANK FINANCIAL CORPORATION
AND
WILMINGTON TRUST COMPANY
DATED: _____________, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS AND INTERPRETATION 1
SECTION 1.1 Definitions and Interpretation 1
ARTICLE II - TRUST INDENTURE ACT 4
SECTION 2.1 Trust Indenture Act; Application 4
SECTION 2.2 Lists of Holders of Securities 4
SECTION 2.3 Reports by the Preferred Guarantee Trustee 4
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee 4
SECTION 2.5 Evidence of Compliance with Conditions Precedent 4
SECTION 2.6 Events of Default; Waiver 5
SECTION 2.7 Event of Default; Notice 5
SECTION 2.8 Conflicting Interests 5
ARTICLE III - POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE 5
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee 5
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee 6
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee 8
ARTICLE IV - PREFERRED GUARANTEE TRUSTEE 8
SECTION 4.1 Preferred Guarantee Trustee; Eligibility 8
SECTION 4.2 Appointment, Removal and Resignation of Preferred Guarantee Trustees 9
ARTICLE V - Guarantee 9
SECTION 5.1 Guarantee 9
SECTION 5.2 Waiver of Notice and Demand 9
SECTION 5.3 Obligations Not Affected 9
SECTION 5.4 Rights of Holders 10
</TABLE>
4.7-i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 5.5 Guarantee of Payment 10
SECTION 5.6 Subrogation 10
SECTION 5.7 Independent Obligations 11
ARTICLE VI - LIMITATION OF TRANSACTIONS; SUBORDINATION 11
SECTION 6.1 Limitation of Transactions 11
SECTION 6.2 Ranking 11
ARTICLE VII - TERMINATION 11
SECTION 7.1 Termination 11
ARTICLE VIII - INDEMNIFICATION 11
SECTION 8.1 Exculpation 11
SECTION 8.2 Indemnification 12
ARTICLE IX - MISCELLANEOUS 12
SECTION 9.1 Successors and Assigns 12
SECTION 9.2 Amendments 12
SECTION 9.3 Notices 12
SECTION 9.4 Benefit 13
SECTION 9.5 Governing Law 13
</TABLE>
4.7-ii
<PAGE> 4
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
Section of Trust Section of
Indenture Act of Guarantee
1939, as Amended Agreement
- - ---------------- ---------
<S> <C>
310(a) 4.1(a)
310(b) 4.1(c), 2.8
310(c) Inapplicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Inapplicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Inapplicable
314(c) 2.5
314(d) Inapplicable
314(e) 1.1, 2.5, 3.2
314(f) 2.1, 3.2
315(a) 3.1(d)
315(b) 2.7
315(c) 3.1
315(d) 3.1(d)
316(a) 1.1, 3.6, 5.4
316(b) 5.3
316(c) 8.2
317(a) Inapplicable
317(b) Inapplicable
318(a) 2.1(b)
318(b) 2.1
318(c) 2.1(a)
</TABLE>
4.7-iii
<PAGE> 5
PREFERRED SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated
as of ________________, 1998, is executed and delivered by MegaBank Financial
Corporation, a Colorado corporation (the "Guarantor"), and Wilmington Trust
Company, as trustee (the "Preferred Guarantee Trustee"), for the benefit of the
Holders (as defined herein) from time to time of the Preferred Securities (as
defined herein) of MB Capital I, a Delaware statutory business trust ("MB
Capital").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement") dated as of ________________, 1998 among the trustees of MB
Capital named therein, the Guarantor, as sponsor, and the holders from time to
time of undivided beneficial interests in the assets of MB Capital, MB Capital
is issuing on the date hereof 480,000 preferred securities, having an aggregate
liquidation amount of $12,000,000 designated the ____% Cumulative Preferred
Securities (the "Preferred Securities"); and
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS AND INTERPRETATION. In this Preferred
Securities Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Preferred Securities Guarantee
but not defined in the preamble above have the respective meanings assigned to
them in this Section 1.1;
(b) a term defined anywhere in this Preferred Securities Guarantee
has the same meaning throughout;
(c) all references to "the Preferred Securities Guarantee" or
"this Preferred Securities Guarantee" are to this Preferred Securities
Guarantee as modified, supplemented or amended from time to time;
(d) all references in this Preferred Securities Guarantee to
Articles and Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Preferred Securities Guarantee, unless otherwise defined in
this Preferred Securities Guarantee or unless the context otherwise requires;
and
(f) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than (a) a Saturday or Sunday, (b)
a day on which banking institutions in the State of Colorado are authorized or
required by law or executive order to remain closed, or (c) a day on which
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the Preferred Guarantee Trustee's Corporate Trust Office is closed for
business.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee
Trustee shall, at any particular time, be principally administered, which
office at the date of execution of this Agreement is located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attn:
Corporate Trust Administration.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debt" means with respect to any person, whether recourse is to all or
a portion of the assets of such person and whether or not contingent: (i) every
obligation of such person for money borrowed; (ii) every obligation of such
person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person; (iv) every obligation of such person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another person
and all dividends of another person the payment of which, in either case, such
person has guaranteed or for which such person is responsible or liable,
directly or indirectly, as obligor or otherwise.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent
not paid or made by MB Capital: (i) any accrued and unpaid Distributions (as
defined in the Trust Agreement) that are required to be paid on such Preferred
Securities to the extent MB Capital shall have funds available therefor, (ii)
the redemption price, including all accrued and unpaid Distributions to the
date of redemption (the "Redemption Price") to the extent MB Capital has funds
available therefor, with respect to any Preferred Securities called for
redemption by MB Capital, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of MB Capital (other than in connection
with the distribution of Junior Subordinated Debentures to the Holders in
exchange for Preferred Securities as provided in the Trust Agreement), the
lesser of (a) the aggregate of the liquidation amount and all accrued and
unpaid Distributions on the Preferred Securities to the date of payment, to the
extent MB Capital shall have funds available therefor, and (b) the amount of
assets of MB Capital remaining available for distribution to Holders in
liquidation of MB Capital (in either case, the "Liquidation Distribution").
"Holder" shall mean any holder, as registered on the books and records
of MB Capital of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.
"Indenture" means the Subordinated Indenture dated as of
________________, 1998, among the Guarantor (the "Debenture Issuer") and
Wilmington Trust Company, as trustee, and any indenture supplemental thereto
pursuant to which the Junior Subordinated Debentures are to be issued to the
Property Trustee (as defined in the Trust Agreement) of MB Capital.
"Junior Subordinated Debentures" means the series of junior
subordinated deferrable interest debt securities
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of the Guarantor designated the ____% Junior Subordinated Debentures due 2028
held by the Property Trustee of MB Capital.
"Majority in liquidation amount of the Preferred Securities" means,
except as provided by the Trust Indenture Act, a vote by Holders of Preferred
Securities, voting separately as a class, of more than 50% of the liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date
upon which the voting percentages are determined) of all Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definition relating
thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever
nature.
"Preferred Guarantee Trustee" means Wilmington Trust Company, until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust Office of the Preferred
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 Preferred 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 referred because of that
officer's knowledge of and familiarity with the particular subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.
"Senior and Subordinated Debt" means the principal of (and premium, if
any) and interest, if any (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Guarantor
whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt of the Guarantor, whether incurred on or prior to the date
of the Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is
provided that such obligations are not superior in right of payment to the
Preferred Securities Guarantee or to other Debt which is pari passu with, or
subordinated to, the Preferred Securities Guarantee; provided, however, that
Senior and Subordinated Debt shall not be deemed to include (i) any Debt of the
Guarantor which when incurred and without respect to any election under section
1111(b) of the
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<PAGE> 8
United States Bankruptcy Code of 1978, as amended, was without recourse to the
Guarantor, (ii) any Debt of the Guarantor to any of its subsidiaries, (iii) any
Debt to any employee of the Guarantor, (iv) any Debt which by its terms is
subordinated to trade accounts payable or accrued liabilities arising in the
ordinary course of business to the extent that payments made to the holders of
such Debt by the holders of the Junior Subordinated Debentures as a result of
the subordination provisions of the Indenture would be greater than they
otherwise would have been as a result of any obligation of such holders to pay
amounts over to the obligees on such trade accounts payable or accrued
liabilities arising in the ordinary course of business as a result of the
subordination provisions to which such Debt is subject, (v) the Junior
Subordinated Debentures, and (vi) any other debt securities issued pursuant to
the Indenture.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Preferred Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Preferred Securities Guarantee and shall, to the extent applicable, be governed
by such provisions; and
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) The Guarantor shall provide the Preferred Guarantee Trustee
with a list, in such form as the Preferred Guarantee Trustee may reasonably
require, of the names and addresses of the Holders of the Preferred Securities
("List of Holders") (i) on or before January 15 and July 15 of each year, 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 Preferred 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 Preferred Guarantee Trustee by the Guarantor. The Preferred Guarantee
Trustee may destroy any List of Holders previously given to it on receipt of a
new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
SECTION 2.3 REPORTS BY THE PREFERRED GUARANTEE TRUSTEE. On or before
July 15 of each year, the Preferred Guarantee Trustee shall provide to the
Holders of the Preferred Securities such reports as are required by Section 313
of the Trust Indenture Act, if any, in the form and in the manner provided by
Section 313 of the Trust Indenture Act. The Preferred Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE. The
Guarantor shall provide to the Preferred Guarantee Trustee such documents,
reports and information as required by Section 314 of the Trust Indenture Act,
if any, and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act.
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The
Guarantor shall provide to the Preferred Guarantee Trustee such evidence of
compliance with the conditions precedent, if any,
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<PAGE> 9
provided for in this Preferred Securities Guarantee that relate to any of the
matters set forth in Section 314(c) of the Trust Indenture Act. 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 Preferred Securities may, by vote, on behalf of the
Holders of all of the Preferred Securities, waive any past Event of Default and
its consequences. Upon such waiver, any such Event of Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Preferred Securities Guarantee, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Preferred Guarantee Trustee shall, within 90 days after
the occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events of
Default actually known to a Responsible Officer of the Preferred Guarantee
Trustee, unless such defaults have been cured before the giving of such notice,
provided, that, the Preferred Guarantee Trustee shall be protected in
withholding such notice if and so long as a Responsible Officer of the
Preferred Guarantee Trustee in good faith determines that the withholding of
such notice is in the interests of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Preferred Guarantee Trustee shall
have received a properly addressed written notice, or of which a Responsible
Officer of the Preferred Guarantee Trustee charged with the administration of
the Trust Agreement shall have obtained actual knowledge.
SECTION 2.8 CONFLICTING INTERESTS. The Trust Agreement shall be
deemed to be specifically described in this Preferred Securities Guarantee for
the purposes of clause (i) of the first proviso contained in Section 310(b) of
the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.
(a) This Preferred Securities Guarantee shall be held by the
Preferred Guarantee Trustee for the benefit of the Holders of the Preferred
Securities, and the Preferred Guarantee Trustee shall not transfer this
Preferred Securities Guarantee to any Person except a Holder of Preferred
Securities exercising such Holder's rights pursuant to Section 5.4(b) or to a
Successor Preferred Guarantee Trustee on acceptance by such Successor Preferred
Guarantee Trustee of its appointment to act as Successor Preferred Guarantee
Trustee. The right, title and interest of the Preferred Guarantee Trustee shall
automatically vest in any Successor Preferred Guarantee Trustee, and such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of such
Successor Preferred Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer
of the Preferred Guarantee Trustee has occurred and is continuing, the
Preferred Guarantee Trustee shall enforce this Preferred Securities Guarantee
for the benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Preferred Securities Guarantee, and no implied covenants shall be
read into this Preferred Securities
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<PAGE> 10
Guarantee against the Preferred Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6) and is
actually known to a Responsible Officer of the Preferred Guarantee Trustee, the
Preferred Guarantee Trustee shall exercise such of the rights and powers vested
in it by this Preferred Securities Guarantee, and use the same degree of care
and skill in its exercise thereof, as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.
(d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the Preferred
Guarantee Trustee shall be determined solely by the express
provisions of this Preferred Securities Guarantee, and the
Preferred Guarantee Trustee shall not be liable except for
the performance of such duties and obligations as are
specifically set forth in this Preferred Securities Guarantee,
and no implied covenants or obligations shall be read into
this Preferred Securities Guarantee against the Preferred
Guarantee Trustee; and
(B) in the absence of bad faith on the part of
the Preferred Guarantee Trustee, the Preferred Guarantee
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Preferred Guarantee Trustee and conforming to the requirements
of this Preferred Securities Guarantee; but in the case of any
such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee shall be
under a duty to examine the same to determine whether or not
they conform to the requirements of this Preferred Securities
Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable
for any error of judgment made in good faith by a Responsible Officer
of the Preferred Guarantee Trustee, unless it shall be proved that the
Preferred Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable
with respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less than
a Majority in liquidation amount of the Preferred Securities relating
to the time, method and place of conducting any proceeding for any
remedy available to the Preferred Guarantee Trustee, or exercising any
trust or power conferred upon the Preferred Guarantee Trustee under
this Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee
shall require the Preferred Guarantee Trustee to expend or risk its
own funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers if the Preferred Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Preferred Securities Guarantee or indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against such risk or liability is
not reasonably assured to it.
SECTION 3.2 CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively rely
upon, and shall be fully protected
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in acting or refraining from acting upon, any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Preferred Securities Guarantee shall be sufficiently evidenced by
an Officers' Certificate.
(iii) Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Preferred Guarantee
Trustee (unless other evidence is herein specifically prescribed) may,
in the absence of bad faith on its part, request and conclusively rely
upon an Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty to
see to any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).
(v) The Preferred Guarantee Trustee may consult with
counsel, and the written advice or opinion of such counsel with
respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with such advice or opinion.
Such counsel may be counsel to the Guarantor or any of its Affiliates
and may include any of its employees. The Preferred Guarantee Trustee
shall have the right at any time to seek instructions concerning the
administration of this Preferred Securities Guarantee from any court
of competent jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by
this Preferred Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Preferred
Guarantee Trustee such security and indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses and the expenses of the
Preferred Guarantee Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Preferred Guarantee Trustee; provided that, nothing
contained in this Section 3.2(a)(vi) shall be taken to relieve the
Preferred Guarantee Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and powers vested in
it by this Preferred Securities Guarantee.
(vii) The Preferred Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Preferred Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(viii) The Preferred Guarantee Trustee may execute any of
the trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys,
and the Preferred Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
(ix) Any action taken by the Preferred Guarantee Trustee
or its agents hereunder shall bind the Holders of the Preferred
Securities, and the signature of the Preferred Guarantee Trustee or
its agents alone shall be sufficient and effective to perform any such
action. No third party shall be required to inquire as to the
authority of the Preferred Guarantee Trustee to so act or as to its
compliance with any of the terms and
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<PAGE> 12
provisions of this Preferred Securities Guarantee, both of which shall
be conclusively evidenced by the Preferred Guarantee Trustee's or its
agent's taking such action.
(x) Whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the Preferred Guarantee
Trustee (i) may request instructions from the Holders of a Majority in
liquidation amount of the Preferred Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such
instructions.
(b) No provision of this Preferred Securities Guarantee shall be
deemed to impose any duty or obligation on the Preferred Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be illegal, or
in which the Preferred Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to exercise
any such right, power, duty or obligation. No permissive power or authority
available to the Preferred Guarantee Trustee shall be construed to be a duty.
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The recitals contained in this Preferred Securities Guarantee shall be taken as
the statements of the Guarantor, and the Preferred Guarantee Trustee does not
assume any responsibility for their correctness. The Preferred Guarantee
Trustee makes no representation as to the validity or sufficiency of this
Preferred Securities Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Preferred Guarantee Trustee
which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under
the laws of the United States of America or any state or territory
thereof or of the District of Columbia, or a corporation or Person
permitted by the Securities and Exchange Commission to act as an
institutional trustee under the Trust Indenture Act, authorized under
such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000, and subject to
supervision or examination by federal, state, territorial or District
of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of
the supervising or examining authority referred to above, then, for
the purposes of this Section 4.1(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Preferred Guarantee Trustee shall cease to
be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee
shall immediately resign in the manner and with the effect set out in Section
4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
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<PAGE> 13
SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED
GUARANTEE TRUSTEES.
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may
be appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee
has been appointed and has accepted such appointment by written instrument
executed by such Successor Preferred Guarantee Trustee and delivered to the
Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been appointed
or until its removal or resignation. The Preferred Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Preferred Guarantee Trustee and delivered
to the Guarantor, which resignation shall not take effect until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such
appointment by instrument in writing executed by such Successor Preferred
Guarantee Trustee and delivered to the Guarantor and the resigning Preferred
Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery to the Guarantor of an instrument of resignation, the
resigning Preferred Guarantee Trustee may petition any court of competent
jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or
removal or resignation of the Preferred Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee all
amounts accrued to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 GUARANTEE. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without
duplication of amounts theretofore paid by MB Capital), as and when due,
regardless of any defense, right of set-off or counterclaim that MB Capital 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 MB Capital to pay such amounts to the Holders.
SECTION 5.2 WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives
notice of acceptance of this Preferred Securities Guarantee and of any
liability to which it applies or may apply, presentment, demand for payment,
any right to require a proceeding first against MB Capital or any other Person
before proceeding against the Guarantor, protest, notice of nonpayment, notice
of dishonor, notice of redemption and all other notices and demands.
SECTION 5.3 OBLIGATIONS NOT AFFECTED. The obligations, covenants,
agreements and duties of the Guarantor under this Preferred Securities
Guarantee shall in no way be affected or impaired by reason of the happening
from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of
the performance or observance by MB
4.7-9
<PAGE> 14
Capital of any express or implied agreement, covenant, term or condition
relating to the Preferred Securities to be performed or observed by MB Capital;
(b) the extension of time for the payment by MB Capital of all or
any portion of the Distributions, Redemption Price, Liquidation Distribution or
any other sums payable under the terms of the Preferred Securities or the
extension of time for the performance of any other obligation under, arising
out of, or in connection with, the Preferred Securities (other than an
extension of time for payment of Distributions, Redemption Price, Liquidation
Distribution or other sum payable that results from the extension of any
interest payment period on the Junior Subordinated Debentures or any extension
of the maturity date of the Junior Subordinated 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 Preferred
Securities, or any action on the part of MB Capital 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, MB Capital or any of the
assets of MB Capital;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guarantied
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 5.3 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 RIGHTS OF HOLDERS.
(a) The Holders of a Majority in liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting of any proceeding for any remedy available to the Preferred
Guarantee Trustee in respect of this Preferred Securities Guarantee or
exercising any trust or power conferred upon the Preferred Guarantee Trustee
under this Preferred Securities Guarantee.
(b) Any Holder of Preferred Securities may institute a legal
proceeding directly against the Guarantor to enforce its rights under this
Preferred Securities Guarantee, without first instituting a legal proceeding
against MB Capital, the Preferred Guarantee Trustee or any other Person.
SECTION 5.5 GUARANTEE OF PAYMENT. This Preferred Securities
Guarantee creates a Guarantee of payment and not of collection.
SECTION 5.6 SUBROGATION. The Guarantor shall be subrogated to all
(if any) rights of the Holders of Preferred Securities against MB Capital in
respect of any amounts paid to such Holders by the Guarantor under this
Preferred Securities Guarantee; provided, however, that the Guarantor shall not
(except to the extent required by mandatory provisions of law) be entitled to
enforce or exercise any right that it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of
payment under this Preferred Securities Guarantee, if, at the time of any such
payment, any amounts are due and unpaid under this Preferred Securities
Guarantee. If any amount shall be paid to the Guarantor in violation of the
preceding sentence, the
4.7-10
<PAGE> 15
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 MB Capital with
respect to the Preferred Securities, and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Preferred Securities Guarantee notwithstanding the occurrence of
any event referred to in subsections (a) through (g), inclusive, of Section
5.3.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 LIMITATION OF TRANSACTIONS. So long as any Preferred
Securities remain outstanding, if there shall have occurred and be continuing
an Event of Default or an event of default under the Trust Agreement, then (a)
the Guarantor shall not declare or pay any dividend or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of its capital stock, (b) the Guarantor shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by the Guarantor (including other Junior Subordinated
Debentures) which rank pari passu with or junior in interest to the Junior
Subordinated Debentures or (c) the Guarantor shall not make any guarantee
payments with respect to any guarantee by the guarantor of the debt securities
of any subsidiary of the Guarantor if such guarantee ranks pari passu or junior
in interest to the Junior Subordinated Debentures (other than (a) dividends or
distributions in common stock, (b) any declaration of a dividend in connection
with the implementation of a shareholders' rights plan, or the issuance of
stock under any such plan in the future or the redemption or repurchase of any
such rights pursuant thereto, (c) payments under this Preferred Securities
Guarantee and (d) purchases of common stock related to the issuances of common
stock or rights under any of the Guarantor's benefit plans for its directors,
officers or employees).
SECTION 6.2 RANKING. This Preferred Securities Guarantee will
constitute an unsecured obligation of the Guarantor and will rank subordinate
and junior in right of payment to all Senior and Subordinated Debt of the
Guarantor.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION. This Preferred Securities Guarantee shall
terminate upon (i) full payment of the Redemption Price of all Preferred
Securities, (ii) upon full payment of the amounts payable in accordance with
the Trust Agreement upon liquidation of MB Capital or (iii) upon distribution
of the Junior Subordinated Debentures to the Holders of the Preferred
Securities. Notwithstanding the foregoing, this Preferred Securities Guarantee
will continue to be effective or will be reinstated, as the case may be, if at
any time any Holder of Preferred Securities must restore payment of any sums
paid under the Preferred Securities or under this Preferred Securities
Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith in accordance with this
Preferred Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Preferred Securities Guarantee or by law, except
that an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.
4.7-11
<PAGE> 16
(b) An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders of Preferred Securities
might properly be paid.
SECTION 8.2 INDEMNIFICATION. The Guarantor agrees to indemnify each
Indemnified Person for, and to hold each Indemnified Person harmless against,
any loss, liability 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 Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 SUCCESSORS AND ASSIGNS. All guaranties and agreements
contained in this Preferred Securities Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Guarantor and shall
inure to the benefit of the Holders of the Preferred Securities then
outstanding.
SECTION 9.2 AMENDMENTS. Except with respect to any changes that do
not materially adversely affect the rights of Holders (in which case no consent
of Holders will be required), this Preferred Securities Guarantee may only be
amended with the prior approval of the Holders of at least a Majority in
liquidation amount of the Preferred Securities. The provisions of Article VI
of the Trust Agreement with respect to meetings of Holders of the Securities
apply to the giving of such approval.
SECTION 9.3 NOTICES. All notices provided for in this Preferred
Securities Guarantee shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by registered or certified
mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
(b) If given to the Guarantor, at the Guarantor's mailing address
set forth below (or such other address as the Guarantor may give notice of to
the Holders of the Preferred Securities):
MegaBank Financial Corporation
8100 East Arapahoe Road
Englewood, Colorado 80112
Attention: Chief Executive Officer
4.7-12
<PAGE> 17
(c) If given to any Holder of Preferred Securities, at the address
set forth on the books and records of MB Capital.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.4 BENEFIT. This Preferred Securities Guarantee is solely
for the benefit of the Holders of the Preferred Securities and, subject to
Section 3.1(a), is not separately transferable from the Preferred Securities.
SECTION 9.5. GOVERNING LAW. THIS PREFERRED SECURITIES GUARANTEE
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF COLORADO; PROVIDED THAT THE IMMUNITIES AND THE STANDARD OF
CARE OF THE TRUSTEE SHALL BE GOVERNED BY DELAWARE LAW.
THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year
first above written.
MEGABANK FINANCIAL CORPORATION,
as Guarantor
By
--------------------------------------------------------
Thomas R. Kowalski, Chairman and Chief Executive Officer
WILMINGTON TRUST COMPANY,
As Preferred Guarantee Trustee
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
4.7-13
<PAGE> 1
EXHIBIT 5.1
December 11, 1997
MegaBank Financial Corporation
8100 E. Arapahoe Road
Englewood, Colorado 80112
Re: Registration Statement on Form SB-2
Ladies and Gentlemen:
In connection with the Registration Statement on Form SB-2 filed by
MegaBank Financial Corporation (the "Company") and MB Capital I ("MB Capital")
with the Securities and Exchange Commission on December 11, 1997 relating to a
public offering by MB Capital of up to 1,200,000 % Cumulative Preferred
Securities (the "Preferred Securities"), please be advised that as counsel to
the Company, upon examination of such corporate documents and records as we
have deemed necessary or advisable for the purposes of this opinion, it is our
opinion that:
1. The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Colorado.
2. The Guarantee, when executed and delivered as contemplated by
the Registration Statement, and the Junior Subordinated Debentures, when issued
and paid for as contemplated by the Registration Statement, will be validly
issued obligations of the Company enforceable in accordance with their terms
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity.
Capitalized terms used herein shall have the definitions given to such
terms in the Registration Statement. We hereby consent to the filing of this
opinion as an exhibit to the Registration Statement, and to the reference to
our firm under the heading "Legal Matters" in the Prospectus comprising a part
of the Registration Statement.
Very truly yours,
/s/ JONES & KELLER, P.C.
----------------------------
JONES & KELLER, P.C.
<PAGE> 1
EXHIBIT 5.2
[RICHARDS, LAYTON & FINGER LETTERHEAD]
December 11, 1997
MB Capital I
c/o MegaBank Financial Corporation
8100 East Arapahoe Road
Englewood, Colorado 80112
Re: MegaBank Financial Corporation and MB Capital I - offering of trust
preferred securities
Ladies and Gentlemen:
We have acted as special Delaware counsel for MegaBank Financial
Corporation, a Colorado corporation (the "Company"), and MB Capital I, a
Delaware business trust (the "Trust"), in connection with the matters set forth
herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, dated December 8, 1997
(the "Certificate"), as filed with the office of the Secretary of State of the
State of Delaware (the "Secretary of State") on December 8, 1997;
(b) The Trust Agreement of the Trust, dated as of December 8, 1997
between the Company and the trustee of the Trust named therein.
(c) The Registration Statement (the "Registration Statement") on Form
SB-2, including a preliminary prospectus with respect to the Trust (the
"Prospectus"), relating to the Preferred Securities of the Trust, representing
preferred undivided beneficial interests in the assets of the Trust (each, a
"Preferred Security" and collectively, the "Preferred Securities"), filed by
the Company and the Trust with the Securities and Exchange Commission on or
about December 11, 1997;
(d) A form of Amended and Restated Trust Agreement for the Trust, to
be entered into between the Company, the trustees of the Trust named therein,
and the holders, from time to time, of the undivided beneficial interests in the
assets of the Trust (including Exhibits C and E thereto) (the "Trust
Agreement"), attached as an exhibit to the Registration Statement; and
(e) A Certificate of Good Standing for the Trust, dated December 11,
1997, obtained from the Secretary of State.
<PAGE> 2
MegaBank Financial Corporation
Page 2
December 11, 1997
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed in paragraphs (a) through (e) above. In particular, we
have not reviewed any document (other than the documents listed in paragraphs
(a) through (e) above) that is referred to in or incorporated by reference into
the documents reviewed by us. We have assumed that there exists no provision in
any document that we have not reviewed that is inconsistent with the opinions
stated herein. We have conducted no independent factual investigation of our
own but rather have relied solely upon the foregoing documents, the statements
and information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Trust
Agreement and the Certificate of Trust are in full force and effect and have not
been amended, (ii) except to the extent provided in paragraph 1 below, the due
organization or due formation, as the case may be, and valid existence in good
standing of each party to the documents examined by us under the laws of the
jurisdiction governing its creation, organization or formation, (iii) the legal
capacity of natural persons who are parties to the documents examined by us,
(iv) that each of the parties to the documents examined by us has the power and
authority to execute and deliver, and to perform its obligations under, such
documents, (v) the due authorization, execution and delivery by all parties
thereto of all documents examined by us, (vi) the receipt by each Person to whom
a Preferred Security is to be issued by the Trust (collectively, the "Preferred
Security Holders") of a Preferred Securities Certificate for such Preferred
Security and the payment for such Preferred Security, in accordance with the
Trust Agreement and the Registration Statement, and (vii) that the Preferred
Securities are issued and sold to the Preferred Security Holders in accordance
with the Trust Agreement and the Registration Statement. We have not
participated in the preparation of the Registration Statement and assume no
responsibility for its contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our
opinions are rendered only with respect to Delaware laws and rules, regulations
and orders thereunder which are currently in effect.
Based upon the foregoing, and upon our examination of such questions
of law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act.
<PAGE> 3
MegaBank Financial Corporation
Page 3
December 11, 1997
2. The Preferred Securities of the Trust will represent validly and,
subject to the qualifications set forth in paragraph 3 below, fully paid and
nonassessable undivided beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of the
Trust, will 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. We note that the Preferred Security
Holders may be obligated to make payments as set forth in the Trust Agreement.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. We hereby
consent to the use of our name under the heading "Legal Matters" in the
Prospectus. In giving the foregoing consents, we do not thereby admit that we
come within the category of Persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above, without
our prior written consent, this opinion may not be furnished or quoted to, or
relied upon by, any other Person for any purpose.
Very truly yours,
/s/ RICHARDS, LAYTON & FINGER
-------------------------------------
Richards, Layton & Finger
<PAGE> 1
EXHIBIT 10.1
Bankers' Bank of the West
October 20 1997
Jean Burr S.V.P.
Megabank of Arapahoe
PO Box 3318
Englewood, CO 80155
Dear Ms. Burr;
We are pleased to inform you Bankers' Bank of the West (BBW) has approved the
renewal of the Federal Funds purchase line for Megabank of Arapahoe on an
unsecured basis with a maturity of 10/31/98. All federal funds purchase lines
are accessible as funds are available. The maximum amount of the established
line is $5,000,000.00. All Federal Funds lines are subject to quarterly review
as well as annual renewal and terms may be altered in the event of a
significant change in the financial condition of the bank. Please continue to
provide BBW with Call Reports on a quarterly basis.
BBW's policy of the sale of funds to respondent banks is outlined in our
Federal Funds Sale Agreement, a copy of which should be in your file. Once
executed, the signed agreement is continuing in nature and need not be
re-executed annually. Your bank should keep this annual re-approval letter in
your file as well.
The staff at BBW is pleased to provide this service to your bank. Should you
have any questions or need additional service, please feel free to call me.
Sincerely,
/s/ Dale W. Utley
- - --------------------
Dale W. Utley
Vice President
<PAGE> 2
FEDERAL FUNDS SALES AGREEMENT
In consideration of the mutual agreements set forth herein, MegaBank
of Arapahoe (the "PURCHASING BANK"), and BANKERS' BANK OF THE WEST (the
"SELLING BANK"), agree as follows:
From time to time the Selling Bank may have on an "as available" basis
funds to lend to the Purchasing Bank in what is commonly known as a "Federal
Funds" transaction. NEITHER THE SELLING BANK NOR THE PURCHASING BANK SHALL
HAVE ANY OBLIGATION TO ENTER INTO ANY FEDERAL FUNDS TRANSACTION. The maximum
amount of unsecured Federal Funds which may be outstanding to the Purchasing
Bank hereunder at any one time is an amount equal to fifty (50) percent of the
Purchasing Bank's equity capital including capital, surplus and undivided
profits but not including reserves for losses or contingencies as of the date
of this agreement.
The Purchasing Bank may propose to borrow Federal Funds from the
Selling Bank by telephoning the Federal Funds desk at the Selling Bank. In any
such telephone call, the Selling Bank shall not be obligated to inquire as to
the authority of any individual on behalf of the Purchasing Bank.
All Federal Funds transactions shall be on a daily origination and
return basis, shall be unsecured unless otherwise agreed to at any time before,
on or after the date of this Agreement, and shall be confirmed in writing daily
to the Purchasing Bank by the Selling Bank. Daily interest charges for Federal
Funds shall be determined by mutual agreement of the parties (subject to
changes in law or regulations) when the transaction is originated, and shall be
paid by charging the account of the Purchasing Bank at the time of daily return
of principal.
The Purchasing Bank is liable to pay the Selling Bank on the next
business day for all Federal Funds borrowed under this Agreement and all
charges thereon. The Selling Bank is irrevocably authorized to receive such
payments when due by charging the Purchasing Bank's account at the Selling Bank
without notice. If there are not sufficient funds in such account to make any
such payment, the Selling Bank may offset or charge an amount due against any
other account and any other property then maintained by the Purchasing Bank
with the Selling Bank without notice.
The Selling Bank's sale of funds to Purchasing Bank on an unsecured
basis shall be for a period of no longer than thirty (30) consecutive days. At
the conclusion of the authorized borrowing period, the Purchasing Bank must not
borrow for five (5) consecutive working days. If the Purchasing Bank cannot
rest the line as required, the line must then secured and comply with the
"Secured Transaction" section of the Selling Bank's Fed Funds policy.
Except for any existing agreement by virtue of which Federal Funds
transactions are secured, which existing agreements shall continue in full
force and effect, this Agreement supersedes and replaces all prior agreements
and understandings of the
2
<PAGE> 3
parties regarding the subject matter hereof, and all prior Federal Funds
transactions shall be governed by this Agreement. This Agreement cannot be
amended, supplemented, waived, terminated or otherwise modified, except by a
writing executed by both parties. This Agreement shall bind and inure to the
benefit of the parties and their respective successors and assigns, provided,
neither party may assign any of its rights or remedies hereunder with the prior
written consent of the other party, and any assignment in violation of this
provision shall be null and void. This agreement shall become null and void
upon the effective change in ownership and control of either the Selling or
Purchasing Bank. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
Executed as of July 14, 1995.
Purchasing Bank: Selling Bank:
MEGABANK OF ARAPAHOE BANKERS' BANK OF THE WEST
ENGLEWOOD, COLORADO Denver, Colorado
/s/ Jean L. Burr
- - --------------------
By: Jean L. Burr
Its SR. VICE PRESIDENT/CASHIER
3
<PAGE> 1
EXHIBIT 10.2
LEASE
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. Definitive Lease Terms 1
Section 1.01 Building 1
Section 1.02 Term 1
Section 1 03 Commencement Date 1
Section 1.04 Minimum Rent 1
Section 1.05 Adjusted Minimum Rent 1
Section 1.06 Use 2
ARTICLE II. Alterations and Additions 2
Section 2.01 Condition of Premises 2
Section 2.02 No Alterations 2
ARTICLE III. Operating Expenses 2
Section 3.01 Additional Rent 2
Section 3.02 Pavements 2
Section 3.03 Extra Charges 2
Section 3.04 Maintenance Costs Defined 3
ARTICLE IV. Tenant Covenants 4
Section 4.01 Care of Premises 4
Section 4.02 Compliance with Law 4
Section 4.03 Tenant's Insurance 4
Section 4.04 Tenant's Indemnification 5
Section 4.05 Utilities 6
Section 4.06 Personal Property Taxes 6
Section 4.07 Liens 6
Section 4.08 Surrender 6
ARTICLE V. Landlord's Covenants and Rights 6
Section 5.01 Quiet Enjoyment and Subordination 6
Section 5.02 Alterations by Landlord 7
Section 5.03 Entry by Landlord 7
ARTICLE VI. General Provisions 8
Section 6.01 Assignment and Subletting 8
Section 6.02 Eminent Domain 8
Section 6.03 Events of Default 9
Section 6.04 Remedies Upon Default 10
Section 6.05 Damage by Fire or Other Casualty 11
Section 6.06 Subrogation 12
ARTICLE VII. Miscellaneous Provision 12
Section 7.01 Administrative Service Charges 12
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 7.02 Late Charges 12
Section 7.03 Holding Over 13
Section 7.04 Notices 13
Section 7.05 Venue 13
Section 7.06 Statutory Remedies Waiver 13
Section 7.07 Brokerage 14
Section 7.08 Jury Trial Waiver 14
Section 7.10 Severability 14
Section 7.11 No Set-Off 14
Section 7.12 Relationship of Parties 14
Section 7.13 Successors Bound 14
Section 7.14 Interpretation 14
Section 7.15 Time of the Essence 15
Section 7.16 Easements 15
Section 7.17 Short Form Lease 15
Section 7.18 Assignment of Rents. Leases 15
Section 7.19 Intent of the Parties - Net Lease 15
Section 7.20 Status Statement 17
Section 7.22 Definition of Lease 17
</TABLE>
ii
<PAGE> 4
LEASE
THIS LEASE is entered into effective the 29th day of December, 1994,
by and between NAGROM L.L.C., A COLORADO LIMITED LIABILITY COMPANY
("Landlord"), having a principal place of business at 7879 South Garfield Way,
Littleton, Colorado 80122, and MEGABANK FINANCIAL CORPORATION, A COLORADO
CORPORATION ("Tenant"), having a principal place of business at 8100 East
Arapahoe Road, Englewood, Colorado 80112 (collectively referred to as "the
Parties").
W I T N E S S E T H:
Subject to and upon the terms herein set forth, Landlord leases to
Tenant and Tenant leases from Landlord the Premises, as hereinafter defined.
ARTICLE I.
Definitive Lease Terms
Section 1.011 Building. The "Premises" is that structure more commonly known
and numbered as 8100 East Arapahoe Road, Englewood, County of Arapahoe, State
of Colorado, now or hereinafter constructed on the "Property" more fully
described in Exhibit A, Page 1, attached hereto and made a part hereof, and as
shown on the Site Plan attached hereto and made a part hereof as Exhibit A,
Page 2.
Section 1.012 Term. The Term of this Lease shall be the period commencing on
the Commencement Date as hereinafter defined and continuing for one hundred
twenty (120) full months after the first day of the first full month following
the Commencement Date, unless sooner terminated as provided in this Lease.
Section 1.013 Commencement Date. The Commencement Date of this Lease shall be
December 29, 1994. The Termination Date shall be the last day of the Term of
this Lease.
Subsequent to the Commencement Date, the Landlord and Tenant shall execute an
Addendum to this Lease, substantially in the form of Exhibit B hereto, setting
forth the precise Commencement and Termination Dates. The Parties hereto
acknowledge and agree that certain obligations under various articles and
sections of the Lease may commence prior to the Commencement Date, including,
but not limited to, hold harmless liability, and insurance, and the Parties
agree to be bound by any such articles or sections prior to the Commencement
Date.
Section 1.014 Minimum Rent. Tenant shall pay to Landlord as Minimum Rent,
without
1
<PAGE> 5
notice or demand and without set off or deduction for any reason whatsoever,
during the Term of this Lease the total sum of Three Hundred Six Thousand and
No/1O0ths Dollars ($306,000.00) payable in advance in the following monthly
installments:
<TABLE>
<CAPTION>
MONTHS PAYMENTS
-------- --------
<S> <C>
1 through l2 $25,500.00 per month
</TABLE>
Section 1.015 Adjusted Minimum Rent. In addition to Minimum Rent, Tenant shall
pay Adjusted Minimum Rent calculated annually by multiplying the Minimum Rent
paid in the last calendar month of the immediately preceding year by twelve
(12), then multiplying this product by three and one-half percent (3.5%).
Section 1.016 Use. The Premises shall be used and occupied by Tenant (and any
permitted and approved subtenants and/or assignees of Tenant) only as a
financial institution, and general business offices, and Tenant shall not use
or permit the Premises to be used for any other purpose without the prior
written consent of Landlord.
ARTICLE II.
Alterations and Additions
Section 1.021 Condition of Premises. Tenant accepts the Premises in its present
"AS IS" condition.
Section 1.022 No Alterations. Tenant shall not make or allow to be made any
alterations, additions or improvements to the Premises or any part thereof
without obtaining the prior written consent of Landlord, which consent shall
not be unreasonably withheld or delayed. Any alterations, additions or
improvements to the Premises excepting movable furniture and trade fixtures
shall become the property of Landlord and shall be surrendered with the
Premises. All alterations, additions or improvements to the Premises made or
requested by Tenant shall be at Tenant's sole cost and expense. Upon the
Termination Date or sooner termination of the Term, Tenant shall, at Tenant's
sole cost and expense, remove any such alterations, additions or improvements
designated by Landlord to be so removed and repair any damage to the Premises
occasioned by such removal forthwith and with all due diligence.
ARTICLE III.
Operating Expenses
Section 1.031 Additional Rent. All operating expenses of the Premises shall be
paid directly by Tenant promptly when due as specified hereunder.
2
<PAGE> 6
Section 1.032 Payments. Tenant shall contract for, and shall pay directly to
all suppliers and vendors all charges for services hereinafter defined as
Premises Maintenance Costs. Additionally, Tenant shall pay to Landlord as
Additional Rent all sums paid by Landlord as Taxes as hereinafter defined. Any
such sums shall be due and payable by Tenant within twenty (20) days of receipt
of invoices (accompanied by photocopies of the tax bills) for same from
Landlord. However, failure by Landlord to provide Tenant with an invoice shall
not constitute a waiver by Landlord of its rights to recapture from Tenant
Taxes for any one year. Any payments due under this Article 3 shall be
prorated for any partial calendar year of the Term. Tenant's obligation to pay
any amounts due under this Article III shall survive the Termination Date or
earlier termination as herein provided.
Section 1.033 Extra Charges. Tenant agrees to pay as its obligation the
entirety of all expenses incurred by Landlord which are solely attributable to
Tenant's use and occupancy or which are incurred pursuant to Tenant's special
request for additional services. Any such Extra Charges shall be due and
payable by Tenant within twenty (20) days of receipt of invoices for same from
Landlord.
Section 1.034 Premises Maintenance Costs Defined. "Premises Maintenance Costs"
as used herein shall consist of all operating expenses of the Premises,
including all expenditures or obligations made or incurred by Landlord or
Tenant associated with the ownership, maintenance and operation of the
Premises. Without limiting the generality of the foregoing, Premises
Maintenance Costs shall include, without limitation, all costs attributable to
the maintenance of the Premises including, without limitation, all parking
areas (whether temporary or permanent), access roads, driveways, curbs,
truckways, loading areas and docks, retaining walls, lighting facilities,
comfort stations, pedestrian sidewalks, foundations, exterior and demising
walls, roofs over the entire Premises, ramps, decorative walls, vacant areas,
landscaped and planting areas and facilities, service lines or conduits for
gas, water, electric, sewage, heating, ventilating, air conditioning, and
lighting services, conduits and appurtenances for use by Tenant, and such other
areas and facilities, whether within or outside the Premises, which may be
located on the Premises. Maintenance of the Premises shall include, without
limitation, the following:
(i) All expenses in connection with making available for
use by Tenant the parking facilities for the Premises including, but not
limited to, all costs incurred for sweeping, cleaning, litter control,
resurfacing, repainting, restriping, removal and replacement of
pavement, curbs and car stops, and snow and ice removal,
(ii) All supplies and materials used in the operation and
maintenance of the Premises including, but not limited to, uniforms,
paper products, painting and replacement of worn out mechanical or
damaged equipment
(iii) The cost of all utilities, including, but not limited
to, the cost of water, electrical service, heating, lighting, air
conditioning and ventilation,
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(iv) The cost of all maintenance and service agreements for
the Premises and equipment therein, including, but not limited to,
window cleaning, fire protection, sprinklers, exterminating and
landscape maintenance of any kind,
(v) Amortization and interest on the cost of capital
improvement items, whether or not such improvement items result in, or
are intended to result in, a reduction in Premises Maintenance Costs, or
which are required to be installed under any governmental law,
regulation or authority. All such costs shall be amortized over the
reasonable life of the capital investment items, with the reasonable
life and amortization schedule being determined in accordance with
generally accepted accounting principles and in no event to extend
beyond the reasonable life of the Premises,
(vi) Legal fees, and other professional services associated
with the operation and maintenance of the Premises; and
(vii) The cost of maintenance, repair and replacements of
roofs, ceilings and exterior walls, gutters, glass, plate glass,
windows, plumbing, pipes and fixtures, and other equipment.
Section 1.035 Taxes Defined. "Taxes" shall mean all taxes and assessments and
governmental charges levied, whether by federal, state, county, municipal, or
other taxing districts or authorities presently taxing the Premises, or by
others, subsequently created or otherwise, and any other taxes or assessments
attributable to real estate taxes and assessments or substitutes therefor or
supplements thereto, upon, applicable, attributable or reasonably allocated to
the Premises or any part thereof, or any improvement thereon, for any tax year
or other tax period or partial tax year or period during the Term hereof. If
and to the extent that due to a change in the method of taxation or assessment,
any franchise, capital stock, capital, rent, income, profit or other tax or
charge shall be deemed a substitute or supplement to the same, then all such
items shall be included within the term Taxes for purposes of this Lease.
Should Landlord dispute and contest the Taxes, all costs associated with such
dispute or contest shall be considered Taxes for purposes of this Lease.
ARTICLE IV.
Tenant Covenants
Section 1.041 Care of Premises. Tenant, at its sole cost and expense, shall
take good care of the Premises throughout the Term and preserve same in the
condition delivered to Tenant on the Commencement Date, normal wear and tear
excepted. Tenant shall be responsible for all maintenance or repairs to the
roof, structural elements, foundation, interior and exterior walls, plumbing,
electrical, heating, air conditioning, ventilating, waste and sewer systems and
equipment, doors and door
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frames, and window and window frames installed in or on the Premises. Tenant
shall be responsible for cleaning the Premises as needed, and making repairs,
replacements and alterations as needed. All repairs, replacements or
improvements undertaken by Tenant under this Section 4.01 shall be performed in
a good and workmanlike manner, using first quality materials and reputable
contractors, and shall be of equal or better quality and utility to the
original work. Tenant shall properly store, out of view of the public, and
shall promptly and regularly remove from the Premises all garbage, trash, and
rubbish. Tenant shall be responsible for all injury or damage of any kind or
character to the Premises caused by Tenant, its agents, servants, independent
contractors or by anyone using or occupying the Premises by, through or under
Tenant. Tenant shall repair any such damage, and Tenant shall promptly pay the
costs incurred therefor.
Section 1.042 Compliance with Law Tenant shall neither use the Premises, nor
permit any act to be done in or about the Premises which will in any way
conflict with any law, statute., ordinance or governmental rule or regulation
now in force or hereafter enacted or promulgated. Tenant shall neither do, nor
permit any act to be done in or about the Premises, nor bring or store anything
therein which is not appropriate to the permitted use of the Premises, nor
which will in any way increase the existing rate of, or adversely affect, any
fire or other insurance upon the Premises or any of its contents, or cause a
cancellation of any insurance policy covering the Premises, any part thereof,
or any of its contents.
Section 1.043 Tenant's Insurance. Tenant shall procure and maintain throughout
the Term of the Lease, at its sole cost and expense, a policy or policies of
insurance of the types and amounts as herein below set forth:
(A) Comprehensive public liability, property damage insurance and
products liability insurance insuring against claims for personal
injury, sickness, disease or death, and property damage suffered in or
about the Premises, including independent contractor coverage, with
limits of public liability coverage of not less than One Million Dollars
($1,000,000.00) per occurrence or with limits for bodily injury of not
less than One Million Dollars ($1,000,000.00) per occurrence and
property damage liability not less than One Million Dollars
($1,000,000.00);
(B) Fire and extended coverage insurance covering the Premises and
Tenant's inventory, personal property, fixtures, improvements, wall
coverings, floor coverings, window coverings, alteration to furniture,
equipment, lighting, ceilings, heating, ventilation and air conditioning
equipment, interior plumbing and plate glass against loss or damage by
fire, windstorms, hail, earthquakes, explosion, riot, damage from
aircraft and such other risks as are from time to time covered under
"extended coverage" endorsements and special extended coverage
endorsements commonly known as "all risks" endorsements, in an amount
equal to the full replacement value thereof;
(C) State Worker's Compensation Insurance, or other similar
coverage, in the statutorily mandated amounts.
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It is expressly understood and agreed that the foregoing minimum limits of
insurance coverage shall not limit the liability of Tenant for its acts or
omissions as provided in this Lease. All of the foregoing insurance policies
(with the exception of Worker's Compensation Insurance to the extent not
available under statutory law) shall name Landlord and such other interested
parties as Landlord shall from time to time designate as insured as their
respective interests may appear, and shall provide that any loss shall be
payable to Landlord and any other interested parties as Landlord shall
designate. All insurance required hereunder shall be placed with companies
which are approved by Landlord and licensed to do business in the state of
Colorado. All such policies shall be written as primary policies,
noncontributing with and in excess of coverage which Landlord may carry.
Tenant shall deliver copies of all such policies and all endorsements thereto,
certified as true and complete by the issuer thereof, prior to the Commencement
Date, or, in the case of renewals thereto, fifteen (15) days prior to the
expiration of the prior insurance policy, together with evidence from the
insurer that such policies are fully paid for, and that no cancellation,
material change or non-renewal thereof shall be effective except upon thirty
(30) days' prior written notice from the insurer to Landlord and its designees.
If Tenant shall at any time fail to procure and/or maintain insurance as herein
provided, Landlord shall be at liberty to do so as often as such failure shall
occur without waiving any other rights under this Lease. Any premiums or other
sums paid by Landlord in obtaining or maintaining such insurance shall be and
become, and are hereby declared to be, Additional Rent hereunder, for the
collection of which Landlord shall have all the remedies provided for in this
Lease or by law for the collection of rent. Payment by Landlord of such
premium or the carrying of Landlord of any such policy shall not be deemed to
waive or release the default of Tenant with respect thereto. Tenant's failure
to provide and maintain in force the insurance provided for herein shall be
regarded as a default hereunder, entitling Landlord to exercise any or all of
the remedies provided in this Lease upon the occurrence of an Event of Default.
Section 1.044 Tenant's Indemnification. Tenant shall indemnify and hold
harmless Landlord from and against any and all claims, demands, causes of
action, judgments and expense, and all loss and damage arising from Tenant's
use of the Premises or from the conduct of its business or from any activity,
work, or other acts or things done, permitted or suffered by the Tenant in or
about the Premises, and shall further indemnify and hold harmless Landlord from
and against any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease, or arising from any act or negligence of Tenant, or any officer,
agent, employee, guest, or invitee thereof, and from all costs, attorneys'
fees. and liabilities incurred in the defense of any such claim or any action
or proceeding which may be brought against, out of or in any way related to
this Lease. Tenant, upon notice from Landlord, shall defend the same at
Tenant's expense by counsel reasonably satisfactory to Landlord. Tenant, as a
material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to persons in, upon or about the Premises from any
cause, and Tenant hereby waives
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all claims with respect thereof against Landlord. Tenant shall give prompt
notice to Landlord in case of casualty or accidents in the Premises.
Additionally, Tenant shall forever hold Landlord harmless from and against any
and all claims, losses, damages, demands, causes of action, judgments and
expense arising from any act or negligence of any other person in the Premises,
and from all costs, attorneys' fees, and liabilities incurred resulting
therefrom.
Landlord or its agents shall not be liable for any loss or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Premises or from
the pipes, appliances or plumbing works therein or from the roof, street or
subsurface or from any other places resulting from the dampness or any other
cause whatsoever, except personal injury caused by or due to the negligence of
Landlord. Landlord or its agents shall not be liable for interference with the
electrical service, ventilation, or for any latent defect in the Premises.
Section 1.045 Utilities. Tenant shall promptly pay for all water, gas, heat,
light, power, and sewer charges, charges for telephone service, and all other
services and utilities supplied to the Premises, together with any taxes
thereon.
Section 1.046 Personal Property Taxes. Tenant shall pay or cause to be paid
before delinquency any and all taxes levied or assessed and payable during the
term hereof upon all Tenant's leasehold improvements, equipment, furniture,
fixtures, and other personal property located in the Premises.
Section 1.047 Liens. Tenant shall keep the Premises free from any liens arising
out of any work performed, materials furnished, or obligations incurred by or
on behalf of Tenant. Landlord may require, at Landlord's sole option, that
Tenant shall provide to Landlord, at Landlord's sole cost and expense, a lien
and completion bond in an amount equal to one and one-half (1 1/2) times the
estimated cost of any improvements, additions or alterations in the Premises
which the Tenant desires to make, to insure Landlord against any liability for
mechanic's and materialmen's liens and to insure completion of the work.
Further, Tenant shall post the Property or take whatever actions are required
to avail itself and Landlord of any statutory protections offered by the laws
and statutes of Colorado. Should any mechanic's or other lien be filed against
the Premises by reason of Tenant's acts or omissions or because of a claim
against Tenant, Tenant shall cause the same to be canceled and discharged of
record by bond or otherwise within twenty (20) days after notice by Landlord.
Should Tenant fail to discharge said lien within twenty (20) days after receipt
of notice from Landlord, Landlord may cure the lien. If Landlord elects to
cure said lien, Tenant hereby agrees to reimburse Landlord for the amount of
the lien plus an amount equal to ten percent (10%) of said amount as
administrative costs, all of which amount shall be deemed Additional Rent. The
remedies herein provided shall be in addition to all other remedies available
to Landlord.
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Section 1.048 Surrender. Upon the expiration or other termination of the Term,
and without further notice, Tenant shall peaceably and quietly quit and
surrender to Landlord the Premises, broom clean, in as good a condition as
existed on the Commencement Date, excepting only ordinary wear and tear, loss
by fire, casualty and other causes beyond Tenant's control, repairs,
replacements and alterations permitted hereunder. Tenant's obligation to
observe or perform this covenant shall survive the Termination Date or prior
termination of the Term. The voluntary or other surrender of this Lease by
Tenant or the cancellation of this Lease by mutual agreement of Tenant and
Landlord shall not work a merger, and shall at Landlord's option terminate all
or any subleases and subtenancies or operate as an assignment to Landlord of
all or any subleases or subtenancies. Landlord's option hereunder shall be
exercised by notice to Tenant and to all known sublessees or subtenants in the
Premises or any part thereof.
ARTICLE V.
Landlord's Covenants and Rights
Section 1.051 Quiet Enjoyment and Subordination. Landlord covenants and agrees
that, upon performance by Tenant of all of the covenants, obligations,
conditions and provisions hereof on Tenant's part to be kept and performed,
Tenant shall have, hold and enjoy the Premises, subject and subordinate to the
rights set forth herein; provided, however, that no diminution or abatement of
payment due hereunder shall be claimed by or allowed to Tenant for
inconvenience or discomfort arising from the making of any repairs or
improvements to the Premises, nor for any space taken to comply with any law,
ordinance or order of any governmental authority, except as provided for
herein. The obligation of Tenant to pay rent of all kinds hereunder is an
independent covenant and an absolute obligation.
Tenant's rights under this Lease are subject and subordinate to any easements
presently existing or created in the future, the lien of any mortgage, which
Landlord may now or hereafter place upon the Premises, or other liens or real
estate taxes. Tenant accepts this Lease subject and subordinate to any
easement, lease, mortgage or other lien presently existing and hereinafter
created on the Premises, and to any renewals and extensions thereof. This
subordination provision shall be self-operative, and no further instrument of
subordination shall be required; provided, however, that Tenant agrees to
execute and deliver, upon request, such further instrument(s) confirming this
subordination as may be requested by Landlord, its mortgagee, or proposed
mortgagee. Tenant hereby constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such instrument(s).
Section 1.052 Alterations by Landlord. Landlord may from time to time make
repairs, replacements, changes or additions to the structure, systems,
facilities and equipment in the Premises where necessary to service the
Premises. In connection therewith, Landlord and/or its representatives may
enter on or about the Premises with such material as Landlord may deem
necessary, and may erect scaffolding and all other
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necessary structures on or about the Premises. Tenant waives and releases any
claims for damage including loss of business resulting therefrom; provided,
however, that in the exercise of its rights hereunder, Landlord shall not
unreasonably interfere with the conduct of Tenant's business.
Section 1.053 Entry by Landlord. Landlord and Landlord's agents and
representatives shall have the right to enter into and upon the Premises, or
any part thereof, at all reasonable times for the following purposes:
(A) Examining the Premises;
(B) Making such repairs or alterations therein as may be necessary
in Landlord's sole judgment for the safety and preservation
thereof;
(C) Erecting, maintaining, repairing or replacing wires, cables,
conduits, vents, HVAC equipment or plumbing equipment running
in, to, or through the Premises;
(D) Showing the Premises to prospective tenants;
(E) Showing the Premises to prospective purchasers or mortgagees;
(F) Posting notices of non-responsibility.
Landlord may enter the Premises at any time in case of emergency without prior
notice to Tenant.
For each of the aforesaid purposes, Landlord shall at all times have and retain
a key with which to unlock all of the doors in, upon and about the Premises,
excluding Tenant's vaults, safes and files, and Landlord shall have the right
to use any and all means which Landlord may deem proper to open said doors in
an emergency in order to obtain entry to the Premises without liability to
Tenant except for any failure to exercise due care for Tenant's property. Any
entry to the Premises obtained by Landlord by any of said means, or otherwise,
shall under no circumstances be construed or deemed to be forcible or unlawful
entry into or a detainer of the Premises, or an eviction, partial eviction or
constructive eviction of Tenant from the Premises or any portion thereof, or
disturbance of Tenant's use or possession of the Premises, and shall not
relieve Tenant of its obligations hereunder.
ARTICLE VI.
General Provisions
Section 1.061 Assignment and Subletting. Tenant expressly covenants that it
shall not, by operation of law or otherwise, assign, encumber or mortgage this
Lease, or any part thereof, or permit the Premises to be used by others, except
as expressly permitted
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herein, without the prior written consent of Landlord in each instance, which
consent shall not be unreasonably withheld or delayed. Any attempt by Tenant
to assign, encumber or mortgage this Lease shall be null and void. The consent
by Landlord to any assignment, mortgage, encumbrance, or use of the Premises by
others shall not constitute a waiver of Landlord's right to withhold its
consent to any other assignment, mortgage, encumbrance or use by others of the
Premises.
If Landlord shall consent to an assignment pursuant to a request from Tenant,
Tenant shall cause to be executed by its assignee or sublessee an agreement to
perform faithfully and to assume and be bound by all of the terms, covenants,
conditions, provisions and agreements of this Lease for the period covered by
the assignment to the extent of the space assigned.
Further, Tenant may sublease all or a portion of the Premises to third parties
without the prior written consent of Landlord; provided, however, that Tenant
shall cause to be executed by its sublessee(s) an agreement that the sublease
is expressly subject to the terms and conditions of this Lease, that the
sublessee shall be bound by all of the terms, covenants, conditions, provisions
and agreements of this Lease for the period covered by the sublease, and that
Landlord may, in its discretion, pursue all remedies herein provided against
sublessee, Tenant or both, jointly or severally.
Section 1.062 Eminent Domain. If during the Term all of the Premises shall be
taken for any public or quasi public use under any statute or by the right of
eminent domain, or purchased under threat of such taking, this Lease shall
automatically terminate on the date on which the condemning authority takes
possession of the Premises ("Date of Such Taking").
If during the Term only part of the Premises is taken or purchased as set out
in this Section 6.02, and if in the reasonable opinion of Landlord substantial
alteration or reconstruction of the Premises is necessary or desirable as a
result thereof, Landlord shall have the right to terminate this Lease by giving
the Tenant at least thirty (30) days' written notice of such termination, and
this Lease shall terminate upon the date specified in such notice.
Notwithstanding the foregoing, if more than one-third (1/3) of the number of
square feet in the Premises is included in such taking or purchase, Tenant
shall have the right to terminate this Lease by giving Landlord at least thirty
(3O) days' written notice thereof, and this Lease shall terminate upon the Date
of Such Taking.
If either party exercises its right of termination hereunder, this Lease shall
terminate on the date as provided above; provided, however, that no termination
pursuant to notice hereunder may occur later than sixty (60) days after the
Date of Such Taking.
On any such date of termination under this Section 6.02, Tenant shall
immediately surrender to Landlord the Premises and all interests therein under
this Lease. Landlord may re-enter and take possession of the Premises and
remove Tenant
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therefrom if necessary, and the Minimum Rent and other monies due shall abate
on the date of termination, except that if the date of the termination differs
from the Date of Such Taking, Minimum Rent and other charges shall abate on the
later date in respect of the portion taken. After such termination, and on
notice from Landlord stating the Minimum Rent and other monies then owing,
Tenant shall forthwith pay Landlord such amounts.
If any portion of the Premises (but less than the whole thereof) is so taken,
and no rights of termination herein conferred are timely exercised, the Term of
this Lease shall expire with respect to the portion so taken on the Date of
Such Taking. In such event the Minimum Rent and other charges payable
hereunder with respect to such portion so taken shall abate on such date, and
the Minimum Rent and other charges thereafter payable with respect to the
remainder not so taken shall be adjusted pro rata by Landlord in order to
account for the resulting reduction in the number of square feet in the
Premises.
Upon any such taking or purchase, Landlord shall be entitled to receive and
retain the entire award or consideration for the affected lands and
improvements, and Tenant shall not have nor advance any claim against Landlord
for the value of its property or its leasehold estate or the unexpired Term of
the Lease, or for costs of removal or relocation, or business interruption
expense or any other damages arising out of such taking or purchase. Nothing
herein shall give Landlord any interest in or preclude Tenant from seeking and
recovering for its own account from the condemning authority any award or
compensation attributable to the taking or purchase of Tenant's improvements,
chattels or trade fixtures, or the removal or relocation of its business. If
any such award made or compensation paid to either party specifically includes
any award or amount for the other, the party first receiving the same shall
promptly account therefor to the other.
Section 1.063 Events of Default. If during the Term any one or more of the
following acts or occurrences (any one of such occurrences or acts being
hereinafter called an "Event of Default") shall happen, Landlord may exercise
the rights set forth in Section 6.04 of this Lease or otherwise provided at law
or in equity:
(A) Tenant shall fail to pay any Minimum Rent, Additional Rent, or
other sums payable by Tenant under this Lease (or cure any other default
which is curable by the payment of money) as and when the same shall
become due and payable; or
(B) Tenant shall default in the performance of or compliance with
any of the other covenants, agreements, terms or conditions of this
Lease to be performed by Tenant (other than any default curable by
payment of money), and such default shall continue for a period of
fifteen (15) days after written notice thereof from Landlord to Tenant,
or, in the case of a default which cannot with due diligence be cured
within fifteen (15) days, Tenant shall fail to proceed promptly after
the giving of such notice and with all due diligence cure such default;
or
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(C) Tenant shall be become insolvent or unable to pay its debts as
they become due, or Tenant notifies Landlord that it anticipates either
condition; Tenant takes any action to, or notifies Landlord that Tenant
intends to file a petition under any section or chapter of the United
States Bankruptcy Code, as amended from time to time, or under any
similar law or statute of the United States or any state thereof; or a
petition shall be filed against Tenant under any such statute, or Tenant
or any creditor of Tenant notifies Landlord that it knows that such
petition will be filed; or a receiver or other custodian shall be
appointed for Tenant, whether or not the same shall relate to their
interests in the leasehold; or
(D) If, within sixty (60) days after the filing of an involuntary
petition in bankruptcy against Tenant or the commencement of any
proceeding against Tenant seeking any reorganization, composition,
readjustment or similar relief under any law, such proceeding shall not
have been dismissed; or if, within sixty (60) days after the
appointment, without consent or acquiescence of Tenant, of any trustee,
receiver or liquidator of Tenant, of all or any substantial part of the
properties of Tenant or of all or any part of the Premises, such
appointment shall not have been vacated or stayed on appeal or
otherwise; or if, within sixty (60) days after the expiration of any
such stay, such appointment shall not have been vacated, or if within
sixty (60) days after the taking of possession, without the consent or
acquiescence of Tenant, by any governmental office or agency pursuant to
statutory authority for the dissolution or liquidation of Tenant, such
taking shall not have been vacated or stayed on appeal or otherwise; or
(E) If the Premises shall be abandoned by Tenant, as shown by
failure to occupy the Premises, for a period of thirty (30) days; or
(F) If a tax lien or a mechanic's and/or materialmen's lien is filed
against any property of Tenant, or Tenant does or permits to be done
anything which creates a lien upon the Premises, and such lien is not
discharged as herein provided; or
(G) Tenant ceases to conduct business from the Premises.
Section 1.064 Remedies Upon Default. Upon the occurrence of any Event of
Default, Landlord shall have the option to pursue any one or more of the
following remedies without the notice or demand whatsoever:
(A) Give Tenant written notice of intent to terminate this Lease
on the date specified therein, whereupon Tenant's right to possession of
the Premises shall cease and this Lease, except as to Tenant's
liability, shall be terminated.
In the event this Lease is terminated in accordance with the provisions
of this Section 6.04(a), Tenant shall remain liable to Landlord for
damages in an amount equal to the rent and other sums which would have
been owing by
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Tenant hereunder for the balance of the term had this Lease not been
terminated, less the net proceeds, if any, of any reletting of the
Premises by Landlord subsequent to such termination, after deducting all
Landlord's reasonable expenses including, without limitation, all
repossession costs, brokerage commissions, legal expenses, attorneys'
fees, expenses of employees, alteration and repair costs and expenses of
preparation for such reletting. Landlord shall be entitled to collect
such damages from Tenant monthly on the days on which the rent and other
charges would have been payable hereunder if this Lease had not been
terminated. Alternatively, at the option of the Landlord, in the event
this Lease is so terminated, Landlord shall be entitled to recover
forthwith against Tenant as damages for loss of the bargain, and not as
a penalty, an aggregate sum, which at the time of such termination of
this Lease represents the excess, if any, of the aggregate of the rent
and all other charges payable by Tenant hereunder that would have
accrued for the balance of the term, discounted to the then present
value of such aggregate sum, plus that portion of any leasing commission
paid by Landlord for which is applicable to the unexpired Term, less the
amount of loss for such period that Tenant proves could be reasonably
avoided.
(B) Re-enter and take possession of the Premises or any part
thereof, and repossess the same as Landlord's former estate and expel
Tenant and those claiming through or under Tenant, and remove the
effects of both or either, without being deemed guilty of any manner of
trespass, and without prejudice to any remedies for arrears of rent or
Preceding breach of covenants or conditions.
Should Landlord elect to re-enter as provided in this Section 6.04(8) or
should Landlord take Possession Pursuant to legal Proceedings or
pursuant to any notice Provided for by law, Landlord may, from time to
time, without terminating this Lease, relet the Premises or any Part
thereof in Landlord's or Tenant's name, but for the account of Tenant,
for such term or terms (which may be greater or less than the Period
which would otherwise have constituted the balance of the Term of this
Lease, and on such conditions and upon other terms (which may include
concessions of free rent and alteration and repair of the Premises) as
Landlord, in its sole discretion, may determine, and Landlord may
collect and receive the rents therefor. Landlord shall in no way be
responsible or liable for any failure to relet the Premises, or any part
thereof, or for any failure to collect any rent due upon such
reletting. No such re-entry or taking possession of the Premises by
Landlord shall be construed as an election on Landlord's Part to
terminate this Lease unless a written notice of such intention be given
to Tenant. No notice from Landlord hereunder or under a forcible entry
and detainer statute or similar law constitutes an election by Landlord
to terminate this Lease unless such notice specifically so states.
Landlord reserves the right following any such re entry and/or reletting
to exercise its right to terminate this Lease by giving Tenant such
written notice, in which event the Lease will terminate as specified in
said notice.
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<PAGE> 17
In the event that Landlord does not elect to terminate this Lease but
takes possession as provided for in this Section 6.04(B), Tenant shall
pay to Landlord the rent and other charges as herein provided which
would be payable hereunder if such repossession had not occurred, less
the net proceeds, if any, of any reletting of the Premises after
deducting all Landlord's reasonable expenses including, without
limitation, all repossession costs, brokerage commissions, legal
expenses, attorneys' fees, expenses of employees, alteration and repair
costs and expenses of preparation for such reletting. Tenant shall pay
such rent and other sums to Landlord monthly on the days on which the
rent would have been payable hereunder if possession had not been
retaken.
No payments of money by Tenant to Landlord after the expiration or other
termination of the Term or after the giving of any such notice by Landlord to
Tenant shall reinstate or continue to extend the Term, or make ineffective any
notice given to Tenant prior to the payment of such money. After the service
of notice or the commencement of a suit, or after final judgment granting
Landlord possession of the Premises, Landlord may receive and collect any sums
due under the Lease, and the payment thereof shall not make ineffective any
notice, or in any manner affect any pending suit or any judgment theretofore
obtained.
Section 1.065 Damage by Fire or Other Casualty. If the Premises shall be
damaged by fire or other casualty not arising from the fault or negligence of
Tenant or its servants, agents, employees, invitees or licensees, except as
otherwise provided by this Section 6.05, the damages shall be repaired by and
at the expense of Landlord with reasonable promptness; provided always,
however, and upon the express condition that there are funds available to
Landlord from casualty insurance policy proceeds actually paid to and received
by Landlord for such repair work; and provided further that such duty to repair
by Landlord shall at all times be subject to obtaining all necessary government
approvals and subject to the approval and consent of the then mortgagee and the
willingness of such mortgagee to make the proceeds of casualty insurance
policies payable to such mortgagee available to Landlord for such purposes.
The Minimum Rent and other charges shall be equitably abated until such repairs
shall be made according to the part of the Premises which is usable by Tenant.
Tenant shall repair or replace its own improvements, furniture, trade fixtures
and equipment. Landlord shall not be liable for any delay caused by
governmental action, or lack thereof, shortages or unavailability of materials
and/or supplies, labor disputes, strikes, slowdowns, job actions, picketing,
secondary boycotts, fire or other casualty, delays in transportation, acts of
God, requests of any governmental agencies or authorities, acts of declared or
undeclared war, public disorder, riot, or civil commotion, or due to any cause
beyond the reasonable control of Landlord.
If the Premises are totally damaged or are rendered wholly untenantable by fire
or other casualty, or if Landlord's architect certifies that it cannot be
repaired within one hundred eighty (180) days of the casualty, or if Landlord
shall decide not to repair the same, or shall decide to demolish the Premises
or not to rebuild it, then Landlord shall,
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<PAGE> 18
within ninety (90) days after such fire or other casualty, give Tenant notice
of such decision, and thereupon the Term shall expire ten (10) days after such
notice is given, and Tenant shall vacate the Premises and surrender the same to
Landlord.
If Landlord does not substantially complete the repair and restoration of the
Premises within twelve (12) months from the date of the casualty (subject to
excusable delays), Tenant shall have the right to cancel and terminate this
Lease upon delivery of notice to Landlord delivered not less than thirty (30)
days prior to the expiration of the aforesaid twelve (12) month period.
Tenant waives the benefit of any statutes of the state allocating insurance
proceeds or requiring application thereof in specific ways or relieving Tenant
of rental obligations and agrees that Tenant will not be relieved of the
obligations to pay the Minimum Rent or any other charges in case of damage to
or destruction of the Premises, except as provided by this Lease.
Anything contained in this Lease to the contrary notwithstanding, Landlord
shall not obligated to expend any funds in connection with any repair or
restoration work in excess of the proceeds of insurance policy payments which
are made available to Landlord by insurance carriers and by any mortgagee of
the Premises. Landlord's obligations in connection with such repair and/or
restoration work shall and are hereby strictly limited to the replacement of
the basic building area as demised by Landlord to Tenant as of the Commencement
Date of the Term hereof and in no event shall Landlord be obligated to replace,
repair or restore any improvements to the Premises or alterations thereof
installed therein by or on behalf of Tenant, nor shall Landlord be obligated in
any event whatsoever to replace, repair, or restore Tenant's leasehold
improvements, personal property, furniture, fixtures, equipment or the like.
Tenant shall give immediate written notice to Landlord of any damage caused to
the Premises by fire or other casualty.
Section 1.066 Subrogation. Notwithstanding anything to the contrary contained
herein, Landlord and Tenant hereby mutually waive and release their respective
rights of recovery against one another and their officers, agents and employees
for any damage to real or personal property, including resulting loss of use,
interruption of business, and other expenses occurring as a result of the use
or occupancy of the Premises to the extent of insurance coverage which would be
included in a standard "all-risk" or special form policy of property insurance.
Landlord and Tenant agree that all policies of insurance obtained by them
pursuant to the terms of this Lease shall contain provisions or endorsements
thereto waiving the insurer's rights of subrogation with respect to claims
against the other, and, unless the policies permit waiver of subrogation
without notice to the insurer, each shall notify its insurance companies of the
existence of the waiver and indemnity provisions set forth in this Lease.
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ARTICLE VII.
Miscellaneous Provisions
Section 1.071 Administrative Service Charges. Tenant recognizes that its
failure to timely pay all of its obligations set forth in this Lease will
result in and cause monetary losses to Landlord above and beyond the amount
unpaid by Tenant. Therefore, in addition to all other remedies provided
Landlord, any and all payments, whether for rentals due or other charges,
adjustments or assessments, which shall remain unpaid by the tenth (10th) day
of the month in which such payments shall be due, shall be subject to an
administrative service charge of fifteen percent (15%) of the total amount then
due.
Section 1.072 Late Charges. In addition to all other remedies provided
Landlord, and in addition to the administrative service charge herein
described, all amounts which shall remain unpaid ten (10) days after their due
dates shall bear interest at the rate of ten percent (10%).
Section 1.073 Holding Over. If, with Landlord's written consent, Tenant remains
in possession of the Premises after the expiration or other termination of the
Term, Tenant shall be deemed to be occupying the Premises on a month-to-month
tenancy only, at a monthly rental equal to one and ten hundredths (1.10) times
the last Minimum Rent and other charges payable hereunder or such other rental
as is stated in such written consent, and such month-to-month tenancy may be
terminated by Landlord or Tenant on the last day of any calendar month by
delivery of at least ten (10) days' advance notice of termination to the other.
If, without Landlord's written consent, Tenant remains in possession of the
Premises after the expiration or other termination of the Term, Tenant shall be
deemed to be occupying the Premises upon a tenancy at will only, at a monthly
rental equal to one and one-half (1.5) times the last Minimum Rent and other
charges payable hereunder. Such tenancy at will may be terminated by Landlord
at any time by notice of termination to Tenant, or by Tenant on the last day of
any calendar month by at least three (3) days' advance notice of termination to
Landlord.
Section 1.074 Notices. Any notices and demands required or permitted to be
given by either party to the other pursuant to this Lease shall be in writing
and shall be sent by United States mail, with proper postage prepaid, certified
mail, return receipt requested, addressed to the parties at the respective
addresses set out below or delivered in person to same:
Landlord: Tenant:
Nagrom, L.L.C. Megabank Financial Corporation
ATTN: Roger Morgan ATTN: Thomas R. Kowalski
7879 South Garfield Way 8100 East Arapahoe Road
Littleton, CO 80122 Englewood, CO 80112
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<PAGE> 20
Either party hereto may change its payment and notice addresses at any time by
giving notice thereof to the other party in accordance with this Section 7.04.
The foregoing notice provisions shall in no way prohibit notice from being
given as provided in the Rules of Civil Procedure of the state of Colorado, as
the same may be amended from time to time
Section 1.075 Venue. All monetary obligations of Landlord and Tenant
(including, without limitation, any monetary obligation of Landlord or Tenant
for any breach of the respective covenants, duties, or obligations of Landlord
or Tenant hereunder) are performable exclusively in Arapahoe County, Colorado,
and Landlord and Tenant agree that the venue for all actions or causes of
actions relating to this Lease shall be in such county. Each party waives all
rights to claim that venue for any such action or cause of action lies in any
place other than said county.
Section 1.076 Statutory Remedies Waiver. Tenant hereby waives and releases each
and every right it may now or in the future have under civil statutes,
including, but not limited to, any right Tenant may have had to a lien against
Landlord's property or rents due under the Lease in the event of a breach by
Landlord of the terms of this Lease.
Section 1.077 Brokerage. Each of the parties hereto represents and warrants to
the other that it has dealt with no broker, and only with each other and their
direct employees, in connection with the negotiation or execution of this
Lease. Each of the parties agrees to indemnify and hold the other harmless
from and against any and all damages, losses, costs, or expenses including,
without limitation, all attorneys' fees and disbursements incurred by reason of
any claim of or liability to any other broker or other person claiming by,
through or under each of them, respectively, for commissions or other
compensation or charges with respect to the negotiation, execution and delivery
of this Lease.
Section 1.078 Jury Trial Waiver. Landlord and Tenant do hereby waive trial by
jury in any action, proceeding or counterclaim brought by either of the Parties
against the other on any matter whatsoever arising out of or in any connection
with this Lease, the relationship of Landlord and Tenant, Tenant's use or
occupancy of the Premises, and/or any claim for injury or damage, or any
emergency or statutory remedy.
Section 1.079 Force Majeure. Any obligation of Landlord (excluding financial
obligations) which is delayed or not performed due to acts of God, strike,
riot, shortages of labor or materials, war (whether declared or undeclared),
governmental laws, regulations or restrictions, governmental action, or lack
thereof, or any other causes of any kind whatsoever which are beyond Landlord's
reasonable control, shall not constitute a default hereunder and shall be
performed within a reasonable time after the end of such cause for delay or
nonperformance.
Section 7.10 Severability. If any term or provision of this Lease or the
application
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<PAGE> 21
thereof to any person or circumstances shall, to any extent, be illegal,
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those to which it
is held invalid or unenforceable, shall not be affected thereby, and all other
terms and provisions of the Lease shall be valid and enforced to the fullest
extent permitted by law.
Section 7.11 No Set-Off. This Lease shall be construed as though the covenants
herein between Landlord and Tenant are independent, and not dependent, and
Tenant shall not be entitled to any set-off of the rent or other amounts owing
hereunder against Landlord if Landlord fails to perform its obligations set
forth herein; provided, however, the foregoing shall in no way impair the right
of Tenant to commence a separate action against Landlord for any violation by
Landlord of the provisions hereof so long as notice is first given to Landlord
and any holder of a mortgage or a deed of trust then covering the Premises or
any portion thereof and a reasonable opportunity is granted to Landlord and
such holder to correct such violation.
Section 7.12 Relationship of Parties. Nothing contained in this Lease shall
create any relationship between the parties hereto other than that of Landlord
and Tenant, and it is acknowledged and agreed that Landlord in no way or for
any purpose becomes a partner of Tenant in the conduct of its business, or a
joint venture or a member of a joint or common enterprise with Tenant.
Section 7.13 Successors Bound. Except as specifically provided herein, the
covenants, terms, and conditions contained in this Lease shall apply to and
bind the heirs, successors, executors, administrators and assigns of the
Parties.
Section 7.14 Interpretation.
(A) Whenever in this Lease any words of obligation or duty are
used, such words or expressions shall have the same force and effect as
though made in the form of covenants.
(B) Words of any gender used in this Lease shall be held to
include any other gender, and words in the singular number shall be held
to include the plural, when the sense requires.
(C) All pronouns and any variances thereof shall be deemed to
refer to the neuter, masculine, feminine, singular or plural as the
identity of the Tenant requires.
(D) This Lease shall be strictly construed neither against Landlord
nor Tenant. No remedy or election given by any provision in this Lease
shall be deemed exclusive unless so indicated, but each shall, wherever
possible, be cumulative with all other remedies in law or equity as
otherwise specifically provided. Each provision hereof shall be deemed
both a covenant and a condition and shall run with the land.
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(E) If, and to the extent that, any of the provisions of any
amendment, modification or rider to this Lease conflict or are otherwise
inconsistent with any of the preceding provisions of this Lease, whether
or not such inconsistency is expressly noted, the Provisions of such
amendment, modification or rider shall prevail.
(F) Tenant agrees that all of Tenant's covenants and agreements
herein contained providing for the payment of money and Tenant's
covenant to remove mechanics' liens shall be deemed conditions as well
as covenants, and that if default be made in any such covenants,
Landlord shall have all of the rights provided for herein.
(G) The Parties mutually agree that the headings and captions
contained in this Lease are inserted for convenience of reference only,
and are not to be deemed part of or to be used in construing this Lease.
(H) Landlord has made no representations or promises with respect
to the Premises except as expressly contained herein. Tenant has
inspected the Premises and agrees to take the same in an "as-is"
condition. Landlord shall have no obligation to do any work in and to
the Premises to render them ready for occupancy and use by Tenant.
Section 7.15 Time of the Essence. Time is of the essence hereof and each party
shall perform its obligations and conditions hereunder within the time hereby
required.
Section 7.16 Easements. The Landlord shall have the right to grant any
easements on, over, under and above the Premises for such purposes as Landlord
determines, provided that such easements will not materially interfere with
Tenant's business.
Section 7.17 Short Form Lease. Tenant shall not record this Lease or a
memorandum hereof without the prior written consent of Landlord. Upon
Landlord's request, Tenant agrees to execute and acknowledge a short form lease
for recordation indicating the names and addresses of Landlord and Tenant, a
description of the Premises, the Term of the Lease, the Commencement and
Termination Dates, and options for renewal, if any, but omitting rent and other
terms of this Lease.
Section 7.18 Assignment of Rents. Leases. Tenant agrees to an assignment by
Landlord of rents and of the Landlord's interest in this Lease to a mortgagee,
if the same be made by Landlord.
Tenant further agrees that, in the event of such assignment, Tenant shall give
to said mortgagee a copy of any request for performance by Landlord or notice
of default by Landlord; and, in the event Landlord fails to cure such default,
Tenant shall give such mortgagee a reasonable period, commencing on the last
day on which Landlord could cure such default, in which to cure same.
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Section 7.19 Intent of the Parties - Net Lease. It is the intent of the
parties hereto that this Lease be a Net Lease with Landlord incurring no
obligation, monetary or otherwise, which is not specifically and expressly
provided for herein.
Section 7.20 Environmental Provisions.
(A) Covenants and Agreements. Tenant covenants and agrees from the
date hereof and so long as this Lease shall remain in effect not to
cause or permit the presence, use, generation, release, discharge,
storage, disposal or transportation of any Hazardous Materials (as
hereinafter defined) on, under, in, about, to, or from the Premises by
Tenant, Tenant's agents, representatives, employees, contractors,
guests, licensees or invitees, except for the storage and dispensing of
petroleum products incident to Tenant's use of the Premises as described
in Section 1.05 above. Notwithstanding the foregoing, Tenant hereby
covenants and agrees to promptly remove from the Premises, any Hazardous
Materials discovered thereon which have been used, discharged, disposed
of or stored thereon by Tenant or Tenant's agents, representatives,
employees, contractors, guests, licensees or invitees, and to comply in
all respects with any and all federal, state, and local governmental
laws, codes, ordinances, and regulations governing such removal and
disposal, whether now in effect or hereafter enacted, with title to all
such Hazardous Materials to remain, and be stored or disposed of, in
Tenant's name.
As used herein, the term "Hazardous Materials" shall include, without
limitation, asbestos or any substance containing asbestos and deemed
hazardous under any Hazardous Material Law (defined below), the group of
organic compounds known as polychlorinated biphenyls, flammable
explosives, radioactive materials, chemicals known to cause cancer or
reproductive toxicity, pollutants, effluents, contaminants, emissions or
related materials and any items included in the definition of hazardous
toxic waste, materials or substances under any law relating to
environmental conditions and industrial hygiene, whether now in effect
or hereafter enacted, including, without limitation, the Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Sec.6901 et
seq., the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), 42 U.S.C. Sec.9601-9657, as amended by
the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the
Hazardous Materials Transportation Act, 49 U.S.C. Sec.6901 et seq., the
Federal Water Pollution Act, 33 U.S.C. Sec.7401, et seq., the Toxic
Substances Control Act, 15 U.S.C. Sec.2601-2629, the Safe Drinking Water
Act, 42 U.S.C. Sec.300f-300j, and all similar federal, state and local
environmental statutes, ordinances, and the regulations, orders, decrees
now or hereafter promulgated thereunder (collectively, the "Hazardous
Material Law").
(B) Environmental Indemnification. Tenant agrees to indemnify and
forever hold harmless Landlord, its agents, successors, and assigns, and
Landlord's
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mortgagee(s), as their interests may appear, from all claims, losses,
damages, expenses and costs, including, but not limited to, attorneys'
fees and cleanup costs, incurred by reason of Tenant's use, storage,
maintenance or removal of Hazardous Materials in, on, or about the
Premises, or any part thereof Landlord agrees to indemnify and forever
hold harmless Tenant, its successors and assigns, from all claims,
losses, damages, expenses and costs, including, but not limited to,
attorneys' fees and cleanup costs, incurred by reason of Landlord's use,
storage, maintenance or removal of Hazardous Materials in, on, or about
the Premises or any part thereof.
(C) Remedial Work. In the event any investigation or monitoring of
site conditions or any clean-up, containment, restoration, removal, or
other remedial work (collectively, the "Remedial Work") is required
under any applicable federal, state or local law or regulation, by any
judicial order, or by any governmental entity, or in order to comply
with any agreements affecting the Premises because of, or in connection
with, any occurrence or event described in subparagraph 7.21(A) above,
Tenant shall perform or cause to be performed the Remedial Work in
compliance with such law, regulation, order or agreement. All Remedial
Work shall be performed by one or more contractors, selected by Landlord
and under the supervision of a consulting engineer selected by Landlord
in accordance with the remediation plan promulgated by an environmental
consulting firm. In the event Tenant shall fail to timely commence, or
cause to be commenced or fail to diligently prosecute to completion,
such Remedial Work, Landlord may, but shall not be required to, cause
such Remedial Work to be performed, and all costs and expenses thereof,
or incurred in connection therewith shall be costs within the meaning of
subparagraph 7.21(B) above. All such costs shall be due and payable upon
demand by Landlord.
(D) Notice of Claim. Tenant shall give notice to Landlord of any
claim, action, administrative proceeding (including, without limitation,
informal proceedings), or other demand by any governmental agency or
other third party involving Hazardous Materials, costs and/or Remedial
Work at the time such claim or other demand first becomes known to
Tenant. Receipt of any such notice shall not be deemed to create any
obligation on Landlord to defend or otherwise respond to any claim or
demand
(E) Survival. The provisions of this Section 7.21 shall be in
addition to any other obligations and liability Tenant may have to
Landlord at law or equity and shall expressly survive the expiration of
the Term or other termination of this Lease.
Section 7.21 Status Statement. Upon written request by Landlord, Tenant
hereby agrees to deliver within fifteen (15) days after such request, a
certificate to Landlord or to any proposed mortgagee or purchaser as designated
by Landlord, in the form supplied, stating (if such be the case) that:
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(I) This Lease is unmodified and in full force and effect, or if
there have been any modifications that this Lease is in full force and
effect as modified and identify the modification agreements, or if this
Lease is not in full force and effect, the certificate shall so state;
(J) The Commencement Date of the Term and the Termination Date and
the terms of any extension options Tenant has, if any;
(K) The date to which the rent has been paid under this Lease;
(L) The amount of the security deposit, if any, being held by
Landlord;
(M) Whether or not there exists any default by Tenant in payment of
any rent or other sum of money under this Lease;
(N) Whether or not there exists any default by Landlord or Tenant
under this Lease with respect to which a notice of default has been
served, and if there is any such default, specifying the nature and
extent thereof; and
(O) Any other information reasonably requested by Landlord or its
mortgagee or purchaser.
In the event that Tenant should fail or refuse to sign a certificate in
accordance herewith within fifteen (15) days following written request by
Landlord, the Landlord shall have the authority to sign such a certificate as
Tenant's attorney-in-fact for limited purpose, it being stipulated that such
power of attorney is coupled with an interest in Landlord and is irrevocable.
Section 7.22 Definition of Lease. "Lease" or "this Lease" shall mean and
consist of this Lease and the following Exhibits:
Exhibit A: Legal Description (Page 1)
Site Plan (Page 2)
Exhibit B: Tenant Acceptance Letter
Tenant: Landlord:
MEGABANK FINANCIAL CORPORATION NAGRAM, L.L.C.,
A,COLORADO CORPORATION A COLORADO LIMITED
LIABILITY COMPANY
By: /s/ Thomas R. Kowalski, By: /s/ Roger Morgan
----------------------- -----------------------
Thomas R. Kowalski, President Its Managing Member
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EXHIBIT A
LEGAL DESCRIPTION
<PAGE> 27
EXHIBIT A
SITE PLAN
<PAGE> 28
EXHIBIT B
TENANT ACCEPTANCE LETTER
Lease Dated: Effective December 29, 1994
Landlord: NAGROM, L.L.C., A COLORADO LIMITED LIABILITY COMPANY
Tenant: MEGABANK FINANCIAL CORPORATION, A COLORADO
CORPORATION
Premises: 8100 East Arapahoe Road, Englewood, Colorado 80112
The undersigned, Tenant under the above described Lease, confirms, as of the
date hereof, the following;
(1) That it is in full and complete possession of the Premises, such
possession having been delivered by the Landlord and been accepted by
the undersigned on December 29, 1994.
(2) That the Premises are made available for use of the undersigned, its
employees and invitees.
(3) That all duties of an inducement nature required of Landlord have been
fulfilled.
(4) That said Lease is in full force and effect; that there are no
existing defaults on the part of the Landlord under the terms thereof
except as follows (if none, so indicate): None.
(5) That no rents have been prepaid except as provided in Lease; that the
undersigned does not now have or hold any claims against Landlord
which might set off or work as a credit against future accruing rents.
(6) That rents provided in said Lease commence to accrue the 29th day of
December, 1994 and such date shall be the Commencement Date.
(7) That the Term of said Lease is one hundred twenty (120) months and the
Termination Date is the 31st day of December, 2004.
Tenant:
MEGABANK FINANCIAL CORPORATION
A COLORADO CORPORATION
By: /s/ Thomas R. Kowalski
-----------------------
Thomas R. Kowalski, President
<PAGE> 1
EXHIBIT 10.3
FEDERAL HOME
LOAN BANK
OF TOPEKA LINE OF CREDIT APPLICATION
- - ---------------------------------------------------------------------------
Institution: MEGABANK OF ARAPAHOE
--------------------------------------------------------------
Address: 8100 E. ARAPAHOE RD
--------------------------------------------------------
ENGLEWOOD, CO 80112
--------------------------------------------------------
The above Institution hereby applies to the Federal Home Loan Bank of Topeka
(Bank) for : (check one)
____a Line of Credit
____an increase to existing Line of Credit
In the amount of $ 7,000.000*
This Line of Credit, including the making of draws and amounts borrowed
hereunder, is subject to and governed by the Advance, Pledge and Security
Agreement between the Bank and the Institution and the Bank's credit and
collateral policies. All requests for draws or repayment must be conducted
through the Credit Department. Failure to contact the Credit Department could
result in the request not being processed.
A request for a draw made after the cutoff time established by the Bank may be
denied if, in the sole opinion of the Bank, insufficient funds are available to
fully meet the draw. Notwithstanding this Line of Credit, the Bank may refuse
to honor a draw if the Institution would not be in compliance with the Bank's
credit and collateral policies immediately after the draw was honored.
Amounts outstanding under this Line of Credit shall bear interest at the line
of credit rate established by the Bank from time to time.
For institutions with total assets equal to or less than $1 billion, the
maximum line is 20 percent of total assets. The maximum line is 10 percent of
total assets for institutions with total assets greater than $1 billion. This
limit is also subject to the regulatory requirement that total advances cannot
exceed a stockholder's total residential housing finance assets for
non-qualified stockholders.
The undersigned representative has read and understands the credit and
collateral policies of the Bank and certifies this Institution to be in full
compliance with the policies.
<PAGE> 2
Furthermore, the Institution agrees to maintain full compliance with the
policies, including any revisions and changes to same, while any debt extended
under this line is outstanding.
/s/ Jean L. Burr, SVP.
- - ----------------------
Authorized Signature
JEAN L BURR, SR VICE PRESIDENT/CASHIER
Name and Title
Date: 10/20/97
-----------
2 Townsite Plaza
P.O Box 176
Topeka, Kansas 66601-0176
913/233-0507
Fax: 913/234-1797
2
<PAGE> 3
FEDERAL HOMELOAN BANK
OF TOPEKA
- - ------------------------------------------------------------------------------
ADVANCE, PLEDGE AND SECURITY AGREEMENT
(BLANKET PLEDGE)
This Advance, Pledge and Security Agreement (Agreement) is made as of OCTOBER
26, 1995, between: The Federal Home Loan Bank of Topeka (Bank) and MEGABANK OF
ARAPAHOE (Institution), Which has its principal office at 8100 E ARAPAHOE ROAD,
ENGLEWOOD, CO 80112.
WHEREAS, from time to time the Institution desires to apply for extensions of
credit from the Bank in accordance with the terms and conditions of this
Agreement; and
WHEREAS, the Bank requires that all existing indebtedness of the Institution to
the Bank and all extensions of credit by the Bank to the Institution pursuant
to this Agreement be secured pursuant to this Agreement, and the Institution is
willing to provide such security;
NOW, THEREFORE, the Institution and the Bank agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS
The following terms shall have the following meanings:
(A) "Act" means the Federal Home Loan Bank Act, as amended.
(B) "Advance" or "Advances" means any and all loans or other
extensions of credit, including all Commitments now or hereafter
granted by the Bank to, on behalf of or for the account of the
Institution, including all loans or extensions of credit by the Bank
to the Institution prior to the date hereof.
(C) "Capital Stock" means all of the capital stock of the Bank and
all payments that have been or hereafter are made on account of any
subscription for such capital stock and all unpaid dividends on such
capital stock.
(D) "Collateral" means all property, including the proceeds
thereof previously assigned, transferred or pledged to the Bank by the
Institution as Collateral for Advances and all property assigned,
transferred or pledged to the Bank pursuant to Section 3.1 of the
Agreement or otherwise.
(E) "Commitment" or "Commitments" means any and all agreements
under which the Bank is obligated to make Advances to the Institution
or payments
3
<PAGE> 4
on behalf of or for the account of the Institution, including without
limitation Swap Transactions, letters of credit, firm commitments,
guarantees or other arrangements intended to facilitate transactions
between the Institution and third parties (but excluding any
obligations that the Bank may now or hereafter have to honor such as
items or transfer orders under a depository or similar agreement
between the Institution and the Bank), and irrespective of whether the
Bank's obligation under such agreement is contingent upon the
occurrence or nonoccurrence of any condition.
(F) "Confirmation of Advance" means a written or machine-readable
electronic transmission issued by the Bank from time to time
confirming an Advance.
(G) "Eligible Collateral" means Collateral, other than Capital
Stock, which: (1) qualifies as security for Advances under the terms
and conditions of the Act and the Regulations and satisfies the
requirements that may be established by the Bank from time to time and
(2) is owned by the Institution free and clear of any liens,
encumbrances or other interests other than the interest of the Bank
hereunder.
(H) "Indebtedness" means all indebtedness of the Institution to
the Bank, whether now outstanding or hereafter incurred, including all
Advances and any other sums owed by the Institution to the Bank
pursuant to any provision hereof, and all other obligations and
liabilities of the Institution to the Bank.
(I) "Lending Value" means the value that the Bank shall from time
to time, in its sole discretion, ascribe to the various types of
Collateral.
(J) "Mortgage Collateral" means that part of Perfected Collateral
that is a mortgage or deed of trust on real property and any note,
bond or other instrument evidencing any loan secured thereby and any
endorsement or assignments thereof to the Institution and all
ancillary security agreements, policies and certificates of insurance
or guarantees, evidences of recordation, applications, underwriting
materials, appraisals, approvals, permits, notices, opinions of
counsel, loan servicing data and all other electronically stored and
written records or materials relating to such loans.
(K) "Perfected Collateral" means all Collateral, including without
limitation Eligible Collateral in which the Bank has attempted in good
faith to perfect its security interest by giving constructive notice
to third parties through taking possession of the Collateral, filing a
financing statement describing the Collateral, of otherwise, and all
deposit accounts maintained by the Institution with the Bank.
(L) "Regulations" means the regulations of the Federal Housing
Finance Board or its successor, as amended.
(M) "Required Collateral Amount" means the aggregate dollar amount
that the
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Bank may specify from time to time with respect to each Advance and
any other obligation or liability of the Institution to the Bank. The
Bank may increase or decrease the Required Collateral Amount at any
time.
(N) "Swap Transaction" or "Swap Transactions" means any and all
interest rate swaps, interest rate caps, floors or collars, currency
exchange transactions or similar transactions entered into between the
Bank and the Institution.
ARTICLE II
ADVANCES
SECTION 2.1 APPLICATION AND PROCEDURES FOR OBTAINING ADVANCES
Periodically, the Institution may apply to the Bank for Advances in accordance
with the procedures established by the Bank from time to time. Each Advance
shall be evidenced by a Confirmation of Advance or other writing issued by the
Bank. Unless otherwise agreed to in writing by the Bank, each Advance shall be
made by crediting a demand deposit account of the Institution with the Bank.
SECTION 2.2 ESTOPPEL
Failure of the Institution to deliver written notice to the Bank specifying any
disputed term or condition of an Advance within seven (7) business days after
the Bank mails by first-class mail a Confirmation of Advance to the Institution
shall constitute the agreement and acknowledgment by the Institution that the
terms and conditions of the Advance are valid and are those that the
Institution requested and by which the Institution agreed to be bound. The
Institution shall thereafter be estopped from asserting any claim or defense
with respect to the repayment of such Advance and all interest, fees and other
charges thereon or in connection therewith.
SECTION 2.3 RIGHT OF BANK TO MAKE ADVANCES WITH RESPECT TO OUTSTANDING
COMMITMENTS
(A) In the event that one or more Commitments are outstanding at
the time of an Event of Default, as such term is defined in Section
4.1, the Bank may at its option make an Advance by crediting a special
account of the Institution with the Bank in an amount equal to the
outstanding Commitments. The Bank shall have a first priority
perfected security interest in any such special account, and amounts
credited to such special account may not be withdrawn by the
Institution for so long as there shall be outstanding Commitments.
The funds in such special account shall be utilized by the Bank for
the purpose of satisfying the Bank's obligations under the
Commitments. When all such obligations have expired or been
satisfied, the Bank shall disburse the balance, if any, in such
account first to the satisfaction of any amounts then due and owing by
the Institution to the Bank and then to the Institution or its
successors in interest.
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Advances made pursuant to this section shall be payable on demand and
shall bear interest from the date the same shall be made until paid at
the rate in effect and being charged by the Bank from time to time on
the Line of Credit program then being offered by the Bank.
(B) The Bank reserves the right to cancel any unfunded portion of
a Commitment at any time an Event of Default shall have occurred or
exist. In the event of cancellation, all or part of the commitment
fee will be refunded. The amount refunded shall be in equal proportion
to the number of days remaining in the commitment period on the date
of such cancellation.
SECTION 2.4 INTEREST
The Institution agrees to pay interest on each Advance at the rate per annum
provided in the Confirmation and Advance pertaining thereto in the Bank's
Credit Policy for such type of Advance and as otherwise specified herein.
Accrued interest on each Advance shall be due and payable at the times
specified in the Bank's Credit Policy, Confirmation of Advance or as otherwise
specified in writing by the Bank. Such payment shall be made in the form of
immediately available funds at the office of the Bank in Topeka, Kansas, or at
such other place as the Bank or its successor or permitted assignee may from
time to time appoint in writing.
ARTICLE III
SECURITY AGREEMENT
SECTION 3.1 BLANKET PLEDGE; REQUIRED COLLATERAL AMOUNT
(A) As security for all present and future Indebtedness, the
Institution hereby assigns, transfers and pledges to the Bank, and
grants to the Bank a security interest in, all property now or
hereafter owned by the Institution including without limitation the
following types of property: (1) Capital Stock; (2) instruments
(including without limitation any note or other instrument evidencing
a debt and any mortgage, deed of trust, title or document securing
it); (3) securities including without limitation mortgage-backed
securities, share certificates or other participation interests in any
securities trust and mortgage loan participation certificates; (4)
chattel paper; (5) choses in action; (6) general intangibles; (7)
certificates of deposit; (8) deposit accounts maintained by the
Institution with the Bank; and (9) the proceeds of any of the
foregoing.
(B) The Institution shall at all times maintain an amount of
Eligible Collateral that has a Lending Value at least equal to the
Required Collateral Amount applicable to the Institution.
(C) While the Institution may, except as provided below, retain
the documents evidencing any Collateral it has assigned to the Bank,
it is specifically understood and agreed that the holding of such
documents is for the benefit and subject to the direction and control
of the Bank.
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(D) The Bank grants to the Institution the right to use, commingle
and dispose of the Collateral and to collect, compromise and dispose
of the proceeds of the Collateral without being required to account
for the proceeds or account for the replacement of the Collateral, and
any transferee of such Collateral shall take free and clear of any
security or other interest granted to the Bank in Section 3.1 hereof,
subject only to the Institution's obligation to maintain the
Collateral as provided in Section 3.1(B); provide, however, that this
section shall not apply to Perfected Collateral.
SECTION 3.2 PERFECTION OF SECURITY INTEREST
(A) Immediately upon the Bank's written request, or immediately at
any time that the Institution becomes subject to any mandatory
Collateral perfection requirements that may be established in writing
by the Bank, and in either case from time to time thereafter, the
Institution shall take all actions as the Bank shall deem necessary or
appropriate to perfect the Bank's security interest in the Eligible
Collateral selected by the Institution. At a minimum, the Institution
shall provide the Bank as perfected security interest in an amount of
Eligible Collateral that has a Lending Value at all times at least
equal to the Required Collateral Amount applicable to the Institution.
(B) The Institution shall not assign, pledge, transfer, create any
security interest in, sell or otherwise dispose of any Perfected
Collateral without the written consent of the Bank.
(C) The Institution agrees to pay to the Bank upon demand such
fees and charges as may be assessed by the Bank to cover overhead and
other costs relating to the perfection of the Bank's security interest
in the Perfected Collateral (including without limitation the receipt,
holding and redelivery of Collateral and to reimburse the Bank upon
request for all recording fees) and other reasonable expenses,
disbursements and advances incurred or made by the Bank in connection
therewith (including the reasonable compensation and the expenses and
disbursements of any bailee that may be appointed by the Bank
hereunder and the agents and legal counsel of the Bank and of such
bailee). Any sums owed to the Bank under this section may be collected
by the Bank, at its option, by debiting a demand deposit account of
the Institution with the Bank.
(D) The form and sufficiency of all documents pertaining to the
Perfected Collateral shall be satisfactory to the Bank. Any
Collateral tendered by the Institution for perfection that is not
satisfactory to the Bank may be rejected by the Bank or may have a
value ascribed thereto that shall be less than the value normally
ascribed thereto under the Bank's Collateral Policy, or as the Bank
may otherwise specify. The Bank may require, before any Advance is
made to the Institution, that the Institution make any or all
documents pertaining to the Perfected Collateral available to the Bank
for its inspection and approval.
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(E) The form and sufficiency of all documents pertaining to the
(Perfected Collateral shall be satisfactory to the Bank. Any
Collateral tendered by the Institution for perfection that is not
satisfactory to the Bank may be rejected by the Bank or may have a
value ascribed thereto that shall be less than the value normally
ascribed thereto under the Bank's Collateral Policy, or as the Bank
may otherwise specify. The Bank may require, before any Advance is
made to the Institution, that the Institution make any or all
documents pertaining to the Perfected Collateral available to the Bank
for its inspection and approval.
(F) The Bank may take such steps as it deems necessary to protect
its security position with respect to outstanding Advances, including
requiring the pledging and/or perfection of additional collateral
whether or not such additional collateral is Eligible Collateral.
SECTION 3.3 INSTITUTION'S REPRESENTATIONS AND WARRANTIES CONCERNING PERFECTED
COLLATERAL
The Institution represents and warrants to the Bank, as of the date hereof and
as of each date on which there shall be an outstanding Advance or Commitment,
as follows.
(A) The Institution owns and has title to the Perfected Collateral
and has the right and authority to grant a security interest to the
Bank in the Perfected Collateral and to subject all of the Perfected
Collateral to this Agreement.
(B) The information given from time to time by the Institution to
the Bank as to each item of Perfected Collateral is true, accurate and
complete in all material respects.
(C) All the Perfected Collateral that the Institution represents
to be Eligible Collateral meets the standards and requirements with
respect thereto from time to time established by the Bank, the Act and
the Regulations.
(D) The Institution has not conveyed or otherwise created, and
there does not otherwise exist, any participation interest or other
direct, indirect, legal or beneficial interest in any Perfected
Collateral in favor of anyone or any entity other than the Bank and
the Institution except as specifically communicated in writing to the
Bank.
(E) All signatories to any and all documents that constitute any
Perfected Collateral are and will be bound as they appear to be by
their signatures and have the requisite authority and capacity
(corporate or other) to execute such documents.
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(F) Except as may be approved in writing by the Bank, no account
debtor or other obligor owing any obligation to the Institution with
respect to any item of Perfected Collateral has or will have any
defenses, offsetting claims or other conditions affecting the right of
the Institution or the Bank to enforce the documents constituting any
such Perfected Collateral in accordance with the express terms of such
documents, and no defaults (or conditions that, with the passage of
time or the giving of notice or both, would constitute a default)
exist or will exist under any such documents.
(G) The real property (including any interest therein) that is the
subject of and/or included in the Perfected Collateral contains no
toxic or hazardous wastes or other toxic or hazardous substances the
presence of which would subject the Bank to any liability under
applicable state or federal law or local ordinance. The Institution
hereby agrees to indemnify and hold the Bank harmless against all
costs, claims, expenses, damages and liabilities resulting in any way
from the presence of toxic or hazardous wastes or substances on any
real property (including any interest therein) that is subject to or
included in any Perfected Collateral.
SECTION 3.4 RELEASE OF COLLATERAL
Upon receipt by the Bank of a written request from the Institution asking for
the release of any Perfected Collateral, the Bank shall promptly release to the
Institution, at the Institution's expense, the Perfected Collateral specified
in said written request. Notwithstanding anything to the contrary herein,
while an Event of Default hereunder shall have occurred and be continuing, or
at any time that the Bank's records indicate that such redelivery would reduce
the Lending Value of the Institution's Perfected Collateral below the Required
Collateral Amount, or at any time that the Bank reasonably and in good faith
deems itself insecure, the Bank may refuse a request for release.
SECTION 3.5 REPORTS, COLLATERAL AUDITS AND ACCESS
(A) The Institution shall provide the Bank with written periodic
reports containing such information on the Collateral as the Bank
shall require from time to time, including listings of mortgages and
securities, unpaid principal balances thereof and certifications
concerning the status of payments of mortgages and of taxes and
insurance on property securing mortgages. The Institution shall give
the Bank access at all reasonable times to Collateral in the
possession of the Institution and to the books and records of account
of the Institution relating to the Collateral for the purpose of
permitting the Bank to examine, verify or reconcile the Collateral and
the reports of the Institution to the Bank thereon.
(B) All Collateral and the satisfaction by the Institution of the
Required Collateral Amount shall be subject to audit and verification
by or on behalf of the Bank. Such audits and verifications may occur
without notice during
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the Institution's normal business hours or upon reasonable notice at
such other time as the Bank may reasonably request. The Institution
shall provide access to, and shall make adequate working facilities
available to, the representatives or agents of the Bank for purposes
of such audits and verifications. The Institution agrees to pay to the
Bank such reasonable fees and charges as may be assessed by the Bank
to cover overhead and other costs relating to such audits and
verifications.
(C) If the Lending Value of the Eligible Collateral owed by the
Institution shall at any time fall below the Required Collateral
Amount, the Institution shall immediately notify the Bank.
(D) The Institution shall furnish to the Bank, as often as the
Bank deems necessary, an audit report prepared by an external
independent auditor of the Institution in accordance with generally
accepted auditing standards and in such form as the Bank may require
certifying the accuracy of any or all information required to be given
to the Bank by the Institution under or with respect to this
Agreement.
(E) The Institution shall also furnish to the Bank, on an annual
basis, copies of its audited financial statement and management
letters.
SECTION 3.6 ADDITIONAL DOCUMENTATION
The Institution shall make, execute and deliver to the Bank such assignments,
listings, powers, financing statements or other instruments and documents with
respect to the Collateral and the Bank's security interest therein as the Bank
may require.
SECTION 3.7 BANK'S RESPONSIBILITY AS TO COLLATERAL
In the event that the Bank shall take possession of any Collateral hereunder,
the Bank's duty as to such Collateral shall be solely to use reasonable care in
the custody and preservation of the Collateral in its possession. This duty
shall not require the Bank to take any steps necessary to preserve rights
against prior parties or the duty to send notices, perform services or take any
action in connection with the management of the Collateral. The Bank shall not
have any responsibility or liability for the form, sufficiency, correctness,
genuineness or legal effect of any instrument or document constituting a part
of the Collateral, or any signature thereon or the description or
misdescription, or value of property represented, or purported to be
represented, by any such document or instrument. The Institution shall make
and maintain copies or microfilm of all Collateral delivered to the Bank. The
Institution agrees that any and all Collateral may be removed by the Bank from
the state or location where situated and may thereafter be dealt with by the
Bank as provided in this Agreement.
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3.8 BANK'S RIGHTS AS TO COLLATERAL; POWER OF ATTORNEY
At any time and at the expense of the Institution, the Bank may in its
discretion, before or after the occurrence of any Event of Default, in its own
name or in the name of its nominee or of the Institution, do any or all things
and take any and all actions that are pertinent to the protection of the Bank's
interest hereunder and, if such actions are subject to the laws of a state, are
lawful under the laws of the State of Kansas, including the following:
(A) Terminate any consent given hereunder;
(B) Notify obligors on any Collateral to make payments thereon
directly to the Bank;
(C) Endorse any Collateral that is in the Institution's name or
that has been endorsed by others to the Institution's name;
(D) Enter into any extension, compromise, settlement or other
agreement relating to or affecting any Collateral;
(E) Take any action the Institution is required to take or that is
otherwise necessary to: (1) sign and record a financing statement or
otherwise perfect a security interest in any or all of the Collateral;
or (2) to obtain, preserve, protect, enforce or collect the
Collateral;
(F) Take control of any funds or other proceeds generated by or
arising from the Collateral and use the same to reduce Indebtedness as
it becomes due; and
(G) Cause the Collateral to be transferred to the Bank's name or
the name of its nominee
The Institution hereby appoints the Bank as its true and lawful attorney, for
and on behalf of the Institution and In its name, place and stead, to prepare,
execute and record endorsements and assignments to the Bank of all or any item
of Collateral (including the identification and listing, by exhibit prepared by
the Bank or otherwise, of mortgage loans constituting such Collateral,) giving
or granting to the Bank, as such attorney, full power and authority to do or
perform every lawful act necessary or proper in connection therewith as fully
as the Institution could or might do. The Institution hereby ratifies and
confirms all that the Bank shall lawfully do or cause to be done by virtue of
this special power of attorney. This special power of attorney is granted for a
period commencing on the date hereof and continuing until the discharge of all
Indebtedness and all obligations of the Institution hereunder regardless of any
default by the Institution, is coupled with an interest and is irrevocable for
the period granted. As the Institution's true and lawful attorney-in-fact, the
Bank shall have no responsibility to take any steps necessary to preserve
rights against prior parties or the duty to send notices, perform services or
take any action in connection with the management of the
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Collateral. The Bank shall not have any responsibility or liability for the
form, sufficiency, correctness, genuineness or legal effect of any instrument
or document constituting a part of the Collateral, or any signature thereon or
the description or misdescription or value of property represented, or
purported to be represented, by any such document or instrument.
SECTION 3.9 SUBORDINATION OF OTHER LOANS OR COLLATERAL
The Institution hereby agrees that all mortgage notes that are part of the
Mortgage Collateral and any notes secured by personal property (personalty
notes) that become part of the Perfected Collateral shall have priority in
right and remedy over any claims, however evidenced, for other loans owed to
the Institution, whether made before or after the date of such mortgage notes
or personalty notes, that are secured by the mortgages or security agreements
securing such mortgage notes or personalty notes but are not part of the
collateral, and shall be satisfied out of the property covered by such
mortgages or security agreements before recourse to such property may be
obtained for the repayment of such other loans. To this end, the Institution
hereby subordinates the lien of such mortgages and security agreements with
respect to such other loans to the lien of such mortgages and security
agreements with respect to such mortgage and personalty notes. The Institution
further agrees to retain possession of any promissory notes evidencing such
other loans and not to pledge, assign or transfer the same, or any interest
therein, except that the same may be pledged to the Bank as part of the
Collateral.
SECTION 3.10 APPLICATION OF PAYMENTS
The Bank may, in its sole discretion, apply any payments by or recovery from
the Institution, which are received by the Bank without any designation from
the Institution (at the time of such payment or recovery) as to the intended
application thereof, at such time and in such manner and order of priority as
the Bank shall deem fit.
SECTION 3.11 COVENANTS AS TO MORTGAGE COLLATERAL
The Institution covenants and agrees as to any Mortgage Collateral:
(A) The Institution shall cause its borrowers to pay when due (or
shall pay if such borrowers are unable or cannot be made to pay) all
taxes and assessments on the real property and improvements that are
subject to the lien of the Mortgage Collateral. Unless otherwise
agreed by the Institution and the Bank, the Institution shall perform
its obligations as lender, secured party or otherwise under all loan
or other agreements pertaining to the Mortgage Collateral.
(B) In the event that the Institution discovers, through audit or
otherwise, exceptions to statements or representations previously made
to the Bank with respect to any of the Mortgage Collateral or any real
property or improvements covered by the lien thereof or any other
matter covered by this Agreement, the
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Institution shall immediately notify the Bank thereof in writing. The
Institution shall also immediately notify the Bank in writing of any
legal process levied against any such Mortgage Collateral or any other
event that affects the value of such Mortgage Collateral or any of the
rights, interests or remedies of the Bank in relation thereto.
(C) The Institution agrees to take any action necessary to
preserve rights against any prior or other parties (including without
limitation endorsers) on and any guarantors or sureties with respect
to any and all of the chattel paper, documents or instruments
constituting all or any part of the Mortgage Collateral and to
preserve redemption, conversion, warrant, preemptive or other rights
concerning all or any part of such Mortgage Collateral. The Bank may
take any action that in its reasonable judgment will assist in the
preservation of such rights. The Bank's failure to act hereunder shall
not relieve the Institution of the Institution's duties under this
section or in any way impair or discharge any Indebtedness or result
in any liability to the Institution on the part of the Bank. The Bank
shall have no duty to take any steps necessary to preserve the rights
of the Institution against prior or other parties or to initiate any
action to protect against the possibility of a decline in the market
value or other impairment of such Mortgage Collateral. Furthermore,
the Bank shall not be obligated to take any action with respect to
such Mortgage Collateral requested by the Institution unless such
request is made in writing, and the Bank determines, in its reasonable
discretion, that the requested action would not jeopardize the value
of such Mortgage Collateral as security for Indebtedness or otherwise
adversely affect any right or interest of the Bank.
(D) The Institution, if directed to do so by the Bank, shall
update and provide to the Bank schedules showing, with respect to any
Mortgage Collateral specified by the Bank, the results of any
reappraisal, any significant changes in leasing (affecting more than
20 percent of the rentable area), and such other information as the
Bank may prescribe. The Institution shall also immediately identify
to the Bank any Mortgage Collateral classified as nonperforming,
nonaccrual, scheduled or criticized, substandard, loss or doubtful and
the value thereof. Unless otherwise requested by the Bank, the
Institution may make the foregoing classifications according to its
own loan criteria.
(E) The Institution hereby agrees to save, hold harmless,
indemnify and defend the Bank against any and all damages,
liabilities, losses, claims, causes of action and expenses (including
attorneys' fees and expenses of the Bank's counsel) that the Bank may
directly or indirectly suffer or incur as a result of consequence of
any claim by any person arising out of or connected with the use or
creation of any Mortgage Collateral or any real properties subject to
the lien thereof. The aforesaid claims include any arising with
respect to any loan transaction involving the Institution or any
default or wrongdoing by the Institution with respect to any third
party, including any nonperformance by the Institution of any of its
obligations as a lender or otherwise in connection with any such
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Mortgage Collateral. Under no circumstances shall the Bank be
obligated to assume, perform or fulfill any obligation of the
Institution as a lender or otherwise.
SECTION 3.12 RIGHT TO CURE DEFAULTS
In the event that the Institution fails to (1) procure or maintain insurance,
or to maintain or cause the maintenance of any real property or improvements
covered by the lien of any Mortgage Collateral, or to pay or procure the
payment of any fees, assessments, charges or taxes arising with respect to any
real property or improvements covered by the lien of such Mortgage Collateral,
or to perform any other obligation to the Bank, all as herein specific, or (2)
make any other advances or take any other actions necessary or advisable to
preserve or protect any of such Mortgage Collateral, the value thereof, or the
Bank's security interest therein, the Bank shall have the right to effect such
insurance, or cause such real property or improvements to be maintained, or to
pay such fees, assessments, charges or taxes, or perform such obligations, or
make such advances or take such actions, as the case may be. In any such event,
the Institution agrees to pay the cost thereof immediately upon demand by the
Bank. All liabilities owing by the Institution to the Bank under this section
shall bear interest from the date when first paid by the Bank at the rate in
effect and being charged by the Bank from time to time on the Line of Credit
program then being offered by the Bank.
ARTICLE IV
DEFAULT; REMEDIES
SECTION 4.1 EVENTS OF DEFAULT; ACCELERATION
Upon the occurrence of and during the continuation of any of the following
events or conditions of default (Event of Default), the Bank may at its option
and notwithstanding any other provision hereof, by a notice to the Institution,
declare all Indebtedness including, but not limited to, any accrued interest
and any prepayment charges that are provided for payment of an Advance before
the date(s) scheduled for repayment, to be immediately due and payable, without
presentment, demand, protest or any further notices:
(A) Failure of the Institution to pay any interest, principal or
other amounts owed with respect to any Advance when due; or
(B) Failure of the Institution to perform any promise or
obligation or to satisfy any condition or liability contained herein,
in any Confirmation of Advance, or in any other agreement to which the
Institution and the Bank are parties; or
(C) Credible evidence coming to the attention of the Bank that any
representations, statements or warranties made or furnished in any
manner to the Bank by or on behalf of the Institution in connection
with any Advance, any Commitment, any specification of Eligible
Collateral or any certification of
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Lending Value is false, misleading or incomplete in any material
respect; or
(D) Failure of the Institution to maintain adequate Eligible
Collateral as required by the Bank from time to time; or
(E) The issuance of any tax, levy, seizure, attachment,
garnishment, levy of execution or other process with respect to the
Collateral; or
(F) Any suspension of payment by the Institution to any creditor
of sums due or the occurrence of any event that results (or which with
the giving of notice or passage of time or both will result) in
acceleration of the maturity of any indebtedness of the Institution to
others under any security agreement, indenture, loan agreement or
other undertaking; or
(G) Appointment of a trustee, conservator, receiver, liquidator,
custodian or similar official for the Institution or any subsidiary
(direct or indirect) of the Institution or the Institution's property,
notice of a judgment, decree or administrative decision adjudicating
the Institution or any subsidiary of the Institution insolvent or
bankrupt or an assignment by the Institution or any subsidiary of the
Institution for the benefit of creditors or the appointment of a
trustee, conservator, receiver, liquidator, custodian or similar
official for any parent (direct or indirect) of the Institution or the
filing of a petition or application by any person for the appointment
of any such official for any such parent of the Institution or the
transfer of any of the Institution's assets or liabilities (whether by
purchase and assumption by any third party, merger or otherwise) in
connection with or as a result of any event heretofore described in
this section; or
(H) Sale by the Institution of all or a material part of the
Institution's assets or the taking of any other action by the
Institution to liquidate or dissolve; or
(I) Termination of the Institution's membership in the Bank or the
Institution's ceasing to be a type of financial institution that is
eligible under the Act to become a member of the Bank; or
(J) Merger, consolidation or other combination of the Institution
with an entity that is not a member of the Bank if the nonmember
entity is the surviving entity in such transaction; or
(K) If an Advance is made pursuant to Section 11 (g)(4) of the
Act, and if the creditor liabilities of the Institution, excepting
liabilities to the Bank, exceed or are increased in any manner to an
amount exceeding five (5) percent of the Institution's net assets; or
(L) The Bank reasonably and in good faith determines that a
material adverse change has occurred in the financial condition of the
Institution or in the Collateral from that disclosed previously to the
Bank; or
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(M) The Bank reasonably and in good faith deems itself insecure
even though the Institution is not otherwise in default.
SECTION 4.2 REMEDIES
Upon the occurrence of any Event of Default, the Bank shall have all of the
rights and remedies provided by application law, which shall include, but not
be limited to, all of the remedies of a secured party under the Uniform
Commercial Code as in effect in the State of Kansas. In addition, the Bank may
take immediate possession of any of the Collateral or any part thereof wherever
the same may be found. The Bank may sell, assign and deliver the Collateral or
any part thereof to public or private sale for such price as the Bank deems
appropriate without any liability for any loss due to decrease in the market
value of the Collateral during the period held. The Bank shall have the right
to purchase all or part of the Collateral at such sale. If the Collateral
includes instruments or securities that will be redeemed by the issuer upon
surrender, or any accounts or deposits in the possession of the Bank, the Bank
may realize upon such Collateral without notice to the Institution. If any
notification of intended disposition of any of the Collateral is required by
applicable law, such notification shall be deemed reasonable and properly given
if mailed, postage prepaid, at least five (5) days before any such disposition
to the address of the Institution appearing on the records of the Bank. Upon
the occurrence of any Event of Default, the Bank may, in its sole discretion,
apply any payment by or recovery from the Institution or any sum realized from
Collateral, at such time and in such manner and order of priority as the Bank
shall deem fit, irrespective of any manifestation of any contrary intention or
desire on the part of the Institution or the provisions of any other agreement
between the Bank and the Institution. The Institution agrees that the Bank may
exercise its right of setoff upon the occurrence of an Event of Default in the
same manner as if the Advances and Commitments were unsecured. Notwithstanding
any other provision hereof, upon the occurrence of any Event of Default at any
time when all or part of the obligations of the Institution to the Bank
hereunder shall be the subject of any guarantee by a third party for the Bank's
benefit and there shall be other outstanding obligations of the Institution to
the Bank that are not so guaranteed but that are secured by the Collateral,
then any sums realized from the Bank from the Collateral, or from any other
Collateral pledged or furnished to the Bank by the Institution under any other
agreement, shall be applied first to the satisfaction of such other
nonguaranteed obligations and then to the Institution's guaranteed obligations
hereunder. The Institution agrees to pay all the costs and expenses of the Bank
in the collection of the Indebtedness and enforcement and preservation of the
Bank's rights and remedies in case of default, including, without limitation,
reasonable attorneys' fees. The Bank at its discretion may apply any surplus
after payment of Indebtedness, provision for repayment to the Bank of any
amounts to be paid under outstanding Commitments and all costs of collection
and enforcement to third parties claiming a secondary security interest in the
Collateral, with any remaining surplus paid to the Institution. The Institution
shall be liable to the Bank for any deficiency remaining.
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SECTION 4.3 PAYMENT OF PREPAYMENT CHARGES
Any prepayment fees or charges for which provision is made, whether under the
Confirmation of Advance or otherwise, with respect to any Advance shall be
payable at the time of any voluntary or involuntary payment of the principal of
such Advance prior to the originally scheduled maturity thereof. This shall
include, without limitation, payments that are made in connection with the
liquidation of the Institution or that become due as a result of an
acceleration by the Bank pursuant to Section 4.1, whether such payment is made
by the Institution, by a trustee, conservator, receiver, liquidator, custodian
or similar official, of or for the Institution, or by any successor to or any
assignee of the Institution. The Institution acknowledges and agrees that the
damages incurred by the Bank due to a prepayment of an Advance will be
difficult to ascertain at the time of such prepayment and, in lieu thereof, the
Institution and the Bank agree that the following constitutes a fair,
reasonable and good faith estimate of the damages suffered by the Bank in the
event of such prepayment and is therefore payable as a prepayment fee or
charge; the greater of (1) $100 or (2) the present value (using the current
Advance rate as the discount rate) of the difference between the scheduled
interest payments to be paid on an Advance through maturity and the interest
payments that would be collected on an Advance of the same principal amount and
remaining maturity as the Advance prepaid issued at the current rate on the day
of the prepayment.
SECTION 4.4 DEFAULT RATE
Any payment of principal or interest or any other sum due hereunder if not made
when due (whether at stated maturity, by acceleration or otherwise) shall bear
interest, to the maximum extent permitted by applicable law, at a rate per
annum for each day during the period commencing on the due date thereof until
such amount shall be paid in full equal to three percentage points above the
rate in effect and being charged by the Bank from time to time under the Line
of Credit program then being offered by the Bank.
SECTION 4.5 CERTAIN PROVISIONS AS TO SALE OF COLLATERAL
In view of the possibility that federal and state securities and other laws may
impose certain restrictions on the method by which sale of the Collateral may
be effected, the Bank and the Institution agree that any sale of the Collateral
as a result of an Event of Default shall be deemed 'commercially reasonable"
irrespective of whether the notice or manner of such sale contains provisions
or imposes, or is subject to, conditions or restrictions deemed appropriate to
comply with the Securities Act of 1933 or any other applicable federal or state
securities or other law. It is further agreed that from time to time the Bank
may attempt to sell the Collateral by means of private placement. In so doing,
the Bank may restrict the bidders and prospective purchasers to those who will
represent and agree that they are purchasing for investment only and not for
distribution or otherwise impose restrictions deemed appropriate by the Bank
for the purpose of complying with the requirements of applicable securities
laws. The Bank may solicit offers to buy such Collateral, for cash or
otherwise, from a limited number of investors
17
<PAGE> 18
deemed by the Bank to be responsible parties who might be interested in
purchasing such Collateral. If the Bank solicits offers from at least three
such investors, then the acceptance by the Bank of the highest offer obtained
therefrom (whether or not three offers are obtained) shall be deemed to be a
commercially reasonable method of disposing of the Collateral.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 GENERAL REPRESENTATIONS AND WARRANTIES BY INSTITUTION
The Institution hereby represents and warrants that as of the date hereof and
as of each date on which there shall be an outstanding Advance or Commitment:
(A) The Institution is not now, and neither the execution of nor
the performance of any of the transactions or obligations or the
Institution under this Agreement shall, with the passage of time, the
giving of notice, or otherwise, cause the Institution to be: (1) in
violation of its charter or articles of incorporation, by- laws, the
Act or the Regulations any other law or administrative regulation, any
court decree or any order of a regulatory authority or (2) in default
under or in breach of any indenture, contract or other instrument or
agreement to which the Institution is a party or by which the
Institution or any of its property may be bound.
(B) The Institution has full corporate power and authority and has
received all corporate and governmental authorizations and approvals
as may be required to enter into and perform its obligations under
this Agreement and to borrow each Advance.
(C) The information given by the Institution in any document
provided, or in any oral statement made, in connection with an
application or request for an Advance or a Commitment, a pledge,
specification or delivery of Collateral, is true, accurate and
complete in all material respects.
SECTION 5.2 GOOD FAITH; LIABILITY OF BANK
The Institution and the Bank shall have an obligation of good faith in the
performance and enforcement of every duty or right imposed or granted by this
Agreement, and any other actions or inactions taken or not taken with respect
to this Agreement. "Good Faith" shall mean honesty in fact (i.e., a subjective
standard rather than an objective standard). The Bank shall not be liable for
any costs, expenses, damages, liabilities or claims (including attorneys' and
accountants' fees) incurred by the Institution, except those costs expenses,
damages, liabilities or claims arising out of the gross negligence or willful
misconduct of the Bank or any of its employees or duly appointed agents. In no
event shall the Bank be liable to the Institution or any third party for
special, indirect or consequential damages, or lost profits or loss of
business, arising under or in
18
<PAGE> 19
connection with this Agreement, even if previously informed of the possibility
of such damages and regardless of the form of action.
SECTION 5.3 ASSIGNMENT OF INDEBTEDNESS
The Institution hereby gives the Bank the full right, power and authority to
pledge or assign to any party all or part of the Indebtedness, together with
all or any part of the Collateral, as security of Consolidated Federal Home
Loan Bank Obligations issued pursuant to the provisions of the Act or for any
other purpose authorized by the Act, the Regulations or the Federal Housing
Finance Board. In the case of any such pledge or assignment, the Bank shall
have no further responsibility with respect to Collateral transferred to the
pledgee or assignee, and all references herein to "the Bank" shall be read to
refer instead to the pledgee or assignee with respect to such Collateral. The
Institution may not voluntarily or involuntarily or by operation of law or
otherwise assign or transfer any of its rights or obligations hereunder or with
respect to any Advances or Commitments without the express prior written
consent of the Bank.
SECTION 5.4 DISCRETION OF BANK TO GRANT OR DENY ADVANCES
Nothing contained herein or in any documents describing or setting forth the
Bank's Credit Policy or other policies shall be construed as an agreement or
commitment on the part of the Bank to grant Advances hereunder, or to enter
into any other transaction, the right and power of the Bank in its discretion
to either grant (with or without conditions) or deny any Advance or other
transaction requested hereunder being expressly reserved.
SECTION 5.5 ACCESS TO BANK RECORDS
The Bank shall grant to all governmental regulatory agencies having
jurisdiction over the Institution, to the Institution's independent public
accounts (to be named by written notice delivered to the Bank) and to the
Institution's internal auditors the right at any reasonable time to examine and
audit the Institution's records in the Bank's possession, the right to request
directly from the Bank any reports, summaries or information of the Bank
relating to the Institution and the right to observe the processing of reports
or examine the Institution's documents at the Bank; provided, however, the
Bank's obligations hereunder shall not apply to the extent that the records,
reports, summaries, information or documents sought or requested are contained
in or derived from data not provided by the Bank to the Institution or the
Institution to the Bank pursuant to this Agreement.
SECTION 5.6 AMENDMENT; WAIVERS
No modification, amendment or waiver of any provision of this Agreement or
consent to any departure therefrom shall be effective unless executed by the
party against whom such change is asserted and shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand
on the Institution in any case shall
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<PAGE> 20
entitle the Institution to any other or further notice or demand in the same,
or similar or other circumstance. Any forbearance, failure or delay by the
Bank in exercising any right, power or remedy hereunder shall not be deemed to
be a waiver thereof, and any single or partial exercise by the Bank of any
right, power or remedy hereunder shall not preclude the further exercise
thereof. Every right, power and remedy of the Bank shall continue in full
force and effect until specifically waived by the Bank in writing.
SECTION 5.7 JURISDICTION; LEGAL FEES
In any action or proceeding brought by the Bank or the Institution in order to
enforce any right or remedy under this Agreement, the Parties hereby consent
to, and agree that they will submit to, the jurisdiction of the United States
District Court for the District of Kansas, or if such action or proceeding may
not be brought in federal court, the jurisdiction of the District Court of the
County of Shawnee, State of Kansas, to the exclusion of all other courts. The
Institution agrees that if any action or proceeding is brought by the
Institution seeking to obtain any legal or equitable relief against the Bank
under or arising out of this Agreement or any transaction contemplated hereby,
and such relief is not granted by the final decision after any and all appeals
of a court of competent jurisdiction, the Institution will pay all attorneys'
fees and other costs incurred by the Bank in connection therewith. The
Institution agrees to reimburse the Bank for all costs and expenses (including
reasonable fees and out-of-pocket expenses of counsel for the Bank) incurred by
the Bank in connection with the enforcement or preservation of the Bank's
rights under this Agreement including, but not limited to, its rights in
respect of any Collateral and the audit or possession thereof.
SECTION 5.8 APPLICABLE LAW; SEVERABILITY
This Agreement and all Advances granted under this Agreement shall be governed
by the statutory and common law of the United States and, to the extent federal
law incorporates or defers to state law, the laws (exclusive of choice of law
provisions) of the State of Kansas. Notwithstanding the foregoing, the Uniform
Commercial Code as in effect in the State of Kansas shall be deemed applicable
to this Agreement and to any Advance hereunder. In the event that any portion
of this Agreement conflicts with applicable law, such conflict shall not affect
other provisions of this Agreement that can be given effect without the
conflicting provision, and to this end the provisions of the Agreement are
declared to be serverable.
SECTION 5.9 SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the successors
and permitted assignees of the Institution and the Bank.
SECTION 5.10 NOTICES
Any notice, advice, request, consent or direction given, made or withdrawn
pursuant to this Agreement shall be in writing or by machine-readable
electronic transmission, and
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<PAGE> 21
shall be deemed to have been duly given to and received by a party hereto when
it shall have been mailed to such party at its addresses given below, if
delivered by first-class mail or if delivered by hand or by machine-readable
electronic transmission, when actually received by such party at its principal
office.
SECTION 5.11 ENTIRE AGREEMENT
This Agreement embodies the entire agreement and understanding between the
parties hereto relating to the subject matter hereof and supersedes all prior
agreements between such parties that relate to such subject matter.
Notwithstanding the above, Advances made by the Bank to the Institution prior
to the execution of this Agreement shall continue to be governed by the terms
of the Confirmation of Advance pursuant to which such Advances were made, and
otherwise by the terms and conditions of this Agreement.
5.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts, all of which shall
constitute but one Agreement.
IN WITNESS WHEREOF, the Institution and the Bank have caused this Agreement to
be signed in their names by their duly authorized officers as of the dates
listed below
Institution:
Date: October 26, 1995 MEGABANK OF ARAPAHOE
--------------------
Name of Institution
8100 E. Arapahoe Rd.
Englewood, CO 80112
-------------------
Address
By: /s/Jean L. Burr
------------------
Authorized Signature
JEAN L BURR,
------------
SR VICE PRESIDENT/CASHIER
-------------------------
Typed Name and Title
Attest: Toni Serra. VP
--------------
TONI L SERRA SR. VICE PRESIDENT
21
<PAGE> 22
Federal Home Loan Bank of Topeka
2 Townsite Plaza
P.O. Box 176
Topeka, KS 66601-0176
Date: November 14, 1995 By:/s/ Roger L. Williams
----------------------
Authorized Signature
Roger L. Williams, SVP-Finance
------------------------------
Attest: /s/
----------------------------
Corporate Secretary
- - -------------------
INSTITUTION ACKNOWLEDGMENT AND NOTARIZATION
State of Colorado )
) ss:
County of Arapahoe )
On this 26th day of October, 1995 before me personally Jean L. Burr came to me
known, who being by me duly sworn, did depose and state that she is the Sr.
Vice President of said Institution; the Institution described in and which
executed the above instrument; that she knows the seal of said corporate seal;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the board of directors or other governing body of said
Institution; and that she signed her name thereto by order of the board of
directors or other governing body of said Institution and that said Jean L.
Burr acknowledged the execution of said instrument to be the voluntary act and
deed of said Institution.
(Corporate Seal) /s/
-------------------------------------------
Notary Public Signature
----------------------------------------------
Notary Public in and for the State of Colorado
My commission expires: May 13,1998
-----------
22
<PAGE> 1
EXHIBIT 10.4
Norwest Bank Colorado, N.A.
NORWEST BANKS Denver
1740 Broadway
Denver, Colorado 80274
303/861-8811
June 1, 1997
Ms. Jean Burr
Senior Vice President and Cashier
MegaBank of Arapahoe
P.O. Box 3318
Englewood, CO 80155
Dear Jean:
Subject: Federal Funds
This is to inform you that Norwest Bank Colorado, National Association
("Norwest") has granted, on an unsecured basis, a Federal Funds line in the
amount of $500,000, for MegaBank of Arapahoe ("Bank"). Unless earlier
terminated by Norwest, this line will remain in effect until June 1, 1998.
The terms and conditions under which an unsecured Federal Funds line is being
approved by Norwest are as follows:
1. Purchase authorizations are reviewed annually;
2. Availability under the Federal Funds line is dependent upon the supply
and demand for these funds. This availability is determined solely by
Norwest;
3. All Federal Funds loans must be repaid in Federal Funds, or renewed,
the next business day following the day the loan is made. All renewals
will be at Norwest's sole discretion and will be effective until the
next business day following the day the loan is renewed;
4. Norwest considers Federal Funds to be a temporary source of liquidity.
Therefore, purchases of more than fifteen (15) consecutive business
days is considered to be excessive;
5. Over a period of time, Norwest would like to purchase Federal Funds
from Bank at least as often as Norwest sells Federal Funds to Bank.
<PAGE> 2
Ms. Jean Burr
Page 2
June 1, 1997
6. The daily rate of interest on any Federal Funds loan will be agreed
upon at the time the loan is requested or renewed. Interest will be
payable daily and will be paid by debit to Bank's account with
Norwest, or by any other method upon which Norwest and Bank agree;
7. The sale of Federal Funds to Bank will be subject to periodic review
for continued satisfactory financial condition. To that end, please
provide Norwest with copies of Bank's Call Reports on at least an
annual basis and at any other time requested by Norwest;
8. Purchase of Federal Funds from Norwest will be only as a principal,
and not as an agent for any other person or entity;
9. Norwest reserves the right to terminate this Federal Funds line at any
time and for any reason sufficient to Norwest;
10. Bank's obligation to repay Federal Funds loans will be evidenced by
Bank's execution and delivery to Norwest of this letter agreement;
11. Bank represents it is duly organized, validly existing and in good
standing under the laws of Bank's State;
12. Bank agrees to notify Norwest, in writing, of any key management or
ownership changes and any other Federal Funds lines provided to Bank;
13. Bank agrees to provide Norwest with any other information reasonably
requested by Norwest;
14. Should Bank fail to comply with any term or condition of this letter
agreement, Norwest may refuse to make any Federal Funds loan which
Norwest previously agreed in Norwest's discretion to make pursuant to
this letter agreement, and, in connection therewith, Norwest may
reverse any entries made to Bank's account with Norwest or to any
other account. In addition, Norwest may exercise any right available
to Norwest by law or by other agreement between us. All such rights
and remedies shall be cumulative.
2
<PAGE> 3
Ms. Jean Burr
Page 3
June 1, 1997
In order to evidence MegaBank of Arapahoe's agreement with the terms and
conditions stated above, please have the appropriate party (parties) sign in
the Agreement section on the next page and return the original of this letter
to me. The enclosed copy of this letter is for your files. Also, enclosed is a
blank Certified Copy of Corporate Resolution Authorizing Borrowing which we ask
that you complete if signers have changed since 1996. In the event no changes
have occurred, the Resolution we currently have on file is sufficient.
If you have questions on any of the above, please do not hesitate to give me a
call.
Sincerely,
/s/ Claudia M. King
- - -------------------
Claudia M. King
Vice President
/ja
Enclosures
AGREEMENT
I/We have read the above terms and conditions under which Norwest Bank
Colorado, National Association is granting an unsecured Federal Funds line to
MegaBank of Arapahoe and understand and agree to same.
MEGABANK OF ARAPAHOE:
By: /s/ Jean Burr Date: 09/24/97
-------------------- --------
Title: SENIOR VP/CASHIER
-----------------
By: /s/ Larry Olsen Date: 09/24/97
-------------------- --------
Title: PRESIDENT
-----------------
3
<PAGE> 1
EXHIBIT 10.5
CONSULTING AGREEMENT
This is a CONSULTING AGREEMENT ("Agreement") entered into as of March
3, l997 (the "Commencement Date"), by and between MegaBank of Arapahoe
("MegaBank") and First Fidelity Service Corp., a Colorado corporation
("Consultant"). The parties agree as follows:
1. Engagement. MegaBank hereby engages Consultant and Consultant
hereby accepts the engagement to provide the Services (as such term is defined
below) to MegaBank pursuant to the provisions of this Agreement.
2. Term. This Agreement shall become effective as of the
Commencement Date and shall expire on March 3, 1998 (the "Term"); provided,
that unless terminated earlier as provided below, this Agreement shall
automatically renew for an additional one-year period, and at the option of
MegaBank and Consultant, may thereafter be extended for further one-year
periods on the same basis.
3. Consultant's Responsibilities. Raymond L. Anilionis
("Principal"), a principal of Consultant is expected to personally perform the
majority of the Services. Consultant shall perform the following services as
are requested by MegaBank from time to time (the "Services"): (i) evaluation
of acquisition of new potential bank sites; (ii) consultation and assistance
with negotiation of real estate and other acquisitions and/or sales; (iii)
evaluation, supervision and oversight of construction projects; and (iv)
evaluation, consultation and assistance with negotiation of complex loan and
work out transactions, and (v) any other services as reasonably requested by
MegaBank.
4. Compensation. MegaBank will pay Consultant $5,000.00 per
month, pro rated for any partial months ("Compensation") for Consultant's
performance of the Services, which amount has been computed based upon an
assumption of the average number of hours Consultant will spend on a monthly
basis performing the services. If during any mouth, the Services which
Consultant performs require time in excess of the average hours which it
normally expends in rendering of the Services, it may bill MegaBank at an
agreed upon hourly rate for the additional time incurred. Payment of the
Compensation to Consultant shall be paid by MegaBank oil a monthly basis.
MegaBank shall also reimburse Consultant for Consultant's reasonable travel
expenses for travel approved in advance by MegaBank and any other reasonable
out-of-pocket expenses submitted from time to time with proper substantiation.
5. INDEPENDENT CONTRACTOR. MEGABANK AND CONSULTANT ACKNOWLEDGE
THAT PRINCIPAL IS A SHAREHOLDER OF MEGABANK AND SITS ON ITS BOARD OF DIRECTORS
OF DIRECTORS AND LOAN COMMITTEE. HOWEVER, THE PERFORMANCE OF THE SERVICES IN
ACCORDANCE WITH THIS CONSULTANT AGREEMENT ARE NOT RELATED TO OR IN ANY WAY
CONNECTED WITH PRINCIPAL'S OTHER POSITIONS AND CAPACITY AS A SHAREHOLDER, BOARD
MEMBER AND LOAN COMMITTEE MEMBER OF MEGABANK. IN CONNECTION WITH PERFORMANCE
OF THE SERVICES, CONSULTANT IS AN INDEPENDENT CONTRACTOR AND IS NOT AN
EMPLOYEE, MEMBER, DIRECTOR OR OFFICER OF MEGABANK. CONSULTANT SHALL PAY ALL
<PAGE> 2
FEDERAL, STATE AND OTHER INCOME TAXES DUE ON THE COMPENSATION RECEIVED UNDER
THIS AGREEMENT. WHILE THIS AGREEMENT IS IN EFFECT, MEGABANK SHALL PAY NO
AMOUNTS ON ACCOUNT OF CONSULTANT FOR PURPOSES OF SOCIAL SECURITY, UNEMPLOYMENT
INSURANCE, OR FEDERAL OR STATE WITHHOLDING TAXES AND MEGABANK SHALL NOT PROVIDE
ANY OTHER CONTRIBUTIONS OR BENEFITS FOR CONSULTANT WHICH MIGHT BE EXPECTED IN
AN EMPLOYER-EMPLOYEE RELATIONSHIP.
6. Termination.
a. Termination if no Default. This Agreement may be
terminated by either party by 30 days written notice given to the
other party at any time for any reason (other than a Default).
b. Termination in the event of Default. Either of the
following events are sometimes referred to as a "Default" and this
Agreement may be terminated at any time following a Default and the
giving of 10 days written notice specifying the nature of the Default.
The defaulting party may elect to cure the Default within 10 days
following receipt of the Default Notice to cure the Default. If the
Default is not cured within said 10-day period, this Agreement will
automatically terminate.
(i) Insolvency. In the event a petition in
bankruptcy is filed by or against Consultant, or in the event that either party
shall make an assignment for the benefit of creditors or seek protection or
otherwise avail itself or himself of any insolvency laws.
(ii) Breach. Breach by either party of any of the
undertakings or agreements set forth herein.
In the event of any termination of this Agreement, and except for the
pro rata Compensation due to Consultant as of the date of termination which
shall be paid pursuant to the terms of this Agreement, all other terms of this
Agreement shall
2
<PAGE> 3
not survive any such termination and the parties hereto shall be relieved of
their respective obligations hereunder.
7. General.
a. Assignment. This Agreement and all rights hereunder shall be
assignable by MegaBank, to another entity or person, in its sole and exclusive
discretion. Consultant shall have no right to assign this Agreement or any
rights and obligations hereunder, except to another entity in which Principal
is a controlling party, it being expressly understood and agreed that MegaBank
is relying on Principals direct involvement in the performance of the Services.
b. Notices. All notices provided for in this Agreement shall be
in writing and shall be either delivered personally or mailed by United States
registered or certified mail, return receipt requested, postage prepaid, at the
addresses set forth below or at such other addresses as Consultant or MegaBank
may specify thereafter in writing.
c. Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid, such holding shall in no way
affect any other provision of this Agreement, which shall remain in full force
and effect as if such provision held to be invalid had never been included
herein.
d. Parties Bound. The rights and obligations of MegaBank and
Consultant under this Agreement shall inure to the benefit of and shall be
binding upon their successors.
e. No Waiver. No waiver of any provision of or default under
this Agreement shall affect the right of MegaBank or Consultant thereafter to
enforce said provision or to exercise any right or remedy in the event of
another default, whether or not similar.
f. Captions. The captions throughout this Agreement are for
convenience only, and the words contained therein shall in no way be held to
explain, modify, amplify or aid in the interpretation, construction or meaning
of this Agreement.
g. Mediation. In the event that a dispute arises between the
parties hereto concerning the provisions of this agreement or any other matter
relating to this agreement, the parties agree to enter into mediation in good
faith in an attempt to resolve all disputes prior to proceeding to litigation
or arbitration. Such mediation shall be binding upon the parties, and shall be
conducted by a mutually agreed upon independent and qualified mediator and
shall be conducted in the Denver, Colorado metropolitan area. The parties
shall share the cost of the mediator. If the parties are unable to agree on a
mediator within thirty (30) days after the request for mediation by either
party, then either party may apply to the chief or presiding judge of the
District Court of Arapahoe County, Colorado or the United States District Court
of Colorado, for the appointment of a mediator.
3
<PAGE> 4
h. Attorneys' Fees. If either MegaBank or Consultant is required
to commence an action or proceeding against the other in order to enforce the
provisions hereof, the prevailing party therein shall be entitled to recover
all reasonable costs and expenses incurred in connection therewith, including
reasonable attorneys' fees.
i. Amendments. All amendments or modifications to this Agreement
shall be in writing and signed by the parties hereto.
j. Governing law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado.
k. Entire Agreement. This Agreement represents the entire
agreement between the parties as to the subject matter hereof and supersedes
all prior and contemporaneous negotiations, agreements, representations and
understandings.
IN WITNESS WHEREOF, the parties have executed this Consulting
Agreement as of the day and year first above written.
MEGABANK OF ARAPAHOE
By: /s/ Larry A. Olsen
-----------------------------------
Title: President
--------------------------------
8100 E. Arapahoe Road
Englewood, Colorado 80112
FIRST FIDELITY SERVICE CORP.,
a Colorado corporation
By: /s/ Raymond L. Anilionis
-----------------------------------
Raymond L. Anilionis, its President
9034 E. Easter Place
Englewood, Colorado 80112
4
<PAGE> 5
STATE OF COLORADO )
) ss.
COUNTY OF ARAPAHOE )
The foregoing instrument was acknowledged before me this 1st day of
March, 1997, by Larry A. Olsen as President on behalf of MegaBank of Arapahoe.
Witness my hand and official seal.
My commission expires 12/16/99.
/s/ Joanne C. Park
---------------------
Notary Public
STATE OF COLORADO )
) ss.
COUNTY OF ARAPAHOE )
The foregoing instrument was acknowledged before me this 1st day of
March, 1997, by Raymond L. Anilionis as President on behalf of First Fidelity
Service Corporation, a Colorado corporation.
Witness my hand and official seal.
My commission expires: 12/16/99.
/s/ Joanne C. Park
--------------------
Notary Public
5
<PAGE> 1
EXHIBIT 10.6
AGREEMENT FOR SALE OF BRANCH BANKING RIGHTS
This Agreement, entered into this 28th of September, 1993, between
MegaBank of Arapahoe, hereinafter referred to as "MB" and the First State Bank
of Hotchkiss, hereinafter referred to as "FSB", is to set forth the terms and
conditions under which FSB shall be selling to MB its presently existing branch
banking rights.
Under the terms of C.R.S. 11-25-103, FSB has the right to open one
branch. The parties hereto have confirmed with the State Banking Commission
that said branch banking right may be transferred between the parties. FSB
hereby transfers said branch banking right to MB under the following terms and
conditions:
1. MB shall tender to FSB concurrently with the execution of this
agreement, the sum of Five Thousand Dollars ($5,000.00), which payment is
non-refundable, in any event.
2. During the time period ending January 14, 1994, MB may replace FSB's
branch banking right with those of another bank. If this is done, then the
$5,000.00 payment above shall be the only sum due and payable between the
parties. Should MB not find a replacement for FSB's branch banking rights on
or before January 14, 1994, MB agrees to pay the further sum to FSB of One
Hundred Thousand Dollars ($100,000.00). Said amount shall be payable in
monthly installments of $2,500.00 for a period of forty (40) months. Payments
shall be due on the 15th day of each month commencing January 15, 1994, without
any further notice or demand. Further, said payments are not subject to any
deduction or setoff of any amount for any reason whatsoever between the
parties.
MB hereby agrees to indemnify and defend FSB against any and all
damages, costs, attorney's fees, expenses, liabilities and penalties in which
FSB may incur or sustain as a result of entering into this agreement or in any
court action arising from this agreement.
This agreement is binding upon and inures to the benefit of the
parties, their successors, agents and assigns.
Venue in any action arising under this agreement shall be in Delta
County, Colorado.
MEGABANK OF ARAPAHOE
By: /s/ Paul Holden /s/ Jean L. Burr, V.P.
------------------------------- --------------------------
Paul Holden, President Jean Burr, Cashier
FIRST STATE BANK OF HOTCHKISS
By: /s/ John R. McCallister /s/ Kelley M. West
------------------------------- --------------------------
John R. McCallister, President Kelley M. West, Cashier
<PAGE> 1
EXHIBIT 10.7
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
This Amended and Restated Stock Purchase Agreement (this "Agreement")
is entered into as of this 4th day of December, 1997, by and among MegaBank
Financial Corporation, a Colorado corporation (the "Corporation"), and Thomas
R. Kowalski, the Ryan R. Kowalski Trust, the Realtek Company Profit Sharing
Plan and Trust, Thomas Investments Partnership, a Colorado partnership, Respond
Corp., a Colorado corporation, and Orchard Valley Financial Corporation, a
Colorado corporation (each a "Stockholder" and collectively the
"Stockholders"). The Corporation and Stockholders hereby agree as follows:
RECITALS
WHEREAS, the Corporation and certain of the Stockholders entered into
a Stock Purchase Agreement, dated December 20, 1990 (the "Original Stock
Purchase Agreement"), wherein the Corporation agreed to redeem all of the
shares of capital stock of the Corporation owned by such Stockholders upon the
terms and conditions set forth in the Original Stock Purchase Agreement; and
WHEREAS, the Corporation and the Stockholders entered into an
Amendment to Stock Purchase Agreement, dated April 16, 1992 ("Amendment No.
1"), wherein the Original Stock Purchase Agreement was amended to add
additional Stockholders and to make certain other modifications; and
WHEREAS, the parties hereto desire to further amend and restate the
Original Stock Purchase Agreement, as previously amended by Amendment No. 1, as
hereinafter described;
AGREEMENT
NOW, THEREFORE, IT IS AGREED:
ARTICLE 1.00-PURPOSE
The purpose of this Agreement is to provide:
A. For the orderly continuation of the affairs of the Corporation
at the time that certain events occur which may require the sale, transfer, or
exchange of the stock of the Corporation held by the Stockholders as provided
by the terms of this Agreement.
B. For a means by which the Stockholders may sell shares of stock
when certain events set out in this Agreement take place.
ARTICLE 2.00-PURCHASE AND SALE
At the time of the execution of this Agreement, the Stockholders own
the following shares of the common stock (the "Stock") in the Corporation:
<TABLE>
<S> <C>
Thomas R. Kowalski 53,160 shares
Ryan R. Kowalski Trust 2,563 shares
Realtek Company Profit Sharing Plan and Trust 20,494 shares
Thomas Investments Partnership 1,663 shares
Orchard Valley Financial Corporation 21,815 shares
Respond Corp. 9,360 shares
</TABLE>
Pursuant to the terms of this Agreement, the Stockholders agree to sell certain
of their shares of Stock in accordance with the terms of this Agreement and the
Corporation agrees to purchase the same in accordance with its terms and
conditions. In the event of any stock dividends or stock splits, the shares
received thereby by the Stockholders shall be similarly subject to the terms of
this Agreement.
<PAGE> 2
ARTICLE 3.00-ENCUMBRANCE
The parties acknowledge and agree that they do not wish to prevent any
Stockholder from pledging, hypothecating or otherwise encumbering his shares of
Stock.
ARTICLE 4.00-PURCHASE AT DEATH
4.01 Purchase by the Corporation. Upon the death of Thomas R.
Kowalski (herein "Kowalski"), each Stockholder shall have an option for ninety
(90) days from the date of Kowalski's death to cause a Purchase (as hereinafter
defined) by the Corporation. Such option may be exercised by any Stockholder
by delivering a written notice (an "Exercise Notice") to the Corporation,
signed by the Stockholder, requesting that a number of such Stockholder's
shares be purchased pursuant to this Agreement. The number of shares to be
purchased shall be designated by the Stockholder in the Exercise Notice and
shall not exceed the number of shares owned by such Stockholder's at the time
of Kowalski's death. The Exercise Notice must be received by the Corporation
within ninety (90) days from the date of Kowalski's death. Once given and
timely received, the Exercise Notice shall be irrevocable with respect to the
Stockholders executing such Exercise Notice (the "Selling Stockholders"), and
the Corporation and the Selling Stockholders, respectively, agree to consummate
a Purchase, on the terms set forth in Section 4.02.
4.02 Purchase. A "Purchase" shall mean the purchase for cash by
the Corporation of a number of whole shares of Stock from a Selling
Stockholder, said number to be determined by subtracting from such Selling
Stockholder's Allocable Insurance Proceeds (as hereinafter defined) any
indebtedness due and payable to the Corporation by such Selling Stockholder and
dividing the remainder by the price for shares of Stock (to be determined in
accordance with Article 5.00), rounded down to the next whole share of Stock.
The "Allocable Insurance Proceeds" for each Selling Stockholder shall mean the
net proceeds payable to the Corporation following Kowalski's death from the
insurance policy listed on Exhibit B (the "Net Insurance Proceeds"), multiplied
by a fraction, the numerator of which is the number of shares of Stock
designated in the Exercise Notice by such Selling Stockholder, and the
denominator of which is the number of shares of Stock designated in all
Exercise Notices by all Selling Stockholders.
4.03 Net Insurance Proceeds. To the extent that an Exercise Notice
is not timely delivered following Kowalski's death or the Net Insurance
Proceeds exceed the amounts necessary for the Corporation to purchase Stock of
the Selling Stockholders pursuant to this Article 4.00, the Corporation shall
be entitled to retain the entire amount of the Net Insurance Proceeds or such
excess, respectively, without liability to any Stockholder or any other party
therefor.
4.04 Closing. The closing of a Purchase shall take place at the
office of the Corporation at a date designated by the Corporation, which date
shall be not more than thirty (30) days after the date of receipt by the
Corporation of the Exercise Notice or payment to the Corporation of the Net
Insurance Proceeds, whichever is later.
4.05 Certain Definitions. For purposes of this Article 4.00, the
term "Stockholder" shall include, in addition to the Stockholders specifically
named herein, Kowalski's estate, the trustee of any trust created by Kowalski
which was treated during his lifetime as owned by Kowalski under the provisions
of Subpart E of Part I of Subchapter J of the Internal Revenue Code of 1986 as
amended, and any entity hereafter formed by Kowalski in which he beneficially
owns greater than 50% of the voting rights.
ARTICLE 5.00-STOCK VALUE AND RE-EVALUATION
The purchase price for the shares of Stock shall be Forty Five Dollars
($45.00) per share until altered by re-evaluation as hereinafter provided.
The Stockholders and the Corporation agree that the value of the Stock includes
an amount representing the good will of the Corporation as a going concern.
Within three (3) months after the end of each fiscal year of the Corporation
and/or 45 days after review of audited financial
2
<PAGE> 3
statements of the Corporation for the preceding fiscal year, the Stockholders
and the Corporation may, by mutual agreement, redetermine such value as of the
end of the preceding fiscal year, and such redetermination shall be entered
into the valuation schedule attached hereto as Exhibit A. If the Stockholders
and the Corporation fail to redetermine the value for any fiscal year(s), the
last previously stipulated value shall be used, with an appropriate adjustment,
upward or downward, to reflect changes in the book value per share of the
Corporation since the effective date of the last valuation.
ARTICLE 6.00-CORPORATE RESTRICTIONS AFTER PURCHASE
[intentionally omitted]
ARTICLE 7.00-LIFE INSURANCE
7.01 Owner and Beneficiary. The Corporation has purchased a life
insurance policy on the life of Thomas R. Kowalski. (See Exhibit B). The
Corporation hereby reserves the right to exercise all incidents of ownership
with respect to such policy.
7.02 Insurance Companies. The insurance company that has issued
the policy of life insurance listed on Exhibit B of this Agreement is
authorized to act in accordance with the terms of such policy regardless of the
provisions of this Agreement. Payments made by any such insurance company,
pursuant to the policy terms, shall be a complete discharge of its obligations.
ARTICLE 8.00-RELEASE FROM INDEBTEDNESS
With respect to a Selling Stockholder which sells all shares of Stock
owned by such Stockholder pursuant to this Agreement: (i) the Corporation
agrees to use its best efforts to release any property of a Selling Stockholder
that is used as security for any indebtedness of the Corporation, said release
to occur, to the extent practicable, within twelve (12) months of the date of
the death of Thomas R. Kowalski; (ii) the Corporation shall also use its best
efforts to release the Selling Stockholders from any liability on any notes or
other obligations incurred for the benefit of the Corporation for which they
are individually or jointly liable, said releases to occur, to the extent
practicable, within twelve (12) months after the date of death of Thomas R.
Kowalski; provided, however, that in the event that the Corporation is
unable to secure said releases, it shall indemnify and hold harmless the
Selling Stockholders, their estates and successors, from any and all
liabilities which are incurred in the event of a default by the Corporation.
ARTICLE 9.00-SECURITY
[intentionally omitted]
ARTICLE 10.00-TERMINATION OF AGREEMENT
This Agreement shall terminate upon the occurrence of any of the
following events:
10.01 The cessation of the Corporation's business;
10.02 The bankruptcy, receivership or dissolution of the Corporation;
10.03 On the date that the insurance described on Exhibit B lapses or
is canceled; or
10.04 Upon written notice by Kowalski to the Corporation.
3
<PAGE> 4
ARTICLE 11.00-BINDING UPON LEGAL REPRESENTATIVES
This Agreement shall be binding upon and shall inure to the benefit of
the respective heirs, legal representatives, assigns, transferees and
successors of each of the parties hereto.
ARTICLE 12.00-CONSTRUCTION
The titles appearing herein are used for purpose of convenience only
and shall in no way change the meaning of this Agreement. If any conflict
between any heading and the text of this Agreement exists, the text shall
control.
ARTICLE 13.00-NOTICES
Any and all notices, designations, consents, offers, acceptances or
any other communications provided for herein shall be given in writing either
by:
(a) Registered or certified mail which shall be
addressed, in the case of the Corporation, to its principal office,
and in the case of any Stockholder, to his address appearing on the
stock books of the Corporation or his residence or at such other
address as may be designated for him; or
(b) Personal delivery to the party requiring notice and
securing a written receipt.
The effective date of the notice shall be the date of the written receipt
received upon personal delivery or five (5) days after mailing in the case of
certified mail.
ARTICLE 14.00-INVALID PROVISION
The invalidity and unenforceability of any particular provision of
this Agreement shall not affect the other provisions hereof and this Agreement
shall be construed in all respects as if such invalid and unenforceable
provisions were omitted.
ARTICLE 15.00-MODIFICATION
No change or modification of this Agreement shall be valid unless the
same is in writing and signed by all the parties hereto.
ARTICLE 16.00-ATTORNEYS' FEES
In the event suit is brought to enforce any or all of the provisions
of this Agreement, the prevailing party shall be entitled to reimbursement of
his court costs and attorneys' fees.
ARTICLE 17.00-GENDER AND NUMBER
As used herein, the masculine gender shall include the feminine and
neuter genders, and the singular shall include the plural, and vice versa,
where the context requires.
ARTICLE 18.00-ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES
The parties hereto agree to execute any other documents that are
necessary to effectuate the provisions of this Agreement.
4
<PAGE> 5
ARTICLE 19.00-GOVERNING LAW
This Agreement and all of its provisions shall be governed and
construed in accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Stock Purchase Agreement as of the date first above written.
The Corporation:
MEGABANK FINANCIAL CORPORATION
By:/s/ Larry A. Olsen
------------------------------------
Larry A. Olsen, President
The Stockholders:
/s/ Thomas R. Kowalski
---------------------------------------
Thomas R. Kowalski
THE RYAN R. KOWALSKI TRUST
By:/s/ Thomas R. Kowalski
------------------------------------
Thomas R. Kowalski, Trustee
THE REALTEK COMPANY PROFIT
SHARING PLAN AND TRUST
By:/s/ Thomas R. Kowalski
------------------------------------
Thomas R. Kowalski, Administrator
THOMAS INVESTMENTS PARTNERSHIP
By:/s/ Thomas R. Kowalski
------------------------------------
Thomas R. Kowalski, General Partner
ORCHARD VALLEY FINANCIAL CORP.
By:/s/ Thomas R. Kowalski
------------------------------------
Thomas R. Kowalski, President
RESPOND CORP.
By:/s/ Thomas R. Kowalski
------------------------------------
Thomas R. Kowalski, President
5
<PAGE> 6
Each of the undersigned hereby acknowledges that this Agreement was
prepared by legal counsel representing the Corporation. Further, each of the
undersigned recognize that said legal counsel was acting solely on behalf of
the Corporation and not on behalf of any Stockholder, individually or
collectively. Each of the undersigned represent and warrant that he/she/it has
been advised to seek independent legal and financial counsel with respect to
the execution of this Agreement and that he/she/it has had the opportunity to
do so. Each of the undersigned agrees that the statements, representations and
warranties made in this paragraph may be relied upon by the Corporation and it
legal counsel and their respective successors in interest.
The Corporation:
MEGABANK FINANCIAL CORPORATION
By:/s/ Larry A. Olsen
------------------------------------
Larry A. Olsen, President
The Stockholders:
/s/ Thomas R. Kowalski
---------------------------------------
Thomas R. Kowalski
THE RYAN R. KOWALSKI TRUST
By:/s/ Thomas R. Kowalski
------------------------------------
Thomas R. Kowalski, Trustee
THE REALTEK COMPANY PROFIT
SHARING PLAN AND TRUST
By:/s/ Thomas R. Kowalski
------------------------------------
Thomas R. Kowalski, Administrator
THOMAS INVESTMENTS PARTNERSHIP
By:/s/ Thomas R. Kowalski
------------------------------------
Thomas R. Kowalski, General Partner
ORCHARD VALLEY FINANCIAL CORP.
By:/s/ Thomas R. Kowalski
------------------------------------
Thomas R. Kowalski, President
RESPOND CORP.
By:/s/ Thomas R. Kowalski
------------------------------------
Thomas R. Kowalski, President
6
<PAGE> 7
EXHIBIT A
VALUE OF SHARES
<TABLE>
<CAPTION>
DATE VALUE INITIALS OF PARTIES
- - ---- ----- -------------------
<S> <C> <C>
Fiscal Year
1998
Fiscal Year
1999
Fiscal Year
2000
Fiscal Year
2001
Fiscal Year
2002
Fiscal Year
2003
</TABLE>
<PAGE> 8
EXHIBIT B
POLICIES OF INSURANCE OWNED
ON THE LIVES OF THE THOMAS R. KOWALSKI
<TABLE>
<CAPTION>
Name of
Insurance Policy Face
Company Number Owner Insured Amount
- - ------- ------ ----- ------- ------
<S> <C> <C> <C> <C>
Transamerica Life 40779161 MegaBank Thomas R. $3,000,000
Financial Kowalski
Corporation
</TABLE>
<PAGE> 1
EXHIBIT 10.8
INDEMNIFICATION AGREEMENT
This Indemnification Agreement is made and entered into as of July 20,
1995 between MegaBank Financial Corporation, a Colorado corporation
("MegaBank") and Raymond L. Anilionis, Warren P. Cohen and Thomas R. Kowalski
(hereinafter referred to individually as a "Guarantor" and collectively as
"Guarantors").
RECITALS
A. MegaBank believes that it is in the best interests of itself
and its subsidiary, MegaBank of Arapahoe ("Bank"), for MegaBank to obtain a $3
million loan (the "Loan") from First Interstate Bank of Denver, N.A. ("First")
for the purpose of increasing Bank's capital which would enable Bank to
increase its lending limit by approximately $450,000 and better serve its
current customers and help attract new customers;
B. In order to obtain the Loan, First required the Guarantors to
personally guarantee (the "Guarantees") the Loan;
C. Guarantors have indicated that as a condition to them
providing the Guarantees required for the Loan, MegaBank shall agree to
indemnify them against liabilities, expenses and costs relating to the
Guarantees and that MegaBank compensate them, pursuant to the terms of this
Agreement, in consideration of the risk of the Guarantees to their respective
personal financial conditions;
D. MegaBank believes that this Agreement contains terms that are
reasonable and comparable as to what unrelated third parties would demand from
MegaBank in consideration for the Guarantees; and
E. MegaBank desires to indemnify and compensate the Guarantors in
consideration of their agreement to execute the required Guarantees on the
Loan.
AGREEMENT
Now, therefore, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
1. AGREEMENT TO INDEMNIFY. MegaBank shall indemnify each of the
Guarantors for all of their respective payments, costs and other
expenses relating to the Guarantees, in accordance with, and to the
fullest extent permitted by, Colorado law.
2. COMPENSATION. MegaBank shall pay to the Guarantors the compensation
set forth below in the aggregate based upon the following ratios: two-thirds
(2/3) to Thomas
<PAGE> 2
R. Kowalski, one-sixth (1/6) to Raymond L. Anilionis and one-sixth (1/6) to
Warren P. Cohen.
2.1. An annual one and one-half percent (1.5%) fee of the
outstanding balance of the Loan as of the date of the Loan and every
anniversary of the Loan, payable in cash on such dates, until the Loan
is paid in full.
2.2. (a) A payment (the "Payment") equal to twenty-five
percent (25%) of the increase (the "Increase") of annual pretax
earnings ("Earnings") of the Bank, if any, until the Loan is paid in
full. The base for calculating the increase in Earnings shall be the
Bank's Earnings for the fiscal year ended December 31, 1995. The
calculation concerning the Increase shall be done on an annual basis,
individually, and not on a cumulative basis. For example, if the
Earnings for the fiscal years ended December 31, 1995, 1996 and 1997
are $100,000, $200,000 and $250,000, respectively, the Bank shall pay
to the Guarantors in the aggregate $25,000 for the Increase for the
fiscal year ended December 31, 1996 and $37,500 for the Increase for
the fiscal year ended December 31, 1997.
(b) The Payment, if any, shall be payable annually in the
following manner, in the sole discretion of each of the Guarantors,
within thirty (30) days after the Earnings of the Bank are determined
by the Bank's independent certified public accountants:
(i) (A) A cash payment equal to forty percent
(40%) of the Payment and, (B) a stock dividend of MegaBank
Common Stock equal to sixty percent (60%) of the Payment using
$24.00 per share as the amount for determining such stock
dividend; or
(ii) (A) An option (the "Option") to purchase
MegaBank Common Stock at $30.00 per share exercisable within
ten (10) years of the date of grant, with the number of shares
subject to the Option calculated by dividing the Payment by
$24.00, and (B) at the time of the exercise of the Option,
MegaBank shall pay to the Guarantor an additional amount in
cash equal to forty percent (40%) of the Payment.
Notwithstanding the above, MegaBank shall not be required to issue in
the aggregate less than 7,500 shares of MegaBank Common Stock or options to
acquire less than 7,500 shares of MegaBank Common Stock pursuant to this
Section 2.2.
3. NOTICE TO MEGABANK. Guarantors shall notify MegaBank in writing of
any matter for which Guarantors intend to seek indemnification hereunder as
soon as reasonably practicable following the receipt by Guarantors of written
notice thereof; provided, however, that delay in so notifying MegaBank shall
not constitute a waiver or release by Guarantors of rights hereunder.
4. ENFORCEMENT. MegaBank acknowledges that Guarantors are relying upon
this
2
<PAGE> 3
Agreement in serving as Guarantors for the Loan. If a claim for
indemnification or compensation is not paid in full by MegaBank within ninety
(90) days after written notice has been received by MegaBank from the
Guarantors, Guarantors may bring suit against MegaBank to recover the unpaid
amount of the claim. If successful in whole or in part in such suit, Guarantors
shall also be entitled to be paid all reasonable fees and expenses (including
without limitation, fees of counsel) in bringing and prosecuting such claim for
indemnification or compensation.
5. NONEXCLUSIVITY. The rights of Guarantors for indemnification under
this Agreement shall not be deemed exclusive of, or in limitation of, any
rights to which Guarantors may be entitled under United States and Colorado
laws, or otherwise.
6. MISCELLANEOUS.
(a) SURVIVAL; CONTINUATION. The rights of Guarantors hereunder
shall inure to the benefit of Guarantors and their personal
representatives, heirs, executors, administrators and
beneficiaries; and this Agreement shall be binding upon
MegaBank and its successors and assigns. The rights of
Guarantors under this Agreement shall continue so long as
Guarantors may be subject to any possible proceeding
concerning the Guarantees. If MegaBank sells, leases,
exchanges or otherwise disposes of, in a single transaction or
series of related transactions, all or substantially all of
its property and assets, MegaBank shall, as a condition
precedent to such transaction, cause effective provisions to
be made so that the person or entity acquiring such property
and assets shall become bound by and replace MegaBank under
this Agreement.
(b) GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Colorado except to the extent that federal law
governs hereunder.
(c) SEVERABILITY. If any provisions of this Agreement shall be
held to be prohibited by or invalid under applicable law, such
provisions shall be deemed amended to accomplish the
objectives of the provisions as originally written to the
fullest extent permitted by law and all other provisions shall
remain in full force and effect.
(d) AMENDMENT. No amendment, termination or cancellation of this
Agreement shall be effective unless in writing signed by
MegaBank and Guarantors.
(e) OTHER PAYMENTS. MegaBank shall not be liable under this
Agreement to make any payment in connection with any claim or
proceeding against or involving Guarantors concerning
indemnification to the extent Guarantors have otherwise
actually received payment of the amounts otherwise
indemnifiable hereunder. Guarantors shall repay to MegaBank
the amount of any indemnification payment MegaBank makes to
Guarantors
3
<PAGE> 4
under this Agreement in connection with any proceeding against
or involving Guarantors, to the extent Guarantors have
otherwise actually received payment of such amount.
(f) SUBROGATION. In the event of indemnification payment under
this Agreement, MegaBank shall be subrogated to the extent of
such payment to all of the rights of recovery of Guarantors,
who shall execute all papers required and shall do everything
that may be necessary to secure such rights, including the
execution of such documents necessary to enable MegaBank
effectively to bring suit to enforce such rights.
(g) HEADINGS. The headings in this Agreement are for convenience
only and are not to be considered in construing this
Agreement.
(h) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be deemed an original, and
together which shall constitute one document.
(i) DEFINITIONS. As used in this Agreement, the term "proceeding"
means any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or
investigative, and whether formal or informal.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above
MEGABANK:
MEGABANK FINANCIAL CORPORATION
A COLORADO CORPORATION
By:/s/ Thomas R.Kowalski
------------------------------
Thomas R Kowalski, President
GUARANTORS:
/s/ Raymond L. Anilionis
------------------------------
Raymond L. Anilionis
/s/ Warren P. Cohen
------------------------------
Warren P Cohen
/s/ Thomas R. Kowalski
------------------------------
Thomas R. Kowalski
4
<PAGE> 1
EXHIBIT 23.1
FORTNER, BAYENS, LEVKULICH & CO., P.C.
LETTERHEAD
Consent of Independent Auditors
THE BOARD OF DIRECTORS
MEGABANK FINANCIAL CORPORATION
We consent to the use of our report included herein and incorporated herein by
reference and to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ FORTNER, BAYENS, LEVKULICH & CO., P.C.
- - ------------------------------------------
FORTNER, BAYENS, LEVKULICH & CO., P.C.
Denver, Colorado
December 11, 1997
<PAGE> 1
EXHIBIT 25.1
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
MEGABANK FINANCIAL CORPORATION
(Exact name of obligor as specified in its charter)
Colorado 84-0949755
(State of incorporation) (I.R.S. employer identification no.)
8100 East Arapahoe Road
Englewood, Colorado 80112
(Address of principal executive offices) (Zip Code)
% Junior Subordinated Debentures of MegaBank Financial Corporation
(Title of the indenture securities)
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the
obligor is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939,
as amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 3rd day
of December, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. CHRIS SPONENBERG By: /s/ EMMETT R. HARMON
----------------------------- --------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the
name of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment
filed in the Office of the Secretary of State on March 18, A.D. 1903, and the
Charter or Act of Incorporation of which company has been from time to time
amended and changed by merger agreements pursuant to the corporation law for
state banks and trust companies of the State of Delaware, does hereby alter and
amend its Charter or Act of Incorporation so that the same as so altered and
amended shall in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City.
In addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
<PAGE> 5
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive
deposits of money, or securities for money, to buy gold and silver
bullion and foreign coins, to buy and sell bills of exchange, and
generally to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation which are proper
or necessary for the transaction of the business of the Corporation
hereby created.
(2) To insure titles to real and personal property, or any estate
or interests therein, and to guarantee the holder of such property,
real or personal, against any claim or claims, adverse to his
interest therein, and to prepare and give certificates of title for
any lands or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort
and kind, from executors, administrators, guardians, public
officers, courts, receivers, assignees, trustees, and from all
fiduciaries, and from all other persons and individuals, and from
all corporations whether state, municipal, corporate or private, and
to rent boxes, safes, vaults and other receptacles for such
property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation,
association, state or municipality, and may receive and manage any
sinking fund therefor on such terms as may be agreed upon between
the two parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
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(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or
persons, for the faithful performance of any trust, office, duty,
contract or agreement, either by itself or in conjunction with any
other person, or persons, corporation, or corporations, or in like
manner become surety upon any bond, recognizance, obligation,
judgment, suit, order, or decree to be entered in any court of
record within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court in the
State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity in the receiving, holding, managing, and disposing of any
and all estates and property, real, personal or mixed, and to be
appointed as such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator, guardian
or bailee by any persons, corporations, court, officer, or
authority, in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation, court,
officer or authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator, guardian,
bailee, or in any other trust capacity, it shall not be required to
give bond with surety, but its capital stock shall be taken and held
as security for the performance of the duties devolving upon it by
such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for
the assumption of any responsibility the said Corporation may be
entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or of
any state, territory, colony, or possession thereof, or of any
foreign government or country; to receive, collect, receipt for, and
dispose of interest, dividends and income upon and from any of the
bonds, mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness and
other property held and owned by it, and to exercise in respect of
all such bonds, mortgages, debentures, notes, shares of capital
stock, securities, obligations, contracts, evidences of indebtedness
and other property, any and all the rights, powers and privileges of
individual
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<PAGE> 7
owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and
from time to time to vary or realize such investments; to issue
bonds and secure the same by pledges or deeds of trust or mortgages
of or upon the whole or any part of the property held or owned by
the Corporation, and to sell and pledge such bonds, as and when the
Board of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by
law, to lease, purchase, hold, sell, assign, transfer, pledge,
mortgage and convey real and personal property of any name and
nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by the
laws of the State of Delaware, it is hereby expressly provided that the said
Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and
to undertake the whole or any part of the assets and liabilities of
any person, firm, association or corporation, and to pay for the
same in cash, stock of this Corporation, bonds or otherwise; to hold
or in any manner to dispose of the whole or any part of the property
so purchased; to conduct in any lawful manner the whole or any part
of any business so acquired, and to exercise all the powers
necessary or convenient in and about the conduct and management of
such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose
of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount,
execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of,
real and personal property, of every class and description, in any
State, District, Territory or Colony of the United States, and in
any foreign country or place.
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<PAGE> 8
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited or
restricted by reference to or inference from the terms of any other
clause of this or any other paragraph in this charter, but that the
objects, purposes and powers specified in each of the clauses of
this paragraph shall be regarded as independent objects, purposes
and powers.
FOURTH: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and
the preferences and relative, participating, optional and other special
rights of each such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all other
series at any time outstanding; and, subject to the provisions of
subparagraph 1 of Paragraph (c) of this Article FOURTH, the Board of
Directors of the Corporation is hereby expressly granted authority to fix
by resolution or resolutions adopted prior to the issuance of any shares
of a particular series of Preferred Stock, the voting powers and the
designations, preferences and relative, optional and other special
rights, and the qualifications, limitations and restrictions of such
series, including, but without limiting the generality of the foregoing,
the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
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<PAGE> 9
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject
to redemption, and the redemption price or prices and the time or
times at which, and the terms and conditions on which, Preferred
Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends
on the Preferred Stock (fixed in accordance with the provisions of
section (b) of this Article FOURTH), if any, shall have been met and
after the Corporation shall have complied with all the requirements, if
any, with respect to the setting aside of sums as sinking funds or
redemption or purchase accounts (fixed in accordance with the provisions
of section (b) of this Article FOURTH), and subject further to any
conditions which may be fixed in accordance with the provisions of
section (b) of this Article FOURTH, then and not otherwise the holders of
Common Stock shall be entitled to receive such dividends as may be
declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution
or sale of assets, dissolution or winding-up, of the Corporation,
the holders of the Common Stock shall be entitled to
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<PAGE> 10
receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each
holder of Common Stock shall have one vote in respect of each share
of Common Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
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(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By- Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable for
the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
FOURTEENTH: - Meetings of the Directors may be held outside of the State of
Delaware at such places as may be from time to time designated by the
Board, and the Directors may keep the books of the Company outside of the
State of Delaware at such places as may be from time to time designated by
them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any Interested
Stockholder (as hereinafter defined) or (ii) any other corporation
(whether or not itself an Interested Stockholder), which, after such
merger or consolidation, would be an Affiliate (as hereinafter
defined) of an Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of related transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate fair market value of $1,000,000 or
more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder, or any Affiliate of any
Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any
one or more of clauses (A) through (E) of paragraph 1 of the
section (a).
(b) The provisions of section (a) of this Article FIFTEENTH shall
not be applicable to any particular business combination and such
business combination shall require only such affirmative vote as is
required by law and any other provisions of the Charter or Act of
Incorporation of By-Laws if such business combination has been
approved by a majority of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have occurred
in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act
of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an
Affiliate or Associate of another, (3) whether a person has an
agreement, arrangement or understanding with another as to the
matters referred to in paragraph (3) of section (c), or (4) whether
the assets subject to any business combination or the consideration
received for the issuance or transfer of securities by the
Corporation, or any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
13
<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at
any time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be
given by mailing to each stockholder at least ten (10) days before said
meeting, at his last known address, a written or printed notice fixing the time
and place of such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one
vote, either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its
<PAGE> 19
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect
from its own members a Chairman of the Board of Directors and a President who
may be the same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person, may appoint at
any time such other committees and elect or appoint such other officers as it
may deem advisable. The Board of Directors may also elect at such meeting one
or more Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who
2
<PAGE> 20
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers
of the Board of Directors when it is not in session to transact all business
for and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and
superintend all investments that may be made of the funds of the Company, and
shall direct the disposal of the same, in accordance with such rules and
regulations as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such
disaster shall be available for the transaction of its business, such Executive
Committee shall also be empowered to exercise all of the powers reserved to the
Trust Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of
the Company in accordance with the foregoing provisions of this Section. This
By-Law shall be subject to implementation by Resolutions of the Board of
Directors presently existing or hereafter passed from time to time for that
purpose, and any provisions of these By-Laws (other than this Section) and any
resolutions which are contrary to the provisions of this Section or to the
provisions of any such implementary Resolutions shall be suspended during such
a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee
shall be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and
wherever the majority of its members shall deem it to be proper for the
transaction of its business, and a majority of its Committee shall constitute a
quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE> 22
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company,
major organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be
called at any time by the Chairman of the Compensation Committee, the Chairman
of the Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time
confer and direct. He shall also exercise such powers and perform such duties
as may from time to time be agreed upon between himself and the President of
the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of
the Board of
5
<PAGE> 23
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties
pertaining to the office of the President conferred or imposed upon him by
statute or assigned to him by the Board of Directors in the absence of the
Chairman of the Board the President shall have the powers and duties of the
Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and
responsible for all monies, funds and valuables of the Company and for the
keeping of proper records of the evidence of property or indebtedness and of
all the transactions of the Company. He shall have general supervision of the
expenditures of the Company and shall report to the Board of Directors at each
regular meeting of the condition of the Company, and perform such other duties
as may be assigned to him from time to time by the Board of Directors of the
Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be
in charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor
and such duties as may be prescribed by the officer in charge of the Audit
Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman
of the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new
certificate or certificates shall be issued in lieu thereof. Duplicate
certificates of stock shall be issued only upon giving such security as may be
satisfactory to the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in
connection with obtaining the consent of stockholders for any purpose, which
record date shall not be more than 60 nor less than 10 days proceeding the date
of any meeting of stockholders or the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver
and the Secretary or any Assistant Secretary shall have full power and
authority to attest and affix the corporate seal of the Company to any and all
deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors
who serve as members of committees, other than salaried employees of the
Company, shall be paid such reasonable honoraria or fees for services as
members of committees as the Board of Directors shall from time to time
determine and directors and associate directors may be employed by the Company
for such special services as the Board of Directors may from time to time
determine and shall be paid for such special services so performed reasonable
compensation as may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless,
to the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or
was a director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person
in connection with a proceeding initiated by such person only if the proceeding
was authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided,
however, that the payment of expenses incurred by a Director officer in his
capacity as a Director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the Director or
officer to repay all amounts advanced if it should be ultimately determined
that the Director or officer is not entitled to be indemnified under this
Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in
whole or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden of proving
that the claimant was not entitled to the requested indemnification of payment
of expenses
9
<PAGE> 27
under applicable law.
(D) The rights conferred on any person by this
Article X shall not be exclusive of any other rights which such person may have
or hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By- Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(B) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: December 3, 1997 By: /s/ EMMETT R. HARMON
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your
state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- - ------------------------ ----------
Name of Bank City
in the State of DELAWARE, at the close of business on September 30, 1997.
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . . . . . . . . . . . . . . . . . . . 206,619
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364,899
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,038,826
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . . 126,000
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,830,772
LESS: Allowance for loan and lease losses. . . . . . 55,936
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve . . . . . . . . . . . . . . . . . 3,774,836
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,895
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,830
Investments in unconsolidated subsidiaries and associated companies . . . . . . . . . . . . . . . . . . . . . . . . . 34
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,215
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,240
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,728,394
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
LIABILITIES
<S> <C>
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,980,001
Noninterest-bearing . . . . . . . . 859,817
Interest-bearing. . . . . . . . . . 3,120,184
Federal funds purchased and Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . 327,543
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,508
Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734,000
With original maturity of more than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,000
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,674
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,278,726
EQUITY CAPITAL
Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380,993
Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . 6,057
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449,668
Total liabilities, limited-life preferred stock, and equity capital . . . . . . . . . . . . . . . . . . . . . . 5,728,394
</TABLE>
2
<PAGE> 1
EXHIBIT 25.2
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
MEGABANK FINANCIAL CORPORATION
MB CAPITAL I
(Exact name of obligor as specified in its charter)
84-0949755
Colorado Applied For
(State of incorporation) (I.R.S. employer identification no.)
8100 East Arapahoe Road
Englewood, Colorado 80112
(Address of principal executive offices) (Zip Code)
% Cumulative Preferred Securities of MB Capital I
(Title of the indenture securities)
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ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 3rd day
of December, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. CHRIS SPONENBERG By: /s/ EMMETT R. HARMON
------------------------ ------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
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EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
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AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the
name of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment
filed in the Office of the Secretary of State on March 18, A.D. 1903, and the
Charter or Act of Incorporation of which company has been from time to time
amended and changed by merger agreements pursuant to the corporation law for
state banks and trust companies of the State of Delaware, does hereby alter and
amend its Charter or Act of Incorporation so that the same as so altered and
amended shall in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City.
In addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
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Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of this
State, to discount bills, notes or other evidences of debt,
to receive deposits of money, or securities for money, to buy
gold and silver bullion and foreign coins, to buy and sell
bills of exchange, and generally to use, exercise and enjoy
all the powers, rights, privileges and franchises incident to
a corporation which are proper or necessary for the
transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or claims,
adverse to his interest therein, and to prepare and give
certificates of title for any lands or premises in the State
of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
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(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become surety
upon any bond, recognizance, obligation, judgment, suit,
order, or decree to be entered in any court of record within
the State of Delaware or elsewhere, or which may now or
hereafter be required by any law, judge, officer or court in
the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by
any persons, corporations, court, officer, or authority, in
the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or be
called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to receive,
collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property held
and owned by it, and to exercise in respect of all such
bonds, mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness
and other property, any and all the rights, powers and
privileges of individual
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owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it may
think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept,
endorse, discount, execute and issue promissory notes,
drafts, bills of exchange, warrants, bonds, debentures, and
other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to purchase
or otherwise acquire, to hold, own, to mortgage, sell, convey
or otherwise dispose of, real and personal property, of every
class and description, in any State, District, Territory or
Colony of the United States, and in any foreign country or
place.
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(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph) be
nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes and
powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and
powers.
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as "Preferred
Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in
one or more series as may from time to time be determined by the
Board of Directors each of said series to be distinctly designated.
All shares of any one series of Preferred Stock shall be alike in
every particular, except that there may be different dates from
which dividends, if any, thereon shall be cumulative, if made
cumulative. The voting powers and the preferences and relative,
participating, optional and other special rights of each such
series, and the qualifications, limitations or restrictions thereof,
if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1
of Paragraph (c) of this Article FOURTH, the Board of Directors of
the Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock of
such series shall be paid, the extent of the preference or
relation, if any, of such dividends to the dividends payable
on any other class or classes, or series of the same or other
class of
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stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series of
the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the generality
of the foregoing include the right, voting as a series or by
itself or together with other series of Preferred Stock or
all series of Preferred Stock as a class, to elect one or
more directors of the Corporation if there shall have been a
default in the payment of dividends on any one or more series
of Preferred Stock or under such circumstances and on such
conditions as the Board of Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the holders
of Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common
Stock shall be entitled to
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receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on all
matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
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(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of
Preferred Stock may, without a class or series vote, be increased or
decreased from time to time by the affirmative vote of the holders
of a majority of the stock of the Corporation entitled to vote
thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two- thirds or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called
for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not made
in accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
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(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation,
or any merger or consolidation of the Corporation with any of
its Subsidiaries or any similar transaction (whether or not
with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder, or any Affiliate of any
Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation
of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by any
Interested Stockholder, and such assignment or succession
shall have occurred in the course of a transaction or series
of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
12
<PAGE> 16
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether a
person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or
more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
13
<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at
any time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be
given by mailing to each stockholder at least ten (10) days before said
meeting, at his last known address, a written or printed notice fixing the time
and place of such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one
vote, either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its
<PAGE> 19
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect
from its own members a Chairman of the Board of Directors and a President who
may be the same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person, may appoint at
any time such other committees and elect or appoint such other officers as it
may deem advisable. The Board of Directors may also elect at such meeting one
or more Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be
in charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who
2
<PAGE> 20
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers
of the Board of Directors when it is not in session to transact all business
for and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and
superintend all investments that may be made of the funds of the Company, and
shall direct the disposal of the same, in accordance with such rules and
regulations as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such
disaster shall be available for the transaction of its business, such Executive
Committee shall also be empowered to exercise all of the powers reserved to the
Trust Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of
the Company in accordance with the foregoing provisions of this Section. This
By-Law shall be subject to implementation by Resolutions of the Board of
Directors presently existing or hereafter passed from time to time for that
purpose, and any provisions of these By-Laws (other than this Section) and any
resolutions which are contrary to the provisions of this Section or to the
provisions of any such implementary Resolutions shall be suspended during such
a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee
shall be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and
wherever the majority of its members shall deem it to be proper for the
transaction of its business, and a majority of its Committee shall constitute a
quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE> 22
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company,
major organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be
called at any time by the Chairman of the Compensation Committee, the Chairman
of the Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time
confer and direct. He shall also exercise such powers and perform such duties
as may from time to time be agreed upon between himself and the President of
the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of
the Board of
5
<PAGE> 23
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties
pertaining to the office of the President conferred or imposed upon him by
statute or assigned to him by the Board of Directors in the absence of the
Chairman of the Board the President shall have the powers and duties of the
Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and
responsible for all monies, funds and valuables of the Company and for the
keeping of proper records of the evidence of property or indebtedness and of
all the transactions of the Company. He shall have general supervision of the
expenditures of the Company and shall report to the Board of Directors at each
regular meeting of the condition of the Company, and perform such other duties
as may be assigned to him from time to time by the Board of Directors of the
Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be
in charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor
and such duties as may be prescribed by the officer in charge of the Audit
Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman
of the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new
certificate or certificates shall be issued in lieu thereof. Duplicate
certificates of stock shall be issued only upon giving such security as may be
satisfactory to the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in
connection with obtaining the consent of stockholders for any purpose, which
record date shall not be more than 60 nor less than 10 days proceeding the date
of any meeting of stockholders or the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver
and the Secretary or any Assistant Secretary shall have full power and
authority to attest and affix the corporate seal of the Company to any and all
deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors
who serve as members of committees, other than salaried employees of the
Company, shall be paid such reasonable honoraria or fees for services as
members of committees as the Board of Directors shall from time to time
determine and directors and associate directors may be employed by the Company
for such special services as the Board of Directors may from time to time
determine and shall be paid for such special services so performed reasonable
compensation as may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless,
to the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or
was a director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person
in connection with a proceeding initiated by such person only if the proceeding
was authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided,
however, that the payment of expenses incurred by a Director officer in his
capacity as a Director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the Director or
officer to repay all amounts advanced if it should be ultimately determined
that the Director or officer is not entitled to be indemnified under this
Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in
whole or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden of proving
that the claimant was not entitled to the requested indemnification of payment
of expenses
9
<PAGE> 27
under applicable law.
(D) The rights conferred on any person by this Article
X shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By- Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(B) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: December 3, 1997 By: /s/ EMMETT R. HARMON
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your
state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- - -------------------------------- ----------
Name of Bank City
in the State of DELAWARE, at the close of business on September 30, 1997.
--------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . . . . . . . . . . . . . . . . . 206,619
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364,899
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,038,826
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . 126,000
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,830,772
LESS: Allowance for loan and lease losses. . . . . . 55,936
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve . . . . . . . . . . . . . . . . 3,774,836
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . . . . . . . . . . . 118,895
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,830
Investments in unconsolidated subsidiaries and associated companies . . . . . . . . . . . . . . . . . . . . . 34
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . 0
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,215
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,240
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,728,394
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
LIABILITIES
<S> <C>
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,980,001
Noninterest-bearing . . . . . . . . 859,817
Interest-bearing. . . . . . . . . . 3,120,184
Federal funds purchased and Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . 327,543
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,508
Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . 734,000
With original maturity of more than one year . . . . . . . . . . . . . . . . . . . . . . . . . . 43,000
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,674
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,278,726
EQUITY CAPITAL
Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380,993
Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . . . . . . . . 6,057
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449,668
Total liabilities, limited-life preferred stock, and equity capital . . . . . . . . . . . . . . . . . . . . . 5,728,394
</TABLE>
2
<PAGE> 1
EXHIBIT 25.3
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
---
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
MEGABANK FINANCIAL CORPORATION
MB CAPITAL I
(Exact name of obligor as specified in its charter)
Colorado 84-0949755
(State of incorporation) (I.R.S. employer identification no.)
8100 East Arapahoe Road
Englewood, Colorado 80112
(Address of principal executive offices) (Zip Code)
Guarantee of MegaBank Financial Corporation with respect to the
% Cumulative Preferred Securities
(Title of the indenture securities)
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 3rd day
of December, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ W. CHRIS SPONENBERG By:/s/ EMMETT R. HARMON
----------------------- -----------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the
name of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment
filed in the Office of the Secretary of State on March 18, A.D. 1903, and the
Charter or Act of Incorporation of which company has been from time to time
amended and changed by merger agreements pursuant to the corporation law for
state banks and trust companies of the State of Delaware, does hereby alter and
amend its Charter or Act of Incorporation so that the same as so altered and
amended shall in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City.
In addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
<PAGE> 5
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of this
State, to discount bills, notes or other evidences of debt,
to receive deposits of money, or securities for money, to buy
gold and silver bullion and foreign coins, to buy and sell
bills of exchange, and generally to use, exercise and enjoy
all the powers, rights, privileges and franchises incident to
a corporation which are proper or necessary for the
transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or claims,
adverse to his interest therein, and to prepare and give
certificates of title for any lands or premises in the State
of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE> 6
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become surety
upon any bond, recognizance, obligation, judgment, suit,
order, or decree to be entered in any court of record within
the State of Delaware or elsewhere, or which may now or
hereafter be required by any law, judge, officer or court in
the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by
any persons, corporations, court, officer, or authority, in
the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or be
called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to receive,
collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property held
and owned by it, and to exercise in respect of all such
bonds, mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness
and other property, any and all the rights, powers and
privileges of individual
3
<PAGE> 7
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it may
think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept,
endorse, discount, execute and issue promissory notes,
drafts, bills of exchange, warrants, bonds, debentures, and
other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to purchase
or otherwise acquire, to hold, own, to mortgage, sell, convey
or otherwise dispose of, real and personal property, of every
class and description, in any State, District, Territory or
Colony of the United States, and in any foreign country or
place.
4
<PAGE> 8
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph) be
nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes and
powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and
powers.
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as "Preferred
Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in
one or more series as may from time to time be determined by the
Board of Directors each of said series to be distinctly designated.
All shares of any one series of Preferred Stock shall be alike in
every particular, except that there may be different dates from
which dividends, if any, thereon shall be cumulative, if made
cumulative. The voting powers and the preferences and relative,
participating, optional and other special rights of each such
series, and the qualifications, limitations or restrictions thereof,
if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1
of Paragraph (c) of this Article FOURTH, the Board of Directors of
the Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock of
such series shall be paid, the extent of the preference or
relation, if any, of such dividends to the dividends payable
on any other class or classes, or series of the same or other
class of
5
<PAGE> 9
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series of
the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the generality
of the foregoing include the right, voting as a series or by
itself or together with other series of Preferred Stock or
all series of Preferred Stock as a class, to elect one or
more directors of the Corporation if there shall have been a
default in the payment of dividends on any one or more series
of Preferred Stock or under such circumstances and on such
conditions as the Board of Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the holders
of Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common
Stock shall be entitled to
6
<PAGE> 10
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on all
matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
7
<PAGE> 11
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of
Preferred Stock may, without a class or series vote, be increased or
decreased from time to time by the affirmative vote of the holders
of a majority of the stock of the Corporation entitled to vote
thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the
8
<PAGE> 12
Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two- thirds or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called
for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not made
in accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
<PAGE> 13
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
10
<PAGE> 14
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation,
or any merger or consolidation of the Corporation with any of
its Subsidiaries or any similar transaction (whether or not
with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder, or any Affiliate of any
Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on
11
<PAGE> 15
such business combination, or immediately prior to the consummation
of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by any
Interested Stockholder, and such assignment or succession
shall have occurred in the course of a transaction or series
of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
12
<PAGE> 16
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether a
person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or
more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
13
<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at
any time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be
given by mailing to each stockholder at least ten (10) days before said
meeting, at his last known address, a written or printed notice fixing the time
and place of such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one
vote, either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its
<PAGE> 19
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect
from its own members a Chairman of the Board of Directors and a President who
may be the same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person, may appoint at
any time such other committees and elect or appoint such other officers as it
may deem advisable. The Board of Directors may also elect at such meeting one
or more Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be
in charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who
2
<PAGE> 20
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers
of the Board of Directors when it is not in session to transact all business
for and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and
superintend all investments that may be made of the funds of the Company, and
shall direct the disposal of the same, in accordance with such rules and
regulations as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such
disaster shall be available for the transaction of its business, such Executive
Committee shall also be empowered to exercise all of the powers reserved to the
Trust Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of
the Company in accordance with the foregoing provisions of this Section. This
By-Law shall be subject to implementation by Resolutions of the Board of
Directors presently existing or hereafter passed from time to time for that
purpose, and any provisions of these By-Laws (other than this Section) and any
resolutions which are contrary to the provisions of this Section or to the
provisions of any such implementary Resolutions shall be suspended during such
a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee
shall be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and
wherever the majority of its members shall deem it to be proper for the
transaction of its business, and a majority of its Committee shall constitute a
quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of
not more than
4
<PAGE> 22
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company,
major organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be
called at any time by the Chairman of the Compensation Committee, the Chairman
of the Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time
confer and direct. He shall also exercise such powers and perform such duties
as may from time to time be agreed upon between himself and the President of
the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of
the Board of
5
<PAGE> 23
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties
pertaining to the office of the President conferred or imposed upon him by
statute or assigned to him by the Board of Directors in the absence of the
Chairman of the Board the President shall have the powers and duties of the
Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and
responsible for all monies, funds and valuables of the Company and for the
keeping of proper records of the evidence of property or indebtedness and of
all the transactions of the Company. He shall have general supervision of the
expenditures of the Company and shall report to the Board of Directors at each
regular meeting of the condition of the Company, and perform such other duties
as may be assigned to him from time to time by the Board of Directors of the
Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be
in charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor
and such duties as may be prescribed by the officer in charge of the Audit
Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman
of the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new
certificate or certificates shall be issued in lieu thereof. Duplicate
certificates of stock shall be issued only upon giving such security as may be
satisfactory to the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in
connection with obtaining the consent of stockholders for any purpose, which
record date shall not be more than 60 nor less than 10 days proceeding the date
of any meeting of stockholders or the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver
and the Secretary or any Assistant Secretary shall have full power and
authority to attest and affix the corporate seal of the Company to any and all
deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors
who serve as members of committees, other than salaried employees of the
Company, shall be paid such reasonable honoraria or fees for services as
members of committees as the Board of Directors shall from time to time
determine and directors and associate directors may be employed by the Company
for such special services as the Board of Directors may from time to time
determine and shall be paid for such special services so performed reasonable
compensation as may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless,
to the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or
was a director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person
in connection with a proceeding initiated by such person only if the proceeding
was authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided,
however, that the payment of expenses incurred by a Director officer in his
capacity as a Director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the Director or
officer to repay all amounts advanced if it should be ultimately determined
that the Director or officer is not entitled to be indemnified under this
Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in
whole or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden of proving
that the claimant was not entitled to the requested indemnification of payment
of expenses
9
<PAGE> 27
under applicable law.
(D) The rights conferred on any person by this Article
X shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By- Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: December 3, 1997 By: /s/ EMMETT R. HARMON
-----------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your
state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
----------------------- -----------------------
Name of Bank City
in the State of DELAWARE , at the close of business on September 30, 1997.
-----------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . . . . . . . . . . . . . . . . . . . 206,619
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364,899
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,038,826
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . . 126,000
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,830,772
LESS: Allowance for loan and lease losses. . . . . . 55,936
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve . . . . . . . . . . . . . . . . . 3,774,836
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,895
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,830
Investments in unconsolidated subsidiaries and associated companies . . . . . . . . . . . . . . . . . . . . . . . . . 34
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,215
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,240
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,728,394
</TABLE>
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<PAGE> 30
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,980,001
Noninterest-bearing . . . . . . . . 859,817
Interest-bearing. . . . . . . . . . 3,120,184
Federal funds purchased and Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . 327,543
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,508
Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734,000
With original maturity of more than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,000
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,674
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,278,726
</TABLE>
<TABLE>
<CAPTION>
EQUITY CAPITAL
<S> <C>
Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380,993
Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . 6,057
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449,668
Total liabilities, limited-life preferred stock, and equity capital . . . . . . . . . . . . . . . . . . . . . . 5,728,394
</TABLE>
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